By now it’s fairly well-known that selling digital music downloads is a tough business with thin margins. However, across both online as well as brick-and-mortar retailing, music and video is being used more universally as a loss leader and it’s not clear what this trends means for content in general. For example:
- for Apple, digital downloads are not something they make a lot of money on, however, it enables their hardware universe (iPhone, iPod, Apple TV).
- for Amazon, many people have suggested that digital downloads is a traditional retailing loss leader. It drives people to their page, where Amazon hopes to sell them something above and beyond the digital download.
- for wal-mart, CDs and DVDs have been used for a long time as a loss leader.
The New York Times is reporting that Apple’s new deal to sell movie downloads (as opposed to their rental business) is not a great deal for Apple from a dollar perspective. So, Apple appears to be using the same model here as they did with the iPod. Effectively they are relegating the movie downloads to a loss leader in the hopes of selling more Apple TVs.
So is content no longer king?