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Issue: Volume: 25 Issue: 6 (June 2002)

Is Digital Media Dead?


If you look at some of the recent corporate losses and listen to some of the market analysts, you’re likely to believe that the digital media industry is as dead as a dinosaur. Consider the recent announcements that the world’s largest media company, AOL Time Warner, lost a staggering $54 billion in the first quarter of this year, the largest quarterly drop for a US business. Industry pundits were quick to point out that the media giant’s grand vision of offering Time Warner’s content to a mass market over the AOL pipeline and supporting that with advertising was a pipe dream

Are such assessments valid? And should digital media developers lay low for the next five to 10 years? Not a chance. In fact, one entrepreneur who is betting that the time for digital content distribution on the Internet has already arrived is Mark Andreessen, cofounder of Netscape and chairman of Internet technology provider LoudCloud. Also keynoting at NAB, he noted that the Nielsen ratings for Internet use in January 2002 show that Americans spent 2.3 billion hours online, half of which were over broadband connections.

Such acceptance of a new technology is rare, Andreessen contends. Usually in the development of a new market, consumer demand is unclear. At the beginning of the TV industry, no one knew whether anyone would actually want to sit in front of a little screen instead of going to a theater, he says. "When we started Netscape in 1994, we weren't too sure ourselves what the demand would be. Yet, in the last few years, consumers have stood up by the tens of millions and said they really want digital media delivered over the Internet."

Of course, in the next five to 10 years, the demand will be even greater, and so will the supply. In fact, if we apply Moore's law to digital media, we find that a $400 TiVo player, which today can store and play back 60 hours of video, will be able to store and play back 2000 hours of video in five years and 64,000 hours of video in 10 years. That represents a huge opportunity for content creators and distributors.

So what should developers do right now? Follow Andreessen's lead. First, make what people want available, legal, and easy to use. The irony of Napster is that there is no legal alternative, but there should be. Second, educate people about what's legal, just as the software industry did in its early days. Once people understand the consequences of piracy, they will be far more willing to pay a fair price for content. Third, feed the demand for digital media and bring costs down. If everyone is going to have PCs and portable players in five years that can store thousands of hours of digital content, start developing material now to meet the growth.

In the long run, the true opportunity is the billions of people who have never bought a compact disk. Making digital media ubiquitous will create a market that is larger than anything we can conceive of today. Those who roll over and play dead now will be nothing more than dust in the wind five to 10 years down the road.

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