By Richard Menta 8/15/07
Trust is one of the most critical components of commerce. When a supplier of a product violates the trust of his customers it not only undermines his ability to sell in the marketplace, it undermines the value those customers derive from the product itself. If the violation of trust is injurious enough, customers may eschew all products of similar type as a "fool me once" perspective takes hold. That's what Google may have done to the paid movie download business as a whole when it shut down that section of its Google Video service that sells movie downloads. Before I go into why let us first turn to the recent toy scandal that's riding on page one of the press this week.
Toy companies Mattel and Playskool are right now in a panic. It was discovered that some of their Chinese-made toys were painted with lead-based paint, a highly toxic concoction outlawed in this country for years. The use of this paint not only threatens the health of children it now threatens the health of both companies and quite possibly the entire toy industry. That's because most toys sold today in the US are manufactured in China where labor costs are low and regulatory controls are nearly non-existent. This lack of regulatory oversight allowed some less-that-reputable Chinese factories to ignore well established commerce rules for safety. The end result is a scandal that has mothers worldwide boycotting toys with Made in China stamped on them. As the USA Today wrote in its August 15th 2007 article titled Mattel's Stellar Reputation Tainted, "Mattel, one of the most trusted names in toys, suddenly finds its consumer trust in a free fall."
But it's China itself that stands to suffer the most, even more than the toy industry. The scandal follows highly publicized news of tainted Chinese pet food and tooth paste, leading cautious consumers to specifically look for and avoid Chinese products. Sure, Chinese-made iPods will continue to sell, but parents don't give $300 electronic devices to their kids to suck on. Products that can be ingested are another story and these industries now have business pressures that could lead to a significant corporate pull out of China. That's because the damage done is so great it might simply be easier to shift location than attempt to rebuild trust in Chinese goods. That bad business practices can threaten not just an entire industry but an emerging economic super power perfectly illustrates the magnitude the most severe violations of consumer trust can take.
So how does this relate to Google Video? When Google Video failed to draw enough consumer dollars to its DTO/DTR (download-to-own/rent) business the company decided to call it quits. As a business move that makes perfect sense. But there was a dirty little secret that those who did choose to patronize the site were hit with and it is leaving a very bad taste in many mouths. Google sent its DTO/DTR customers this note:
As a valued Google user, we're contacting you with some important information about the videos you've purchased or rented from Google Video. In an effort to improve all Google services, we will no longer offer the ability to buy or rent videos for download from Google Video, ending the DTO/DTR (download-to-own/rent) program. This change will be effective August 15, 2007.
To fully account for the video purchases you made before July 18, 2007, we are providing you with a Google Checkout bonus for $5.00. Your bonus expires in 60 days, and you can use it at the stores listed here: http://www.google.com/checkout/signupwelcome.html. The minimum purchase amount must be equal to or greater than your bonus amount, before shipping and tax.
After August 15, 2007, you will no longer be able to view your purchased or rented videos.
If you have further questions or requests, please do not hesitate to contact us. Thank you for your continued support.
The Google Video Team
Google did not give full refunds when it decided to revoke consumer ownership of these movies, an issue that is as much the heart of a bigger problem as the act of cancelling their customer's right to continue to enjoy what they paid for. These movies are wrapped in a digital rights management scheme that allows Google to remotely render them inoperable. Details of how this works are unreleased, but most likely every time a user views one of Google Video DTO files it "phones home" to Google Video to be re-validated. Google Video will no longer supply this re-validation, without which the movies will no longer play.
When a consumer pays full price to "own" a feature film, it is implied that an entity cannot come along and just take that property away. Doing so violates the customer's expectations. Many argue it's theft. This is what digital pundits Cory Doctorow and John C. Dvorak are calling it. Dvorak called for the Attorney General to step in while Doctorow wants to unleash the class-action lawyers. But I suspect the collateral damage done will prove to be greater than anything the judicial system can inflict. That damage comes in the form of what Google Video DTO's public post-mortem actions did to consumer perception of the pay download market.
As a consumer, if you purchase a digital movie file online only to have it unexpectedly repossessed you will probably think twice before ever buying any such download again. If you do consider it again it certainly will not be for the same price as before. Experience made these downloads worth far less to you. So what are feature films that can be revoked at any time worth in the market place? Content that was marketed to the consumer as something they keep, but in reality was just an extended rental with an undefined term of possession.
To some Google Video customers the value of a movie download dropped all the way down to zero. They decided they won't make that mistake again. Considering that they were part of the segment of the video viewing public who actively paid for movie downloads no statement could be more damning. As for the rest, they may buy, but they won't pay nearly as much. They can take a chance for a couple of bucks, but the fact they now view it as taking a chance insidiously weakens the ability for this market to grow into a vibrant one. That's bad news for a movie industry trying to wean BitTorrent users away from file sharing.
Had Google given full refunds it might have been different as there is no loss incurred by the user, but a gain as they did ultimately hold possession without charge. This doesn't mean users wouldn't be angry that their files evaporated, just that the fiery rhetoric might not be so loud. But it is loud an this has led to an informed public left with the knowledge that any movie download they buy in the future is inherently perishable. That will only make it much harder for future services to convince consumers to part with their dollars.
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