I don’t want to be so strident. At first, I thought that content holders weren’t taking the tectonic potential of these services seriously. I now believe it’s just the opposite. Looking at their model, it’s almost engineered to make digital delivery the least appealing option.

That’s Tycho at PennyArcade railing against the high price of digital delivery. The more I read up on the economics here, the more I realize that it isn’t so much that the media companies don’t get it; they do. The problem is that right now, so much of their revenues come from DVDs, and DVDs are sold at Wal-Mart and other brick and mortar retailers (but especially Wal-Mart), who see direct-to-the-home as a competitor. The reason studios and networks can’t deliver reasonably priced downloads to the home isn’t because they don’t want to, it’s because their “distribution partners,” who make a fortune off of DVDs, won’t let them.

Categories: Distribution, Entertainment Media, Information Economics