Price cuts signal download war
Guba, CinemaNow flirt with $5 new releases
By Paul Sweeting -- Video Business, 8/23/2006
AUG. 23 | Having recently bagged deals with Sony Pictures and Warner Bros., online video sharing site Guba has moved aggressively to stake its claim in the increasingly crowded field of movie download services.
The company announced a limited-time price reduction that will let consumers buy permanent downloads of new release feature films for $9.99, compared to the regular price of $19.99.
Catalog titles are being offered for $4.99 a piece. TV episodes are going for as little as 49¢.
Among the recent titles available on the site are V for Vendetta and Harry Potter and the Goblet of Fire from Warner, RV from Sony and Hostel from Lionsgate.
The aggressive price cutting by Guba echoes a similar move by CinemaNow, which has run promotional pricing as low as $4.99 for permanent downloads touching off speculation that the download business could be facing its first price war.
“Obviously, there is going to be a number of new entrants into the digital downloading space, and in any business with an increased number of parties, there’s inevitably competition,” Sony Pictures Home Entertainment executive VP of digital distribution Sean Carey said in response to Guba’s move. “From a pure growth of the digital side of the business standpoint, that competition could be a good thing.”
Some involved in the download business, however, worry that it could be too much too soon for a business that has barely begun.
“The biggest surprise to me in the last year is that it seems a lot more people are going to get access to major studio product than I originally thought,” BitTorrent VP of business development Brian Taptich said. “I used to think it would be a pretty small handful of operators who would get studio product, but it now seems there will be lots of them. That means it’s going to be a brutal business for awhile.”
BitTorrent recently landed a deal with Warner and plans to launch a download store with the studio in the fall.
“Basically, everyone is going to get the same deal and then it’s a marketing game,” Taptich said. “So if your only business is making content available for download on a paid basis, you’re going to have a very tough time for the next three or so years.”
According to Akimbo co-founder Jim Funk, download services also must compete with consumer expectations set by packaged media, a phenomenon he calls the “Netflix bar.”
“Basically, if it’s not better than or easier or cheaper than Netflix, or really all three, then why switch?” Funk said.
Over time, however, the download business will consolidate under a handful of operators, Funk believes.
“I do think there will be a narrowing of service providers,” he said. “Going to 20 different sites to get the content you want is not very realistic.”
Jennifer Netherby contributed to this report.
