But as much as I like Netflix, a funny thing happened recently: Blockbuster® entered the home-delivery movie rental business, trumpeting lower rates and integration with their brick-and-mortar stores. And I’ve heard rumors that other major corporations like Wal-Mart® and Amazon.com® may join the fray. Almost immediately, Netflix became commodified in my mind. How much cheaper would these other providers be? What kind of packages would they offer? Might their delivery be even quicker? My loyalty to Netflix quickly disintegrated. I took it for granted that their competitors would offer the same movie catalog, delivery speed, and Web application features and user interface. It seemed like I could rent videos based only on price.
But as I continued to use Netflix while investigating other providers, I suddenly realized that—unless the cost difference was significant, say more than $5 or $10 per month—I would not be leaving Netflix. Why? They have all of my personal movie data.
I have taken the time to rate over 200 movies and provide data for their databases that enables them to make smart recommendations on the basis of my past behavior. I had created a queue of about 100 movies that I had already read about, decided I want to see, and put in my virtual shopping cart. Some of my friends also have Netflix accounts, and their history and data operates in concert with my own, enhancing the quality of my movie selection experience. It would take hours to transfer my movie ratings and the movies in my queue to a new service. And what about the participation of my friends? It would require a strong sales job to get my friends to move to a new video rental service, too. I might, at best, get half of them to switch.
So, Netflix has essentially got me. Why? Not because they’ve created exclusive content. Not because their service is better or their prices are lower. Not because their Web application provides a killer user experience. They’ve got my personal data, my history, my preferences, and my viewing plans for the future. Netflix is essentially plugged into me, taking what is inside my head and using that information to help me enjoy a more robust movie-viewing experience. The content—the movies themselves—has become commodified. The value and differentiation is in the ownership of my personal data.
But this lesson goes so much further and applies in many different contexts.
Thanks to enormous, inexpensive digital-storage capacities, there is no longer any reason for digital media to exist in a physical form. The notion of people physically possessing software applications, video games, or other digital media on compact discs, videotapes, DVDs, cartridges, or other media will become quaint—if not an indulgence. A single device—perhaps the size of a Mac mini or smaller—could hold all of it. And since broadband connections and even wireless connections to centralized networks are becoming faster and more ubiquitous every day, we don’t need physical media to conveniently deliver software or content to people. There is no need to store digital media locally. It can reside on remote storage devices.
Virtual digital media represents a fundamental shift in people’s conceptual model of possessions. We are accustomed to our possessions existing in some tangible way. Now, all we need is a user interface and the right to use or access software or content—a license or user account—not to possess them on physical media. However, from the standpoint of usability, there may still be a preference for certain types of media to continue to exist in a physical form, particularly written content like books or periodicals.