Wednesday, January 16, 2008

No permanent allies

One of Steve Jobs’ announcements Tuesday was for a movie rental business, in which customers can

  • download a movie
  • play it within 30 days
  • play it as often as desired (on a PC, iPod or AppleTV) during the next 24 hours

The price is $4 ($3 for backlist), plus a $1 premium for HD content.

Obviously this requires DRM (and new iTunes software), thus bucking the DRM-free trend in music. The iTunes website also seems to have dropped all mention of Apple’s experiment selling movie downloads (with only Disney cooperating fully), suggesting that Wal-Mart’s retreat was no fluke.

The coverage today of the announcement made it sound like Steve Jobs had won a great victory with Hollywood after a string of defeats. For example, the Hollywood Reporter reported

Steve Jobs' eagerly anticipated Macworld keynote lived up to the hype Tuesday as the Apple co-founder, chairman and CEO announced that movies from every major studio would now be available for rental on iTunes.

During his annual speech in San Francisco, Jobs revealed that his company had reached agreements with 20th Century Fox, Disney, Warner Bros., Paramount, Universal, Sony, MGM, Lionsgate and New Line to make movies available to rent through Apple.

But I think Forbes has it closer to the truth:

Hollywood's interest in protecting lucrative DVD sales and rentals, as well as revenues from on-demand cable movies, made some studios reluctant to embrace permanent downloads at iTunes. And with DVD sales holding up much better than sales of compact discs, they had far less incentive to play ball with Jobs than the deeply troubled music industry.

Online movie rentals — that is, downloads that become unplayable after a specified period of time — will help bridge the interests of Apple, which badly wants to offer a full menu of movie downloads, and the studios, which are interested in new revenue streams that won't cannibalize existing ones.

Forbes quotes an analyst noting that, in effect, Apple is still king of the handheld playback device — a market that so far has not been penetrated by any system. Thus iTunes revenues here are incremental to existing revenues, and do not entail sharing existing revenues (which Hollywood is loathe to do) with anyone. Similarly, TV shows still are available for sale. on the iTunes store, because these are revenues the studios weren’t getting before.

This time Hollywood and Apple have their interests aligned, but that’s no sign that Steve will have an easier task getting cooperation next time.

As Lord Palmerston (oft-quoted by other English statesmen) said: “Nations have no permanent friends or allies, they only have permanent interests.” The permanent interests of movie studios are to find new growth markets, control their IP, and fight like heck to avoid being Napster-ized.

1 comment:

Movie Download War said...

Great article thanks. Apple's plans at MacWorld will have undoubtedly shaken a few feathers within the movie download market including the likes of Vizumi, Netflix and Cinema Now. Not because Apple is offering a fundamentally new twist on VOD but because it's Apple.

The movie download market today is very similar to where online music was in wake of the first Apple iPod. Back then, MP3 players were already on the market but were largely niche products and most music that played on them was illegal pirated copies. Apple created the first cool digital music player.

Movie download services across the board has started to take off in the same way downloading music did with iTuness so to seems inevitable that the same will happen with iMovies and emulate what iTunes did to the music industry with movie downloads? It will be an interesting year!