What can we learn about the "right" way to launch the digital delivery of home entertainment from the most successful entertainment media launch of all time -- the introduction of the DVD? Mitch Singer, Chief Technology Officer (CTO) and Executive VP New Media & Technology for Sony Pictures Entertainment (SPE), believes that physical media holds many of the clues to a successful, industry-wide, strategic launch of the next wave of home entertainment delivery via the Internet. He will be addressing this subject and more as the Day Two keynoter at the Entertainment Supply Chain Academy (ESCA) , June 18th at the Intercontinental Hotel in Century City.

What about the launch of the DVD offers us insights into the right way for the industry to launch digital delivery?

The launch of DVD was a cross-industry effort. Collectively, everyone had a voice into what the DVD product was going to look like, including the compression, the security, and even the look and feel. Most importantly, though, the decision was made early on that consumers should have a choice of stores, a choice to play it cross platform -- gaming, laptops, settop boxes -- and it needed to be cross manufacturer, based on an open standard. On the other hand, digital distribution has rolled out differently. We have to make a choice as an industry how to proceed?

And those choices are?

We just got over a huge format war in high-definition: Blu-Ray vs. HD DVD. Every commentary said that if the format war continued it would lead to the downfall of high definition movies on optical discs. In digital distribution, we have a format war on steroids -- every store is selling a different product, different DRM, different codec, and different usage model. How is the consumer going to broadly adopt this format if we confuse the consumer and fragment the marketplace?

What we need is a cross-industry effort to develop a new digital product. It needs to be something that consumers can identify with, that has many of the attributes that DVD has. We need to make it available across storefronts and across platforms, design a logo around it and enhance its perceived value. A new product can only succeed and scale to mass market if the perceived value is greater than or equal to the retail price.

What can be done to enhance the perceived value of a digital download?

Everyone knows that we are going to migrate to digital over time. Sure the market is small today, but everyone knows that it is going to grow. Today, the perceived value of a digital download is less than retail price. Why would we, as an industry, want to migrate to a less valuable product? Once the music downloads’ perceived value was set at 99 cents it could only go down from there. As we migrate to digital downloads, we must enhance the perceived value of the product. We must enhance the feature set of the format as well as make it more useable. We must make more content available, add in optical disc burn, enable remote access of content, and add features that make a big difference. If you buy the content you should be able to remotely access it from anywhere. You keep it in your own rights locker. You can stream it anywhere, anytime and to any device. Studies have found that these features raise the perceived value of a download by as much as five dollars.

Besides lessons learned from the DVD, what lessons can be learned from the first wave of digital delivery services?

Today, it is difficult to successfully operate a back-end service that can compete with Apple. To build a successful back end you need to hire engineers who write user-interface applications and recommendation engines; you need to license content, build servers to host and fulfill, establish customer services, and do CDN deals. But many have tried and failed because they do not have sufficient market penetration of devices to support the back-end service. If we open the marketplace, this can change.

Why would the consumer want a system that limits them to a single platform? Why would they want to be limited to a single service? By opening up the marketplace we are enabling competition and we are giving the consumer much more flexibility.

How do we, as an industry, make this happen?

Solving the problem requires a cross-industry approach. All players – information technology, device manufacturers, service providers, content providers, infrastructure – have to work together to develop this new product. Everyone has a common goal, and, therefore, everyone must invest equally in its success. Let us do what is best for the consumer. Only by meeting the consumer’s demand for digital flexibility will we succeed.