The relationship between high-speed internet access and the content industries remains unresolved. Will ubiquitous broadband drive the demand for premium content to fill the pipes or will it demolish content-based business models for good? To find out turn to the grown-up sector.
As the take-up of broadband communications grows, one sector that thought it would do well from the shift from low-speed to high-speed access was the "adult" sector. As has been the case since time out of mind (see, for example, the evolution of VHS video in the US), the producers and consumers of pornography have provided a laboratory for rapid technological change and its relationship to rapid evolution of business models. I can't do better than to reference the Economist, which once advised readers that "butts'n sluts.com" might be a better place to find insight into the future of web-based business models than corporate marketing departments.
For the adult sector, already an experienced exploiter of the internet, moving to broadband appeared to be a no-brainer. Websites soon began to offer movies and video streaming alongside their traditional fare made up from text and pictures. Unfortunately (for the websites) the law of unintended consequences has kicked in. Now that their consumers have broadband, it has become possible for them to download the entire contents of naughty websites in a reasonable time and with reasonable convenience.
On a typical cable modem or ADSL link, downloading 600Mb of website content and then burning it on to a CD might take three or four hours, but that's no longer a big barrier. Consumers log in, sign up with their credit card, fire up some shareware to hoover up all of the content on the website and rebuild it locally, and then go out to dinner. When they come back, they cancel their subscription.
It may get even worse for the adult service provider. At the end of the month, when the credit card bill arrives, the consumer calls the bank ("hey, someone's stolen my credit card number") and charges back the original subscription. Now they have all of the content and it's cost them nothing.
Since a large fraction of the little that consumers will actually pay for online content is spent on adult content (Jupiter put it at $273m out of a total market of $1.4bn), trends in that sector are important. Not that the content industry is unaware of the dangers. Yahoo found that finance sites were plagued by screen scrapers running every few seconds to grab real-time stock quotes (traffic on the finance sites dropped by 80% after the screen-scrapers were blocked). The content owner who provides a premium service finds that people sign up for it, download the information and then provide the service themselves.
Content owners want consumers to have broadband so that they will view movies and so forth online. But given ubiquitous broadband, the content will slip away like sand through their fingers. This is not to say that it is impossible to sell content online. Consumer Reports, the American equivalent of the UK's Which?, has been charging $24 a year since 1997 for online access to its product ratings and now boasts 800,000 paying subscribers. There are other successful niches, such as the New York Times crossword, but it would be brave to bet the future of the sector on them.
In the UK, BT has already decided to abandon the broadband content business and concentrate on providing access. But access to what? It could be that the real value of broadband will be in high-speed interaction, not in high-speed viewing. Thus one might expect online interactive game playing across high-speed low-latency networks to be a beneficiary. Playing Quake Arena via wireless LAN and cable modem from my house against my brother 70 miles away was amazing fun. Having said that, figures released recently at the industry's annual show (the Electronic Entertainment Expo) indicated that fewer than 10% of online players would pay extra to play.
Broadband models may be about creating a community that consumers actively want to participate in. Here, as I have previously noted, the "always on" characteristic may still be the driving force rather than the greater bandwidth per se. The validation of this theory may already be visible in the US marketplace where a survey found that while the most popular use of the dialup internet was email, for hi-tech always-on super-fast broadband users it was... email.
