Digital Media in 2012


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daunting picture of the near future of digital media:

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  • Digital music made up 35% of all music sales in the first half of 2009, and “is steadily gaining ground—NPD MusicWatch says that's up from 20% of sales in 2007 and 30% in 2008.” ibid. “ According to a report by Forrester Research, U.S. digital music sales — downloads and subscriptions — will grow at a compound annual growth rate of 17 percent over the next five years, putting digital music on track to make up 41 percent of the music market in 2013.” “ Digital music sales will grow at a compound annual growth rate of 23 percent over the next five years, reaching $4.8 billion in revenue by 2012, but will fail to make up for the continuing steady decline in CD sales.”,1769,1200,00.html As of 2009, “65% percent of teenagers are streaming music regularly, with more 14 to 18 year olds (31%) listening to streamed music on their computer every day compared with music fans overall (18%).” This indicates a continued growth in digital music consumption as this market group ages. Downloads comprised 21% of the audiobook market in 2008. Downloads have comprised a larger percentage of the audiobook market every year (14% in 2006, 17% in 2007, and 21% in 2008). This number is expected to continue growing. Ebook sales are approaching 3-8% of total book sales. Ebooks currently account for 30-40% of sales of most popular books on Amazon, and rising. Kindle sales account for 35% of all book sales for books that have a Kindle version available. Kindle revenues are expected to double between 2009 and 2010 to $983 million. By the end of 2009, there will be 3 million dedicated e-reader devices in the U.S. “ E-readers are on track to penetrate about a third of the U.S. adult book-reading population in five years, up from only 1 percent penetration in 2008.” “Credit Suisse expects Amazon, specifically, will sell 1.8 million Kindle e-readers in 2009, increasing to 2.9 million in 2010 and up to 8.5 million in 2014, marking a compound annual growth rate of 36.4 percent.” The market is expected to roughly double each year: “The total U.S. e-book wholesale industry will grow from $52.3 million in 2008 to $196.6 million in 2009, reaching $1.8 billion in 2014.” Sales in June 2009 were up 136% over June 2008, and have been steadily and exponentially rising with no end in sight. around-the-corner “ According to a recent report from survey company In-Stat of the US, total global shipments of dedicated eBook readers will hit 28.6 million units in 2013,” a 30-fold increase over 2008. With new reading devices, features continually being developed, and new publishers joining every day, “there is every reason to think the growth will gain additional impetus.” ibid. “ Online video is still just 1% to 3% of the overall video viewing, with traditional TV viewing the dominant player,” but record numbers of viewers are being set each month. ibid. In 2009 total video streams climbed 31.4% from 2008 to 11.2 billion, with a 14.2% increase in unique viewers to 136 million Credit Suisse projected YouTube will serve 75 billion video streams in 2009, up 38% compared with last year. Digital video is showing huge and continued growth, as YouTube is now the second highest ranking search engine, above Yahoo.
  • As of 2005: About 36 million Americans—or 27% of internet users—say they download either music or video files and about half of them have found ways outside of traditional peer-to-peer networks or paid online services to swap their files, according to the most recent survey of the Pew Internet & American Life Project. As of 2007: "30% of youth admit to illegally downloading music, down from 32% in 2006, and a remarkable 53% in 2004." As of 2008: In a recent Pew Internet Project survey, 15% of online adults admitted to downloading or sharing files using peer-to-peer or BitTorrent. As of 2009, "... less than a third of teenagers are now illegally downloading music, the survey suggests. In January this year 26% of 14 to 18 year olds admitted filesharing at least once a month."
  • DRMed/DRM-Free Music: In 2004, record companies were extremely cautious of selling digital music, and required the use of DRM. In 2005, eMusic, which would have accounted for around 10% of the digital market, was DRM-free. The switch to DRM-free has been extremely recent. As of 2009, adding together the iTunes store, which accounts for 69% of the digital market, Amazon's MP3 store, which accounts for 8% of the digital market, and eMusic, which accounts for 10% of the digital market, means at least 87% of the digital music market is currently DRM-free. As the four major music labels have just committed to eliminating DRM in 2009, this number is expected to extend beyond these major sites, and DRM should virtually disappear.   Audiobooks: The sale of DRM-free audiobooks was virtually unheard of prior to 2007; a 1% figure for 2005 seems generous. As of 2009, most major audiobook publishers, with the exception of Audible, have made some percentage of their audiobooks DRM-free. Many of these top publishers have signed on to making their entire catalog DRM-free; a 50% figure for the year seems reasonable. With such a large number of major publishers signed on, and speculation that Audible may move in that direction, major growth (up to 75%) is likely through 2012.   Books: Only a very small number of minor publishers offered DRM-free books for sale in 2005 (1%). As of 2009, Amazon controls around 70% of the ebook market, which is entirely DRMed and showing no sign of change. Of the remaining 25%, Sony eBooks, the only other major ebook contender, is going DRM-free. Ten percent of the overall market being DRM-free seems reasonable. Microsoft has also committed to graduating to DRM-free; another 5% of DRM-free growth by 2012 (without any movement by Amazon) seems reasonable.   Videos: There has been essentially no development of DRM-free digital video for sale. EMusic is looking into DRM-free video in the future, and there is some speculation that YouTube may develop this in the future as well. With no concrete plans outside of eMusic, it is unlikely that more than 5% of the total video market will be comprised of digital downloads. “ When Apple approached record companies about selling their music digitally five years ago, they "were extremely cautious and required Apple to protect their music from being illegally copied", according to Steve Job’s recollection of the process. That meant using digital rights management (DRM) - a software wrapper - to protect songs from unlimited copying.” In 2006, eMusic accounted for 11% of the digital music market, with a full DRM-free catalog. All songs in the iTunes Store are now DRM-free. The iTunes Store owns 69 percent of the digital music market. Amazon's MP3 store is a distant second with 8 percent.” ibid. Amazon songs have been DRM-free since 2008. eMusic accounts for around 10% of the digital music market. With the four big music labels now committed to eliminating digital rights management (DRM), DRM-free music will extend beyond pioneer to Apple iTunes and the other major online music sites. eMusic’s “audiobook catalogue has surpassed 7,000 titles”, all DRM-free, as Recorded Books and HighBridge Audio have signed on to DRM-free. 90% of Random House and 7% of OverDrive titles are DRM-free. Some percentage of Random House Audio, Blackstone Audiobooks, Hachette Book Group and Books in Motion titles are DRM-free. HarperAudio and S&S are testing DRM-free titles at eMusic. Simply Audiobooks, the second largest online retailer of digital audiobooks (behind Audible) will be offering DRM free audiobooks with the goal of making its entire catalog DRM free. Penguin Group, the second-largest publisher in the United States behind Random House, also plans to provide all their titles DRM-free. ibid. With Amazon’s switch to DRM-free, there is speculation Audible may eventually move in that direction. DRM-free audiobooks are on the rise. “ Audiobook publishers look to drop DRM.” Many major audiobook publishers are already trying it out on some scale, with those numbers likely to increase. A very small number of publishers offered DRM-free books in 2005. Amazon, whose ebooks are entirely DRMed, may hold 70% of the ebook market. A handful of small sites offer DRM-free ebooks for sale. “ Microsoft has committed to make its ebooks DRM-free” “ Apple chief executive Steve Jobs may be pushing for music labels to lift copyright protection on digital music but he doesn't appear so eager to do the same for video content, despite his position as the largest shareholder in Walt Disney.” "Video is pretty different from music right now because the video industry does not distribute 90 percent of their content DRM free. Never has. So I think they are in a pretty different situation and I wouldn't hold it to a parallel at all." eMusic is looking into selling DRM-free video in the future.  
  • Digital Media in 2012

    1. 2. Media in 2012 <ul><li>Cartwright Reed </li></ul><ul><li>VP Product Dev & Solutions </li></ul>
    2. 3. Ingram Intro <ul><li>Ingram Micro. Global distribution of micro-component parts </li></ul><ul><li>Ingram Entertainment . Distribution of video and DVD product </li></ul><ul><li>Ingram Barge . Largest inland shipper in the U.S. </li></ul><ul><li>Ingram Content Companies: </li></ul><ul><li>Ingram Book – Largest book distributor in the world </li></ul><ul><li>Lightning Source – Largest on-demand book manufacturer </li></ul><ul><li>Ingram Digital – Largest independent distributor of digital content </li></ul>
    3. 4. Introduction <ul><li>By 2012, if you are listening, reading, or watching you will be more likely to be doing it on the Internet than not. </li></ul><ul><li>This presentation will describe how we got here, how we’ll get there and what to do about it. </li></ul>References for statistics in the notes section of each slide. Market, digital and DRM numbers are indicative, not definitive
    4. 5. How we got here <ul><li>“ It’ll hurt, buster. It’ll hurt!” </li></ul><ul><li>-Hitchhiker’s Guide to the Galaxy </li></ul>
    5. 6. <ul><li>There are three clearly defined stages in the physical to digital media transition: </li></ul><ul><li>“ Physical media is better than digital media” </li></ul><ul><li>“ We can control how people use our digital media” </li></ul><ul><li>“ Did you see that tweet?&quot; </li></ul>
    6. 7. <ul><li>There are three clearly defined stages in the physical to digital media transition: </li></ul><ul><li>“ Physical media is better than digital media” </li></ul>
    7. 8. Physical Media Costs <ul><li>EX: Typical Physical Book Cost </li></ul><ul><ul><li>Production / Delivery / Use </li></ul></ul><ul><ul><li>$6 / $.50 / $0 (Integrated/Cheap Reader) </li></ul></ul><ul><ul><li>Cost for 100 Books </li></ul></ul><ul><ul><li>$650 </li></ul></ul>
    8. 9. Digital Media Costs <ul><li>EX: Typical Digital Book Cost </li></ul><ul><ul><li>Production / Delivery / Use </li></ul></ul><ul><ul><li>$0 / $.01 / $0 </li></ul></ul><ul><ul><li>(excluding one time device charge) </li></ul></ul><ul><ul><li>Cost for 100 Books </li></ul></ul><ul><ul><li>$1 </li></ul></ul>
    9. 10. Blame Apple <ul><li>Before the iPod, nobody was too worried about digital media. </li></ul><ul><li>“ Digital music distribution will not emerge as a mainstream consumer technology until it overcomes major obstacles.” </li></ul><ul><li>- Jupiter Communications (1999) </li></ul>
    10. 11. Apple Model <ul><li>to transition a media market you need: </li></ul><ul><ul><li>A device with a good user experience </li></ul></ul><ul><ul><li>A store with enough good content </li></ul></ul><ul><ul><li>A delivery system that reliably and quickly gets you your content </li></ul></ul>
    11. 12. The Result (1)
    12. 13. The Result (2) Apple (AAPL)
    13. 14. Media Schadenfreude <ul><li>“ Newspapers aren’t like Music” </li></ul><ul><li>“ Books aren’t like Music” </li></ul><ul><li>“ Movies aren’t like Music” </li></ul><ul><li>“ Audiobooks aren’t like Music” </li></ul>
    14. 15. Fail.* 2009 2012 Music Audiobooks Books Videos Red: physical content Blue: digital content *See slide notes for references Unit Sales
    15. 16. <ul><li>There are three clearly defined stages in the physical to digital media transition: </li></ul><ul><li>“ Physical media is better than digital media” </li></ul><ul><li>“ We can control how people use our digital media” </li></ul>
    16. 17. Controlling Media <ul><li>DRM (Digital Rights Management) is the name for mechanisms used by publishers and device manufacturers to prevent the easy copying of a digital title. </li></ul><ul><li>...But all it takes is one person to successfully copy and share that title to make it generally available </li></ul>
    17. 18. A Case In Point <ul><li>Driving in America </li></ul><ul><li>Clearly Defined Speed Limits for Cars </li></ul><ul><li>Significant Cost Associated With Noncompliance </li></ul><ul><li>61.3% of all Americans exceed speed limits on a regular basis* </li></ul>*
    18. 19. Speeding & Digital Content <ul><li>Top Three Reasons Why People Speed (or Copy Digital Files)* </li></ul><ul><li>I Get Where/What I Want </li></ul><ul><li>It’s Easy </li></ul><ul><li>Who Does It Hurt? </li></ul>
    19. 20. Q <ul><li>If the government installed regulators on all cars to prevent speeding, and a hacker discovered that you could disable the regulator by honking the car horn for exactly three seconds, how many people would honk their horn and speed? </li></ul>
    20. 21. A <ul><li>A Big Number% </li></ul><ul><li>-between a third and half of all adults on the Internet use download sites or P2P to avoid paying for content. </li></ul>
    21. 22. <ul><li>So How Effective Is DRM? </li></ul>
    22. 23. Fail.* 2005 2012 Music Audiobooks Books Videos 2009 Red: DRMed content Blue: DRM-free content Unit Sales *See slide notes for references
    23. 24. Why The Variation <ul><li>Device, Content, Delivery </li></ul><ul><li>Music/Audiobooks: iPod, iTunes, iTunes Sync </li></ul><ul><li>Books: Kindle, On-Device Store, On-Demand Books </li></ul><ul><li>Videos: Tablet, On-Device Store, Streamed Video </li></ul>
    24. 25. <ul><li>Getting Ready for 2012 </li></ul>
    25. 26. <ul><li>There are three clearly defined stages in the physical to digital media transition: </li></ul><ul><li>“ Physical media is better than digital media” </li></ul><ul><li>“ We can control how people use our digital media” </li></ul><ul><li>“ Did you see that tweet?&quot; </li></ul>
    26. 27. DRM-Free is not Enough <ul><li>Today, digital content consists of static digital files. </li></ul><ul><li>If the only differentiation between digital media vendors is price, how do vendors differentiate? </li></ul>
    27. 28. The Race to the Bottom <ul><li>Oct 23, ‘09 – “Late last week, announced it would sell the 10 most anticipated new books for $10 via its online retail site,, as pre-orders. Amazon quickly matched that price, prompting to lower its price to $9. Amazon matched that price, and responded again. Target's online retail arm has also jumped into the fray, charging $8.99 for the titles. Today, prices those 10 titles at $8.98…” </li></ul>
    28. 29. What is (Nearly) Free? <ul><li>Production </li></ul><ul><li>Distribution </li></ul><ul><li>Discovery </li></ul>
    29. 30. Dynamic Content Examples Realationships Cory Doctorow Real Time Neuro Now Reintermediation Pride & Prejudice & Zombies
    30. 31. The Basics <ul><li>1. Do something that others aren’t doing for free and charge for it. </li></ul><ul><li>2. Repeat </li></ul>
    31. 32. Summary <ul><li>Charles Dickens , A Tale of Two Cities </li></ul>It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to heaven, we were all going direct the other way
    32. 33. Thank you! <ul><li>Twitter: @cart </li></ul><ul><li>Email: [email_address] </li></ul><ul><li>Call: +1 484-434-6634 </li></ul>