Page 152 - Electronic Commerce

Selling on the Web

software, called Digital Rights Management (DRM) software, that limited the number of
copies that could be made of each audio file.
In 2007, the Amazon MP3 store was the first major online retailer to offer music
tracks from several major recording companies in DRM-free MP3 format. Since then, most
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other online music stores have followed Amazon’s lead and now offer their music in DRM-
free, compatible file formats. After years of suffering declines due to illegal copying, the
music industry in 2013 reported that sales of recorded music had increased for the first
time in 14 years, although the 2013 sales of $16.5 million were substantially below the
1999 peak of $38 billion.

Online Video
Digital video can be sold or rented online as either a file download or as a streaming
video. DRM software provides control over the number of copies that can be made of the
downloaded video, the devices on which the video can be installed, and restrictions on
how long the video remains available for watching. Videos offered for sale online include
previously released movies, television shows, and programming that is developed
specifically for the online market.
In the past, video sales have been limited by three main issues: the large size of video
files (which can make download times long and streaming feeds uneven), concern that
such sales might impair other sales of the video, and technological barriers that prevent
downloaded videos from being played on a variety of devices. Online businesses have been
working to overcome these issues and have had some success in addressing all three
issues.
First, videos are still the largest types of files that are regularly transmitted on the
Internet, but companies are continually experimenting with technologies that improve the
delivery of large files and video streams. You will learn more about these content delivery
enhancement technologies, pioneered by companies such as Akamai, Amazon.com, and
Google, in Chapter 8.
Second, the companies that produce media are learning more about how online
distribution fits into their overall revenue strategy. Movies were released traditionally by
the major Hollywood studios (20th Century Fox, Paramount, Sony, Walt Disney, Warner
Brothers, and Universal) into different markets in a well-defined pattern. Movies were first
distributed to theaters, which paid a high price for the right to show the movie first. After
its initial theater run, the movie might then have been sold to airlines for in-flight
showings and to premium cable channels such as HBO or Starz. Next, the movie was
released on DVD and became available for purchase or rental through retail video stores.
Eventually, the movie was sold to broadcast television stations and basic cable channels.
This serial release pattern was designed to provide the movie’s creators with the highest
revenue obtainable at each point in the life of the product. The major studios released
movies in this pattern for years, out of fear that any online distribution might steal sales
away from one of their traditional outlets. These media producers now are experimenting
with alternative distribution strategies. Some are now releasing movies online and on DVD
simultaneously. As the number of online content distributors that charge either a

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