The Critical 'I'

Read. React. Repeat.

Wednesday, December 04, 2002

How big a business is digitized, consumer-oriented media? With margins of 50% and up, DVDs have emerged as the cash cows of Hollywood studios. Meanwhile, mom-and-pop music stores are taking it on the chin thanks to the popularity of file-swapping programs.

Why the disparity? From a non-strategic/analytic viewpoint, let's look at the tale of the tape: DVDs cost an average of $15, even for new releases. They typically contain not only the original movie, but loads of extras like extra footage, interviews, commentary, etc. On the other side, CDs cost an average of 20 bucks. And let's face it, most of the time you buy it just for one, maybe two, singles on it, and the rest is filler of variable quality.

Is there really much guesswork involved here?

Actually, the difference is one of scale. Music fileswapping is widespread and pretty easy to pull off, even if you have a pretty slow dialup connection. Movie fileswapping exists, and is growing, but because the file sizes are so big, it's just not very time-effective for most people to do it. If that weren't the case, the movie business would be as up in arms over piracy as the music business is (and in fact, Hollywood is taking action against fileswapping, but in a much quieter way than their music counterparts).