Amazon Unbox - Terms Undermine Value

By Richard Menta 9/20/06

Value is what consumers expect most when they make a purchase. Violate that sense of value and they will walk away every time. As Digital Music News editor Paul Resnikoff pointed out a few months ago there are people who spend $50,000 on a car and half-a-million on a house, but won't spend $20 for a CD. So when Cory Doctorow of BoingBoing went on his very angry tear through the legal agreement that accompanies Amazon's new movie service Amazon Unbox I couldn't help but think how the people who insist on including draconian terms for the release of digital media are only undermining there own attempts to make money.

But, the market has a way of leveling the playing field, and when it comes to consumers it can be brutal.

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Both the record and movie industries insist on the most controlling digital rights management schemes and it appears one of their strategies is to have their legal teams parse every mundane activity into a separate set of license permissions. Want to record a TV show? That will require a record license. Want the right to use a product like SlingBox to watch the Met game while on business in South Dakota? That will require a space shift license. Some in the media are excited by this because they believe this will generate new lines of revenue. Doctorow points to a comment made by an MPAA Vice President during DRM negotiations he sat through. The VP said "Watching a show that's being received in one room while you're sitting in another room has value, and if it has value, we should be able to charge money for it."

He's right, you CAN charge for it. The trick is actually getting enough consumers to pay.

We all have our different opinions of what constitutes value. Having a Lexus logo on a car is worth several thousand dollars to some folk, even if they are fully aware it is only a rebadged Toyota with luxury features added. Value is both real and perceived. The reviews of Amazon Unbox so far have been universally bad, with CNNmoney calling it a "horrow show" of low service and absurd restrictions. It was those restrictions, as detailed by Doctorow, that make me wonder how Hollywood can continue to be its worst enemy and not realize it.

Yesterday Apple announced the early success of their pay movie service. It is not the first movie-download service, both CinemaNow and MusicLink have long preceeded it, but it is the first one to achieve some form of mass acceptance. Most of the stories I read about say Apple's difficulties with signing the other studios has been over price. Amazon's licensing terms suggest to me that the restrictions the other studios want to foist on an iTunes movie service are also a significant point of contention.

Apple is all about delivering value, even when its products are more expensive that others. I have not had a chance to read the Apple-Disney terms for its movie service - for all I know it is just as restrictive as Amazon Unbox's - but the iTunes brand already delivers a sense of value to its regular customers and that carries over to any new service it debuts. Recent research shows that a high percentage of iPod owners shun iTunes, so that sense of value is not universal even for the most "successful" of paid content services. Apple, of course, is restrained by the terms it had to accept just to secure this content, but the music and movie industries are not all to blame. The fact that the music sold on iTunes will only play on iPods rings sour even for those who only own iPods. Overly restrictive terms restrict Apple's mass market appeal too.

As consumers our past experiences with products and services go a long way towards defining our expectations that make up that thing we call value. Decades of VCR and phonograph record use already define it for movie and music media. New restrictions delivered through creative licensing, abysmal DRM strategies and potential law like Broadcast Flag only violate those expectations. Furthermore, file sharing and other online activities reinforce for many the attitude that the significantly reduced distribution costs brought about by the Internet should mean we pay less for content, not more.

Amazon Unbox will survive only if it delivers value to enough consumers. If it doesn't it will bleed money and perish, it's as simple as that. If it dies that's a setback to the movie industry, whose only recourse is to re-evaluate the terms and conditions they offer. In other words the market will adjust.

Other MP3 stories:
Some Thoughts on Zune
iPod: Handicapping the 6th Generation


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