Friday, September 08, 2006

Amazon Unboxed

I know I'm a bit late on the scene with this comment, but there was a sentence in an article about online movie rentals which appeared shortly before Amazon Unbox d├ębuted which I found a little strange:
The reason Amazon will have content from most major studios, while Apple may have only one, comes down to price, insiders said. Because it also sells DVDs, Amazon has agreed to studio demands that digital wholesale prices not undercut those of DVDs. As a result, Amazon.com's digital download prices are expected to range from $9.99 to $19.99 -- about the same as those for other online retailers such as CinemaNow, Movielink and AOL.
I know I'm a simple-minded no-business-knowledge twerp, but: Why should digital wholesale prices not undercut those of DVDs? I don't mean here that, as a consumer, I deserve lower prices for my digital downloads (although it's easy to think I do); but rather, why would a studio even be concerned with this? I heard lots of arguments over on Slashdot that the apparent savings in price for digital sales isn't really as considerable as it seems -- that is, that the packaging and pressing involved in providing a physical disc aren't really all that expensive -- and I can believe that, although I think it neglects the considerable financial advantage (reaping which is, as I understand it, a large part of Amazon's business model) to a retailer of not having to maintain a physical brick-and-mortar presence -- but surely it can't be more expensive to sell a digital product than a physical one? (I set aside the initial cost of developing the (snort snicker) uncrackable DRM with which the downloads are certainly laden.) My wife came up with two suggestions, in both of which I find merit:
  • The bandwidth costs associated with providing tremendous files for download (especially since, to have your download on the two computers allowed, Amazon actually requires you to download it twice) might offset the other savings mentioned above.
  • The studio executives are so scared of the adjective 'digital' that they shrink in their seats like vampires before garlic and cry "No, it burns, it burns!"
The first suggestion I find a sober and considered one, except that, it seems to me, the bandwidth costs would be borne by Amazon (which is actually providing the downloads), not the movie studios (which are simply presenting Amazon with their finished products). The second solution I find eminently believable, and suspect is the actual reason, except that I wonder: If they're so paralysed by their fear of piracy, even when soothed by the calming ministrations of DRM vendors, that they will do everything they can to discourage people from actually buying these downloads -- I'm even granting them here their ridiculous obsession with crippling DRM, and just talking now about the price -- then why make the downloads available at all?

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