OPINION: Special delivery

It has been an interesting week of contrasts in the world of digital delivery.

At the E3 show in Los Angeles, both Microsoft and Sony made news with announcements of expanded movie and TV download offerings for Xbox Live and the PlayStation Network, respectively.

Up the Coast in Seattle, meanwhile, Amazon made news with the beta launch of a new video streaming service called Amazon Video On Demand, which will, at some point presumably, replace its current Unbox download service, which has so far largely failed to catch on.

The different approaches to delivering digital content—downloading for Microsoft and Sony vs. streaming for Amazon—suggests we’re beginning to see some sorting out of roles among different types of actors in the digital economy to fill different consumer needs.

That, in turn, could require content owners to start to differentiate the licensing deals they strike with the different types of players, even though they’re all in the business of delivering digital content to consumers.

The download offerings being promoted by Microsoft and Sony are a natural extension of the two game-console makers’ device-centric view of the digital living room.

Both are seeking to position their consoles as entertainment hubs that can handle multiple jobs, from playing games, to streaming content over a home network, to acquiring content from the Internet.

Both have worked to pack ever-larger hard drives into their consoles to bolster their roles has home media servers as much as to enhance game play.

In their model, content—particularly locally stored content—enhances the consumer value proposition of the device by leveraging the device’s functionality: Now that you have the content on your hard drive, you can do a lot of cool things with it. You can play it back at will, you can stream it, you can (usually) transfer it to another device, you can archive it, play-list it and even copy it for a friend (although Microsoft and Sony would never condone that last one, of course). It’s an accessory—sold separately and having value only in relation to the device.

The premium placed on local storage by the device-centric model also makes the often-lengthy and cumbersome download process more tolerable. The goal is to get the content onto the device, whatever it takes, and let the device provide the convenience and accessibility.

Amazon, on the other hand, isn’t in the device business, apart from the Kindle e-book reader. As far as digital delivery is concerned, it’s a service provider. It’s selling access to presumptively valuable content.

Unlike the device-centric model, local storage doesn’t add much value to a service. Thus, the vicissitudes of downloading—from the lengthy transfer times to the delay in starting playback and the need for a separate application for viewing—become far more problematic.

By switching to a streaming model, Amazon will be in a position to leverage recent advances in in-browser streaming such as (ironically enough) Microsoft’s Silverlight platform, as well as peer-assisted platforms such as BitTorrent DNA, to provide a service that looks and feels more like traditional video services such as cable TV and broadcast.

Streaming puts a premium on the service and the content rather than on the functionality of the device being used to view the content.

Right now, content owners tend to treat streaming and downloading as equivalent for licensing purposes, despite the differences in how and where in the two systems that value is created and captured.

That could start to change however, as the industry and consumers gradually sort out the different roles each plays in the digital economy.