Summary
Good article - the ugly truth about digital movies on the web is that no stand alone digital video content service makes money today, not CinemaNow (Sonic Nasdaq SNIC), Amazon, Vudu, or BlockBuster. The business model is missing, the revenue share small and the demand absent.
Many have tried and failed including: Intertainer, MovieLink, Akimbo, Moviebeam - even CinemaNow was sold because it could not make money. The digital movie business model is broken....
Analysis
Good article - the ugly truth about digital movies on the internet is that no stand alone digital video content service makes money today, not CinemaNow, Amazon, Vudu, or BlockBuster. The business model is missing, the revenue share small, and the demand absent.
Many have tried and failed including: Intertainer, MovieLink, Akimbo, Moviebeam - even CinemaNow was sold because it could not make money. The digital movie business model is broken and has a long way to go before digital is profitable for any service provider. You can't win unless you can achieve either enormous scale or generate a complementary revenue stream.
All the winners today in new media use digital to complement the real business model. Apple sells iPods, NetFlix has subscription DVD revenues.
The problem? The digital experience is bad; the cost high (film rental cost at $3.99/ 24 hrs is 400% higher than RedBox Coinstar CSTR ), viewing rights are too restrictive, DRM limits playback on other devices or TVs. DVDs rentals are a better deal. The digital copy itself has no chapters points, no thumb nails, no extras commentaries, its just a digitally flat film - i.e. the digital movie experience sucks compared to traditional DVDs.
The digital kiosk is no better, because it requires consumers to change consumption behavior, this takes years. They say that the download is the issue with digital, this misses the point - its the overall experience that is lacking. In fact, many digital services can pre-download a film or do streaming nearly instantly, so download times are omitted from the equation. Even those that offer instant playback see no significant rise in consumption when the download time is removed as a variable.
The Hollywood model for digital downloads and streams for movies was focused on the PC for its first 9 years, the wrong screen for movies. Unfortunately cable companies never wanted the internet in the living room, so they kept video downloads on the PC in nthe office. Now that over the top video is gotten out of the bag, people can now begin to find digital PPV films streamed to the TV, I think we will begin to see IP VOD gaining traction - following in the footsteps with NetFlix onto LG , Samsung Blu-ray players and connected HDTVs, Vizio flat panels, Rokus and VuNow etc.
With digital streaming of films finally getting to the connected living room, 2010 will see the beginning of this market to get real, but to be serious sources of profits, the digital alternative is still years out.
