International sales increased an even faster 30%. The company also reported a record profit of $857 million during the second quarter and accelerated expansions ...
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A simple plan
Having access to downloadable movie content is one thing; making it available to television screens is another, experts say. “Until there’s a simple way to connect the computer and TV set, the movie download business really will be just a footnote in the video distribution landscape,” Bernoff of Forrester Research contends.
Some industry analysts also have questioned the ease of use of some of the new download services and tools. Michael Gartenberg, a media analyst at Jupiter Research, writes in his blog at MichaelGartenberg.com that when he attempted recently to download videos from Amazon Unbox, the imbedded digital rights management software apparently aborted the download process mid-stream, causing him to give up on the whole idea. Digital rights management software regulates the amount of time users can view rented downloaded videos by locking the files after the rental period expires.
Amazon declines to comment on such difficulties, but notes that it is still in the early stages of perfecting VOD. “This is still Day One for Unbox, and Day One largely for the entire VOD industry,” Price says. “This is the beginning of the early adopters.”
Discovery’s Craig says he believes the image clarity and resolution on Amazon Unbox, as viewed on either a computer or a TV screen, is “virtually the same” as watching a DVD. “I think the quality is really good,” he says.
The combination of evolving technology systems and increasing availability of content, Price says, is enabling Internet-based VOD to provide the most flexibility in the business of distributing video. Most computers operate with Windows operating systems, and many users already have the necessary Windows XP operating system and Windows Media Center technology needed to download movies from the web. The same technology can also be used to transfer downloaded video to TV screens. The Windows Media Center, sold separately for $300, already is included in many Windows operating systems and is expected to become a standard feature of Microsoft’s forthcoming Vista operating system.
Instant Media expects its customers to eventually watch its downloaded content on their TV sets, even though it’s initially focusing on serving consumers such as college students and business travelers who see value in watching downloaded content on their desktop computers and laptops, Leak says. “Many people spend more time in front of computers than in front of TVs,” he adds.
But Instant Media expects long-term growth among customers who will use a new generation of PC-to-TV video converters from companies like GrandTec USA to view downloaded high-definition video on large TV screens, Leak says, echoing the views of Amazon Unbox and Guba.com. “The second audience for Instant Media will be people who like to view their downloaded video on a flat screen,” he says, adding that prices are beginning to drop for devices that convert high-definition video from PCs to TV screens. GrandTec, for instance, already lists high-definition converters at GrandTec.com for $100.
Although VOD still is in its early stages of development, the market and its technology are evolving quickly, experts say. Wait several months and it may change drastically with higher levels of service, says Guba’s Myers, a former technologist at IBM Global Solutions who has worked on e-commerce strategies since the Internet’s early boom days. He declines to specify what changes are in the works for Guba, hinting only that it will offer far more personalization in the video shopping experience. “Things will be very different a year or two from now,” he says.
Flix picks clicks-pix mix
Perhaps nothing is as good a harbinger of the future course of video on demand as the actions of Netflix, whose complete focus on the online DVD rental market makes it more susceptible than most to the speed at which both consumers and movie content providers take up video on demand in large numbers.
It’s telling, meanwhile, that Netflix is deploying the dual strategy of investing in video on demand while talking up its strengths in its established system of online rentals backed by its highly regarded video recommendation system and its expansive network of distribution centers. “We’re investing a significant amount in video on-demand-five to ten million dollars this year, following one to two percent of revenue last year,” a company spokesman says. Netflix had 2005 sales of $688 million, putting its investment in VOD last year between $7 million and $14 million.
Netflix co-founder and CEO Reed Hastings, who is holding off interviews for now on the company’s video on demand plans, will address them in a conference call with industry analysts in January, the company spokesman says.
Hastings has said that when the market is fully ready for video on demand, Netflix will begin serving it with the same level of personalized service, including its video recommendations system, that it provides its online rental customers. But the company doesn’t expect a wide migration to video on demand anytime soon.
Besides, even if Hollywood makes available its feature films to video on demand services earlier in the distribution cycle, Netflix still will command the market for older and rare titles, the spokesman says. Netflix ships about 1.4 million DVDs daily, in which there are between 35,000 and 45,000 different titles. It maintains 65,000 different titles in toto in its catalog. But more than 70% of the titles it ships every day are non-new releases, the spokesman adds, which VOD at least early on will not be able to do.
Blockbuster has not commented on specific plans for video on demand services, though it holds an investment in CinemaNow, the first to announce a burn-to-DVD video on demand service.
So with video on demand, the Internet retailing industry for now is microwaving its popcorn, plopping on the couch, and waiting to see if the feature film will be “How to Succeed in Business Without Really Trying,” “When Worlds Collide” or “Apocalypse Now.”