With CES going in Vegas and Macworld occurring next week, the tubes are full of rumors dealing with media distribution. Some of the hot topics include: (1) a set top box for Netflix, (2) movie rentals via iTunes, (3) updates to the Vudu platform, (4) Quicktime versions of FOX movies included on DVD releases, and (5) Sony going “DRM-Free” on its music distribution. This is far from a complete list, but it’s a good enough sampling to show that media companies are inching forward on their distribution channels. Unfortunately, a examination of the above rumors and stories shows that media companies are still behind the times in their thinking.
To start things off, let me know articulate what I think is the ideal scenario for media distribution: (I’m going to limit this discussion to movies, just to simplify things)
I’m watching the Red Sox on television when the game goes to commercial. An ad comes on for the latest Milla Jovovich movie (for the sake of this example, lets say she’s humanities’ last hope against a horde of evil zombies…since she seems quite good at that role). I find the ad interesting enough to want to watch the movie, so I flip over to my AppleTV and browse through “New Releases”. I find the movie I want and click purchase. Apple deducts from my iTunes account and starts downloading a High Definition copy of the movie to my AppleTV directly as well as marking that’s I’ve purchased the movie within the iTunes database.
Later, I decide I’m going to go dinner and want some entertainment when I eat. I have the movie I just purchased on my AppleTV, but I obviously can’t bring that whole contraption with me, so I head over to my computer, open up iTunes and browse to “Recently Purchase Movies”. I find the Milla Movie in the listing and choose “Download in an Alternate format”. I pick “iPod” and set it to download while I go get ready to head out. After it’s finished downloading, I sync the movie to my iPod and go on my way.
The main point of the above scenario is that when I pay money to see a movie, I want that movie in whatever format I want to view it in. Currently, I own a lot of DVDs. They take up shelf space, they don’t look aesthetically pleasing wherever I have them on display, and putting them in any sort of order can be rather cumbersome. I would much rather have all of them stored digitally and available for playback on my AppleTV whenever I want to view them. Today’s laws, however, make it illegal for me to rip the content off the DVDs I own and store them digitally. I’m, therefore, forced to use my media, that I own, in a way that I feel is less than ideal.
Let’s take a closer look at some of the rumors and stories mentioned earlier to see if the media companies are getting any closer to reaching the ideal viewing scenario. Story (1) was a new set top box from Netflix that will allow streaming of content to your television. I have to admit, this sound promising. Assuming the box is affordable, the subscription plans are similar to Netflix’s current approx. $20 for unlimited downloads of media content, and the library of available content is as extensive as their rental library, then this really has potential. Of course, those are three very big “ifs”. Also, there is no portability with this “strategery”. I’m stuck watching content on the TV that has the Netflix box attached to it, I can’t load the content onto my iPod and take it with me.
iTunes movie rentals (Story (2) from above) have been getting a lot of play on Apple blogs, Tech blogs, and Media blogs. I am going to go off the rumors at this time, making a note that the official plan might change things. Currently, it appears the plan is to provide movie rentals at $3.99 a piece. The most common rumors concerning DRM on the movie rentals is that you will have 1 week to watch the movie after you download it and 24 hours to finish watching the movie once you start watching it (this DRM “strategery” is similar to that used within Xbox 360 movie rentals). I have a few problems with this method of getting media. The first problem is the method of delivery. Currently, there are no rumors about being able to purchase the rental directly from my AppleTV. Though this might change at the official announcement, the current plan involves purchasing the media on my computer and then transferring it or streaming it to my AppleTV. Second, there is no mention about the quality of the downloads. Most sources point to the downloads being “iPod Hi resolution” quality (i.e. 640 x 480), a resolution lower than current DVD standards. If I’m paying money for content, I want it in the highest resolution possible. Third, the price point. At a $4 per rental price plan, I would only have to rent 5 movies in the course of a month to blow through the cost of my Netflix subscription. My Netflix subscription lets me have 3 movies out at a time, allows me to keep the DVD as long as I want it, and contains TV on a DVD (and odds are you won’t be able to get 4 episodes of a show for $4).
The price point issue discussed in the previous paragraph requires some further exploration. I intentionally left price point out of my scenario so I could discuss it in depth later. The basic question comes down to: What price would I be willing to pay to own a particular piece of media content? There are a number of camps on this question, some dealing with complicated “pay less for less resolution” formulas, and some suggesting a “rent to own” model. Personally, after putting in some time thinking about how much I’d pay for the content in my ideal scenario, I’ve decided that my price point is $4. That’s $4 to own a movie, that I can download an unlimited number of times, in an assortment of digital formats. I pay $4 for a movie today, I download it to my iPod tonight and watch it, and then, in 4 months, I can download it in HiDef to my AppleTV for no extra cost. Now, I do not want be a pollyanna and suggest that this type of plan is right around the corner. Clearly, the media companies think their content is worth approx. $15 to own at this time. A trip to Best Buy on the day of a movie release or finding a gem in a bargain bin might result in you picking up a movie for $13 or even $10, but most likely you’re going to be paying around $15 for most recent movies. The question then becomes: if a media company can sell a million copies of the movie at $15, why would they charge less than 1/3 of that price in the future? Two possible reasons come to mind: (1) piracy and (2) rental service.
Let’s examine (1), Piracy, from the paragraph above. A quick search on a few popular BitTorrent websites for a recently released movie will reveal hundreds of thousands of people downloading the film. How many of these people would pay $4 for this movie to avoid the hassle of going through a BitTorrent service? 60%? 70%? Combine that with the people who think $13 is too much to pay for the latest Jason Stratham shoot ‘em up movie, but wouldn’t mind paying $4 for it, and I find it hard to believe that the total amount of money brought in by the movie studio wouldn’t surpass the amount brought in with their $13 DVDS, with the added side effect of dramatically reducing piracy. Item (2) above, Rental Service, is a little more difficult to understand. A quick glance at the monetary issue would probably point out the obvious question: “Who would pay $3 to rent a movie when you can pay $4 and own it forever?” Well, odds are, probably no one. But is that such a bad thing? Are people actually renting movies 2 or 3 times? Though this move might prove to be the end of the rental industry, those funds should be transfered back to the media companies through purchases. Also, would someone continue to spend $20 a month for a Netflix subscription when they could use that same $20 to purchase 5 movies? The latter seems much more likely to me.
Rumor (3) from the opening paragraph was the updates to the Vudu platform. For those unfamiliar with Vudu, it’s a set top box that allows television purchases, movie purchases, and movie rentals via the interwebs. It’s very similar to the functionality found within the Media part of the Xbox 360, but with a slightly easier to interface and a higher cost ($399 for the box). Movie purchases cost $20, but it is unclear of whether you can download a movie, watch it, delete it and then re-download it again without cost. Also, there is no way to transfer the content to your portable media player, so we’re once again forced to watch the movie from our Vudu box. The main rumor concerns the availability of more HiDef rentals via Vudu. That sounds like promising news, however, it turns out to fall into the same pattern we’ve seen before, namely: price. HiDef movie rentals on Vudu are rumored to run $5.99 with 24 hour clock. You can watch the movie as many times you want within 24 hours, but once the 24 hours are up, you have to pay full rental price to see it again. That seems to be a high level of restriction for a $6 rental.
The inclusion of Quicktime versions of movies on new FOX DVDs (rumor (4) from above) seems like a very promising development. It shows FOX is aware that people might not always want to watch a move via their home DVD player, but possibly on their iPod or iPhone when they’re traveling. There is not sufficient information concerning DRM requirements on these files, or concerning the quality of the included video file,to give an accurate thumbs up / thumbs down rating. This development, however, appears to be a move in the right direction.
Up to this point, I’ve mostly discussed video content. Though Rumor (5) concerns audio content, it’s a perfect illustration of how media companies simply don’t understand how customers want to receive their content. Once again, on the surface, Sony’s announcement to go DRM-free on some of their music catalogue seemed quite promising. It turns out, however, their distribution model is severely flawed. Instead of using one of the existing online stores (iTunes, Amazon Mp3, etc..) to sell the content, Sony is requiring its customers to go to a brick-and-mortar store (a Best Buy, a Wal-Mart) and purchase an “album unlock card” there. A customer can then go home and use the code on this card to download the album in the un-DRMed format. It is almost inconprehensible that a company could think that this method of media distribution would be effective. Instead of sitting in front of the computer, clicking on the albums I want to purchase, I have to go down to the store and buy a card so I can go home and download the music? What advantage is there to that over a standard CD purchase? And with the cards priced at approx. $12.99 a piece, aren’t the odds in favor of the CD actually being cheaper? I do not foresee Sony’s DRM-free sales to be particularly stellar.
In the preceding paragraph, I chastised Sony for their “buy in the store / unlock at home” model. My complaint requires some clarification. I have no problem with the “buy in the store / unlock at home” being one aspect of the distribution channel, as long as a “buy at home” model exists. In fact, there are some scenarios where I think that the “buy in the store / unlock at home” model could be quite effective. Imagine going to see a movie in the theatre and, as you leave, there are places where you can purchase the movie you just saw for the $4 mentioned previously. Just walk up to the seller (whether it is person or machine), plunk down $4 and leave with a little card so you can unlock the movie when you get home. Obviously, this “strategery” would fly in the face of the current “Wait 3-5 months before putting out the DVD” model that’s currently in place, but wouldn’t it result in many more impulse buys? What if the only way you could get the movie while it was in the theatres was via this “buy in the theatre / unlock at home” channel? That would provide some shelter for the theatres but also capitalize on people’s feelings about a particular film. A whole column could easily be written on these type of movie “release in the theatre v. release to the public for purchase” issues and how the media companies have refused to evolve within the market place.
A disconnect exists today between media companies that produce content and the customers that consume said content. Though this disconnect might not be as wide for a large percentage of the population as it is for me, it’s hard to imagine people aren’t frustrated with the way their forced into certain behavior concerning their media watching. Will media companies make changes as drastic as those I’ve outlined here? Most likely, the media companies won’t make those changes any time in the foreseeable future, however, there are some promising developments that they’re at least trying to experiment with the idea of modernizing their distribution channels. Until such time though, it’s going to be their way or the highway.