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Lamenting the Digital Decline is a Dangerous Path

One of the biggest fallacies in the early years of the digital age was the assumption that digital content revenue would replace traditional content income on a 1:1 basis. That thinking has proven incorrect time and again, yet marketers, journalists and other pundits seem legitimately surprised anytime the 1:1 ratio fails to materialize. From eMarketer:

It was not supposed to be like this. The [music] industry had staked its future on the hope that the legitimate download business would make up for falling CD sales …

… More people than ever before are buying music, and the balance is shifting decidedly toward downloads and away from physical formats. Despite the audience in the downloading sector, the revenue math has not added up for the music industry. Per-capita music spending in the US is trending downward, offsetting the increases in the number of music buyers …

The methodology and conclusions in this eMarketer report are reasonable, but I do take issue with the need for this type of research. Seems to me we’re all well aware that digital revenue isn’t where anyone wants it to be, yet reports confirming and reconfirming this conclusion continue to materialize. If digital content was a closed experiment that could be pulled back and erased from public consciousness, I could understand the utility of research reports harping on disappointing digital revenue (i.e. “Avoid this path! Turn back!”). But the digital genie is out of the bottle — way, way out — and these days there’s no discernible upside to digital vs. traditional conclusions because traditional as we formerly knew it is not coming back.

Rather than reading the same results from yet another report, I’d rather see a broader conversation that addresses the hard-to-stomach questions:

  • Have we (insert content industry title) fully accepted the fact that the old models are gone?
  • Will digital revenue ever equal or surpass traditional revenue?
  • If yes, how do we create those revenue streams? (Note: to its credit, the eMarketer report does offer alternative revenue examples from the music industry.)
  • If no, what can we do to create sustainable businesses with less profit?

You’ll notice that none of these questions ask How can we get the old model back?. At best, that’s a futile thought experiment. At worst, it’s a dangerous diversion from the real issues at play.

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  • Steve Loughran

    This is quite amusing. I note that nobody in the digital camera business expects the same 1:1 ratio of snap to print that existed before; the old business models of the film print companies (low cost cameras, free films) have been replaced by new ones: fast camera obsolescence, optional printing, take many more photos. What is it about other industries that havent noticed the future?

  • http://www.magellanmediapartners.com Brian O'Leary

    The research that Clay Christensen and others have conducted on disruptive innovation at least partially applies here: established businesses tend to ignore, dismiss or tolerate small losses in market share to businesses that offer what is at least initially seen as lower-quality or less functional as well as lower-margin. To Steve Loughran’s point, the companies that are successful in digital photography are generally not the film-based companies (Kodak) that dominated the prior order. Publishers risk being replaced by firms whose business models are not based on the established order; the most relevant competitors probably are not other publishers.