Original URL: https://www.theregister.com/2005/04/06/the_future_of_movie_downloads/

Movie downloads will be a big business... but for whom?

Riders and runners

By Faultline

Posted in On-Prem, 6th April 2005 11:52 GMT

Analysis The trouble with one business model that works for one area of digital media, is that it will rarely work, unchanged, for another area.

That’s the thing that has been bugging Steve Jobs at Apple and which stops his company from coming out with something analogous to a video iPod. But it doesn’t seem to be stopping any other company, and everyone this week seems ready to announce their shot at taking digital video to the world legally, hoping to become the iTunes of the movie and TV world.

Sony has announced it will launch a service next year, Microsoft has launched MSN Video Downloads in the US, Intel and Bertelsmann plan to collaborate on devices and a service for downloading music, movies and games, while Akimbo Systems, is adding more content to its download-to-DVR service, from the Food Network, Home & Garden Television and DIY Network.

It’s not that any one of them on its own is likely to revolutionize video file delivery to the home, but it shows how many companies are already on the track of the Holy Grail of internet film delivery services.

All we know so far is that CinemaNow, MovieLink and Starz Ticket, an online version of the US Starz film channel, have not managed to break through, and recent figures suggest that only 36 per cent of internet users in the US are even aware they exist. But then again they don’t really advertise and there is the tiniest suspicion that none of the studios want them to work.

Perhaps this week, the most important of these new services, with a natural advantage, is from Sony Pictures, whose senior vice president, Michael Arrieta, was heard telling reporters in the US that his company plans to digitize and make available its top 500 films from an online store rather like iTunes.

Sony already has the experience of building Connect, its music store, which is probably 90 per cent as good as iTunes, but you have to question whether or not 90 per cent is good enough to have initiated the market.

It can solve all of the technical difficulties, and it has. The system works well. It lacks perhaps in some of the subtler innovations and design detail from iTunes, and also its delivery into Europe and the US was bungled, in the sense that there was no fanfare of marketing, no anticipatory splurge of publicity. Where a smaller company Apple, rolled out its CEO for the iTunes Europe launch and gathered 600 or so journalists for a show of rock star proportions, Sony managed to put out a press release and launch the system a day before it was working properly.

But Sony will have learned from the experience and its movie store may well become a success. Sony can also learn from the fortunes of Movielink, a company it has a share in, which has been offering around 400 "current" movies for rental online for several years now, but not for permanent sale.

Although the company claims success, and once told Faultline that it was growing at 25 per cent per month, it was always from a very low base, and no-one can say that the same growth rate is still being experienced. The downloads have been limited to the US, and the playback has been limited to a PC, and so its success has been limited.

What Apple achieved with iTunes was a service that would compete with piracy as a means to obtaining music. The simplicity with which it works, the availability of sufficient content, the consistency of price (within a region anyway) and the iPod dominated playback experience, were all part of the success of the venture, and if Sony wants to achieve the same, it will have to come up with something similar.

Perhaps in the PlayStation Portable (PSP) it already has, and the genius of the PSP may be that it is a wolf in sheep’s clothing, a general purpose entertainment machine, masquerading as only a gaming device. So can the PSP playback on any TV? If so, how will it communicate with the TV? Through a plug or though Wi-Fi or some other way?

Will these film downloads be able to be burned into the new PSP miniature DVD format, the UMD? Or can they only be held in flash memory? And will there be cheap home based players that can also use the UMD format or play the flash memory? And will Sony launch the service with a big enough marketing bang? Will it become global, or just a US operation? Will it also include Sony Ericsson phones, which can play Sony flash memory?

All these questions will have to be answered before we can gauge the potential success of Sony’s online film service effort.

But even those answers will not be enough. There’s the simple and immediate issue of price. Apple realized early on that music cost too much, and if you were also taking away the cost of CD manufacture and distribution through a retail network, then surely it should cost substantially less to buy online music. Here is where it initially differed from the record labels.

The same needs to apply to any online film service. Also the small matter of content availability and giving an online film service “enough” content has to be considered.

The obsession that ALL VoD services, pay per view services and online movie rental services exhibit, is the idea that only the top 100 films are worth putting out.

This means that recent films which are in the same relatively early stage of their exploitation cycle are put side by side on the assumption that everyone that watches TV has already seen all the old movies. Classics are priced low and there are never enough of them. Fastweb, CinemaNow and Movielink, to name three services, all say that the big viewing potential are the top 100 to 150 films.

But this is a hangover of existing services. iTunes has managed to create an environment which can serve as a buying place for both old and new content. If you wish to have digital versions of all your old vinyl records, and put them on an iPod, it is possible. If you want to keep in touch with one specific genre, it is possible, if you want to own everything an artist has ever done, it is nearly possible.

The same needs to be possible in any successful version of an online film business. Simple search criteria for finding types of films, films with certain actors in, the entire works of a particular director, films which have the same or similar plot lines, or specific scenes in them. All this is a given and a standard way of indexing films and creating key metadata, still needs to be arrived at (it was the job of MPEG 7 but where is it?).

But unless you have a huge amount of film content, virtually every film that enjoyed widespread distribution throughout the last 25 years, a service will not become the natural home of film buffs. If a service has too many holes in it, customers will look elsewhere. If prices vary too much per film, people will look elsewhere. If films can either only be bought or rented, not both, then people will look elsewhere.

But looked at from the film producer’s point of view, this way of exploiting a back catalog is far more preferable than what happens right now, say in DVD sales or rental.

In retail sales or rental, a DVD takes up storage space, so is discontinued once people stop asking for it, which is often inside 12 months from its release. That means you have a year to make your money. After that there is no pay per view revenue and little DVD revenue, only TV repeats revenue, which is miniscule.

But a digital copy of a file takes up virtually no space, and on a file download service a single copy can support an entire sub-continent. So old films should never be out of date or out of print. This is the experience of the new online DVD rental companies like Netflix, and it’s an effect that someone on Wired Magazine nicknamed The Long Tail, because instead of revenues just dropping dead, they tail off for years after the film’s launch date.

But more questions need to be solved by any online film store which is going to have as much effect as iTunes had on music. The most important thing is how do these films get to your home/portable device?

There really are only three ways a digital film can get anywhere, carried pre-burned onto storage, broadcast at the same time for everyone or narrowcast down a broadband pipeline of some description. Well we are sure that Sony can arrange to send a copy of a UMD out to anyone that orders it, and perhaps partner both Amazon and Netflix on this approach for sale and rental. We think Sony will do that, but it’s not enough. It quite simply won’t provide the spontaneity of iTunes and neither will any process that broadcasts film files (like Disney’s Moviebeam service) although this is the approach that most mobile phone operators favor in the experiments on Digital Video Broadcasting for handhelds.

No, the only service that can give you instantaneous access, is either streaming over the internet, or best effort file downloading at very high speeds. Right now a film download will take a long time and will have to be run as a background task taking several hours. And that ruins it for its immediacy.

The final question is how to stop piracy on the service when launched?

The Apple approach was to make the experience better than piracy, and that shouldn’t be too difficult, just achieve everything listed above. The wide variety of choice, the right platform/s to play the films on, the right price, and the right first time, simple ease of use. But there is a feeling that if all that was possible right now then Steve Jobs and Apple would have already launched it.

One interesting last fact for Sony is that it already has a joint venture with Disney in Europe for selling a movie channel called Filmflex, which is already delivering films in the UK to cable TV channels. Why can’t it use the same distribution agreements to distribute the same films over the internet?

Meanwhile the Microsoft MSN film services are really just a series of video services for PC download, nothing fancy, and many of them amount to simple links to other existing services.

Since this is a service from Microsoft, it's only available for Windows and Windows mobile-based devices such as Portable Media Centers and select Smartphones and Pocket PCs.

MSN Video Downloads, at www.msnvideodownloads.com, is essentially a portal where consumers can go to download a variety of video content ranging from news and sports to home improvement and food-related programming. Content is updated on a daily basis and it is all designed to be absorbed on the move, not played on a TV.

For $19.95 a year, subscribers can choose the content they want to receive from the website. The selected digital videos are then downloaded daily to the user's Windows Media Player 10 library on a Windows XP PC. Once the content is downloaded, the user can then transfer it to a Portable Media Center or other Windows Mobile device. But using a web interface is one of the key lessons of iTunes. It just doesn’t. Instead iTunes is a specially downloaded program that will manage all of your music for you, and so is Sony’s Connect . So what Microsoft MSN is offering is really just a support mechanism for the portable media centers, which have not proved all that popular. Interestingly the service is supposed to include CinemaNow, Blockbuster and iFilm services, piggy backing on MSN traffic.

Microsoft is pushing the content in all compliant devices that carry Microsoft's “PlaysForSure” logo. Creative, iRiver and Samsung are among the companies that offer Portable Media Centers and in the end this service is just not revolutionary enough to be the new movie iTunes and it fails to meet any of the criteria we have stressed earlier, except the existence of a specialized player.

The Intel and Bertelsmann deal is little more than an announcement of intent at this stage, so it’s a little difficult to predict the shape of any service that comes out of these two, except to say that the announcement mentioned the cell phone as one of the places this content would be viewed.

In the end, despite Job’s continual protestations that Apple is focused on music, we now expect that studios will go with any platform that Apple offers them, on the basis that if the company has solved music piracy by inventing a better service, then it’s the only company that is likely to have the chutzpah to do the job a second time, this time for films.

Copyright © 2005, 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.

Related stories

Hollywood brow-beats second BitTorrent Brit
Hollywood threatens to sue UK BitTorrent man for millions
High Definition and the future of viewing
Digital music: flat fee futures
Downloading digital music
Stealing movies: Why the MPAA can afford to relax