Great Changes in Wireless Internet Industry (4) Apple's Strategy

As a matter of fact, Apple's understanding of Internet remains to be around computers, not handsets.

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[+]The rises and falls of Apple

In March 2008, Apple, led by "legendary" Steve Jobs, topped Forbes Most Respected Companies in the United State, where Google ranked No.4 and Microsoft far behind - No.16. Being respected while making money is not an easy thing.

Nobody foresaw the company, once in its low, would come back in glory. Back in history, Apple was left alone in the cold due to the introduction of product platforms (open standard) and industrial platforms (labor division within the industry) built by the PC group led by Intel and Microsoft.

Apple's proprietary system throttled the enthusiasm of players in the industry to collaborate in the manufacturing of hardware/software and peripheral products, resulting in few applications usable, which, on the other hand, held consumers back from buying its products. Eventually, Apple was cornered by the PC group into a niche market.

Nobody would deny that Apple's computers had more elegant and appealing shapes. However, it was no rival of the Wintel legion, because they could dig deep into the personal computer market with the power of the entire industry after open standards were formed.

Remarkably, the first surprise Steve Jobs brought the world after coming back to Apple was iPod, which was launched in October 2001. Back at the time, iPod could only be connected with Apple computers through iTunes. Persisting on Apple's tradition for fashionable design, however, it was able to win the favor of its loyal users.

In June 2002, Apple launched iPod Windows version, and then the mid/low-end series, and successfully infiltrated into non-Apple users. Once mocked by its rivals as a "clumsy MP3 player with a mini-hard drive", iPod finally became an icon of imitation.

[+]Beginning to reap the benefits of a "platform"

iPod successfully built two platforms. The first one was a platform of peripheral products, with open interfaces allowing other hardware manufacturers to develop products compatible with iPod, e.g., plug-in FM radios, special voice record pens and digital cameras.

The second platform was iTunes, the one most talked about but none of the rivals could successfully copy. It was first introduced to enable users to synchronize music files with iPod and assist them to manage music files in their computers. Surprisingly, Steve Jobs used it to build his music stores.

The more iPods were sold, the more likely users would buy music. For the traditional music industry, iTunes turned out to be a platform to sell music products in the digital world. With the increase of users who chose to pay for digital music, labels found themselves tied more and more tightly to the platform.

So when Steve Jobs insisted USD 0.99 per song, the labels that originally planned for a price rise had no choice but to agree. Some labels did build their own music distribution websites, but failed to achieve the sales level of Apple.

The support of the admirable iPod sales is the key to the success of Apple, which offers the benefits of a powerful platform of hardware + software + Internet service - benefits which Yahoo! and other Internet players cannot offer. Maybe it is the reason that Google wants to introduce its own cell phones.

The platform can be further expanded. The first approach is to infiltrate into the film distribution market. Now that Steve Jobs has reached his hand into their pockets, film makers, however afraid of following the fate of the music industry, cannot afford to ignore the presence of the platform.

[+]Building a powerful platform with contents

The second approach is that iTunes, while adapting to the Web 2.0 trend, enables ordinary people to make music, broadcasting programs or even films themselves and move them onto Apple music stores. A wide range of PodCast programs are really amazing and of good quality. What's more, the rich contents have increased the confidence of iPod buyers in its value.

However, it is time to use the content platform to introduce new hardware. In June 2007, Apple launched iPhone, an unprecedented achievement through a partnership with AT&T. To use iPhone, users had to register an iTunes ID, and telecom operators share income with Apple.

Such humble operator was never seen before. If not for Apple's bargaining ability backed by the powerful content platform and the user number, the arrogant operators would never have given in.

Interestingly enough, it is said that the same cooperation model proposed by Apple was rejected by China Mobile. Apart from that the latter was the largest mobile operator in the world and hence even more arrogant, it also indicated that the platform was not powerful enough in China to offer a bargaining ability against China Mobile.

Will Apple, which was beaten in the PC market a decade ago, realize the importance of platform and open its iPhone? Currently, iPhone uses Mac OS X operating system. With the increase in sales, there would be more hardware/software and service vendors around the OS, and eventually, new platforms would emerge.

This, however, is not the style of Jobs. iPhone is a proprietary device. In each country, Apple would choose only one operator as its partner. In addition, Mac OS does not have many software service developers. Completely relying on itself, Apple is expected to sell only tens of million cell phones at most.

In terms of building a large cell phone-based platform, wouldn't Nokia, which has much larger sales, present a bigger chance than Apple?

[+]Continue to be proprietary?

Currently, Google is trying to build a series of platforms ranging from cell phone operating system to browser to online service, which it intends to offer free of charge. Apple is doing virtually the same things, but doesn't seem to consider to offer them free to other manufacturers.

The key is Apple does not regard Internet as its core business, at least as of the present time. Both Google and Yahoo! hold Internet as their core business. While the former chooses to develop hardware standards independently and offers them free of charge to the public, the latter chooses to be compatible with all hardware standards.

Other than its own online stores, Apple does not seem to be interested in any other Internet service. Unlike ordinary cell phones, which can only view WAP sites, the iPhone browser enables the viewing of HTML websites. Nor has Apple considered building a wireless portal for all iPhone users to make itself more popular.

As a matter of fact, Apple's understanding of the Internet remains to be around computers. A China Mobile executive once had a negative comment on Apple, saying that downloading music from a computer to a cell phone was not consistent with the experience of cell phone users, who were supposed to download music directly from portals of telecom operators.

Anyhow, Steve Jobs has successfully attracted the eye of the world. Although traffic volume or ad revenue-based profit model is beyond his vision of the Internet market, the success of iPod, iTunes and iPhone is powerful enough to shock traditional cell phone manufacturers. (
2008/04/06 - By Digitalwall.com - Way to
China Internet/Telecom )

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Prev : Great Changes in Wireless Internet Industry (3) Nokia's Strategy


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- Today in History

Great Changes in Wireless Internet Industry (4) Apple's Strategy - 2008/04/06

The Mist of 3G in China (2) TD-SCDMA is a Hot Potato - 2007/04/08

The Mist of 3G in China (1) 3G Makes No Profit - 2007/04/01

Predictions on China Internet Market (6) Community Services - 2006/04/09

Media, Community, and Blog (5) The Power of Media - 2005/04/03

3G Time Comes (4) Video Phone - the Killer Application - 2003/04/06

Pricing is a Handful for Internet Business

Culture/Management - Tech Management - 2005/06/11

Keywords / Tags / Labels:

Pricing is a Handful for Internet Business

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It's only natural that Internet means cheaper prices.

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[+] Consumers are empowered by access to information

Prior to the advent of the Information Technology, information is a nearly inaccessible commodity that comes, when it does, with a high price. That is, few have the luxury of making decision based on ample info. In fact, monopoly of information and lack of transparency have more often than not caused power and fortunes to converge on a few elites, who have grown to enjoy a huge edge in society, an edge built on asymmetric information.

Sociologists have foreseen many years ago that in an time and age when information flows at nearly negligible costs, a shift of power will take place to give rise to consumers who can have their way every time and a competitive landscape extremely harsh for enterprises.

Those who are used to shop on the Net are usually also in the habit of comparing prices of all major online stores before they make a purchase. That is, the Internet is like a coliseum in which prices compete with one another for survival. But in the end, whatever sellers have up their sleeves to court buying, the decision is consumers' and consumers' only.

This has led a several outcomes. First, few big-time brand name vendors would risk having their product marketed over the Internet. At a time when eCommerce is where it's at, we still have a hard time finding European fashion/apparel/accessories brands loading their product onto the Internet for sales.

Sellers of these boutique items are keen on holding on to their elite status and are highly reluctant to engage in price warfare, which will inexorably debase an otherwise prestigious brand name. In the end, there are left on the Internet certain individual traders who can get things cheap in small quantities and put them up for sales on the Net. As it turns out, buyers have no resistance for these offerings at cut-throat prices.

Second, infectious price-cutting has resulted in razor-thin profit margins for every one. At a time when information flows like the wind, price advantages prove ethereal, thereby forcing operators to speed up change of strategy, and what they come up with usually involves cost-cutting, which in turn, usually involves tax evasion and questionable sourcing of merchandise.

What would be more recommendable includes building of own-brand operations and maintaining of customer loyalty. Own-brand means consumers get one-of-a-kinds in a particular online store, which instantly nixes the case for price comparison; loyalty, because having old buyers back is easier than capturing new ones.

[+] Change of meaning of "basic services"

What new paradigm the advent of Internet has brought along is that basic services are supposed to be free of charge. That, however, leads us to wonder what basic services really mean. It used to mean the services one supplies only he/she get paid. To the dismay of website operators, it now means the services I must gladly serve up without the slightest glean of hope of being financially rewarded.

The business model of portal sites is the quintessential example the aforementioned situation. That is, peer competition finally gave way to a so-called "balance of terror," in which nobody was willing or, if you will, could afford to fall behind, meaning one must bulge in first and then try to come up with a viable business model.

The current Blog maniac is reminiscent of that craze, with an innocent start turning into a feeding frenzy. But any field-trip/on-site researchers would tell you that none of these Blog Service Providers (BSP) have been logging any hard cash. When asked about the business pattern they had in mind, the answer was a uniform "hasn't seen anything yet, but there is full of hope ahead." They were fooling nobody but themselves. But who can blame them? What is there to do expect following the lead blindly?

This is hardly unthinkable, since the exact same thing is happening to the ever-larger storage of free email service. That is, the definition of "basic service" has been involuntarily stretched too thin out of an unhealthy whim to please users (note: they are not consumers). In sum, with Internet comes the paradigm that money lies only with value added services.

You can get your web-based email account free, but for anything more (i.e. bigger storage, anti-virus features), you must pay; Blogs are free, but the gratuity ends strictly at blogging; Search for news during the past seven days is free of charge, that for news eight days from now or older is not.

Even the VoIP giant Skype, which is all the rage right now, dares not challenge such business model. As a result, what could have been a service that charges a fee by the minute is now a freebie. In its defense, Skype said it will seek to profit from such voice-based value added services such as voice mail or fortune-telling over Skype and other content services.

Despite everything, we are in no position to accuse Skype of defaulting on its responsibility as market leader to build a business model that carries higher profits. If Skype does not want to offer the service gratis, some other players will. In the end, competition will twist Skype's arms hard enough to force it to offer VoIP service free again. Most who came before did not have a choice; neither does Skype right now. That is, the name of this game is now officially "surviving on micro-profit."

[+] Bidding farewell to era of monopolizing lucrative business

Once online, all businesses must first and foremost deal with the pressure of price competition, and I am talking about a great deal of it. Now that one can only charge a fee for extra services, all the companies other than LV and Gucci should find this issue highly relevant.

By the time iMusic, a licit Taiwanese music download website, decided to close down after 18 months of operation, it has only logged a membership population of 100k-strong. This shows how reluctant consumers have become when it comes to paying for online music. After all, why pay when you can easily get it for free?

Unless what you sell is one-of-a-kind, or else the traditional wisdom of "product out, money in" is a law of gravity that no longer applies on the Internet. And the lesson in it is that music labels should now rethink whether they want to approach the issue of digital music authorization with the same old stuffy logic that have not induced any happy tune from any one.

What record labels can lay their finger on is but websites selling music online. The reality remains that consumers are free to download whatever rap, hip-hop, or teen pop they want. The deeply resented P2P might be beleaguered for a good reason, but what good does it do to vanquish it? One way or another, consumers will be able to get music free. It's what Internet is all about after all. Time to face the music, if you ask me. (
2005/06/11 - By Digitalwall.com - Way to
China Internet/Telecom )

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Prev : Brief Study at Portable Multimedia Player (PMP)


Next : Ultimate Mobile Device (1) Age of Hybrid Handset

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- Today in History

Web 2.0 Think Again (4) "Private Property" and "Class Inequality" - 2007/06/10

Ultimate Mobile Device (1) Age of Hybrid Handset - 2005/06/19

Pricing is a Handful for Internet Business - 2005/06/11

Three Musts of Digital Content Biz (4) Pricing by Consumers' Budget

The essence of digital content business is to turn fickle income into a stable one.

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When a certain type of digital content is finally equipped with three musts of digital content business that are the monthly fees, the community, and the real-time connection, most clients will choose to pay a monthly fee, but that doesn't mean that a company is denied the options of a multitude of pricing strategies.

The most vivid example is online game. At this point most gamers pay US$10-12 for a monthly fee card to store value in and play within 30 days of depositing of value. This makes more sense to hard-core gamers who play the game as frequently as they can, usually daily.

For less addicted players, they have the option of paying US$5 for a card carrying 150 points of playing rights. For every entry of the game, 20 points will be deducted for the right to stay logged on for one day. Consumers will do the math. For a player who habitually logs on 18 days a month, buying a monthly fee card is the better deal.

By providing these two different ways of paying for log-ons, game companies have proposed the distinction between frequent gamers and less frequent ones and treat them accordingly. Frequent players are credited with guaranteeing constant income for game companies and are therefore rewarded with lower fees than that of less frequent players.

This is the beauty of the digital content business. It used to be that game companies needed to develop standalone game one after another and have then packaged in a box and sold on the market. As there was telling a particular game would be a hit or not before launching, game companies were subject to very unstable inflow of revenues. Here is where new online game business can come to their aid. That is, the whole point of converting to digital content is that such business can help induce a periodic, say monthly, cash in-flow.

This is an idea that must sink in for the digital content business to make sense. By selling digital music song by song and digital publications book by book, even digital content business can not bring in stable and sustainable income. Therefore, digital content operators must endeavor to increase the number of monthly subscriptions so that they can rake in monthly income the way telcos do.

But for those who aren't willing to pay a periodic fee, we should have something for them. Take the IT home newsletter from the previous article for example. For people who are only interested in certain standalone articles and won't pay US$50 for an extended subscription, IT Home newsletter service offers them the option of calling a number (not toll-free) to get a temporary set of account and password, with which one can log in to read one article. The phone bill will cost you about US$ one cent per minute. To read a second article, of course, you'll have to dial again.

As far as content producers are concerned, all the production cost are calculated on the basis of a book, a song, a movie, an article, a speech, so on and so forth. This is in stark contrast with consumers' demand to be charged by the month. How can this difference be reconciled?

To locate the answer, we must look into the value chain that threads up the entire digital content industry. As illustrated below, the answer to the problem is division of labor. That is, the role of content producer and that of content distributor should be assumed by separate enterprises.

As indicated by the illustration above, an Internet book renter can charge a monthly fee of US$10 or so for unlimited access to its book collection. Every time a book is ordered and read, the renter will pay about US$30 cents to the author or the publisher. By adopting this division of labor, the issues of charging the consumers and rewarding the producers can at gotten around at the same time.

Even so, websites might be worried that a system that grants free access to all the books all the time by charging only US$10 a month might leave the business vulnerable to consumers who set his heart on taking advantage of the website. But let's now forget that there are only 24 hours in a day. How many books do you suppose one can read in a month?

The monthly fee of US$10 is but an assumption of mine. Websites in their real operations have the liberty of setting up price they find reasonable. But this liberty is as much a curse as it is a blessing for such websites, because if one charges too much, consumers would find it too expensive and won't come, but if one charges too less websites will not be able to profit as planned from the business. To find the right price, there are a number of strategies.

As illustrated above, the rates are one book for US$4 and unlimited access to the entire book collection for US$10 in this particular instance. However US$10 a month on books might pose as a burden for many. That's when US$6-7 for two books of choice comes in as such rate is in the midst of two extremes and should serve as a good compromise.

The figures here are but examples. They are to show that when setting prices for digital contents, we need to first make out the target price range on the basis of consumers' average spending on the commodity. Also, we should help ourselves to some distinction of users of varying frequencies. Such strategy can be of use to operations of other digital contents than eBooks.

The introduction of monthly payment and real-time connection can help us break the chains of selling containers but it also sets us up for the crisis of price war. Image a competing eBook rental service charges only US$8 a month when it sees you charge US$10. Once such price war begins, it will not stop until people get hurt.

At a time like this, let's not forget that once digital content business adopts the monthly payment model, its success hinges upon maintaining long-term relationship with its subscribers. That is, how can the website make consumers stick around in the fact of price competition by peers? To do that, website operators must really put their hearts to their businesses. More importantly, they must resort to the force of community to make consumers stay.

Besides, the uniqueness of the digital contents is also a key. That is, even TV news broadcasters know that nothing beats a scoop, an exclusive piece of news. The same applies to digital content business. How can I give what other can't? How can I give the same thing faster than other? These are the things that should be on the mind of digital content sellers.

Post Script: This article uses eBook as an example. But the bottleneck of eBook operations lie not in the pricing but in the fact that PC monitors have too low a resolution to serve as an appropriate platform for an extended time of reading. That is what results in its low market acceptance. But we won't touch upon that issue here. (
2004/10/03 - By Digitalwall.com - Way to
China Internet/Telecom )

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- Today in History

The Web 2.0 Revolution (6) Struggle of the Press Industry - 2006/10/08

It All Boils Down to Brand Names - 2005/10/09

Crime and Punishment of P2P (2) Fire of Greed - 2005/10/02

Three Musts of Digital Content Biz (4) Pricing by Consumers' Budget - 2004/10/03

Corporate Website a Handful (2) Division of Labor How? - 2003/10/05

Three Musts of Digital Content Biz (3) Redefining Ownership

What does it mean to own a file?

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The traditional thinking of selling the "container" has everything to do with consumers' psychological need to "own" something. I own a car-race game software when I can buy it and take it home. I own a music CD when I can buy it and stash it at home.

The seller offers the container for consumers to purchase for ownership. In an equation like this, it's only natural that the seller/producer will hold the completeness of the contents in the container in very high regard. For a music album that has ten songs, the ten songs must be in uniform in style and be arranged in a specific order, not to mention the design of the CD case and the wardrobe choice of the artist him/herself.

The same is true of newspapers, magazines, movies, PC games, curricula, you name it. The effort on the part of producers to edit or, if your will, compose the content and then have it wrapped up nice and neat in a package serves to endow the product with commercial appeal to consumers, who whip out their wallet when whey find the commodity standing as an indivisible item and a keeper.

This way of handling content, however, are being seriously challenged in the Internet age. After all, this is a time when a consumer will demand the option buying any three out of the ten songs from an album. By making such a demand, the consumer is rejecting the seven other songs that's not music to his/her ears as well as the CD case. However, by setting the music files free from the CD, people are making it possible to file owners to share them on the Internet at will, sometimes illegally.

What's being described here is a scenario in which consumers have narrowed down their unit of ownership to a song, instead of an entire CD album. With this change, the ownership of the songs tends to be diminished. It's so easy get hold of these three songs in electronic files via the Internet that people succeed in doing so won't think much of the transfer.

It used to be when a famous singer released an album that featured unique appearance and a set number of CDs released around the world, fans will go all out to get one. Even if the songs are bound to fall out of the Billboard rankings in due course, such CD will still appeal to collectors.

However, it's a far cry from that with the digital content, which can be copied an infinite number of times and then spread as far as the Internet can go. Compared to tradition existence of music on CD and movies on DVD, music and movie files, even when protected by copyright, can seem so ethereal that its ownership feels like nada.

The music downloading service has become a hit in Europe and US because it sells every song for US$0.99, which is considered cheap in Europe and US, and the files sold there are protected by copyrights. However, such a business model should run into trouble pretty soon.

How did you handle the old music CDs in your home? Those has-beens that were popular at the time and bought on the spur of the moment almost always ended up alone in a corner, never to be listened to again. Before you know it, there is a mountain of such CDs in you home, and you don't know what to do with it.

In a parallel universe, where you paid for ten music files by three recording artists every time, you will also soon become the owner of hundreds of songs in digital form. Again, new songs will keep on coming out to inundate your hard disc and push your old songs under wraps of memory, will you simply erase them or just leave them alone?

Same question, Alternatively put. If you are not a collector or someone whose heart is set upon starting a digital library since digital files hardly qualify as collectibles, what's the point of having the music download into your PC hard disk to take up storage?

Let me refresh your memory of the three musts of digital content business. They are monthly fees, community, and real-time connection. Image a place on the Internet where you can pick out songs to hear whenever you want, all the while no music files are downloaded onto your PC.

That is, all the songs are stores in a remote server, which delivers the songs you order to you only on request. When you're done listening to them, no files will be left behind in your PC. For such an all-you-can-hear service, one might be charged an annual fee of US$13 or so.

As a subscriber to such a service, you will always have the newest songs to hear and you will never need to buy any CDs, download any files, and clean out you hard disc again. ADSL broadband connection is already a household fixture now. Music is almost automatic whenever a PC is turned on. That is, it makes no difference if you have the files on your disc. They are yours on request.

This is what real-time connection is capable of. Scraping the obsession of selling containers started with giving up selling the compact disc and went on to giving up selling the files. At a time when bandwidth is no longer an issue, when music files are available through several mouse clicks, selling the music files seems simply pointless.

Earlier on, other types of digital contents have been revolutionized. Take audiovisual programs for example. Right now, Internet TV operators in Taiwan have all launched monthly fees that come in US$8-9 for an all-you-can-watch subscription. They have almost all turned profitable.

Subscribers do not need to download these programs onto their hard discs. Instead, they watch via video streaming. When they're done watching, there will be no digital leftovers in their PC. For one thing, audiovisual files are too big to be downloaded. Sure. But the truth is eBook and digital music can also find this mode of business applicable.

Only in one situation will the consumers want to download the files. That is, portable device owners might sometimes want the music files on their MP3 players or eBook files on their PDAs.

Even that may soon become redundant as future portable devices improve in capability of being connected to the Internet. In fact, almost all PDAs are Internet-ready, some via WLAN, other via GPRS nowadays, rendering it unnecessary to download digital contents on PC and then transfer them onto PDAs, as PDAs have Internet connection of their own.

When digital content is at one's fingertips any time on request, consumers virtually own the content. For people who still find this virtual ownership unacceptable, they can still fall back on CDs, books, DVDs, whose value as collectibles remains undeniable. (
2004/09/26 - By Digitalwall.com - Way to
China Internet/Telecom )

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Prev : Three Musts of Digital Content Biz (2) Stop Selling "Containers"


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- Today in History

The Web 2.0 Revolution (5) Search 3.0 - 2006/09/24

Crime and Punishment of P2P (1) Liberalization of Power - 2005/09/25

Three Musts of Digital Content Biz (3) Redefining Ownership - 2004/09/26

Corporate Website a Handful (1) Accountability Where? - 2003/09/28

Three Musts of Digital Content Biz (1) Content is Cheap

Producers of digital content, despite their key roles, are seldom sufficiently rewarded.

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If I dare say it out loud that "human wisdom is valuable but can not be put on sale for a price," I might be laughed at, lashed out at, or left unnoticed. Enlighten me on which is worse. However, with the following analysis, I intend to convert some of the readers into my believers.

Ever since the dawn of the Internet age, when all were looking for a viable business model, I have reasoned that one can not charge for information disseminated on the Internet, since throughout the history of human consumption, we have never really paid much in exchange for information.

At a free-access seminar, where a world-renowned guru had been invited as the inaugural keynote speaker, two thousand people applied for admission, which, thankfully, was not a problem as the organizer had prepared for a capacity crowd.

As there was no charge for admission, the venue, the cost of flying the guru in including board, lodging, and traffic, the remuneration for the speech itself, the compensation for the staff, not to mention advertising, including newspaper ads and print materials for on-site distribution, were almost entirely paid for by a number of corporate sponsors.

A closer look shows that of all the sponsorship, only about 10% went to the guru's speech, meaning venue, wages, ads, and travel took up 90% of the sponsorship. Considering that the guru's wisdom was the only thing that justified all the trouble of holding such a speech, this cost structure didn't really make much sense.

That is, has the organizer spent too much on things other than the wisdom of the guru? Think again. Ninety percent of the sponsorship went to facilities and advertisement, leaving only 10% as rewards to the key figure that made the whole even possible.

However, this anomaly is hardly rare in the realm of education and training industry . In fact, people have gotten so used to this anomaly that they have started to see it as normal. For a training course that lasts 36 hours for 30 trainees, its common for every one enrolled in must to pay a fee of US$600-700, of which, again, only 10% is headed for the lecturer's wallet.

Where has rest of the money gone? One must ask. The answer is the venue, the printed materials, and the advertisement. These costs and compensation to the lecturer deducted, the organizer is still left with some slim profits. Things have always been this way in the world of training and education industry .

An even more convincing example is with the publishing industry, in which a writer has to rack his brains to get a book out and be rewarded with a royalty of 10%, give or take, depending on the level of fame this particular writer enjoys. That is, if the book sells for US$6-7 a copy, the author will be cut a share of less than US$1.

That brings us back to the same old question of where has the rest of the dough goes. A closer look will reveal that there is the cost of print materials, the cost of paper, the wages of administrative staff with the publishing company, the cost of advertisement and promotion, the cost of transporting book (yes, no such thing as a walking book), the cost of warehousing (unless you own the warehouse), and finally, the publishing company would not say no to some profits.

The same situation is true of the recording industry, where lyricists and music writers get the smallest shares of the big pie, as most of the US$10 tag price that consumers pay to get the CD album goes to the compact disc, the packing, the transport, and ads before the little that's left can trickle down to those that make the product even possible.

The movie industry is no exception to the rule that content is cheap. Do you think that by buying tickets at cinemas you are being supportive of the cinematic creation? Pardon my French, but…you wish. The cruel fact of life is that most of your money is used to rent the movie theater, maintain the facilities and pay for the utilities.

For hundreds, if not thousands, of years, people have grown accustomed to such uneven distribution of profits. They don't feel a thing any more. Content might be "priceless," but there is a price for content, a low one, on the market. In the worst case, when detached from the container, content becomes really priceless, this time literally.

We have encountered too many examples of this on the Internet. At the dawn of the Internet age, someone made the first ever attempt to sell news stories on the Net, the first time in human history when news was completely detached from its paper-based carrier. The result proved disastrous as plenty people would pay 30 cents for paper, but no one would pay anything for news on the Net.

Right now, around the globe, governments are encouraging development of digital content, which is good, because once content in books, music albums, movies, and educational curricula is digitized, the transfer of it can be done through the Net to save a great deal on hardware.

Companies will no longer need to dispatch CDs over to retailers and save on packaging and transport by adopting sales of digital music; neither do companies need to ever print the wisdom of authors on paper again as there is the convenience of eBook. For educational event organizers, venue will stop being a source of cost; instead, they can channel what financial resources they have into getting as good lecturers as they can afford by providing digital learning.

However, one little thing still stands in the way to that digital paradise. Consumers' emotional attachment to containers, that is. In a world where things without something wrapped around them can hardly have a price, how can one convince consumers to whip out their wallet and pay? For people who have learned to appreciate music only contained in a CD, how can we teach him to give music in files as much credit?

The absence of hardware cost means that price can be driven down. But this is hardly enough to induce change in consumer behaviors. In fact, in an age when content is removed from containers to be sold as pure electronic files, people in the content business must have themselves undergo a makeover of thought by flushing the idea of selling things in a container down the drains and embracing a business platform built upon monthly fees.

The take-off of digital content industry hinges upon consumers' will to pay. And for consumers to pay, three pieces must fall into place. They are monthly payment, online community, and real-time connection. All three must start with online businesses' willingness to quite the obsession with selling stuff put in containers. (
2004/09/12 - By Digitalwall.com - Way to
China Internet/Telecom )

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- Today in History

The Next Step for Web 2.0 (3) Collective Will Is the Cornerstone of Everything - 2007/09/16

The Web 2.0 Revolution (4) the Google Paradigm - 2006/09/17

The Web 2.0 Revolution (3) Advertising Revenue is Not Enough - 2006/09/10

Envisioning China's 3G Market (3) Systems & Markets - 2005/09/11

Three Musts of Digital Content Biz (2) Stop Selling "Containers" - 2004/09/19

Three Musts of Digital Content Biz (1) Content is Cheap - 2004/09/12