Amazon Exploring Movie Downloads
By George Anderson
A report in The New York Times, says Amazon.com is in negotiations with Paramount Pictures, Universal Studios and Warner Brothers to offer a movie and television show download service that would allow consumers to burn their own DVDs.
If the deal is consummated, Amazon.com would put itself in direct competition with Apple’s iTunes. Jeff Bezos and company, as has been previously reported (see RetailWire
2/17/06, Amazon Looks to Take Bite out of Apple’s Music Biz), are also working on a music download service as well as a proprietary Amazon.com MP3 player.
The studios are providing backing for a number of on-demand content services, but none offer the option of allowing consumers to burn their own DVDs.
Amazon may have an advantage, according to the Times, because of its ownership of imdb.com (Internet Movie Database). The web site contains extensive information on movies and is often found through online searches using Google and other services. According to comScore Media Metrix, imdb.com was the most-visited movie web site February 2005 and February 2006.
Moderator’s Comment: What do you see as the market potential for movie and television program download services and
how will that impact the current rental and sales market? What merchants/services do you think are best positioned to take advantage of downloads? –
George Anderson – Moderator
I agree that digital delivery is going to transform all forms of content, but the timetable is a little less certain. Movie downloads, IMHO, are not quite ready for general Internet services. I am personally an atypical media consumer: I have a home network, I have massive amounts of home storage, including a network-attached storage device, and I have the skills to edit video, transcode it into various formats, send it around my network, burn it onto DVDs, and stream it to my television if I want. And yet, I’m not all that interested in a movie download service. Yet. Here’s why:
Time: even with a relatively fast broadband connection, it takes quite a while to download even a TV episode, let alone a movie, at full resolution (believe me, I’ve done it). That takes it out of the impulse purchase realm; I can’t decide on a movie 10 minutes before I sit down to watch it. In most cases, I’m not going to be able to decide on a movie and then watch it any faster than I can with Netflix, and not as fast as if I have a Blockbuster near me, and not nearly as fast as Pay-per-View. Unless….
Resolution: ….unless they compress the heck out of the movie. Apple is selling TV shows in 1/4 size and compressed. That’s fine for your iPod. But why would I download a movie that looks *worse* than a DVD? Anyone with the skills to not be intimidated by the whole process is looking for HD resolution, not worse resolution. That means the files are huge, and the download process even longer. We need bigger pipes to the home to make this practical. But this also holds the seeds of promise for early adopters: I am likely to be able to download a wider variety of higher-resolution movies and shows online and burn them to next-gen Blu-Ray or HDDVD discs before they become widely available at retail or in rental channels.
Complexity: I think they’ll solve this one first. Anyone who has used Apple’s One Step DVD knows that when it happens, you will insert a blank DVD, click the “Download” button, and a few hours later return to your Mac to retrieve your completed movie DVD. Seriously, this part will be easy.
So….I think we’re close, but not there yet. TV shows are better candidates, because people miss episodes and will pay a couple bucks to catch up. The files are going to be 1/2 to 1/3 the size of a movie at the same resolution, and they aren’t readily available (Bittorrent aside). Movies are easy to rent and easy to own, and available through multiple channels already.
How could this not be a winner? It has very low incremental costs for distribution, and proven appeal from the music industry. I would like the option of buying the movie or renting it for a certain number of days.
If I could rent movies with this technology, I would cancel my NetFlixs subscription tomorrow.
Can we say iTunes Amazon-style? The download business will only be good for Amazon, the movie business and the consumer. Amazon has a tremendous share of eyeballs on the Internet, with a massive customer database. This means the ability to drive interest at a lower cost per thousand when the theaters need to generate interest and top-line revenue dollars. This also gives Amazon the ability to maximize their online presence by offering yet another “product” through their electronic portal. We can look for a JV with Amazon and some of the DSL or Cable folks as well, since it would benefit both of these organizations in a virtual online partnership. Finally, the consumer will win as prices continue to drop, competition gets more aggressive, and they have a larger entertainment choice. Consumers may no longer have to wait in line at movie theaters, but will soon be able to see a newly released movie in the comfort of their own home. There will be no delayed release dates (as there are now with DVDs) and consumers will determine what, when, and on which device they want to see their movie.
I have felt for some time now that the entertainment delivery industry is in the same sort of revolutionary change that the transportation industry was at the time of the automobile’s mass production introduction. Traditional suppliers of almost anything to do with entertainment delivery run a grave risk of emulating buggy whip manufacturers.
Unfortunately, I don’t have a perfect crystal ball or I would invest the few pennies I have in the next Ford motor company. Seriously, digital delivery of entertainment on demand is NOT going to go away. And, most of the current formats do NOT provide the experience, ease, and need delivery that the consumer really values. But someone is going to get this right, and soon.
Burn-at-home DVD’s? No. I don’t think that’s the mainstream delivery method. Yet. Maybe in a 5 years or 10 years. But right now, that’s a skill set that most consumers do not believe they have. Yes, a significant number of consumers can and will participate in it. But look it at this way: DVD’s are available at relatively low prices almost everywhere now. Ease of purchase is already met, with regard to popular or new titles. Older titles do not take much more effort to find and buy. One can sign onto Amazon, find the title, and order it. No, it’s not immediate gratification…but where did someone do the research to show that immediate gratification on older or less popular entertainment content is a high value need?
The entertainment download market potential is huge. The winners will be retailers who can preserve their margins by keeping customer acquisition costs low. Neither Amazon nor Apple have bricks and mortar locations to help them acquire customers. The copyright owners will have the best leverage. Look at movie theater chain profits. They often pay so much for the films that their only profit is from the refreshments. Movie theaters show commercials because they can’t make money showing movies. If the download sites can sell enough advertising, that may help their profits.