Where's the iTunes for movies?

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Jonathan Marlow has spent much of the last two years trying to persuade filmmakers to put their most valuable products on the Net. On some days, the task feels a little like pulling teeth.

Marlow, a cinematographer and Amazon.com alumnus, is director of content acquisition at Greencine, a small San Francisco-based Netflix rival that is increasingly offering online access to films alongside its rent-by-mail business.

Unlike most video-on-demand providers, he's all but ignored Hollywood. Greencine launched the on-demand service in September 2003 with a small independent documentary called "Mau Mau Sex Sex," about a pair of exploitation filmmakers from the 1950s, and he's continued to focus on indie productions since.

News.context

What's new:
Video-on-demand services have been hampered by lack of content and Hollywood's fear of undermining DVD sales. But new technology could change their business models.

Bottom line:
Consumers still have to be shown that movies online can rival the experience of a DVD. Until customer demand develops, Hollywood will put its emphasis on selling, rather than renting, movies over the Net, a strategy that offers pricing advantages over VOD.

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For now, Marlow says it just isn't worth working closely with the big studios. Hollywood is too in love with its own soaring DVD revenues to risk supporting an attractive Internet alternative, and it needs to be shown that video-on-demand services can make money, he said.

"DVD revenues are so out of proportion to every other aspect of this business," Marlow said. "There has to be some proven revenue in the space before the big studios will even think about dismantling a model that has proven so lucrative for them."

Despite continued pessimism throughout the sector, signs of change are in the air. Perhaps most telling is a new online movie venture unveiled Wednesday by actor Morgan Freeman's production company, Revelations Entertainment, and backed substantially by Intel. The new company, dubbed ClickStar, plans to distribute first-run, pre-DVD release movies over the Net to homes, in a secure digital format, and is already in the process of persuading other studios to join.

Nevertheless, Marlow's complaint is echoed by virtually anyone who has tried to make a business from video-on-demand services: Even as consumers and technology are showing signs of being ready for a video-on-demand service with the scope and appeal of Apple Computer's iTunes music service, Hollywood remains unconvinced.

The vision of the ideal service may have been outlined most succinctly by Qwest Communications' early advertisement for broadband services, in which a clerk in a third-rate motel blandly promised in-room access to "every movie ever made, in every language, any time, day or night."

Easy enough. After all, hasn't iTunes shown the way? Hasn't the increasing popularity of on-demand programming at cable networks such as Comcast shown the demand?

Yes, and no. Aspiring on-demand services face a chicken-and-egg problem similar to the early days of digital music. Consumer demand for their services remains low, in large part because their prices are high and they offer fewer choices than ordinary rental stores. Yet Hollywood won't offer them more favorable movie release policies until demand improves.

Nor has Net-based technology, with today's bandwidth constraints and PC-focused services, provided a movie-watching experience as compelling as a DVD.

"The problem that differentiates Internet-based delivery and cable and satellite...is quality of service," said Warner Bros. Chief Technology Officer Chris Cookson. "We are not going to get the quality of service readily over the Internet until the Internet gets its act together a little better."

On top of that, the studios already have a lucrative way to reach home consumers. For the last few years, DVD sales have soared to more than $15 billion a year at a time of falling box-office revenues. Industry wags are only half joking when they say that big-screen theater releases have become little more than promotional tools for home video release.

At least today, the studios aren't willing to risk undercutting those revenues by allowing on-demand rental services--which produce far less revenue than do DVD sales--to compete directly.

"It's not the best business right now," said Stephan Shelanski, senior vice president at the Starz Entertainment Group, which offers subscription movies and pay TV channels on cable networks and the Internet. "I know the studios are experimenting to try to make it more viable, but they have so much money coming in from DVDs. They're really trying to find a business model that works."

Take a number at the window
For years, the studios have tightly controlled what they call "release windows"--essentially the staggered release of a movie first to theaters, then to home video, to video-on-demand services and pay television, and finally to broadcast television.

Until the last few years, the video-on-demand side of this was the relative backwater of pay-per-view cable television networks, where more attention was focused on live programming such as sporting events. But with the advent of digital cable and Internet services, the offerings are evolving dramatically.

Yet even if on-demand content services now see themselves as rivals to a video store--without the hassle of driving--studios have left them in

[JLBer]

Why VOD just won't cut it

A. Full-frame. I can just about guarantee that most VOD products would be full frame to cater to the anti-widescreen crowd, thus alienating those who respect the filmmakers' vision. Show the movie in its CORRECT aspect ratio, or don't show it at all. Those who support the filmmakers' choices for aspect ratio - and there are more of us than people will care to admit - will wait for the widescreen DVD so that we can see the movie as it is supposed to be shown. (This of course assumes that the movies in question are meant to be in widescreen. Duh.)

B. Video quality. DIVX is the only way to go. But you can bet that Microsoft will have something to say about that, so DIVX probably will not be the choice. It will probably be WM9, thus alienating Linux and Mac users. That's not a lot, compared to Windows users, but the numbers are growing, particularly in the Linux world.

C. DRM. I need to say no more. When we buy a DVD, it's ours. We can do with it as we please. You can bet that no Hollywood studio will jump on this unless there some kind of draconian, Circuit-City-Divx-Like DRM scheme attached to it.

D. Netflix. The real DVD as close as my mailbox, and I can keep it as long as I want with no draconian DRM telling me how long I can have it.

E. Extras. No DVD extras; no subtitles; no chapters; nothing of the sort -- unless we're allowed to download the entire .VOB structure, and you know that's NOT going to happen.

Just give it up on VOD. As long as NetFlix is around and studios keep giving DVD the value-add that customers demand, there is no real justification for VOD.

[JLBer]

Why VOD just won't cut it

A. Full-frame. I can just about guarantee that most VOD products would be full frame to cater to the anti-widescreen crowd, thus alienating those who respect the filmmakers' vision. Show the movie in its CORRECT aspect ratio, or don't show it at all. Those who support the filmmakers' choices for aspect ratio - and there are more of us than people will care to admit - will wait for the widescreen DVD so that we can see the movie as it is supposed to be shown. (This of course assumes that the movies in question are meant to be in widescreen. Duh.)

B. Video quality. DIVX is the only way to go. But you can bet that Microsoft will have something to say about that, so DIVX probably will not be the choice. It will probably be WM9, thus alienating Linux and Mac users. That's not a lot, compared to Windows users, but the numbers are growing, particularly in the Linux world.

C. DRM. I need to say no more. When we buy a DVD, it's ours. We can do with it as we please. You can bet that no Hollywood studio will jump on this unless there some kind of draconian, Circuit-City-Divx-Like DRM scheme attached to it.

D. Netflix. The real DVD as close as my mailbox, and I can keep it as long as I want with no draconian DRM telling me how long I can have it.

E. Extras. No DVD extras; no subtitles; no chapters; nothing of the sort -- unless we're allowed to download the entire .VOB structure, and you know that's NOT going to happen.

Just give it up on VOD. As long as NetFlix is around and studios keep giving DVD the value-add that customers demand, there is no real justification for VOD.

[unknown unknown]

Still not practical

It's still easier and quicker to goto your local block buster etc and rent the DVD or even subscribe to Netflix. In it's current form the videos take hours to download and the quality isn't really all that great, at least if current examples like Movielink and CinemaNow are any indication. Until the average broadband user start seeing Internet2 quanities of bandwidth were download a couple of gigabytes may take several minutes these services will remain a niche market. Also these could be made more attractive by offering comparable rental prices and lengths as stores like Blockbuster.

[unknown unknown]

Still not practical

It's still easier and quicker to goto your local block buster etc and rent the DVD or even subscribe to Netflix. In it's current form the videos take hours to download and the quality isn't really all that great, at least if current examples like Movielink and CinemaNow are any indication. Until the average broadband user start seeing Internet2 quanities of bandwidth were download a couple of gigabytes may take several minutes these services will remain a niche market. Also these could be made more attractive by offering comparable rental prices and lengths as stores like Blockbuster.

Disgusted with the studios

This is really disappointing. You would think that after the music industry's mistakes, that Hollywood would be proactive in embracing web technologies and clearly see that offering online downloads is the way of the future (I hope I don't need to explain why - please see iTunes example).

Let's consider an analogous situation... is iTunes cannabilising CD sales? If so, is it a good thing? That is the important question.

Cannabilisation of sales is not always a bad if it means that in the long term, you open a new source of revenue that grows into something much larger than your existing sources. They must be stupid if they don't see that the web-delivery of their products facilitates a whole new and exciting way of doing business - volume sales, movies on demand/at your fingertips etc.

Get out of your conservative, uninnovative rut, Mr Movie Studio, and get with the times. If you don't start now, you'll lose out later. Just look at the mess the music industry is in. Learn from their mistakes.

*shakes head*

Disgusted with the studios

This is really disappointing. You would think that after the music industry's mistakes, that Hollywood would be proactive in embracing web technologies and clearly see that offering online downloads is the way of the future (I hope I don't need to explain why - please see iTunes example).

Let's consider an analogous situation... is iTunes cannabilising CD sales? If so, is it a good thing? That is the important question.

Cannabilisation of sales is not always a bad if it means that in the long term, you open a new source of revenue that grows into something much larger than your existing sources. They must be stupid if they don't see that the web-delivery of their products facilitates a whole new and exciting way of doing business - volume sales, movies on demand/at your fingertips etc.

Get out of your conservative, uninnovative rut, Mr Movie Studio, and get with the times. If you don't start now, you'll lose out later. Just look at the mess the music industry is in. Learn from their mistakes.

*shakes head*

VOD not too bad

I dont think VOD isnt too bad or too good an idea as long as it stays an option, one needs to look at some of the services like edgestream http://www.edgestream.com/corp/demos.htm
they claim dvd quality streaming video, which i think its close to what they claim.

I have also noticed that Atomfilms HD http://www.atomfilms.com/af/spotlight/collections/hidef/
has really great hi def short flicks although not block buster movies just the quality of the video is great on the true HD media there.

I think there is something of a trade off, with dvd i can watch the movie when and were i want, but vod you can watch it only so many times in a set time limit before you have to buy it again aka ala online pay per view.. but if im paying for a pay per view then my dishnetwork dish is the route im going to take because i can save it on dvr and watch it when i want to.

VOD not too bad

I dont think VOD isnt too bad or too good an idea as long as it stays an option, one needs to look at some of the services like edgestream http://www.edgestream.com/corp/demos.htm
they claim dvd quality streaming video, which i think its close to what they claim.

I have also noticed that Atomfilms HD http://www.atomfilms.com/af/spotlight/collections/hidef/
has really great hi def short flicks although not block buster movies just the quality of the video is great on the true HD media there.

I think there is something of a trade off, with dvd i can watch the movie when and were i want, but vod you can watch it only so many times in a set time limit before you have to buy it again aka ala online pay per view.. but if im paying for a pay per view then my dishnetwork dish is the route im going to take because i can save it on dvr and watch it when i want to.

[Rod Adams]

Do the math

There is a huge technical leap between reasonably delivering
songs or "CDs", with per song file sizes of between 4-50 MB
depending on play length and compression format and
reasonably delivering full length, full resolution video with file
sizes of up to 4.8 GB.

Assuming the same wires, people think it is really cool to be able
to decide to purchase a "CD"'s worth of songs and download
them within minutes. If they try to do the same thing with the
movies that are a 100 to 1000 times as many Bytes, the
experience is far less desireable. I am willing to tie up my high
speed connection for a 4 minute download; I refuse to do so for
a download of 400 minutes - I can drive to the store and pick up
half a dozen DVD's in about 20 minutes.

Optical disk storage capacity is increasing far more rapidly than
is Internet bandwidth to consumers. I do not forsee any time in
the near future when electronic delivery will provide a better,
more cost effective experience than physical delivery of of that
permanent media.

[Rod Adams]

Do the math

There is a huge technical leap between reasonably delivering
songs or "CDs", with per song file sizes of between 4-50 MB
depending on play length and compression format and
reasonably delivering full length, full resolution video with file
sizes of up to 4.8 GB.

Assuming the same wires, people think it is really cool to be able
to decide to purchase a "CD"'s worth of songs and download
them within minutes. If they try to do the same thing with the
movies that are a 100 to 1000 times as many Bytes, the
experience is far less desireable. I am willing to tie up my high
speed connection for a 4 minute download; I refuse to do so for
a download of 400 minutes - I can drive to the store and pick up
half a dozen DVD's in about 20 minutes.

Optical disk storage capacity is increasing far more rapidly than
is Internet bandwidth to consumers. I do not forsee any time in
the near future when electronic delivery will provide a better,
more cost effective experience than physical delivery of of that
permanent media.