Spiking the digital media punch
Digital music has clearly crossed a threshold. Apple just sold its 100 millionth iPod. EMI is taking a chance on DRM-free music in hopes that consumers will embrace legal music downloads (and thus offset a 20% slump in CD sales).
I have a Zune, and I find it has revolutionized the way I listen to music (and I'm sure iPod users have experienced the same thing). The world of digital music, however, still carries with it habits that originated in the need to accomodate disc-based media in an all-digital player. Individual music files give me musical content, but an album offers something more. I get the printed material that is inserted into the CD cover, which contains things like additional art (more than just the cover), lyrics, and other information not normally found in online CD databases.
There's no reason for CDs to have that advantage. Given that most digital music playback devices come with screens, why not incentivize people to buy complete albums by packaging them with art and lyrics in a fashion that is easily accessible from music players?
Heck, since this is a digital medium, the surface area for artistic expression is a lot larger than it ever was with physical CDs. Instead of the small number of printed pages that can be crammed into a CD cover, you can include hundreds of pages of poetry if you want. But why stop there? Videos, animated interactive content, etc. are all possible, provided someone starts to create a standard format for such things that would work cross-device (if DRM incompatibilities were bad, we hardly want a situation where music extras are device-specific).
Why not enter karaoke territory and make it possible for lyrics to be displayed in a way that syncs with the music being played. Imagine the entertainment value of people singing the lyrics to the Beatles "Maxwell's Silver Hammer" at the top of their lungs as they crash into a Range Rover in front of them because they were staring at their iPod screen instead of paying attention to the road (okay, karaoke-style lyric display is clearly a feature for PASSENGERS, not drivers).
Digital movies are something that definitely needs improvement. I noted yesterday that Microsoft would prefer to sell downloaded media versus physical discs as one reason to hold off on integrating an HD-DVD drive in the XBOX 360. Something which might help downloaded media to really take off would be if purchased movies come with the full interactive menus and "extras" people have come to expect from DVDs. There is no reason a specially-formatted downloaded movie can't have the same level of interactivity as a DVD.
Though digital media has crossed a threshold, there are still consumption habits left over from the transition period. Bringing the digital media market into full bloom will involve emphasizing downloaded media as the primary product. This means anything that can be done with a physical disc should be possible, if not exceeded, by the downloaded version.