The Film Delivelution: 21611
FIlm Delivelution: The Evolution or Revolution, depending on your tastes, of Filmed Entertainment Delivery.
Today, I won’t spend much time on the WSJ piece by Martin Peers that speaks to many of the issues with Netflix that have been repeatedly outlined here. What he doesn’t speak to, and what I see as the single biggest problem with Netflix’s long-term position, is competition.
And just to note, I don’t see Hulu as “The Winner” either. I see a changing playing field, which because of increasingly simple technology is bigger than any existing company or tool.
There is also this brief snippet from Mark Cuban via The Daily Beast:
“What (people) are saying is that they are willing to save money by waiting to watch the same TV shows everyone else is watching. That isn’t anything new. That is the whole reason windows for content licensing exist. You can get any content for less just by waiting.
How long is it before the complaints of “I don’t watch 19,900 of Netflix’s shows and movies, why should I pay $8.95 per month? I only want to pay for what I watch!”
That brings us to…
Say “hello” to WB Digital Distribution’s new creation… the movie app.
$11.99 for Inception or The Dark Knight on your iPad/iPhone along with all the DVD extras, subtitles, etc. Stream it or download it all you like. (Here’s the press release)
I’m not saying that an app for every movie is The Future. But what I see in ideas like this one that the door is wide open for direct delivery from the content owner to the customer in just seconds (which obviously doesn’t include the time to cache a stream or download a whole movie).
Imagine the free WB Movie App that organizes and offers every film in the WB library. Imagine a free MPAA app that organizes and offers every title from every MPAA member library. Imagine being able to subscribe to this service for $40 a month to download any movie in the consortium after a 6 month theatrical release window to any of your platforms, including your TVs. Imagine another $40 a month for all of television.
Of course, there are dozens of variations out there. Want to pay nothing? Ad-supported television will still exist for that purpose, for that percentage of television watchers. Want a household platform that interacts with cable/internet/telephone, etc… that will certainly be an option.
But look at it from a studio standpoint. If the major studios gather and acquire 80 million buyers of All Studio Movie Content for $40 a month (about the wired television penetration in the US alone), that’s more than $38 billion a year to carve up between 6 companies. And revenue can be shared with very little conflict on the simple basis of popularity.
Ironically, the group of filmmakers likely to be most benefited by this notion are the indies… as the distribution issues of the past would be put in the past, and the loyal viewership of a committed group would be worth as much or more to a distributor in a subscription-based post-theatrical world than a film that has more widely marketable elements but is not well-liked enough to score multiple viewings… at least in my Utopian fantasy.
Here is a promotional video from WB about this new app-based platform:
The standard App Store terms mean that Apple gets a 30% cut of each and every copy sold. Do you think that’s more or less sustainable than other formats? And shouldn’t it concern the studios that Apple is probably more dominant in the mobile app market than, say, Netflix is in the streaming market?
This is exactly what it seems Apple TV could be (if Apple is so inclined). Others have noted that since it is based on iOS it should be able to run apps; imagine getting the free WB app (or Paramount or CBS or whatever) and then getting a subscription and/or making an in-app purchase of a particular movie. Apple could probably do this tomorrow if they wanted to, and Google wouldn’t be far behind. It does seem like Netflix has a small window to find another business model.
Apple’s 30% deal is onerous. But it’s also still the wild west.
There will come a moment when the studios say, “no” and Apple will have to choose between having movie content on the iPad and iPhone or not.
This is the same situation that Netflix is now facing, really. Right now, they can grossly overpay for content or lose their most high profile content completely. So they are paying. But they can’t sustain that if they are paying for “all” the streaming content without a major increase in subscribers. They are already shockingly successful gathering subscribers, but even beyond churn issues, the question of whether they can triple the massive success they have already had in getting monthly fees is not a pretty one to consider.
Apple will continue to dominate in the smart phone and tablet market for as long as they maintain the idea – true or false – that they make the best product that gives you the smoothest, easiest access to the most stuff.
Right now, it’s still easier for studios to pay the 30% and not sweat it. But that is changing and changing fast.
Think of it like this… Apple (and Netflix and Hulu) are part of the new era affiliate system. When networks needed television stations to play their shows in more of the country, they paid affiliated to air their line-up. Now, affiliates pay to air network line-ups.
Last year, Sony was thrilled to be making an extra $50,000 – $250,000 a film from Starz streaming their films on Netflix. Now that Netflix is paying Paramount and others a couple of million per film per year, Sony would be a chump to take the smaller amount. Last year, Netflix was doing Sony a favor. This year, Sony – still under the Starz deal – is doing Netflix a (contractual) favor.
The scale that studios are now looking at is 20x bigger than The iPad or iPhone. If Apple ends up controlling 10% or 15% of your overall post-theatrical market, they’ll still be very powerful. But they won’t be powerful enough to, basically, charge double what the market value is likely to be.
Thing is, I think all the players know that. I think that Apple knows that they will have to adjust the subscription model they just rolled out. But they’ll do it quietly, they will hide behind “special partnerships,” and they will serve their own needs, which is likely to mean an occasional show of force and a willingness to negotiate with the biggest players.
and even if you have an MPAA site or App with all major studio content accessible on it no one would have to worry about the material not being available through Apple, Hulu, Amazon and netflix, I think. The studios are too lawyer-savvy to put all their eggs in one vertically integrated basket like Apple, or their own conglomerate site. Say there is a service you can sign your internet ready TV or bluray player to that is unaffiliated with apple. That’s the primary, you get content direct and all money goes to the studio, the subscription model would work well here. But you’ll still be able to access it through Apple, where apple will take (a much smaller, once the studios have their conglomerate site rolled out with plenty of marketing support trumpeting it) their cut. likewise you’ll still be able to access content through Netflix and Hulu etc. The studios know that even if they collude, so long as there is the illusion of marketplace choice, they’re more or less safe from any trust busting attempts. If they conglomerate and collude and try to shut out third party distributers (such as Apple, Hulu, Netflix etc) then they’ll get smacked pretty fucking hard by the feds.
I love Martin’s little dig at Hastings at the end of the article because he’s sold out a large part of his position since 2008. He still owns anywhere from 100M to 200M worth of Netflix stock.
“Imagine a free MPAA app that organizes and offers every title from every MPAA member library. Imagine being able to subscribe to this service for $40 a month to download any movie in the consortium after a 6 month theatrical release window to any of your platforms, including your TVs. Imagine another $40 a month for all of television.”
Why can’t Netflix be the MPAA in this example?
Shouldn’t Warners offer an app that simply streams their cable channels at a subscription rate? All the TCN properties at a monthly rate (say what they get from the monthly carriage fees plus 25%) and make it compatible with all wireless devices. This way they could still get the fees and eyeballs of the people who turn away from cable to the web. I know no studio wants ala carte cable, but isn’t that likely where this is heading on the web (or even a double dip by those who have cable but want access to Conan and NCAA Basketball on the go)? Are they going to wait until Disney or Viacom do it first?
I like the added bonus you mention of all the DVD extras. I’ve been away and just excitedly logged into hulu to check out their Criterion offerings and was kinda disappointed. They have an AMAZING selection, but none of the extras which is what makes Criterion “Criterion.” Plus the hulu stream isn’t *really* hi-def so in effect, it’s just movies that don’t look particularly great and offer none of the Criterion bells and whistles. Meh.