Sunday, October 10, 2004

Infinite Shelf Space

Here's a really interesting Wired article about a phenomenon that might be the start of a seismic shift in the entertainment industry, away from purely hit-based economics and toward a more niche-based market, as online delivery and ordering eliminate the constraint of physical shelf space. For example, they point out that a Barnes & Noble generally carries about 130,000, but that over half of Amazon's book sales are from titles outside of its top 130,000. Now, there's probably a selection effect going on here - Amazon is selling more of those titles because customers can't just grab them at their local Barnes & Noble, and thanks to Amazon's discounted rates, it's usually advantageous to order from Amazon rather than to place a special order at a local store. So the article may be somewhat overestimating the size of the market for niche products. But the article does make some very interesting points, and ones that I've made before.

For example, they suggest that video/computer game companies could offer old, outdated games, with no support or guarantees, as, say, 99-cent downloads. I've posted about this before - I believe there is a market for "nostalgia" games that is not currently being served (at least, not legally). It's intellectual property that is currently making its owners absolutely nothing, and (usually) long ago covered the development costs (or else was just written off as a money-loser), so they have nothing to lose by offering it online for a few cents more than the cost of server space and bandwidth. As long as you charge enough to cover those minimal costs, anything above that is pure profit, just sitting there waiting to be grabbed. I'd actually go even further, beyond the "old games" part of the market. I have a feeling there are quite a few people out there who would be willing to pay, say, $50 or $100 for an older, out-of-date, but legal version of something like Maya or 3DS Max. No printed documentation, no technical support, just the software. Production costs are minimal (CD duplication, assuming you don't just offer it as download-only), and it isn't as though old versions of your software are making you any money now. I may have more on this particular subject in the future.

The author of the Wired article does perhaps underplay the distinction between online merchants who sell or rent physical artifacts, like Amazon and Netflix, and those who deal in purely digital information, like iTunes. Still, that distinction will narrow as things progress. With the advancement of things like print-to-order, even those who want physical, bound books will be able to get them without the seller having to spend money on storage space for them.

(And once again, Frank Zappa was way ahead of his time. In his book, he talks about a system he proposed, back before there was even an internet, where people would buy music through some sort of recording device hooked up to the phone. He could never get investors interested in it, though...)

1 comment:

Chameleon said...

I completely agree as far as back catalogues and old games are concerned. Pacman, Space Invaders, Defender and the like possess a certain innocent charm and are appealing to the teenagers of today if my son is anything to go by (I have consistently attempted to steep him in his cultural heritage by force-feeding him with Dr. Who and the like, which he has expressed gratitude for). As an ex-patriot living in a non-English speaking country Amazon is a true godsend (far too easy to spend a fortune in just a few clicks), my only carp about it being that it does not offer a true custom recommendations service - by which I mean that as a sociologist I might welcome an e-mail update on the latest work by Zygmunt Bauman, for example. Strolling into the Waterstones flagship in London will reveal a host of titles I would have remained unaware of if I did not occasionally supplement my digital peregrinations through Amazon space with wanderings in the real space counterpart. Yes, the author's point about the tyranny of the physical world is well made (I need to fork out the price of a Eurostar fare and a hotel room in exchange for a weekend in London).