Here are a couple of initial thoughts on the report in the FT on Apple’s Movie downloads.
Firstly, this is an unsubstantiated report, so as is always the case with Apple, a shovel full of salt is required with consumption. But that said, it’s still illustrative to consider the implications of this potential strategy.
Apple’s video downloads to date have operated within the confines of relatively limited content. The AppleTV initiative has increased the importance of getting prime content from more studios. Just as with music and the iPod, Apple needs movie downloads to help market AppleTV.
The fact that it appears downloads will be rental (30 days for $2.99 according to the FT) reflects the realities of trying to get the studios onboard in a way which appears to minimize cannibalistic threat to existing release windows. If the downloads are synched with existing VOD release windows then it’s the cable co’s etc who will be at most risk of cannibalistic impact. However they’ll likely be able to differentiate on quality: one of the big challenges for online video versus TV is quality. However much PC displays may have improved, the TV experience has improved more so – with large HD Ready screens becoming increasingly widely purchased. (Though of course Apple will be hoping many buyers will be watching on their TV via an AppleTV box). But file quality is also an issue: delivering a HD quality file for play back on a 1080 40 inch screen is a big challenge for mainstream home Internet connections.
If release windows for online video were eventually shortened then there is greater disruptive threat to established value chains. Movie watching is very different from music listening. It is normal to listen to a CD three or four times in a week after purchase, much less so for watching a DVD. People tend to watch once or twice and shelve. So a 30 day period will be plenty for many consumers and would thus be a cannibalistic threat to DVD sales, if available too close to that release window. In the longer term, the Blockbusters of the world will be watching their backs.
In the near term though, just as with music, movie downloads are still niche and not replacing the core product. This is the process of movie studios trying to empower the online channel to a strong enough degree to generate revenue, assess opportunity, compete with piracy etc but at the same time protect established revenue streams. It’s a difficult balancing act and there will probably be a few slips along the way.
For further reading see these recent European Jupiter reports on online video and PC based video: