Movie downloading? You'll have to wait
European market will trail music for some time
Analysis Movie downloading in Europe is set to grow but not as quickly some would like
Screen Digest believes that the market for movie downloads will be worth £60m in the UK and €250m in Europe as a whole by 2010. This is considerably smaller than the market for music downloads, which are forecast to reach €900m by 2010.
A recent article by Rethink Research's Faultline has suggested that the market for movie downloads would follow an almost identical pattern to that of music and reach $1.2bn by 2010.
For good reason, Screen Digest believes that the model for music downloads cannot be applied so simplistically to that of movies. Our thinking is as follows:
The European movie downloads market will be worth just €2.7m in 2005. Several services are currently in operation - mainly in Germany, France, Italy and the Nordics. All have had similar downbeat experiences to both Movielink and CinemaNow in the US, where sales have been very slow despite the availability of premium content.
In the UK, not only is there at present no single movie download service offering premium content, but of the several UK services expected to still launch in 2005, only one has a direct paid-for business model. Importantly, the key services that will drive the market, such as Sky Movies Broadband, will be primarily made available free of charge to existing customers for subscriber retention purposes and as such bear no immediate direct incremental revenue generating potential.
The growth model of iTunes in the music sector cannot be applied simplistically to the complex business model of film, nor can the sale of small music files be placed on a par with sale of movie files which are in excess of 500Mb in size and are predominantly for exploitation in the 'lean-back' environment of the living room.
At present, no hardware plus software model (like the iPod plus iTunes model) is in place for feature films, nor is one expected to appear in the medium term. There is currently a reticence to encourage a single dominant retailer, but instead to foster healthy competition amongst a variety service providers.
Arguably the iPod phenomena built on existing consumer familiarity with portable music, the equivalent of which has not existed in the movie sphere. Although portable video may yet become a mass market for television and short form content, Screen Digest remains skeptical as to this being the case for feature length movies.
The Hollywood studios are proactively encouraging digital distribution models. However, there is still a great deal vested in current and next generation DVD. There is no clear assumption that business models will be moved online soon with the same vigour that the music industry has done so (which after all has taken many years to happen). What is clear is that existing movie download services have severe usage restrictions, both in terms of portability and the ability to buy and burn downloaded movies as a DVD. Although Screen Digest believes that this will change and that digital sell-through (with burn rights or bundled with packaged media sale) of titles will be the most significant driver of the European movie download market, there are at present no signs that portability and burning will feature dominantly in short term strategies as key security issues have yet to be addressed.
There is as yet no evidence, as Rethink Research suggest, that piracy over P2P networks will "evaporate". It is irresponsible and erroneous to treat Internet piracy so lightly and dismissively. It is still a major concern which needs to be addressed by the film industry as a whole.
Broadband connectivity is growing, but there are still many technical restrictions - not least of all average download speeds. The assumption by Rethink Research that a "considerable proportion" of European Internet connections will benefit greatly from being upgraded to ADSL2+ is ill-judged - for a consumer home to be able to experience the full benefits of ADSL2+, or even VDSL, it would have to be within 1.5km of the exchange - not a realistic assumption for many consumers.
Screen Digest is the pre-eminent source of business intelligence, research, and analysis on global audiovisual media. To find out more visit www.screendigest.com