Is Ownership Passé?

The upcom­ing release of a Kin­dle brings to mind an inter­est­ing new wrin­kle in the way dig­i­tal assets are traded: Tra­di­tion­ally, music, movies, and books were “owned goods” which were more expen­sive but fully owned. With the rise of the itunes music store, Net­flix, the Kin­dle, and oth­ers, our own­er­ship soci­ety seems to be started a slide towards a new mode of being: a rental society.

Tra­di­tion­ally, the model or rent vs. own has been one that most con­sumers and com­pa­nies have mostly con­sid­ered when it came to real estate (and tra­di­tion­ally, peo­ple have looked at rent­ing real estate as more nor­mal than own­ing, with the pos­si­ble excep­tion of the last cou­ple of decades, dur­ing which real estate own­er­ship appeared more attrac­tive). But today, that con­cept seems to be increas­ingly extend­ing to other arenas.

Net­flix

For exam­ple, Net­flix has build a very solid model around rent­ing movies over the Inter­net. True enough, many peo­ple will men­tion that rental of media dates back to the early days of the video store and were a sub­stan­tial com­po­nent in the rise of com­pa­nies like Block­buster (born Block­buster Video). True also that said com­pa­nies have been falling on hard times lately. But the sub­stan­tial dif­fer­ence between what Net­flix offers and the tra­di­tional rental model is focused on con­ve­nience: one could argue that Netflix’s orig­i­nal busi­ness model was largely cen­tered around the dis­tri­b­u­tion of phys­i­cal media (the DVDs them­selves) but I would argue that the true suc­cess of Net­flix will be due largely to its dig­i­tal dis­tri­b­u­tion model, allow­ing for instant dis­tri­b­u­tion of movies and TV shows with the click of a few but­tons. The instant (and the empha­sis here needs to be put on instant) access to a large media col­lec­tion can eas­ily call into ques­tion the con­cept of own­ing sim­i­lar con­tent in a phys­i­cal form: What is the advan­tage of hav­ing a phys­i­cal copy of a movie sit­ting on your shelf, col­lect­ing dust most of the time, when the same movie is avail­able at the touch of a remote con­trol but­ton from the Internet?

How­ever, the chal­lenge in such con­cept is that once some­one stops pay­ing Net­flix, the access to said col­lec­tion dis­ap­pears. An owned movie is paid for upfront and can be watched time and time again by a con­sumer but a rented one can only be watched as long as one keeps pay­ing the owner rent­ing party.

Apple

With Apple’s recent move to sell music tracks with­out any dig­i­tal rights man­age­ment fea­tures on it, one could safely assume that Apple is not in the rental busi­ness. Apple’s move was largely a response to Amazon’s own mar­ket­ing around sell­ing DRM-Free music but it is inter­est­ing to note that, while the restric­tions on music went away, the same was not true of sim­i­lar restric­tions around music videos, movies, and TV shows. The lock-in that appears here is sim­i­lar to that which exist with Net­flix in that if you decide to end your rela­tion­ship with Apple, the media you bought will stop work­ing. Under such restricted mode, can one really assume that he/she owns the media he/she purchased?

Sim­i­larly, Apple is rent­ing out, in part­ner­ship with telecom­mu­ni­ca­tion ven­dors like AT&T, an inge­nious device called the iPhone. The rea­son I would call it a rental model is that use of the device is lim­ited by the part­ners to peo­ple who have paid the ini­tial fee and con­tinue to pay a fee to the telecom­mu­ni­ca­tion provider on a reg­u­lar basis. It is a model that exists for most phone providers, as devices tend to be tied to a spe­cific ven­dor. Once again, peo­ple will high­light that it is pos­si­ble to get rid of that lock-in with soft­ware but I will counter that doing so is a vio­la­tion of the con­tract terms of the device, void­ing war­ranty and your agree­ment with Apple. To claim oth­er­wise would be sim­i­lar to say­ing that every­one has access to as much money as they want, as long as they are will­ing to rob banks. (In the inter­est of dis­clo­sure, I should high­light here that I own an iPhone which is not con­nected to the “autho­rized provider”.)

Going a lit­tle fur­ther, Apple gets to lock-in who can and can­not play on an iPhone, only allow­ing devel­op­ers who sub­mit them­selves to Apple’s whim and offer­ing what is some­times only tem­po­rary access to the user­base as release of every update to a prod­uct still has to go through Apple’s review. In other words, Apple gives devel­op­ers tem­po­rary access to the iPhone user base, an access it can choose to revoke at any time.

The Ama­zon Kindle

All this con­ver­sa­tion bring us to Ama­zon and a cou­ple of its prod­ucts, start­ing with the Kin­dle, which serves as the incen­tive for writ­ing this lenghthy post. The Kin­dle, much like the iPhone is a pretty impres­sive device, bring­ing sev­eral tech­nolo­gies (always on device, e-ink) out of the labs and into more main­stream con­sump­tion. And like the iPhone, it has both fans and detrac­tors. And once again, the Kin­dle offers an inter­est­ing kind of lock-in, allow­ing you to read titles pur­chased on the kin­dle (or through the iPhone kin­dle soft­ware) but allow­ing you access for only as long as you keep a rela­tion­ship with Ama­zon. Where the model moves to rental is around mag­a­zines and news­pa­pers: you may pur­chase sub­scrip­tions but, should your Kin­dle be com­pletely full as a result of your sub­scrip­tion, you may loose access to the back issues you “own”.

But Amazon’s move to a rental model is not just around the kin­dle device. On the con­sumer end, Ama­zon now play in the same spaces as Apple and Net­flix, rent­ing out or sell­ing dig­i­tal ver­sions of movies, TV shows, and music.

Rent­ing at the Enter­prise Level

In other exam­ple of the evolv­ing trend mov­ing from the con­sumer to the enter­prise space, Ama­zon is now rent­ing itself, or rather por­tions of its own oper­at­ing capac­ity, to any­one will­ing to pay a fee. Its infra­struc­ture (stor­age, com­put­ing, and data­bases ) are all avail­able to orga­ni­za­tions who are will­ing to put their appli­ca­tion on top of Amazon’s own servers. Ama­zon offers sim­i­lar solu­tions for pay­ment ser­vices, and goes as far as pro­vid­ing space in their ware­houses along with com­plete pick, pack and ship capa­bil­i­ties.

The infra­struc­ture com­po­nent is part of a trend in which enter­prise ven­dors are now pro­vid­ing data cen­ter capa­bil­i­ties on a per data trans­ac­tion cost­ing model. For many Chief Tech­ni­cal or Chief Infor­ma­tion Offi­cer, it changes the basic ques­tions around data cen­ter from a “Build vs. Buy” to “Build vs. Buy vs. Rent”.

In the process, it also changes the dynam­ics of how a busi­ness can be built as a sub­stan­tial por­tion of a company’s activ­i­ties can now be out­sourced to out­side play­ers (I’ll go into more details around the enter­prise related issues in my next post)

Is it all bad?

If you read this far, you might assume that, by this point, I’m going to claim that this is all about the over-reach of DRM and that it is all a hor­ri­ble thing.

I’m not.

What I am try­ing to high­light here is that the expe­ri­ence around inter­net dri­ven goods is chang­ing. As con­nec­tiv­ity speeds increase, the abil­ity to access any movie/TV show/video/ music clip/ books / mag­a­zines / etc is going to have a sub­stan­tial impact on our rela­tion­ship to said goods (in a fash­ion sim­i­lar to the type of rela­tion­ship kids now have to music, assum­ing that music on the Inter­net ought to be free of restric­tions, while at the same time assum­ing that mobile phone ring­tones are some­thing one ought to pay for).

The change in our rela­tion­ship to media forces us to reassess the value of the phys­i­cal good. In the case of our house­hold, we have made a leap of faith, assum­ing that the con­tent of cer­tain DVDs will always be avail­able online from one rental provider or another. The rea­son for that approach is that the expe­ri­ence of watch­ing such thing on our TV using an inter­net con­nected video player is not dimin­ished by the lack of a phys­i­cal medium. Liv­ing in a more con­strained space (in Man­hat­tan, space is always at a pre­mium), the phys­i­cal­ity of a DVD box is actu­ally an imped­i­ment to the expe­ri­ence of the medium. As a result, the inter­net con­nec­tiv­ity, and the rental model, appears to make much more sense than the phys­i­cal own­er­ship of DVD boxes.

In the same way, the value of a CD col­lec­tion is in what’s on the CD rather than the plas­tic con­tainer it’s in. Much of the value of the phys­i­cal con­tainer of music has decreased: in the past, LPs were designed and the wrap­ing of the LP was almost has impor­tant to the expe­ri­ence as the music itself. How­ever, as CDs reduced the size of the cases, and music pro­duc­tion com­pa­nies spend less time on design­ing cus­tom boxes, phys­i­cal CDs became more of a com­mod­ity, with the music on them being the only thing that truly dis­tin­guished one CD from another.

But what about books, mag­a­zines, and newspapers?

To a large extent, I would ven­ture that the rela­tion­ship we have with mag­a­zines or news­pa­pers is dif­fer­ent from that of a book. When I first saw the Kin­dle, I was not attracted to it because I could read books on it but rather because I might be able to sub­scribe to news­pa­pers or mag­a­zines. The clear line falls in the arena of expe­ri­ence: with a few excep­tions, mag­a­zines and news­pa­pers are read and then dis­carded. The ephemeral nature of that expe­ri­ence arche­type seems to make such rela­tion­ship a prime can­di­date for dig­i­ti­za­tion: Once again, the con­ve­nience of some­thing like a Kin­dle seems to trump the expe­ri­ence of hav­ing to fold a news­pa­per in a crowded sub­way or the guilt asso­ci­ated with recy­cling large amount of newsprint or mag­a­zines on a reg­u­lar basis: because the intrisic value of news­pa­pers or mag­a­zines is as con­vey­ors of tem­po­ral infor­ma­tion that now appears to be archiv­able and retrie­ve­able online, the need for own­er­ship of that data appears to be lowered.

Books, on the other hand, are a dif­fer­ent issue. Ref­er­ence books may lend them­selves to a good dig­i­ti­z­able model (O’Reilly, for exam­ple, has had suc­cess with its Safari offer­ing, as have ency­clo­pe­dias like Brit­tan­ica and the OED) but fic­tion books may be in a dif­fer­ent class. The book as object may be falling into the same class as those ancient LPs, being designed as a full object rather than just its con­tent and rental of such good (though peo­ple will men­tion that books have been some­thing you can bor­row from a library for a long time) may take longer to break through as the advan­tage of read­ing such a book on a Kin­dle is not nec­es­sar­ily higher than that of a phys­i­cal good. I may be roman­tic in my think­ing, attach­ing to books not only the con­tent and the pack­ag­ing but its expe­ri­ence in a greater space, as each book I own has, in itself, a num­ber of mem­o­ries attached, in the form of sand from a beach where it was read, or wrin­kles from being car­ried on a trip or fold mark­ing and writ­ings from a par­tic­u­lar era. In those rare cases, the books serve as con­tain­ers for more than the sto­ries they held when first pre­sented on a book­shelf or through the online pre­sen­ta­tion they had: they are con­tain­ers of a full expe­ri­ence and that, at this point, is not yet some­thing that any dig­i­tal device (whether it is a kin­dle or other) has yet been able to reproduce.

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