Executives Ponder Digital Economics, Eroding Scarcity

The digital disruption is generating high levels of uncertainty, and most businesses and entrepreneurs are charting a foggy course.

Attendees at the Digital Summit in Nashville on Tuesday were consumed with a contentious and unsettled body of rights and licensing procedures, a situation that prevails despite ever-ramping levels of illegal content acquisition.  As formats mature, so will licensing arrangements, though bigger questions continue to cloud the prospects of paid music platforms.  That includes the once-celebrated paid download, a format that is now nearing the three billion mark.

That sounds like a big number, though the cumulative tally took years to achieve, raising concerns that a broader, sustainable segment may never materialize.  Discussing P2P-based file-sharing volumes, BigChampagne vice president of Sales and Marketing Joe Fleisher estimated that monthly swaps easily cross one billion.  Quoting IFPI estimates of swapping levels across a number of different protocols, Fleisher also tossed a larger figure of three billion, a tally that surpasses the total number of purchased tracks since 2003.

According to Fleisher, the comparison is a critical one to make, and highlights a fundamental flaw with paid models: lack of scarcity.  “Competing with free means you have lost,” Fleisher declared, a depressing possibility for many startups.  Referencing basic supply-and-demand curves, the executive noted that the recording industry now lacks a way restrict access to its product, and that is marginalizing a number of paid concepts.  Others disagreed, including PassAlong Networks cofounder Dave Jaworski.  PassAlong offers backend digital music ecommerce services, including a platform that allows real-time price variation based on consumer demand.  Surveying the landscape, Jaworski noted that digital formats are largely incompatible, a frustrating reality that could be dampening adoption.  “The CD is easier to use than the digital file,” Jaworski said, a state of affairs that could change if labels shift away from DRM.

Story by editor Paul Resnikoff, on location in Nashville, TN.