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Digital Dissonance

26 Oct, 2006 By: Jessica Wolf

SANTA MONICA, Calif. — While the major studios have loosened their iron grip on movie content for alternative distribution mediums of late, mass adoption remains stymied for several reasons.

Executives from Movielink, CinemaNow, BitTorrent, Akimbo and Movibeam at the Digital Hollywood conference discussed the pitfalls facing the video-on-demand market.

“Consumers will tell you that most [Internet-based VOD] services are some combination of too hard, too restrictive, too expensive, or the video is too low quality,” said Jeff Goldman, CEO of Akimbo.

Anyone selling video content over the internet, especially high-profile feature films, has to tackle all these issues and solve at least one in order to jump-start adoption, he said.

Of the four aforementioned roadblocks, there is some debate on which is the most prohibitive. Quality and download speeds are important and improving all the time. Still, many people seem content to spend vast amounts of time downloading questionable pirated content, so those two factors may be less problematic for determined digital movie watchers, said Brian Taptich, VP of business development for P2P technology service and Internet video provider BitTorrent.

Pricing is definitely a big issue, panelists said. Studios don't want to tick off their big retail accounts with download prices much lower than DVD, but consumers expect some kind of savings because of the limited uses of a digital file and lengthy downloading time.

However, if all things were equal, panelists agreed they think consumers would be willing to pay a DVD price for a movie download.

But all things are not equal when it comes to digital rights management, the usage restrictions studios put on their content and the proliferation of closed networks, such as Apple's iTunes, which have DRM schemes that are incompatible with non-proprietary systems.

Still, big players such as Apple and Amazon getting into the business will have a positive effect on studios attitudes toward DRM, panelists said.

“The iTunes deal alone has the potential to break through some of these issues,” said Carl Crabill, VP of sales and marketing for MovieBeam, which delivers VOD movies to homes via a set-top box. “It's going to take the Apples and the Amazons to do it, and in truth, they need to do the heavy lifting here.”

Crabill said there are two things that always seem to drive this market: “greed and paranoia.”

“Studios have a huge retail channel that they are not going to mess with, and I wouldn't either,” Taptich said. “When the Wal-Marts and Best Buys get into it, things are going to get looser.”

Bruce Eisen, president of CinemaNow, downplayed the potential competitive advantage big box retailers might have over established players should they enter the market.

Wal-Mart's near 40% of the DVD sales market came from loss-leader pricing designed to attract shoppers to the store and keep them there spending money. A Wal-Mart Video Web site would not have the same effect, he said.

Meanwhile, in-store downloading kiosks, which Wal-Mart is rumored to be mulling, are “fraught with peril,” Eisen said.

Even all Apple's downloading success to date doesn't mean that the company has the market cornered either, said Mary Coller Albert, chief marketing officer for Movielink, which has been in the movie-downloading business almost as long as six-year-old competitor CinemaNow.

“Even if they get all the studios, there are people who don't want to own a Mac or an iPod, who want content differently,” she said.

It's in the studios best interest to make sure there are plenty of paths to content outside traditional retail, Goldman said. Wal-Mart headquarters is already wielding more power than anyone is wholly comfortable with, he said.

At an earlier panel, Fritz Attaway, EVP and Washington General Counsel for the Motion Picture Association, said the studios are more interested than ever in using DRM tools to provide more access to content.

The problem is, a vast majority of creative content out there today is not coming from the studio level, said Michael Petricone, SVP of government affairs for the Consumer Electronics Association. Hollywood studios are backing legislation that would hold even those kinds of content creators to very restrictive digital rights management.

What's good for the most expensive Hollywood studio-level content will not necessarily be good for the increasingly democratized and Internet-based creative community at large, he said.

Indeed, digital movie purveyors on the panel said the profit margins in the digital-download sphere are not going to come from the high-end feature film content, but from niche content and new, exciting kinds of video from all over the spectrum.

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