A Call to End Format Wars, Boost on Demand and Untether Digital Downloads

The music, television, movie and consumer electronics industries (hereafter collectively referred to as the industry) have been struggling with the rapid advance of technology and the new virtuality of content. Here are the top eight things the industry should do to harness the technology and recapture the simple tenet of giving the customer what they want.

1. End format wars.

When a new format is needed to advance the industry to the next level, there should be one and only one format that goes to market and becomes the standard. This applies to both online virtual formats and offline physical formats.

The current example in physical formats is Blu-ray vs. HD DVD. Two formats were necessary at first to spur competition, but the differences between them at this point are so negligible that ultimately one has to win for either to succeed. A standards body needs to exist to allow competition at first and to oversee a limited beta period to ensure customer opinions are factored in, but then to ultimately pick a winner before full-scale market launch. Companies should be required to register candidate formats in the early stages. The standards body should track investment and invention level of each candidate along the way. Then a winner should be chosen with a percentage of the licensing revenue going to all of the candidates commensurate with their investment and invention level. The candidates either agree to these terms from the get-go or they do not participate in determining and profiting from the next generation format.

The current example in virtual formats is mp3 vs. AAC vs. WMA vs. yet others for audio, and mpeg-4 (H.264) vs. WMV (VC-1) vs. yet others for video. The industry should have standardized on mp3 and mpeg-4 a long time ago to ensure that all content will be universally playable on every device.

Correcting this immediately is essential. The industry should get a standards body in place as soon as possible and declare much overdue industry standards, such as Blu-ray, mp3 and mpeg-4. The marketplace will rejoice, sales will skyrocket and the floodgates will open on the dam the industry itself has been one of the largest contributors to building.

2. Offer three consumption models.

a. Offer all content free with ads.

All content should be available on demand all the time free with ads. The best examples of this so far are music videos at mtv.com and music.yahoo.com and TV shows at in2tv.aol.com. The worst examples of this are the television networks who still insist on having their content time expire after only a short period of availability. Networks should use the ad model to make their entire catalog of shows, current and past, available for free all the time. All media stores, such as iTunes, should also introduce the option of listening to or watching a brief ad per 10 minutes of content or so in order to enjoy the entire content rather than just short preview clips.

b. Rent all content without ads for a fee.

This is the same as 2a only without the ads for a fee. The best examples of this so far are Netflix and Yahoo! Music Unlimited. With the former, for as low as $8.99 per month, you can rent any movie in the store, and that now includes some that can be watched directly online. With the latter, for as low as $5.99 per month, you can listen to every song in the store as many times as you want with no ads. All media stores and sites should offer this option.

c. Sell all content Digital Rights Management(DRM, or copy protection)-free.

There will still always be a market for owning content outright, such as for those times where you just don't have an Internet connection or don't want to be tethered to a server. In these cases, for both online virtual formats and offline physical formats, DRM simply should go. It has proven to hamper sales significantly due to treating everyday paying customers as if they are pirates, restricting them to play back the content on too few devices, giving them the chore of backing up and managing licenses on their computer and violating their fair use rights. DRM will always be defeatable and the industry simply needs to stop investing an inordinate amount of time and money into something that has a negative impact on their bottom line. The industry should abandon it and get back to the basic premise of allowing the customer the joy of experiencing the content they paid for without any strings attached. The best example of this so far is EMI which is now allowing media stores to sell their songs DRM-free.

3. Wireless Internet-enable all devices.

The computer cannot be the only access point. TVs, cable boxes, disc players, DVRs, game consoles, portables, boom boxes, phones, car head units - in short all playback devices - should come with built-in wireless connection to the Internet for access to content servers. The best examples of this so far are the Playstation 3 and the iPhone/iPod touch Wi-Fi Music Store.

4. Allow playlists to be defined and stored on the servers.

What 2a and 2b do is move us away from the need to store and manage our own copies of the content on our client devices (or on our shelves). Moving playlists off of the clients is a natural extension of that. When we can dial up all content including our favorite playlists on demand all the time anywhere we have an Internet connection, the convenience of not having to permanently store and backup our own copies of the data will start to prevail. The best example of this so far is Yahoo! Music Jukebox.

5. Offer movies by the chapter in addition to whole.

Just as the norm is now to be able to buy individual songs rather than just whole albums, the same option should be available for buying the individual chapters of movies. Doing so would offer the same advantages as individual song sales - the ability to collect favorite chapters at lower cost and storage use, the ability to direct-access chapters on playback and the ability to arrange favorite chapters from various movies into playlists. Note that this would require players to pre-cache the next chapter to ensure gapless chapter-to-chapter playback, but that is certainly doable.

6. Offer a choice of bitrates.

Highly compressed bitrates were fine at first, but there is no doubt that even with today's bandwidth and storage (which will only grow with time), those who want to enjoy higher bitrates should have the option. With 2a and 2b, bandwidth is the primary factor, and clearly higher bitrates are possible even today. With 2c online formats, storage is also a factor, but even with today's capacities some may choose quality over quantity for must-have content.

7. Piggyback audio on video for physical formats.

The industry moving to a new physical format is a big undertaking. Assuming a new HD format succeeds for video, then audio should just piggyback on that success. The video format will obviously have enough capacity for audio, and consumers will not have to buy additional players. Previous HD audio attempts of DVD-Audio and Super Audio CD failed for several reasons - separate audio-only players, no single digital connection such as HDMI, format war, etc. - all of which can be avoided once either Blu-ray or HD DVD is declared the standard. Albums in uncompressed PCM, both 2-channel stereo and multi-channel surround, with HD extras such as music videos, live concert footage and still photos all played through an existing player with single HDMI connection would be very compelling. With lossless compression such as Dolby TrueHD, perhaps entire album box sets could fit on one disc. These are exciting new possibilities.

8. Leverage viral marketing.

This is an extension of 2a. Provide url-addressability to free ad-coupled content that sites anywhere can provide links to - it essentially equates to free marketing for you. It doesn't matter from where the eyeballs found the content, just that they found it. More eyeballs means more ad revenue in your pocket and more exposure that will lead to the eventual purchase of the content and related merchandise such as concert tickets, t-shirts, posters, action figures, toys, etc. A free ad-supported lure has always been necessary (radio and TV) for widespread exposure. The best examples of this so far are music videos at mtv.com and music.yahoo.com and TV shows at in2tv.aol.com. Music, movies and all TV programs should get on board and realize the massive new source of constant ad revenue never before possible without the new technology.

These eight things would take the industry out of its current slump and carry it into unprecedented growth territory.