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TK's MORNING BUZZ: Relax, Electronic Delivery Is Not Coming Soon -- And Won't Kill Video When It Gets Here

25 Jan, 2001 By: Thomas K. Arnold

The fear factor has been raised significantly in recent weeks, first with the Wall Street Journal report from late December that several studios are making plans for electronic video-on-demand delivery over the Internet and then with the news last week that Miramax Films is about to post a romance called Guinevere on the Internet for digital downloading and a one-time "rental" viewing.

Ease up, guys. Electronic delivery is coming, but it's not coming soon, and when it does, it will take awhile to ramp up. Morever, even when it is ramped up to the point where it has a high penetration rate -- by 2010, analyst Tom Adams told me today, he projects VOD via the Internet and cable combined will have a reach of nearly 40 million homes -- it won't kill physical video.

Sellthrough is practically immune. DVD has revitalized the market, and its explosive growth underscores the fact that a good percentage of us -- yours truly included -- are collectors who like the idea of owning things. Then there's the gift market, which accounts for 40% of packaged media sales. I don't see myself giving my wife a digital download of her favorite romantic comedy (or, in Diana's case, a fast-paced action flick is more like it) for Christmas.

As for video rental, well, the existing model will certainly take a hit, and a lot depends on the future of the DVD rental market -- specifically, whether the studios will allow it to continue, or mess it up in some fashion, as some are talking about doing through higher new-release prices. But even when a good chunk of our population has access to downloading or The Next Step, video streaming, it's not going to completely wipe out video.

For one thing, there will still be twice as many households with VCRs and/or DVD players, and those machines aren't going to live solely on $20 sellthrough meals. For another, the Internet camp is still basing its model on delivering movies to the PC, and that's taking for granted a sweeping change in consumer habits -- specifically, we tend to like to watch movies on TV.

So no, the sky isn't falling. It's merely heating up with all the hot air coming out of Hollywood.

Comments? Contact TK directly at:TKArnold@aol.com

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