Major studios today will make mainstream movies available for downloading the same day they are released on DVD -- a significant step in Hollywood’s tentative migration to the Internet.
But movie fans will pay for the convenience: Downloadable flicks such as “Brokeback Mountain,” “King Kong” and “Pride and Prejudice” may cost as much as twice what the DVD versions do and play only on a personal computer. New releases can’t be rented online, just purchased.
The constraints on services from Movielink and CinemaNow illustrate the central role that economics plays in the evolution of home video distribution. As they experiment with offering online video on demand, studios are keeping prices high and restrictions tough so they don’t alienate retailers, whose DVD sales still provide the vast majority of revenue.
“We think this is a great consumer offering that complements the DVD release,” said Rick Finkelstein, Universal Pictures’ president and chief operating officer. “If somebody wants to get their content online and create a digital library, this gives them the opportunity to do that. This is another way for consumers to access movies.”
Piracy fears also prevent online services from giving technological early adopters what they really want -- the ability to watch downloaded movies on their televisions. That’s because the studios insist that downloadable movies include rigorous safeguards on copying. Users, for instance, can burn a DVD of a downloaded movie, but it will play only on a PC.
Finkelstein said people eventually would be able to watch downloadable movies as they would any other DVD. But rather than wait for the technology to burn it securely, Universal is rushing to make more than 100 movie titles available online to provide a legitimate alternative to Internet piracy.
“At this point, we wanted to get out there,” Finkelstein said. “This is the only way we could do it at this time. The intent and goal is to allow people to also be able to have a DVD they could watch on their DVD players.”
The download-to-own services starting today are among a variety of studio experiments that take advantage of the instant gratification of the Internet. Universal Pictures partnered with online rental service Lovefilm in Britain to sell movie downloads for the computer, and also ship the DVD by mail. Warner Bros., meanwhile, sells movies and TV shows online in Germany through In2Movies, a service that distributes video using a file-sharing technology similar to BitTorrent’s.
But in some ways, the efforts by Movielink and CinemaNow are reminiscent of the music industry’s response to Napster in the late 1990s. Early label-backed online music services such as Pressplay, launched in 2001 as a joint venture by Sony Music Entertainment and Universal Music Group, were more pricey and less flexible than Apple Computer Inc.'s iTunes Music Store, which was launched later.
“Watching movies on a PC -- it’s a real market,” said David Card, senior analyst at JupiterResearch in New York. “There are college students, there are business travelers and kids in the back seat of the SUV. But the missing link to this kind of an offering is getting it on the TV screen.”
U.S. consumers spent $24.3 billion buying and renting home videos last year, according to Digital Entertainment Group, a trade association. And with sales projected to grow to $30 billion by the end of the decade, the studios are more focused on supporting their existing business -- and backing a new generation of high-definition video disc formats known as Blu-ray and HD-DVD -- not cannibalizing the market to support downloads, said Reed Hastings, chief executive of online movie rental service Netflix Inc., which mails DVDs to 4.2 million subscribers.
“At some point, the studios will be interested in broad-scale licensing,” Hastings said. “At some point, the Internet will be connected to the television. We see those as the two linchpins. That will happen eventually, but it won’t happen this year.”
DVDs account for 46% of studios’ sales -- more than double movie box-office receipts, Adams Media Research Inc. said.
Movielink Chief Executive James Ramo said the ability to buy digital downloads filled a void in Movielink’s service. Until now, the 4-year-old service has struggled to attract a wide audience because the films it rents online have already been out for months on DVD and at the neighborhood video store.
“There’s no question that 2006, in part with the addition of this offering, is becoming a crossover year, as the hardware community is beginning to make it easier and easier to get from the Internet to a TV set,” Ramo said. “And we are, from our side, delivering the kind of content that a consumer would want to put on his TV set.”
Ramo said the new service offered fresher fare and let movie lovers create digital movie libraries of contemporary films such as “Memoirs of a Geisha,” and classics such as “Easy Rider” or “To Kill a Mockingbird.”
“We think that this opens the digital downloading market not only to PC early-adopter types but really now to movie lovers who want to create these libraries,” he said.
Ramo said download-to-own movies would sell for $20 to $30 -- up to double the $15 that discount retailers such as Wal-Mart Stores Inc. charge for DVDs, with downloads of classic titles for $10 to $17. He said the premium reflected the convenience of the service and the flexibility to transfer the digital download to two computers, as well as the ability to create a backup DVD that also would play on computers running Microsoft Corp.'s Windows operating system.
Movielink will have a greater array of movies available to purchase than CinemaNow -- including “Brokeback Mountain,” when it’s released Tuesday on DVD. The service is jointly owned by Metro-Goldwyn-Mayer Inc.'s studio unit, Viacom Inc.'s Paramount Pictures, Sony Corp.'s Sony Pictures Entertainment, General Electric Co.'s Universal Studios and Time Warner Inc.'s Warner Bros.
CinemaNow will sell 75 downloadable films from Sony Pictures Home Entertainment, MGM and Lionsgate. Prices will range from $19.95 for new DVD releases to $9.95 for classic films such as “Taxi Driver” or “Easy Rider,” although the service will offer an introductory promotion in which the second movie download of any film will sell for $4.95.
CinemaNow Chief Executive Curt Marvis acknowledged that offering movie downloads locked to the computer was far from an ideal consumer proposition but called it a good first step.
Marvis said “in a perfect world” the studios would introduce an offer that satisfied all consumers. “Unfortunately, it doesn’t work that way,” he said. “They need to take a first step to get into digital distribution for a variety of reasons. That’s what this is, a first step.”