Broadband distribution of interactive multimedia is a rapidly growing market that utilizes data networks and requires stringent resource allocations. Supporting such allocations and conserving resources require economically rational and technically feasible models. Shared distribution of products to generate customized combinations is outlined as a possible solution, augmented by a subscription-based regime that induces consumers to reveal their valuations by migrating to combinations that match their preferences. The distribution of a product involves a hierarchy of self-sustaining communities, that effectively decentralizes the informational issues. Local providers act as intermediaries procuring content from network-wide auctions and assembling it into customized bundles.
This article develops an economic basis for shared distribution of customized bundles of multimedia products over public broadband networks to local communities of end users. The problem is addressed from the perspective of economics because production and distribution of such content necessarily constitute business models that require appropriate economic justification. In the process, the engineering framework used for distribution is accounted for, rather than abstracted away, and the distribution mechanism attempts to bridge the technological realities and economic imperatives.
Interactive multimedia applications are rapidly emerging as a thrust area of businessto- consumer electronic commerce with telecommunications companies, media giants, and digital content providers collaborating on multiple initiatives. The worldwide market for video games and interactive entertainment is expected to grow from $23.2 billion in 2003 to $33.4 billion in 2008 (Research and Markets 2004). Accustream Research estimates that subscription and video streaming-based revenue will hit $625 million this year and $864 million in 2005, for a 40% increase (Stump 2004). There are several factors driving the momentum of this trend. Convergence of networking technologies, the most important factor, enhances the distribution channels in reach and capacity, and facilitates mingling of different types of traffic (data, audio and video) over same channels. The available bandwidth of the network infrastructure has been increasing sufficiently to render transmission of multimedia content a feasible prospect. Broadband usage in the United States grew by 20 percent in the second half of 2003 and 42 percent for the year as a whole, according to the semi-annual market analysis done by the Federal Communications Commission (FCC) (FCC 2004). At the end of 2003, there were over 85 million broadband subscribers worldwide, and this market is changing the map of supply and demand for visual content, as broadband video poses a threat for conventional pay television (ABI Research 2004). In one example of collaboration across industries to provide broadband multimedia content, Scripps Networks provides Comcast Corp. and MSN with 120 broadband clips each month from Food Network, Home & Garden Television, Do It Yourself and Fine Living (Stump 2004). Rapid strides are being made in multimedia encoding, compression, and distribution technologies that improve the quality of delivered multimedia content. Meanwhile, enhancement and standardization of interoperable content description formats (markup languages such as Extensible Markup Language (XML)) and protocols to aid resource discovery (Resource Description Framework (RDF), Lightweight Directory Access Protocol (LDAP)) are enabling delivery of diverse types of content in an integrated form. As a result of these factors, the Internet is emerging as a `super media'. Interactive multimedia applications form the nucleus of this vision.
Interactivity and convergence are not the only aspects in which net-based media are seen to possess advantages over conventional media. The possibility of providing content on-demand in a dynamic fashion, allows the flexibility to customize content. …