Should we buy or rent bits?
Saturday, March 17, 2007 at 12:48PM I say it makes sense to rent TV shows and movies - and sometimes software - but not to rent music. It all comes down to how often and for what period of time you think you'll use those bits and bytes.
Steve Johnson over at Pragmatic Marketing quotes Don Tapscott of Mercury News about music as a service. Don imagines a day when for a few dollars a month we could "get access anytime, on any device, anywhere, to any music ever recorded." He goes on to describe a kind of smart internet radio, where a variety of songs is played based on your preferences, ratings, mood, activities, etc. This idea has been around for a long time and is currently embodied in such services as Pandora and Yahoo Launchcast.
Given how close these services already are to the music nirvana Don describes, why aren't these services nearly as successful as the iPod? It might be just insecurity about access to the network. My iPod works wherever I am regardless of net access. But music phones have near-universal access to the network and they are still selling MP3s for download to the phone rather than charging a fee for listening. The iPhone has a hard drive. Even Mercora, a startup that streams music to your smartphone, does so from your personal MP3 library on your PC.
Netflix, on the other hand, is a highly successful bit-rental business. What's the difference? My theory is it has to do with permanence - with how often and for how long you expect to want access to the content. Netflix is great for watching whole seasons of TV shows I missed when they were broadcast or movies I didn't get to see in the theater. It has entirely stopped me buying DVDs because I recognize I won't watch them again. (The dusty shelf of pre-Netflix DVDs in your family room stands silent testament to the truth of this. Admit it to yourself.)
Music is completely different. I listen to the songs I buy on CD or through iTunes over and over again. I rate them and have my favorites and my playlists. If I were to lose my library of music built carefully since high school, I'd be devastated. I'm not sure I could organize and access music the same way with a service, but even if I could, the day my subscription lapsed or the service went out of business, I'd have nothing.
So I'm suggesting some bits are for renting and some are for owning. You rent the ones you think you'll only use once or for a short period of time. You own the ones you want to reuse many times or over a long period of time. It's a sort of hotel room vs. homestead argument. Let's test this theory on software. Most of us have been buying perpetual licenses to software for years but more and more the industry has been moving to monthly or annual fees for services. Why is that?
I contend that with rental software most of the time one is not so much renting bits as actually hiring a service. More and more corporations are outsourcing their entire IT efforts and paying fees to have their systems developed, hosted and managed by firms that specialize in that work. The bits are only a small part of what they are renting. The rest is the hardware, the expertise, and the bodies needed - the services related to the bits. (One proof of this is that many SaaS providers, including my employer ATG, offer a deal where you can buy a perpetual software license but pay monthly for the hosting service. Companies are hedging their bets on how long they will want what parts of the total package.)
This is part of a healthy move toward companies concentrating on their core strengths, but it's also a recognition that technologies (and the services they are part of) change so quickly, you may not want to keep them forever. Companies want to have the flexibility to change service providers if their business changes or if a better provider comes along. This is much more like my relationship with Netflix than my purchase of music.
It does make me wonder, though, how well Apple will fare with iTunes movies and TV shows. I think AppleTV sounds like a super-convenient way to access my bits (music, photos, home movies) from my TV. And I think downloading TV shows and movies sounds more convenient than waiting for them to come in the mail from NetFlix. But do I want to pay to own those bits and to store them on my hard drive forever the way I do my MP3 collection? Maybe Amazon Unbox on TiVo is a smarter solution.
What's your vote? Buy or rent bits? Post your comments with the Comments link below.
Reader Comments (2)
I'd vote for rent.. no way i'm gonna keep my bits for next decade