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Wal-Mart online service misfires, as iTunes readies video for Europe

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For people entering the online film business the strategy is clear, don’t even try to make money on the current top 100 films, offer them at whatever price that the studios insist on, but take the price to the bargain basement for Independent and Long Tail (old) films and use this as the basis of your profit line.

Someone has to convince the studios that they cannot miss out on an online market, and Apple’s refusal to take much in the way of Hollywood material until it is sensibly priced, is the right strategy, because once inclusion on iTunes offers serious money to a film studio, then it will finally be ready to accept the $9.99 maximum that Apple’s Steve Jobs wanted to place uniformly on all download to own movies.

All the press statements wax lyrical about Wal-Mart having the power to attract all the six big US studios, Disney, Warner Brothers, Paramount, Sony, 20th Century Fox and Universal, not to mention the biggest tier two player, Lion’s Gate.

But it's easy to be the ONLY company that has signed a deal with all of them when pricing is dictated to the online service by the studio and it is unrealistically high.

Wal-Mart previously launched into the online DVD rental market and ended up dropping it and giving the business over to Netflix. It cannot afford to lose its entire DVD franchise and will have to follow the lead when someone in this market creates the right conditions to innovate. But don’t expect it to revolutionize the online film market, because it doesn’t have a vested interest to do so.

In the meantime rumors are rife that Apple is on the verge of taking its online video downloads into Europe. What we presume is meant by this is that the there is enough licensed material to officially launch iTunes video in Europe.

But you could download some video from day one, for instance the Pixar short films, which were controlled by Apple’s Steve Jobs at the time of the video iPod launch. The company has since been sold to Disney, making Jobs the biggest shareholder in Disney, in the process.

It took Apple roughly a year before it could get licensing sorted out for its basic iTunes music service, after the US launch. We noted at the time of the video launch 15 months ago that it should take a little longer for video licensing, because it is more complicated. The individual talent is a much larger pool of individuals, and there are more permissions needed, including the soundtrack rights.

It is unlikely that iTunes will have a lengthy collection of video for Europe, but it should have most popular TV series, which can be released in sync with the prevailing broadcasts of things like “24”, “Lost” and “Desperate Housewives.”

Mostly Apple watchers are saying the service is set to go live Europe wide from a service based in Luxembourg, primarily because the finance minister there said that Apple would launch there in Spring to Agence France-Presse and also because VAT is lower there.

Once both Apple, and Amazon with its "unbox" video, are launched outside the US, the numbers of potential purchasers of Hollywood video is going to go up and up.

Many locations across Europe and in other parts of the world, have far poorer coverage of cinemas, although many European countries have rampant DVD piracy, which dilutes film revenues. Our take is that as these two online services drive up volume, the pressure will be on the film studios to take iTunes volumes seriously and listen to their requests to drive down pricing.

Copyright © 2007, Faultline

Faultline is published by Rethink Research, a London-based publishing and consulting firm. This weekly newsletter is an assessment of the impact of the week's events in the world of digital media. Faultline is where media meets technology. Subscription details here.

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