From Analogue Dollars to Digital Dimes

ImageThe seismic shift in consumer buying patterns is being felt everywhere but is especially prevalent in all areas where digitisation of content and services is possible.

The first, and so far the best, example has been the music industry.

During the late 90’s and early 2000’s the music industry first began to encounter the increased digitalisation of content. The first evidence was Napster. Initially founded as a music streaming service without the record labels support it became synonymous with piracy, even though it was initially meant for easy sharing of legally purchased music. The Napster problem was partially solved by the Apple’s iTunes store, offering individual songs for 99c. The real significance of iTunes was not that it solved the digital piracy problem but that it offered music in smaller digital chunks. Arguably buying individual songs, mix and match albums, personalised compilations and the inevitable duplication that results from copy protection amongst users with multiple devices has led to higher sales of music.

Similar transformations have started with books – although not quite to the same extent.

Even internet access is starting to go this way. As mobile operators battle with the capacity crunch that smartphones are bringing some have responded by selling “internet in packets”, i.e. 30 minutes of Facebook access for a few cents versus an “all you can eat” data plan.

This heralds the future for digital services.

Digitisation allows the breaking of content and services into smaller and more definite chunks. Why pay for a complete album when I only want 2 favorite tracks? Why pay for access to the entire internet when I only want Facebook and Twitter? What happens if I only use the internet at night – why should I pay an extra tax for not using it during the day when everyone else does?

 

The consumer trend is very clear – they want access to anything, anytime and they want it for free (or as close to free as practical). Companies like Google are forcing down the cost of accces in the US, they want to give information away for free as long as they get the advertising dollars. STL, a UK consultancy, are preaching the 2-sided business model as a way for telcos to participate in this new world, the Telco2.0 world. Chris Anderson from Wired magazine writes about the new phenomenon of “freemium” services, i.e. the lure of a free service that delivers 90% of what you want but asks you to pay for the premium edition.

 

My credit card statement is littered with small transactions, $5 or less, from Google PlayStore, iTunes, Apps Store, Amazon and many other online retailers. I am spending more and more by small transactions.

So the future is the Digital Dime … from a product catalogue of thousands to millions of widgets, all selling for a fraction of what the few products you originally had are. This is the Long Tail in evidence and we all have to adapt to it.

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