By : Erik Gruenwedel | Posted: 18 Feb 2010
When Sonic Solutions, a company synonymous with marketing software enabling the burning of music CDs and DVD movies, quietly acquired movie download service CinemaNow for a paltry $3 million in 2008, few people cared.
After all, CinemaNow, along with fellow download pioneer Movielink (itself purchased by Blockbuster Inc. for $7 million in a fire sale), had failed to generate much consumer interest in movie downloads (even with adult content) to the PC since launching in 1999.
Fast-forward two years and the concept of Internet-delivered movies into the home on the television is no longer science fiction. In fact, it’s hot. And while consumer adoption remains limited, electronics manufacturers have embraced the concept with the belief that further enabling a “connected” consumer pulls them up the ladder in the entertainment distribution food chain.
Home Media Magazine caught up with Sonic president and CEO Dave Habiger to find out how the Novato, Calif.-based company plans to use electronic distribution going forward.
HM: Consumer electronics devices offering CinemaNow movie downloads have topped 1 million, up 66% from just September. Why has electronic access to movies become hot among CE manufacturers?
Habiger: What we’re doing with CinemaNow is helping CE manufacturers participate in the entertainment value chain for the first time. Manufacturers now have the ability, by pairing their devices with a CinemaNow-enabled service, to offer a complete experience out of the box. Before, there were “dumb” devices that could only play back content. Now, you can get a CE device that not only plays the content but also delivers it. Over-the-top services offer a great consumer experience that provides a very efficient and easy way to deliver movies. In the same way that applications complement and extend the capabilities of the iPhone, services like CinemaNow provide a natural extension of the capabilities of CE devices.
HM: The recent 28-day retail window for Warner movies that Redbox agreed to would suggest another digital window for electronic distribution of movie rentals and sellthrough. How big a deal is this for Roxio CinemaNow?
Habiger: This is a significant development for us. We feel confident our three-year investment in the VOD ecosystem delivery of content electronically was the right decision. The 28-day window is one of a number of positive signs about the growth of e-distribution. This means that people who use CinemaNow-powered services can enjoy a new release from the comfort of their living room even before that title is available in a kiosk or via mail.
HM: Best Buy is launching an ambitious digital content store with Sonic support that offers music and movies this summer. Are consumers ready for electronic consumption of entertainment?
Habiger: Consumers have undeniably shown they’re ready, and the studios have been extremely supportive. The industry is currently in a period of transition, where it’s important we educate consumers. There’s still a need to increase awareness, which we’re doing by partnering with retailers like Best Buy and Blockbuster.
Best Buy can educate consumers at the store, letting them know that the TV for sale is Internet-enabled so you can buy it, plug it in and have the new “Harry Potter” movie waiting for you when you get home. There’s an opportunity to do some bridging and consumer education, and Best Buy has the Blue Shirts and Geek Squad to help do exactly that.
Plus, people are already used to the concept of making micro-payments, like paying a dollar to download a ring-tone onto your cell phone. That’s essentially what we’re talking about: making a micro-payment so you can buy a movie and make your son happy while he’s in the backseat of the minivan. Once people click and conveniently get a movie from their CE device, they’re hooked.
HM: Blockbuster has aggressively rolled out a multi-platform distribution channel that includes incorporating CinemaNow technology in CE devices. Why does this venerable brand get such a bad rap in the media and on Wall Street?
Habiger: Let me tell you, this is why we’re excited to work with Blockbuster: They have one of the most recognizable brands in the world, and they rent more movies than anyone in the industry, producing several billions in revenue. I’ve seen what happens when their brand is on a streaming CE device — the attach rates triple.
I believe people may be underestimating Blockbuster and what that brand means, how they’ve built it over many years and have invested heavily in the future. When consumers see the Blockbuster logo, they know it stands for movies. The Blockbuster employees in the retail stores also offer a great way to educate consumers about digital distribution.
HM: How important is the Internet-enabled Blu-ray Disc player to the evolution of digital distribution of movies?
Habiger: It plays an important role as one of the stepping stones for consumers to experience digital distribution. It’s a great bridging technology — the Blu-ray device can play discs and also accept movies electronically. It helps consumers get comfortable with the idea of downloads.
I believe there will be an expanding ecosystem of CE devices that give consumers the flexibility to manage and seamlessly move content between their devices. This is a very powerful channel to deliver premium content and provide a very compelling consumer experience. Ultimately, the amount of connected CE devices and services in the market will be in the hundreds of millions, and digital distribution is going to be ubiquitous.
Just like you can’t find a cell phone without a camera these days, I predict you won’t be able to find a CE device without a CinemaNow-powered service on it.
HM: Both Time Warner Cable and Comcast reported VOD declines in their most recent financial reports. Can the VOD movie ever have mainstream consumer appeal?
Habiger: I can’t speak to the cable VOD business, but I can tell you the CE/PC VOD numbers are increasing exponentially. Once consumers understand the convenience of having the flexibility to move their content across devices in the ecosystem, I believe it will become even more popular. This is the future.