2006 Indecision Continues In 2007

In Episode 17, Stephen brought up the point that cinema in 2006 could be characterized as a transitional year, but one in which nobody quite knew where the industry was transitioning to. Already, 2007 seems to be shaping up in the same spirit, as companies continue to dabble in new technologies and distribution patterns in the hopes that something will stick.

Yesterday, Wal-Mart announced that it would be selling movies as online downloads, tossing its hat in the ring with iTunes. Just as Wal-Mart, commercial juggernaut that it is, failed its head-to-head match with Netflix, I have to think this new plan is also doomed.

iTunes gives you the ability to watch a movie on your computer and a portable device. Wal-Mart gives you the ability to watch a movie on your computer. Both of these choices are pretty poor, but it's obvious which one is the better offer.

The main problem is the price point. Wal-Mart, unlike iTunes, wants to offer variable prices -- some titles will be more expensive than others -- and that's attractive to studios. But for the consumer, it's all the same: $15-$20 for a movie download is too expensive. When you can pick up a DVD for the same price, a physical copy with nice packaging (and be able to play the thing in a greater number of devices), who's going to go for the download? It's not analogous to buying songs online, vs. a physical CD. The attraction of buying songs online is you can buy one at a time and not get stuck with a whole album.

So a cheaper price is the first hurdle. The second is, what are you going to do with the download? There isn't (yet, and I would say there won't be for several years yet) a hardware base out there for consumers to be able to do anything with their downloaded movies other than watch them on their computers. I'm not sure if Wal-Mart's plan is to allow consumers to burn to DVD. If so, why not just buy a commercial DVD copy? If not, what are consumers going to do with the download?

At this point, I see a "rental" model working better for online downloads. As discussed in the comments for a previous thread, Netflix plans to offer streaming movies for their subscribers, limited to a certain number of minutes per month that varies based on your subscription level. This makes so much more sense. You're not buying a movie that you will ideally want in the most versatile, portable, attractive way possible. You're renting. You're paying for a single experience.

In general, I prefer owning over renting, but clearly there is a demand for both forms of delivery, as video sales and rentals and pay-per-view have co-existed peacefully for years. Until the hardware base is out there to make purchased downloads an attractive option, "rented" downloads are all the make sense.

Moreover, the price point is spectacular. Netflix is worth the monthly fee just for the DVD deliveries, so how can adding on this additional service for free be unwelcome?

But as for the hardware base, Apple has made the most interesting move, with the forthcoming Apple TV, a device to bridge the gap between your computer and your TV. Will it catch on? I have no idea.

One problem is that it's expensive, but that's to be expected with a new type of device, and presumably the price will come down in time. I still say that the desire to own a physical object when they purchase something is a big deal. A song for a dollar, maybe not. A movie for twenty, and I think people will expect more for their money.

But I'm not predicting that the shift toward online content delivery won't happen, only that it won't happen quickly. Maybe the problem isn't that the industry doesn't know where it's going. Maybe it knows where it's going but not the way to get there.