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Microsoft has not yet taken a stand on DRM issues nor have the defined their strategies for dealing with the intricacies of RIAA and NARAS as it relates to the content purchased. As a result, consumers vary of the RIAA and NARAS are taking a much more cautious approach to adopting the Microsoft digital music store as a result. There is a very good chance however that Microsoft will concentrate on an aggressive strategy to eventually attain DRM-free status of their downloads while also appeasing the legal entities that dominate this industry. Their challenges and the series of efforts they will need to make in order for this entire strategy to be successful will be fascinating to watch evolve over the coming years. Yet these two examples illustrate a fundamental fact about the future of Internet-based distribution of music and digital media, and that is only larger, more vertically oriented corporations will be able to underwrite the significant expenses of supporting such a global digital content ecosystem online.
The Future of Digital Media & Entertainment Distribution over the Internet
Video content and its implications on the product and service strategies of Apple, Microsoft, Sony and any additional competitors that attempt to launch businesses in this sector are being planned by each of these companies today. Apple's lead however on DRM for music and video is already formidable. First from the standpoint of their catalog of digital songs and videos online on iTunes, and second, their product strategy is beginning to entirely reflect the flexibility customers have in playing music and video. There are several strategic decisions Apple made about their product strategy years ago that are just beginning to pay off from a monetization of their digital media and entertainment strategy today. First, the broader development of digitization of video across iPod and iTunes needs to be a catalyst of future growth for the company. Second, the development of Apple TV platforms including the development of an Apple Personal Video Recorder (PVR) is critical. Apple TV needs to also have an HDTV equivalent and the ability to receive, not just play back recorded content. Third, there is significant expansion in the area of video-capable mobile devices. Approximately 80% of all Apple iPod units sold in the last quarter or 2008 are capable of playing video, expanding the installed base of video-enabled devices to nearly 50 million units in 2007, increasing from 19 million through all of calendar 2006. Fourth, the company has significant potential to completely re-define their content provider and partnership strategies by concentrating on populating iTunes with fresh musical and video content. The existing laptop business is 50% of iTunes revenue and shows potential through 2010 through the existing product roadmap (Apple Investor Relations, 2009).
While peer-to-peer music sharing sites have been proven in court to be in violation of the RIAA and NARAS requirements, the growth of entire product-service ecosystems including iTunes and the upcoming online Microsoft music store show that DRMs' proprietary nature may be waning over time as the monetization of digital music continues. Microsoft's strategy is too late for the market unless they acquire digital music sources that could possibly include Hulu.com and even a given networks' content as well. The consolidation of the digital music industry however will be occurring more rapidly now that DRM-free songs are being increasingly sold and repurposed. The greatest potential of growth however is in the area of providing entire digital music ecosystems that can quickly support video as well, as iTunes has discovered.
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