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APAR's WORKING WEEKEND: Fly in the Ointment?

17 Aug, 2001 By: Bruce Apar

Color TVs in the 1960s, handheld calculators and VCRs in the 1970s, Walkmans and CDs in the 1980s, mobile phones and DVDs in the 1990s, MovieFly in the 2000s.

Which one does not belong? If you said MovieFly, I’m not sure I’d agree. MovieFly – not a bad brand coinage when you compare to the epidemic of bland high-tech corporate IDs like Cendant, Viant, Accenture – is the flavor of the week in entechtainment news. MovieFly is AOL Time Warner (Warner), Kirk Kerkorian (MGM), Sony (Columbia), Viacom (Paramount) and Vivendi (Universal) saying, “Enough already!” to the threat of digital piracy a la Napster.

MovieFly is those entertainment conglomerates (“movie studio” is sounding more quaint by the nanosecond) realizing they have to put down stakes in the digital prairie that more and more consumers are settling, if only to claim a territorial imperative on their public’s share of mouse.

Getting back to the beginning, what does MovieFly have to do with the rest of those technological innovations? Simply that in each case, at introduction, they were embraced only by early adopters, a function of high prices and limited applications, at least in the view of a consumer public whose behavior needed some nurturing to conform to the contours of the new gadgets.

It’s much the same with MovieFly and similar services that will follow. It will be of limited appeal for a while, as the consumers’ learning curve wends its way through the digital maze of devices dotting the marketscape. By the end of 2000, nearly 11% of U.S. online households subscribed to broadband access — more than double the number in 1999. By 2003, broadband access is expected to grow to one-third (20 million total) of online households, according to International Data Corp. For the time being, it seems safe to assume more than one-fifth of U.S. homes have access to broadband, a prerequisite for using the MovieFly service.

It’s also long been Sony Corp.’s strategy to develop and position its products through market segmentation, whereby it might appear to compete with itself but in fact it recognizes there are many different types of professionals and consumers to be served and there is no reason why a single company can’t satisfy all those needs. With MovieFly, the studios might be capturing consumers who are not avid VHS renters, for example, or even DVD buyers.

Increasingly, the new generation of digital customer channels MovieFly exemplifes force the issue of redefining what “retail” really means. The conventional wisdom is that it implies a storefront but that perception will change as nonphysical venues become more commonplace points of transaction. Which is to say, while MovieFly may someday compete seriously with storefronts serving packaged media like DVDs, it cannot accurately be said to compete with retailers. It is a retailer in its own right.

If Blockbuster can own a movie production company in DEJ, and studios can own their own branded storefronts (bad example of late with Disney and Warner stores going out of business), then studios are also functioning as retailers in the case of MovieFly. Of course, studios tried a similar in the 1980s through cable television – a joint venture called Premiere – and by the time the Justice Department cleared its throat, it was the end of that allegedly anticompetitive effort.

Based on canned statements, the most savvy MovieFly studio partner where storefronts are concerned is Universal Studios, which, in a remark attributed to president Ron Meyer, covered its bases with, “In addition to… going to the theater or local video store, this service….” Less concerned about such niceties is Jack Waterman of Paramount Television Group, who bluntly informed The Wall Street Journal, “It will be better than watching a tape on television.”

The Wall Street Journal’s Web site (wsj.com), is conducting on online poll that asks, “Would you buy video-on-demand service?” When I checked it out Friday morning (EDT), of 240 people who had cast ballots, 32% said yes, they would buy VOD; 27% said no, they would not buy VOD; 37% said it depends on how much it costs; and 4% checked “I still can’t program my VCR.” The Journal notes this is by no means a scientific sampling, just anecdotal feedback.

For the record, I voted No. For the time being, for me, DVD is the place to be. With evolving enhancements such as Nuon and New Line’s Infiniflm “Beyond the Movie” adding depth to the movie-watching experience, it will be VOD that will have to play catch-up with DVD in the years ahead. That basic premise is explored in an article at msnbc.com.

Comments? Contact Bruce directly at:bapar@advanstar.com

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