UPDATE: Cinemanow.com's IP-Based VOD Making Inroads with Studios9 Oct, 2002 By: Holly J. Wagner
As other Internet-based video-on-demand companies struggle along with catalog, independent and public domain offerings, Los Angeles-based Cinemanow.com is gradually building test deals for studio ‘A' titles that the company hopes will blossom into long-standing arrangements.
Cinemanow, which is majority-owned by Lions Gate Entertainment, has announced two studio deals in the past two months: one with Warner Home Video that will bring titles like Harry Potter and the Sorcerer's Stone to Internet VOD and another with Universal Pay-Per-View (PPV) that will put The Scorpion King, Brotherhood of the Wolf and more ‘A' titles from that studio online.
“The two single biggest issues for the studios from the beginning have been picture quality and security,” Cinemanow.com CEO Curt Marvis said. “With the forthcoming launch of Movielink and Movies.com, I think the studios are getting comfortable that the distribution of movies are up to the quality standards they set.”
Cinemanow holds some technology patents and has built its IP-delivery VOD business on independent titles, he noted, both of which make it less dependent on studios for survival than cable- and satellite-based PPV and VOD models.
“We feel library titles are very important to our business,” Marvis said. “We're not relying on all studio product to run our business. We have significant technology licensing that is a large part of our business. You certainly want to have those films and make them profitable, but there are other aspects of our business to make money off of, including subscriptions.”
On the other hand, studios are more willing to experiment with IP delivery, using companies like Cinemanow.com to test the waters before launching their long-promised VOD services, Movielink.com and movies.com.
“IP delivery of video is a separate market from VOD offered by cable operators. The latter is proven; the former is still experimental,” said Forrester Research analyst Josh Bernoff. “These deals reflect the studios trying to see if there's enough business here, even with hit movies, to make it worthwhile to deliver movies directly over the net. They'd like that, since it would allow them to go around the cable operators.”
Consumer research bears that out.
Streaming media usage is on the rise, according to recent findings that Arbitron and Edison Media Research published. The number of Americans 12 and older who have tried streaming media at least once grew from 24 percent in 2000 to 27 percent in 2001 and to 35 percent in January of this year. It's not the kind of meteoric rise the world has seen in DVD, but respectable gains for a comparatively new technology. When considering only streaming video content, 20 percent of users queried in January 2001 said they had tried streaming video at least once. The number jumped to 28 percent by January of this year.
“Everyone knows this is still a relatively small market,” Marvis said, calling his studio deals “an acknowledgement.” “We look at this as being major forward progress,” he said. “When you're dealing with studios, you've got to be patient.”
Hot new releases will be available for stream or download for $3.99 each, while catalog titles will go for $2.99 each. Negotiations are ongoing, he said, to extend the deals and offer more hot studio titles.
“The key for us is this is an iterative process, and this is a big step for us. It's a big deal to go through the technical and business hurdles,” Marvis said. “Our first deal was with MGM for two movies for 30 days. We've graduated. We've just got to keep moving along. It's still an emerging market, and you are not going to find anyone ready to go full tilt just yet.”
What's more, the Arbitron/Edison research indicates the folks most likely to stream are precisely the ones that studios and advertisers most want to reach: the affluent. Figures indicate 49 percent of people who stream content at least once a month are in homes with a $50,000 or higher annual income. Which follows, considering that “speedies” — people with broadband connections in the home — are more likely to stream content. Nearly half of dial-up users (47 percent) reported at streaming content at some time, while 59 percent of people with home broadband connections reported streaming. But even broadband may not be enough to popularize streaming media to the widespread force that broadcast media are today.
“In the end, delivery to the TV — through cable — is the big market,” Bernoff said. “IP delivery to PCs is not likely to generate much traction, since people like to watch TV on their TVs.”