Dubious about downloads
By Tom Paine -- Video Business, 3/9/2007
MARCH 9 | Despite the constant news stories, the business of legitimate movie downloads over the Internet is slow to catch on. Yet the independent rentailer feels threatened by download technology and, like me, many wonder if this will ultimately mean the end of renting movies on tangible media.
Paine
There are many businesses offering movie downloads and more coming. Some only stream, some download only to hard drives and some are burnable. Yet the business is hardly a blip in the marketplace. In this wired world, one would think it would catch on like iTunes … or has it?
A recent article in USA Today claimed the business model for downloading music has been a failure. That was a surprise to me. Many iPods have been sold, but the sales rate of legal downloads has been underwhelming. The average iPod owner downloads 20 songs per year. That’s $20 spent per iPod, per year. The music is coming from other sources instead, like CDs or file-sharing Web sites.
The reason given for low sales is that digital rights management technologies inhibit consumers. DRM is the technology that restricts what one can do with a digital file. Steve Jobs concurs and proclaimed recently that DRM needs to go.
The implication for our business is huge. The music industry may eliminate DRM and downloads may or may not increase. If unprotected music downloads get into the public domain, it does not necessarily mean the business model fails. Legal downloading will continue because it is convenient and less risky than pirated downloads. Costs to produce an album are relatively low, so legitimate downloads in a world of multiple copying could still prove profitable and yield a reasonable return to the record companies.
The movie business model differs.
Films require major investments upfront, and you can bet that studios will never allow digital copies in the marketplace without DRM. The business already struggles with piracy and illegal downloads. DVD, HD DVD and Blu-ray are all copy-protected. Studios are not going to open the door to legitimate downloads being copied with no restrictions.
If DRM inhibits the consumer from downloading a 99¢ recording, imagine how they will feel about a $15 or $20 movie that is restricted.
Interestingly, the majority of music downloads are for singles, otherwise unobtainable, but the preference for albums is the tangible CD itself.
When Wal-Mart recently announced its movie download service, an analyst from Forrester Research commented on the cumbersome portability of downloads and the technology required for watching them on TV. He said we already have that technology. It’s called a DVD.
I have long thought the technological revolution facilitated a multitude of solutions to problems that do not exist. Renting, buying, trading, loaning, borrowing and selling DVDs have proliferated all over the world. It’s easy, reliable and the quality of the product is excellent. One wonders if there will really be much mainstream consumer demand for movie downloads. Tom Paine is owner of six-store DVDNow! in Redmond, Wash.
