Sunday, October 4, 2009

iTunes v Foxtel

I know; there is no battle between iTunes and Foxtel (yet) but it seems like a good attention grabbing headline. The relevant point here is that Foxtel is releasing a new service where subscribers can download movies and TV programs. Although the service has its drawbacks, it sounds like the next big thing to me.

Whenever I see innovation like this, I can’t help but see it as another example of economics in action. It also makes me wonder what industries will be next to leap into the downloadable marketplace. Given that music and books have taken the leap, probably in response to pirated downloads, movies were an obvious candidate to jump soon. But what next?

This trend in downloadable consumption has me envisioning the possible future response by households and electronics manufacturers. In my future home, a large computer-like device – an all purpose downloading, storage, playing machine, hooked up to a nice widescreen, with decent sound system – will emerge to replace the current mishmash of home entertainment systems, DVD and CD players, computers, sound systems, phones and faxes. iiNet has made a significant step in this direct by combining a phone, modem and wireless router together in a reasonably affordable package. It is only another step to combine this with significant storage space and output to LCD screens, and sound systems, and a simple operating system to manage and play files, and we have my future. No doubt, the Nintendo, Playstation and other gaming consoles will merge with this all-in-one media computer.

While many of the functions of this future machine are available on current home computers (with some peripherals), developing a streamline way of combining this functionality that is accessible to the computer illiterate opens up a significant market. To make this centralised system work with multiple users, most householders will also have a laptop to use a secondary player that will access the home network.

While people may baulk at the excessive consumption of electionics gadgetry, this technology invasion actually replaces and streamlines previous consumption. No more wandering the aisles of bookstore, music stores, or wasting time channel surfing.

There must be significant welfare benefits to the shift to downloadable consumption, and that makes the little economist in me very satisfied.

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