The Gotham Gal has been under the weather this weekend. Last night we made soup for dinner and decided to sit on the couch and watch a movie and go to bed early. After dinner, we fired up Boxee and checked out Netflix. Nothing good there. Then we fired up the Mac Mini and checked out Amazon Instant Video. Nothing good there. Then we went to the Cable Set Top Box and checked out movies on demand. Nothing good there. Frustrated and unwilling and uninterested in heading to a "foreign rogue site" to pirate something good, we watched a TV show and went to bed.

Making movies is expensive and risky. I totally get that the studios need to make a lot of money on those movies to make their business model work.

But denying customers the films they want, on the devices they want to watch them, when they want to watch them is not a great business model. It leads to piracy, as we have discussed here many times, but more importantly it also leads to the loss of a transaction to a competing form of entertainment.

We would have paid good money to watch Sherlock Holmes or Tinker Tailor Soldier Spy. But it simply was not an option. So we went with a TV show that was free and then went to bed.

I am sure there was a time when scarcity was a good business model for the film industry. And I am sure that many of the leaders of the film industry came of age during that time. I understand their muscle memory in terms of the scarcity business model. But restricting access to content is a bad business model in the age of a global network that costs practically nothing to distribute on.

I've argued this point many times with film executives. They insist that they need their windows. They argue they need to manage access to their films to extract every last dollar from the market. That just doesn't make sense to me. If they went direct to their customers, offered their films at a reasonable price (say $5/view net to them), and if they made their films available day one everywhere in the world, I can't see how they wouldn't make more money.

I understand that many participants in the broader film ecosystem might do worse under this model. And I understand that moving to such a model will cause great disruption and pain to the broader film industry. But the studios themselves are likely to do better in a direct distribution model where they reach a broader market at lower effective prices to the end customer. This is what happens in digital distribution. Prices come down, markets expand, customers see lower prices and broader availability. Producers do better. Everyone else does worse.

But for some reason the fim industry doesn't want to move to the new model. They want to stick with scarcity. So they lost a transaction last night. And they lose transactions every night, to piracy, to competing forms of entertainment, and possibly to apathy brought about by frustration. Such a shame.