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Digital Downloading Perspective- movies on Apple's iTunes download service

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From the Digital Bits:

"There are also a couple of interesting stories in the mainstream press
worth commenting on. First, Fortune is reporting that Time Warner, Fox,
Disney, Paramount, Universal, Lionsgate, Image and First Look are all soon
going to begin releasing their movies on Apple's iTunes download service day
and date with the DVD release. The piece then goes on to conclude that this
means "Time Warner is finally ready to start weaning itself from DVD sales,
which have been Hollywood's biggest revenue source for years." and also that
"Sony and Toshiba just incinerated a pile of money in a useless DVD format
war." Here's what we say about their conclusions: NUTS! What this move is
going to impact is EXACTLY what we've been saying downloading would impact
years now here at The Bits - the DVD rental market. So who should be afraid
of this? Blockbuster and Netflix. As for DVD sales, Time Warner CEO Jeff
Bewkes himself offers evidence as to why that market isn't in trouble yet.
Here's the relevant text from the article:

According to Time Warner's Bewkes, the company had been experimenting with
"day and date" video on demand (VOD) release for several months and found
that DVD rentals only fell by 3 to 5 percent and sales of DVDs actually
increased. Since VOD is so much cheaper than printing and distributing
discs, it looked like a no-brainer.

"Taking a customer and moving that person over from rental-physical over
moving them to VOD day-and-date is like a 60 to 70 percent margin instead of
a 20 to 30," Mr. Bewkes said, according to the New York Times. "So it's
about a three-to-one trade."

There's something else Fortune is forgetting to mention - most movie
consumers DON'T DOWNLOAD. It's still way too complicated for most consumers,
particularly a majority of older consumers. It tends to require a level of
technical knowledge and set-up effort that older folks just don't want to
deal with. And to enjoy a downloaded movie in your living room requires a
broadband or wireless connection in your living room, which many don't have.
Otherwise, you're stuck watching a download on your PC. That's still not
something alot of people do. Sure, there are many younger consumers who
think nothing of this. But younger consumers aren't spending massive amounts
of money on movies or music these days - they're buying videogames.
Middle-aged and older consumers do. As for high-definition, the idea that
downloading is going to somehow cannibalize the Blu-ray market is completely
absurd. Downloading isn't going to be able to deliver the ease and quality
experience of Blu-ray Disc for a very long time, and that doesn't even take
into consideration the sheer bandwidth issues. Consider too that many ISPs
have caps on the amount of bandwidth you can use each month, especially if
you pay less than $100 a month for your Internet access (thanks to Bits
reader Marty S. for pointing that out). Downloading lots of movies could
raise your bill substantially. Downloading also doesn't serve the movie
collector market either - the folks who like the satisfaction of owning a
physical product. Where are you going to store your downloads? What happens
if you have a hard drive crash? As far as we're concerned, this 'Death of
DVD' business is rubbish. DVD's going to be around a long time yet. So, we
suspect, will Blu-ray."

Bill Hunt, Editor
The Digital Bits

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