Don't jump off the cliff

December 12, 2010
For an informed view on connected entertainment in the UK & Ireland, visit Cue Entertainment 

The 1958 Walt Disney film “White Wilderness” helped fix the popular misconception that lemmings commit mass suicide when food supplies run low. Although the filmmakers thought the folk tale to be true when they staged the sequence by herding lemmings over a cliff, 50 years of authentic wildlife documentaries have taught us not believe everything we see.

The current rush towards the cliff edge of online trading bears some resemblance to myth about the lemmings as businesses large and small bow to what they perceive as the inevitable and shutter their high street stores. By doing so, they may help to create a self-fulfilling prophesy as fewer and fewer opportunities to browse physical product add weight to an acceptance that discs are dead and everyone shops on the internet.

While there can be no doubt that the next few weeks will see a boom in online sales, the dramatic drop in half-year performance at both MBL and HMV is as much a symptom of a loss of management confidence as it is in public appetite for packaged media. HMV CEO Simon Fox blames the decline in computer games for the mediocre performance of the group but CD and DVD sales are down too.

The tone of one analyst’s comment in the Evening Standard newspaper sums up the general response, “The group’s products are made for the internet, whilst the supermarket operators continue to utilise entertainment products as shop window offerings.” In other words, “Why bother with the high street? It’s over!”

As they scan the results from HMV and MBL, financial analysts and media commentators conclude that “everyone is moving online” but in their haste to write off bricks and mortar stores they underestimate the potential consequences. The average UK household might spend just over £1,000 a year online, according to Ofcom, but even if 100% of the population had 24-hour superfast connections to the internet, most people leave the house from time to time to shop.

Retail distribution in towns, cities and shopping malls makes sense simply because it gives producers large and small the opportunity to parade their wares in front of the public. Customers for bread and cakes can make an impulse purchase of a CD or a DVD anytime they pass a high street HMV. They do not necessarily go home and browse for an online bargain.

It is the principle that made Woolworths one of the largest retailers of home entertainment. If you take away the store, do not be surprised if you lose the customers. Few will follow you online and those that do will buy only what they seek, not what they find.

The eventual arrival of reliable high-speed broadband connections might encourage consumers to spend more online, both in time and money, whether they watch digital streams or buy from offshore warehouses. Jeremy Hunt told us this week, however, that we must wait until 2015 before we achieve the previous government’s promise of “2 megabits for all”.

Then we learn that even the supposedly secure internet servers of major financial institutions can be brought to their virtual knees by the actions of a few cyber-kiddies with a grudge against the establishment. The reputation of the internet as a good place to do business has become somewhat tarnished.

European credit card and payment industry body Vendorcom says the so-called “botnet attack” underscored the significance of card payments. Founder and CEO Paul Rodgers says, “The real impact of these attacks, as revealed in the in the sheer volume of headlines and column inches, has been the emphasis on how important the card payments system is to our everyday lives.”

He has a point, but the potential fragility of the infrastructure should concern any business that has bet its future on the virtual world. Forces with even more malign intent will have spotted that a relatively small number of political activists can bring secure online shopping almost to a halt. This was not the loss of data connection at the height of a busy day for a single high street store. It was to deny access to card users across the entire online community.

If European and North American authorities respond to this week’s cyber attacks with knee-jerk regulation, the entire premise of a single online market could be overturned and the world wide web could become a series of privatised online services that charge for access and control who sees what and when. In commercial terms, it is all about “net neutrality” and “traffic management”. For the consumer, it could be the online equivalent of a shopping mall with an admissions policy and a charge for entry.

The arguments go something like this: Broadband access should be metered, taxed and regulated in order to ensure an adequate payback for superfast connections. Network providers should be allowed to prioritise, restrict or block access to services of their choice for commercial, copyright or political reasons. Perhaps most controversially, customers will get the speed they pay for. The universal service commitment will mean a guaranteed 2 megabits per second to each household and no more.

In effect, there is a risk that broadband could become little more than a digital cable network restricted to the services that an ISP has negotiated with content owners and e-tailers. The evolution of the internet parallels the way radio broadcasts began, first as an unregulated private enterprise free-for-all promoting sales of “the wireless”, and very quickly thereafter as a platform for commercial messages.

Regulation followed, with an advertising-supported model in the USA and a licence-payer funded national monopoly given to the BBC here in Britain. Other countries adopted one or other of these options but in both cases the effect was to restrict what the listener could receive, a situation that persists until today. Access to operate radio and TV networks is restricted to those who can afford to buy it.

The internet also began as an unregulated network, first for the free exchange of knowledge between academic institutions and latterly for around 70% of UK households. The increased call for regulation and monitoring, coupled with an almost unchecked malicious element that is determined to exploit personal computing for its own gain, makes the decision to put all the retail eggs into a single online basket look decidedly dangerous.

Everyone involved in the home entertainment business needs to remember the way lemmings actually behave, which is to follow their best instincts and not jump off a cliff. 

Just because something appears on the screen does not make it true.