Showing posts with label online movies. Show all posts
Showing posts with label online movies. Show all posts

Thursday, February 7, 2008

Content, TV Display Key to Online Success

The most-important things online movie download services can do to succeed is offer a broad selection of content and make it possible to view that content on TVs, which is the expectation users now have for movie content. That's because the single most important ingredient for success for any video offering is the content.

That isn't to say content pitched to mobiles or PCs can't find a niche. It is to say that the broad mass market for online-delivered movie viewing won't become a mass phenomenon until user behavior is consistent with what consumers expect today.

"When it comes to movie rentals and purchases, the quality of content matters," say analysts at The Diffusion Group. The second crucial element is that "getting video downloads to the TV is absolutely imperative."

The ability to view movie downloads on any TV in the home is of critical importance, both to those that have used online movie download services and those likely to do so soon, The Diffusion Group says.

The use of mobile phones for video viewing is not considered sufficiently desirable to justify using an online movie download service, Diffusion Group researchers find. "As such, cell phone video viewing will not in-and-of-itself be a compelling attribute for an online movie download service, especially of full-length movies.

And there's a difference between users and proponents. Proponents emphasize the interactive capabilities online content enables. But users don't seem especially enamored of those sorts of features, as fond of them as interactive proponents are.

Adult broadband users don't agree. "Only 28 percent rank this attribute positively and 42.3 percent rank it unimportant," Diffusion Group researchers say.

Sunday, January 27, 2008

What Future for Downloading, Streaming Video?

The conventional wisdom now is that movie downloading will replace DVD sales and rentals, and that this replacement is only a matter of time. The conventional wisdom may well be correct, up to a point. On-demand viewing, in one form or another, has been increasingly for decades.

To some extent, the rise of the cable industry was an early and crude form of on-demand viewing, to the extent that viewers began to break away from the "three networks" experience, starting a process of audience fragmentation that continues today in much more diverse forms.

But movie downloading isn't the only future. In fact, the way new visual media are being used suggests that consumers are taking an "all of the above" approach to media.

People might continue to rent DVDs as well. But maybe not in the same way. "Unless video stores are reinvented, it may be that in five years, there are tens of thousands of kiosks, millions of online DVD renters and very few video stores," says Reed Hastings, Netflix CEO.

If you look at any sort of DVD media as an example of "sideloading," as people sideload music onto their iPods and MP3 players, you get the idea. People download songs. But they also may stream or sideload. And though one often thinks online delivery is the only viable business format, one can imagine other ways to do things.

Price, for example, might be one way to differentiate the market. Online or to-the-TV downloads or streaming will have a higher price point, with a more "immediate" delivery format. But mailed DVDs will have a much-lower price point, with less immediate delivery. But the point is that the delivery time might not matter.

On the Netflix unlimited three DVD plan, can have as many as three movies "checked out" at any one time. And if a person is busy enough, viewing of those movies only happens on weekends. So "immediate" availability isn't required. The three selections have to be available on the weekend.

Release windows still are a factor as well. If you want to see a movie, and missed it in the theaters, you can view it about a month to 45 days sooner than any "on demand" outlet has the content, if you watch on a DVD. On an unlimited rental plan, the cost of any viewing is arbitrary.

Cable and Internet VOD costs something on the order of $4.00 per movie, and the content has to be viewed within a certain period of time, sometimes within 24 hours.

Selection probably will be an issue as well. It is hard to imagine an equivalent lineup of online titles as the Netflix catalog represents, especially in the "long tail" area of niche content.

"Despite the growth of VOD over the last five years, DVD rental has been stable, with online rental and kiosk rental making up for store losses," says Hastings. "In the United States, DVD spending, including purchase, is still approximately 20 times larger than cable and Internet VoD combined, according to Adams Media Research."

Just about everybody thinks this will change, at some point. The issue is whether online delivery is the only choice, or whether other delivery methods still will remain a significant part of the mix. Price, release windows, immediacy, and depth of catalog suggest there is room for multiple consumption modes.

Saturday, January 19, 2008

Why Video Isn't Like Voice and Data

The entertainment business--music, concerts, TV, movies, downloads, streaming, mobile, magazines, audio broadcasting, CDs, DVDs and other display devices--is fundamentally different from the voice, text and visual communications business in one really important way.

Entertainment is all about the "content" or "stuff" anybody wants to watch, listen to or interact with. For communications, you and I supply our own content, so all we need are compliant networks and devices. Other humans or in some cases machines are the "content."

Everything else about the value chain--discovery, delivery, navigation, display, audio, format, business model, pricing and packaging--is subsidiary to the availability of content one wants to view, hear or interact with. Unlike the communications business, then, it is not possible to "disrupt" or "disintermediate" any parts of the value chain without the willing cooperation of the entities that own the content people want to access.

That's really different from communications, where people can build whole networks to disintermediate or disrupt the dominant providers. You might need permission for rights of way, or a license, or an operating permit. But you don't need the permission of the dominant provider to do so.

And that is what makes video a harder business to "disrupt," even if all one wished to do is create a new distribution channel. Content owners are well aware of how they make most of their money and even how they make that last incremental five percent of their money.

So they are not going to give you access to the best content before they have wrung the expected profit out of that content using the current distribution methods. Of course, that doesn't apply to user-generated content, but the point is that most people still watch commercial video most of the time, despite UGC growth.

That makes it tough for any new distribution platform, much less any new contestant using a new platform, to get access to the "really good and highly-viewed stuff" until it is proven that the new distribution method produces more revenue for copyright holders than the older methods.

The other problem is that "when" a provider gets access is as important as "what" a distributor gets access to. This is a sheer matter of exposure. By the time a popular movie or TV show gets to online or on-demand distribution, people have had a chance to watch in movie theaters, in hotels, on airplanes, on DVDs, on premium cable channels or cable or satellite TV. Not to mention illegal viewing along the way, as well.

By definition, people have had lots of chances to see something before it is made available to emerging distribution channels such as online and streaming services. All of that limits the actual market for online or streaming delivery of content.

In principal, downloads can replace DVD rentals and sales, but only once those older formats generate less than, or equivalent amounts of money as online sales do. And that is going to take some time.

So we shouldn't be too surprised that early forays into online or streaming services face a tough, uphill battle.

Any distributor needs access to the popular content, soon enough to capture some volume, on devices with high penetration of users, in a very easy and convenient way, at prices that make sense to people.

Google has stumbled, Joost might not be doing much, Wal-Mart has folded and even Apple has had to reposition and relaunch its Apple TV service from a "buy" to "rent" model.

Video won't be as easy to disrupt as voice or data.

Thursday, January 17, 2008

Apple, Netflix ramp up Online Video Efforts


There are many reasons lots of people ought to be paying attention to streaming and downloaded video. Lots of people work for companies making a living delivering video products and everybody watches video in its various forms. Lots of companies are making expensive bets about what people want to watch, how and where they want to watch, what features are required and how much they will watch. The two mid-January developments in the area of particular note are the Netflix "unlimited online viewing" offer and Apple's launch of a video download service.

Up to this point Netflix has allowed its subscribers to watch online movies on a limited basis, corresponding to their monthly plans. Basically, hours of online viewing roughly correlated to the monthly subscription price. The big change is that Netflix now allows users on unlimited rental plans starting at $8.99 a month to stream as many movies and TV episodes as they want on their PCs, choosing from a library of over 6,000 familiar movies and TV episodes.


Now, subscribers on unlimited plans can stream as many movies and TV episodes as they want from the smaller instant watching library, unconstrained by any hourly limits. The move widely is viewed as a preemptive response to Apple's launching of its own video download service, using a rental model rather than "download to own" approach. Up to this point Apple has seen modest success with an approach based on Apple TV hardware and content from two studios, Disney and Paramount.

All major Hollywood studios have agreed to make their content available as part of the new Apple service. They include Paramount, Universal, Walt Disney, Warner Bros, Sony Pictures, Metro-Goldwyn-Mayer, Lionsgate, New Line and News Corp's Fox.

Using Apple's iTunes online store, US consumers will be able to hire new-release movies at $3.99 for 30 days. Older titles are priced at $2.99 for the same duration.

These movies can be viewed on iPhones, iPods and television. One can debate the impact of Apple's more-aggressive move into online downloads and streaming. In fact, one can argue that the streaming business is a different segment from the "download to own" market or the "rent by downloading" segment.

One also can debate who wins and loses in the video rental business: Netflix, Blockbuster, Amazon.com, Joost, iTunes or others. Even the impact on Netflix is debatable. If consumer use of the streaming feature increases, Netflix will pay more money in licensing fees to the studios who own the content. It also will incur more bandwidth charges. On the other hand, Netflix might spend less money on postal charges, shipping and handling of physical DVDs.

Probably more important is the strategic impact: Netflix's ability to retain existing market share as new competitors enter the market.

The other issue is which market is affected. To some extent the "view on PC" segment is where Apple, Netflix and others compete head to head. There are other segments, such as the "watch on my iPod" market, where Netflix and others delivering to the PC do not play.


Also, one might debate whether a subscription service is different from a pay-per-view model. Heavier users arguably will prefer a subscription model. Lighter users might well prefer the "pay as you go" model. Also, there is little question but that mobile, iPod, PC and TV viewing segments will emerge as full-fledged markets at some point, irrespective of the payment model.

Business motivations also are different. Apple sells content at prices as low as possible so it can create a market for its devices. Its market is rNetazors (devices) not razor blades (recurring revenue). Netflix has the opposite business model: it only cares about devices as platforms to sell content on a recurring basis.

To some extent, then, Netflix and iTunes ultimately compete with telco, wireless and cable on-demand programming offerings, in addition to competing with each other to some extent. Netflix and iTunes now are in the video on demand business, not the "DVD rental" business.

Telcos and cable companies investing heavily in broadband access networks play in the linear TV space as well as the on-demand video space. They compete directly with each other and satellite providers. But over time each of the three main linear programming providers also competes in the on-demand entertainment market, especially as such viewing can be supported on TV screens at some point.

Thursday, January 3, 2008

Theater Attendance Also Flat

Lots of legacy businesses are flat to shrinking these days. Theater attendance seems to be one of the "flat" sorts of legacy video businesses.

"Ticket sales at North American movie theaters totaled $9.7 billion, a four percent increase over the previous year, according to Media by Numbers, which tracks box office receipts. More important: attendance was flat, after a narrow increase in 2006 and three previous years of sharp declines.

Some of that sluggishness historically has been attributed to the rise of alternate formats: cable, satellite TV, widescreen TVs, DVD rentals and VCR tape rentals. Add HDTV, larger screen sizes, PC viewing, download-to-TV services and user-generated content and one has a recipe for continued sluggishness at the box office.

No business based on communications, information or entertainment now is immune from the rise of new electronic alternatives.

Netflix Download -to-TV Service Coming


Netflix is working with LG Electronics to market a set-top-box=based movie download service for TVs, Business Week reports. The move is not unexpected, but is significant in terms of its timing. Netflix has over the last few years modified its statements about the DVD rental business, moving from a "consumers don't want to mess with downloading" to "we'll do it when it's the right time" stance.

The move now means it is "time." The transition from physical distribution of movie content to electronic download to TVs is underway, Netflix is signaling. The service, which extends the Netflix download service beyond "movies to your PC," is expected to begin service in the fall of 2008.

And though Apple TV has not gotten much traction, Business Week expects Apple to unveil its own download-to-TV service as well.

Netflix has been offerings downloads to PCs for about a year. But just about everybody who thinks about the matter agrees that downloads directly to TV screens is what is needed to really jumpstart the business.

Amazon.com, TiVo and Blockbuster also have decided they no longer can wait to enter the nascent business.

Again, what is important about the Netflix move is the timing, not the move itself. Netflix has concluded that even if revenues from online-to-TV downloading will not eclipse DVD rentals for some time, one tipping point has been reached. Netflix has to get into position now if it wants to maintain leadership in the movie rental business of the future.

By some reckoning, that business already is entering its 3.0 phase, having started with retail store rentals, followed by mail delivery and now starting the download phase.

And it is worth noting that if cable TV "pay per view" or "on demand" efforts had been quite a bit more than a niche, the video rental business and Netflix would not have developed. Cablers will note that studio licensing rules and release windows account for the rise of the independent video and DVD rental business.

That is true. What also is true is that studio profit margins and gross revenues control the availability of product. Once studios decide they can make as much, or more money, by switching to online distribution, they will do it.

In that regard, a recent slowdown in growth rates for DVD sales in retail outlets is another important market indicator. Consumer fascination with DVD purchases might be waning, overall. Legally or illegally, online-delivered content might be a contributing factor.

So legal alternatives such as Netflix will provide should have a shot at success. What remains to be seen is how widespread adoption will be. Consumers are quite fickle about special-purpose electronics devices. If the value is high enough Netflix will not find there is a problem. "No late fees" and "no drive to the store" have proven to have high consumer value.

But Netflix also seems to be pursuing the integration of the decoder circuits into other Internet-connected devices. The decoding software might reside into a TV, a game player or media reader, for example. That would alleviate the "one more box" barrier, as some consumers just don't want another device, with cords and cables, around their entertainment center.

On the other hand, Netflix then encounters the "only available on one model or one brand" problem. Consumers generally don't want to bother with "this flavor of access on this device" issue.

And though on-demand video should in principle provide even more convenience, the problem has been the content release windows, which essentially dictate that by the time an on-demand movie is available, consumers have had lots of other opportunities to view the content.

For the moment, at least, Netflix should continue to have an advantage over cable, satellite or telco on-demand content. The studios aren't going to disrupt the profitable DVD window just because online delivery now is possible.

Providers of broadband access services face a more complex business challenge. Demand for download speeds should get a boost if the download services take off. The issue is how much actual profit might exist. The problem with video is that it offers scant returns on a cents-per-bit basis compared to voice.

Put another way, video necessarily "commoditizes bandwidth." For those of you who are Bellheads, think of it this way. A two-hour movie delivered in widescreen format essentially requires bandqwidth equivalent to a DS-3 with a holding time of two hours(45 Mbps). True, we compress and pre-process now so only 4 Mbps to 6 Mbps is needed.

But the point is that the value of a 4 Mbps to 6 Mbps circuit used continuously for two hours or so is "worth" what a consumer deems a fair price for watching a two-hour video event. Call it $3 to $7, depending on what the content is and when it can be viewed.

All bits are not valued equally. On a cents-per-bit basis, text messages represent the highest return, with voice someplace in the middle and video at the very low end of the revenue continuum.

It might not matter so much whether "streaming" or "downloading" is the delivery technique, though analysts at the Yankee Group so far think streaming will get more volume. Most consumers won't care. But downloading offers more opportunity for managing bandwidth.

Tuesday, December 4, 2007

Blockbuster, Netflix, Then What?

"Blockbuster" is almost synonymous with "rent a movie." But it appears "Netflix" is more nearly synonymous with "rent a movie by mail." What isn't clear is whether either of the two movie rental players will dominate the third phase of movie distribution, the download or streaming delivery of such material. Cable companies might have hoped to dominate that niche, but "pay per view" has not yet emerged as a truly significant revenue generator, with the exception of some sporting events and X-rated material.

Well, perhaps we should say that no sizable "legal" download business yet has emerged. There appears to be lots of illegal downloading going on. The fact that no name immediately jumps out as "synonymous" with downloading indicates the field remains open. There is no "category killer" yet in place.

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