Self-fulfilling prophecies? Or trends before their tipping points?

I’ve been spending some time reading The Internet and Consumer Choice, a report produced by the Pew Internet and American Life Project a month or two ago.

The report makes four key statements:

  • The internet helps music buyers connect with artists and learn more about music, but it doesn’t strongly influence what or how they buy
  • The internet is an influential source of information and options for those purchasing feature-rich items such as cell phones
  • The internet is an efficiency-enhancer in searching for new housing
  • Few internet users bother to rate or comment on their purchase, even for a digital good such as music

I’ve read the whole report, and I think there’s a deeper point to be made here.

When it comes to physical goods, the internet reduces search costs and informs the buyer, but fulfilment does not necessarily take place there. While the ability of the internet to disintermediate continues to grow, the fact is that disintermediation is not the norm as far as physical goods are concerned. Where it does take place for physical goods, the drivers tend to be simplicity and convenience of engagement and breadth of inventory rather than price and distribution capacity.

But when it comes to physical goods that have a digital alter-ego, I think the story is completely different. I think the digital world can and will strongly influence buying decisions for such goods. If the digital world was allowed to. Particularly with music and film, and increasingly with magazines and books, people are going to be influenced in their physical purchases by the nature of access they have to their digital counterparts. So I don’t buy the first point made in the Pew report. I think the market here is not about searching and finding, it’s about tasting and coming back for more. And I don’t mean a trailer or sampler model either, I’m talking about access to the whole thing.

There’s a big Because Effect looming here, a big abundance-versus-scarcity tension. Makes me think of the restaurant business. I get the impression that many restaurants make their money on the liquor and soft drinks they sell, and loss-lead on the food. They’re in the business of keeping their customer satisfied, and making money as a result. They don’t care whether they make money on the food or not, as long as they have satisfied loyal customers and they make money overall.

Merchandising and memorabilia have been around for a long time. So when it comes to music and films, the money may well continue to migrate to physical goods like merchandising and memorabilia, with the Kevin Kelly “Better Than Free” model coming more and more into play. Immediacy and authenticity will command greater premiums.

More later. There’s some stuff I want to share on one aspect of this, primary and secondary markets for memorabilia and suchlike.

Let me know what you think

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