OPINION: Reviving retail in a digital media world
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By Anthony Bay -- Video Business, 10/3/2007
OCT. 3 | When online digital content originally debuted in the marketplace, many predicted the impending demise of retail. For many of us, though, those predictions bring to mind Mark Twain’s famous quote: “The rumors of my death have been greatly exaggerated.”
Bay
If you recall, some predicted “bricks and mortar” banks would disappear with the introduction of the ATM. Instead, ATMs have radically changed the banking experience, and consumers rely on a mix of tellers, self-service ATMs and online banking to meet their needs.
Similarly, the arrival of digital cameras and home photo printers did not spell the end of commercial photo printing. Web sites allow consumers to send in their photos and have them returned by mail, or to send in their photos for pickup at a local store. In fact, the demand for self service photo kiosks in retail has grown rapidly at the same time home photo printers and Internet photo sites have become more pervasive.
In travel, a similar phenomenon has occurred. It started with online check-in and seat selection for airline flights, followed by the rapid deployment of airport check-in kiosks. Travelers now have the option of self service at home, self service at the airport or hotel or service by staff personnel.
Digital entertainment in retail will follow a similar model. Though not all the pieces are in place today, the opportunities are becoming clearer, the technology more widely available, and business strategies and best practices are being developed.
Physical retailers now have a unique opportunity to create a compelling atmosphere for consumers to sample, buy and download digital content. This means every consumer, not just the technologically savvy, can participate. It means every retailer, not just the traditional entertainment and electronics stores, can leverage it. Downloads in retail stores expand the marketplace and introduce revenue opportunities for a whole new ecosystem of players.
The recent decision by the DVD Copy Control Assn. (DVD CCA) to license on-demand manufacturing of DVDs opens up a new world of opportunity for retailers. For the first time, retailers will be able to legally create CSS copy-protected DVDs on a custom basis for playback on existing DVD players.
Retailers will have the ability to stock a “virtual” catalog of titles—including both the newest and catalog content, as well as content never before available on DVD or by download. This broadened combination of physical and digital inventory means that consumers are more likely to find the titles they want, less likely to leave empty-handed. And that’s good for everyone.
Now, the real business can begin
With this licensing hurdle behind us, the real business of bringing digital entertainment content to consumers via the retail channel can get underway.
There are several key business issues that retailers, together with the content providers and technology platform providers, now need to address for the business to move forward. Some of these include:
• Establishing pricing models for the content as well as a process for managing the many complexities of ingesting content and paying royalties
• Making sure compelling content is available—from educational programming to the latest releases, to DIY, sports, local coverage and more.
• Offering the ability to search, sample and purchase from both the in-store and online selling channels. How will this new digital delivery system be integrated? Can customers order online and pick up in store? How will your retail store serve as a hub by providing multiple modes of delivery?
• Can video content be bundled, such as with soundtracks or other movies? Can advertising be inserted? Is there the ability to add user-created content to personalize the final product?
• Providing an engaging customer experience with responsive touch-screen kiosks that provide all the features and functions customers have come to expect.
• Measuring the impact of implementation and store configuration models. Where will customer manufacturing kiosks be located: in aisle, on endcaps, in different departments, a centralized lounge area or a combination? How will sales associates be involved in the process? What happens if a terminal goes down?
• Establishing success criteria, such as how many downloads or burns are needed to reach your ROI goals or how long should a “buy” take? How do you best leverage these data points and apply them to different locations?
• Experimenting with delivery to different devices, such as digitally to mobile devices and flash storage, in addition to burning DVDs. What does that mean for playback and how is the ecosystem of providers, platforms and devices developed?
The retail industry is embarking on an exciting new digital era. While there are certainly many questions to be answered, success will come as more and more consumers are provided with easy, affordable access to more of the content they want, in a range of environments outside the home. More than ever, individual consumers are driving the market, and retail merchandising outlets of digital content will broaden consumer choice.
The bottom line is physical retail locations are needed. They’re more than needed—they’re pivotal to the success of the on-demand digital media world.
Mark Twain was right: rumors of the death of the retail store are grossly exaggerated.
Anthony Bay, chairman and co-founder of MOD Systems (www.modsystems.com ), brings more than 25 years of experience as a technology executive and private venture investor previously serving as executive chairman of Loudeye Corporation, a leading provider of business-to-business systems and services for the digital media industry, which was acquired by Nokia in 2006. Mr. Bay spent six years with Microsoft, last serving as corporate VP and general manager of the Digital Media Division, and as a member of Microsoft’s executive staff. In addition, Mr. Bay worked for a number of years for Apple Computer.
