Digital distribution

The move towards online distribution led to a dip in sales in the 2000s; CD sales were nearly cut in half around this time.[5] One such example of online distribution taking its toll on a retailer is the Canadian music chain Sam the Record Man; the company blamed online distribution for having to close a number of its traditional retail venues in 2007–08.[6] One main reason that sales took such a big hit was that unlicensed downloads of music were very accessible. With copyright infringement affecting sales, the music industry realized it needed to change its business model to keep up with the rapidly changing technology.[7] The step that was taken to move the music industry into the online space has been successful for several reasons. The development of lossy audio compression file formats such as MP3, allows users to compress music files into a high quality format, compressed down to usually a 3-megabyte (MB) file. The lossless FLAC format may require only a few megabytes more. In comparison, the same song might require 30–40 megabytes of storage on a CD.[7] The smaller file size yields much greater Internet transfer speeds.

The transition into the online space has boosted sales, and profit for some artists.[8] It has also allowed for potentially lower expenses such as lower coordination costs, lower distribution costs, as well as the possibility for redistributed total profits.[7] These lower costs have aided new artists in breaking onto the scene and gaining recognition. In the past, some emerging artists have struggled to find a way to market themselves and compete in the various distribution channels. The Internet may give artists more control over their music in terms of ownership, rights, creative process, pricing, and more. In addition to providing global users with easier access to content, online stores allow users to choose the songs they wish instead of having to purchase an entire album from which there may only be one or two titles that the buyer enjoys.

The number of downloaded single tracks rose from 160 million in 2004 to 795 million in 2006 which accounted for a revenue boost from US$397 million to US$2 billion.[7]

Many traditional network television shows, movies and other video content is now available online, either from the content owner directly or from third party services. YouTube, Netflix, Hulu, Vudu, Amazon Prime Video, DirecTV, SlingTV and other Internet-based video services allow content owners to let users access their content on computers, smart phones, tablets or by using appliances such as video game consoles, set-top boxes or Smart TVs.

Many film distributors also include a Digital Copy, also called Digital HD, with Blu-ray disc, Ultra HD Blu-ray, 3D Blu-ray or a DVD.

Some companies, such as Bookmasters Distribution, which invested US$4.5 million in upgrading its equipment and operating systems, have had to direct capital toward keeping up with the changes in technology. The phenomenon of books going digital has given users the ability to access their books on handheld digital book readers. One benefit of electronic book readers is that they allow users to access additional content via hypertext links. These electronic book readers also give users portability for their books since a reader can hold multiple books depending on the size of its hard drive.[9] Companies that are able to adapt and make changes to capitalize on the digital media market have seen sales surge. Vice President of Perseus Books Group stated that since shifting to electronic books (e-books), it saw sales rise by 68%. Independent Publishers Group experienced a sales boost of 23% in the first quarter of 2012 alone.[10]

Tor Books, a major publisher of science fiction and fantasy books, started to sell e-books DRM-free by July 2012.[11] One year later the publisher stated that they will keep this model as removing DRM was not hurting their digital distribution ebook business.[12] Smaller e-book publishers such as O'Reilly Media, Carina Press[13] and Baen Books had already forgone DRM previously.

Online distribution is changing the structure of the video game industry. Gabe Newell, creator of the digital distribution service Steam, formulated the advantages over physical retail distribution as such:

The worst days [for game development] were the cartridge days for the NES. It was a huge risk – you had all this money tied up in silicon in a warehouse somewhere, and so you’d be conservative in the decisions you felt you could make, very conservative in the IPs you signed, your art direction would not change, and so on. Now it’s the opposite extreme: we can put something up on Steam, deliver it to people all around the world, make changes. We can take more interesting risks.[...] Retail doesn’t know how to deal with those games. On Steam [a digital distributor] there’s no shelf-space restriction.

— Gabe Newell, Rock, Paper, Shotgun (2007)[14]

Since the 2000s, there has been an increasing number of smaller and niche titles available and commercially successful, e.g. remakes of classic games.[15][16] The new possibility of the digital distribution stimulated also the creation of game titles of very small video game producers like Independent game developer[17][18] and Modders (e.g. Garry's Mod[19]), which were before not commercially feasible.

The years after 2004 saw the rise of many digital distribution services on the PC, such as Amazon Digital Services, Desura, GameStop, Games for Windows – Live, Impulse, Steam, Origin, Battle.net, Direct2Drive, GOG.com, and GamersGate. The offered properties differ significantly: while most of these digital distributors don't allow reselling of bought games, Green Man Gaming allows this. Another example is gog.com which has a strict non-DRM policy[20] while most other services allow various (strict or less strict) forms of DRM.

Digital distribution is also more eco-friendly than physical. Optical discs are made of polycarbonate plastic and aluminum. The creation of 30 of them requires the use of 300 cubic feet of natural gas, two cups of oil and 24 gallons of water. The protective cases for an optical disc is made from polyvinyl chloride (PVC), a known carcinogen.[21]