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Panel: Electronic Sellthrough at Crossroads

16 Jun, 2008 By: Erik Gruenwedel

CENTURY CITY, Calif. — Widespread consumer adoption of electronic sellthrough of movies and television shows is years away and in jeopardy unless digital files can be played on the TV, said a panel of industry experts.

Speaking June 16 at the seventh annual home entertainment summit, presented by Home Media Magazine, panelists said without cheaper and easier access of digital content across multiple devices, electronic sellthrough is destined to remain a niche market.

“From a domination standpoint, we are years and years away, if [it happens] at all,” said Russ Crupnick, VP and senior analyst with The NPD Group.

David Cook, president and COO of entertainment download pioneer CinemaNow, said the service had spent the past year repositioning itself to be embedded in consumer devices more likely found in the living room than the PC.

CinemaNow expects to bow select enabled devices later this year.

“We're probably a couple years away before there are enough of those devices in the market that creates a compelling use case for consumers to start adopting in mass,” Cook said.

Tony Knight, senior product manager at Macrovision, said electronic sellthrough would only takeoff if the user experience replicated DVD, which he said could happen in the next five years.

Jason Kramer, chief strategy officer with Interpret LLC, a consumer research firm specializing in technology and entertainment, said the concept of electronic sellthrough has been around for 10 years with little or no traction with consumers.

“There is no sign that it is really going to [generate traction],” Kramer said.

Citing internal research that compared consumer attitudes about electronic sellthrough in 2006 and 2008, Kramer said little had changed. Instead, Interpret found that consumer awareness of videos through social networking sites such as YouTube and streaming ad-supported TV content had grown from 50% to more than 70%.

In addition, Interpret found that consumers expected electronic sellthrough movies to retail for less than DVD, and less than what Apple ($14.99), CinemaNow (from $17.99) and others currently charge.

The company found consumers would pay about $7.75 for new movie releases electronically.

Kramer said the download industry should retrench and more clearly determine what it wants from consumers, who, he said, also don't consider a digital file as “owning” a movie.

Crupnick said Apple's iPod proved successful largely because consumers could transport their music CD collections onto the device. He said such an experience is not available for video.

“Ninety percent of what is on the average iPod in America is not bought from iTunes, Amazon or anybody else,” Crupnick said. “It's from [the consumer's] music catalog.”

He said the electronic business model thus far dominating the Internet has been underscored by free content.

“Is electronic sellthough really the right business model for digital content?” Kramer said.

Panelists said electronic rental transactions and ad-supported content appeared to have stronger legs going forward.

“We haven't seen that perfect package of consumer value demonstrated in a way that validates [$15 to $20] for [an] electronic sellthrough movie,” Knight said.

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