# Monday, 01 February 2010

The content middle men (Hollywood studios, record labels, book publishers, etc) are suspicious of digital content. I predicted last month that they will fight back this year against digital distribution, most notably against Netflix and Amazon. Last month Warner Brothers held Netflix hostage and threatened to withhold its content unless Netflix held back new releases for 30 days. Netflix had no choice but to capitulate.

Inspired by their motion picture brothers’ success with Netflix, book publisher Macmillan recently held Amazon hostage. They threatened to withhold their entire collection of books, print and digital, unless Amazon raised their prices for the Kindle. Amazon challenged, but lost and yesterday had to capitulate as well. New books from Macmillan will now cost between $12.99 and $14.99 for the kindle. (FYI, Steve Jobs of Apple said that the iPad’s pricing model will be identical to Amazon as well.) I am now embarrassed that my first book was a Macmillan imprint.

You can’t blame Netflix and Amazon, they had a gun to their head. They are pioneering a new way to legally consume digital content, so we always knew that the middle men would fight back. While the studios hold all the power today, that will not be the case tomorrow.  People who use Netflix never go back to the old model, same with the Kindle. (I say, if it is not on the Kindle, it doesn’t exist.) As Kindles, iPods, iPads, Sony eReaders, etc, all grow in numbers, the studios and publishers will no longer be in a superior position, and the market will remember the barriers they are putting up today. This day is almost here, my 68 year old uncle now streams movies with Netflix.  My parents get the Kindle. My mom has an iPod. An entire generation is now growing up with iTunes and Kindles-my 13 year old niece will not leave the house without her iPod and Kindle.

Today consumers and innovation lost a battle. But the war is far from over.

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