February 7, 2007, 12:00 AM

Amazon.com and TiVo dramatically alter video-on-demand landscape

Amazon and TiVo will introduce a service later this year that will allow TiVo subscribers with web-enabled TiVo digital video recorders to rent and purchase movies and TV shows at Amazon.com and view them on TVs as well as computers and portable devices.

In a move that has changed the video on demand landscape in the blink of an eye, Amazon.com Inc. and TiVo Inc. today announced they will introduce a service later this year that will allow consumers to easily watch digital video files on television sets.

Amazon Unbox on TiVo will enable TiVo subscribers with Internet-enabled TiVo digital video recorders to rent and purchase movies and television shows online at Amazon.com and view the videos on TVs as well as computers and Windows Media Video-enabled portable devices. Amazon.com, No. 1 in the Internet Retailer Top 500 Guide, delivers video files directly to customers’ TiVo boxes and, if they choose, PCs. The service is in beta testing among a select group of TiVo subscribers and soon will be available to subscribers with Internet-enabled TiVos. Of TiVo’s more than 4.5 million subscribers, 1.5 million have set-top boxes that can be Internet-enabled; 600,000 have done so.

The stumbling block for greater penetration of video on demand has been the lack of options for consumers to transfer video files from computers to TVs. The current video on demand model delivers files only to PCs and limits viewing to PCs and some portable digital media players because of the dearth of computer/television interface technology. “The television is and will continue to be the preferred platform for watching video content,” says Tara Maitra, TiVo’s vice president and general manager for programming.

This hurdle created and maintained the common view that video on demand simply is a promising new market in Internet retailing not expected to see widespread penetration for many years. “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,” Josh Bernoff, vice president and principal analyst at Forrester Research Inc., told Internet Retailer in October.

However, video on demand has evolved dramatically in an extraordinarily short time. “We’ve seen more changes in the industry in the last year than we’ve seen in the past decade,” says Darren Giles, co-founder and chief technologist at CustomFlix Labs Inc., a subsidiary of Amazon.com that specializes in digitizing limited-run and old movies and manufacturing on-demand discs.

Recent video on demand developments include:

  • Sept. 13: Apple Computer Inc., No. 15 in the Internet Retailer Top 500 Guide, introduces iTunes 7, expanding the popular digital music store to offer downloads of films and TV shows.
  • Nov. 22: Microsoft Corp. begins offering Internet downloads of movies and TV shows through its Xbox 360 online gaming console.
  • Jan. 9: John Antioco, chairman and CEO of Blockbuster Inc., No. 70 in the Internet Retailer Top 500 Guide, says the rental colossus is readying a video on demand business: “It’s clear video downloads could be a $1 billion business five years out. We need to be in the business, and I won’t be surprised to see us enter a partnership.”
  • Jan. 10: Internet-to-TV video on demand pioneer Akimbo announces deal with Yahoo Inc. to bring online videos directly to TVs via Akimbo’s service and set-top player.
  • Jan. 16: Netflix Inc., No. 21 in the Internet Retailer Top 500 Guide, debuts an “instant watching” feature using real-time playback technology that enables subscribers to view a rental film on a PC screen almost as soon as it’s delivered.
  • Feb. 6: Wal-Mart Stores Inc., No. 12 in the Internet Retailer Top 500 Guide, launches Video Downloads Store on Walmart.com. “This is our first step in a long-term roadmap to a multi-format, multi-channel offering. Downloads are compelling today, but DVDs, HD-DVDs and Blu-ray discs will have long legs,” says Cameron Janes, director of digital media. “So in part we’ll be focusing on integrating the digital format with the physical form through special promotions.”

“Amazon and TiVo’s offering is a good idea but ahead of the market because it’s dependent on installation. How many of those 600,000 TiVo subscribers will be buying downloads?” says Sucharita Mulpuru, senior retail analyst at Forrester Research. “Video on demand is a very, very small part of film and TV show sales.”


Ultimately, though, video content sales likely will evolve similarly to music sales, Mulpuru adds. “I can see the digital video download market going the same way as CDs. However, sales of digital music for MP3 players still are not as big as everyone thinks.”

Reed Hastings, founder, chairman and CEO of Netflix, will speak at the Internet Retailer Conference & Exhibition, June 4-7 in San Jose in a keynote address entitled The Transformation of the Movie Rental Industry. Brian Osborn, vice president of category marketing at Walmart.com, will speak at the Internet Retailer Conference & Exhibition, June 4-7 in San Jose in a session entitled Wal-Mart: The Giant Uses the Web to Extend its Market Reach.


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