13 Movie Online Services is WAY too many. (PPV Part 2)

Netflix vs. Google TV 2.0 PPV (powered by Honeycomb 3.1) vs. YouTube rentals vs. iTunes vs cable PPV vs VUDU vs. Blockbuster OnDemand vs Facebook OnDemand vs BigStar Movies vs CinemaNow OnDemand vs. Alphaline ( Sears/Roxio) vs. Redbox (due 2011) vs. Flixster via Warner Bros. vs anyone else ?

What happens when the airlines have a fare war? You know, you can fly from NY to L.A. for $xx.xx and then the next thing you know, another airline tops that price by $ 20.00? Or gives you a free bag to carry on board? All of a sudden 5 or more airlines have the same special going on. Who do you fly with? Decisions, decisions… It all begins to seem and look the same to you. You get to the same destination, same approximate times, using the same type of transportation, in the air for just about the same money. Who suffers? Ultimately the carriers do.
Meet the carriers. Not the airlines, but the carriers of movies online. I count thirteen (13) of them – eleven (11) of them are live as we speak. All boasting the same movies for the most part for the same prices. All rentable at the same time for about the same amount of time. And I’m not even counting Redbox as an online rentable service…yet. What’s a consumer to do – who do you choose? And why. Do you ‘subscribe’ to a Netflix monthly or do you pick off a film on a one-off basis from another provider. More importantly, how do all of these guys begin to differentiate themselves from each other? How and where do they market themselves? Netflix is clearly the 900lb gorilla today. I guess iTunes is # 2. But beyond them, I can’t really tell who’s in third place. But more importantly, do I really care? Do I need3 or 5 or 7 similar services? On top of all this, I have Verizon’s FIOS cable service at home with thousands of movies to choose from to watch on any given day/hour.

I have licensed movies before from each of the studios and it was no easy task. Number one, its VERY expensive. Figure an upfront fee to be paid to play, maybe between $500k-$1m. That’s just for starters. Then there are the guarantees against each title licensed. Therefore as a provider of online fare, you’ve got to re-coup that fee with a certain number of minimum rentals or turns of the gate so to speak. With nearly 13 services out there plus cable choices, I’m going to take a guess here a few will not make it. Not only must you guarantee upfront cash, you also must explain how you are going to market the studios films, how you will digitally protect them from piracy ( good luck on that one) and how you will separate yourself from the rest of the online movie ‘noise’. All of this and then compete with the new ‘premium’ $30.00 a pop cable TV onDemand offering ( not that I think that’s going to be too successful – it’s the least of these companies problems).
However, the one issue I have with all these services is this: I am unable to save ANYTHING I purchase or rent for viewing later on a rainy day. If I had a ‘digital’ locker – someplace to hold what I spend my money on to see so I can view it later (more than 24hrs later), that might sway me to use that service ALL THE TIME.

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Blockbuster killed the video store all by themselves

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It was a lethal combination of technology, fatter pipes and morons who THOUGHT they understood this business but didn’t have a clue. That’s right. MORONS. Why do I say this? In August of 2008 when interviewed about the success NetFlix was having, Blockbuster CEO Jim Keyes was “baffled by his competitor’s success”. And what was even more confusing to Mr. Keyes was the emphasis on catalog size. “Why would anyone want to watch anything other than new releases”, he wondered. He goes on to say : “I don’t care how many movies are available to me. As my personal taste as a customer, I want to watch the new stuff so whether we have 10,000 movies or 200 movies doesn’t matter if I don’t want to see any of the movies that we have . . . our assortment is heavily weighted toward newer releases and mainstream staple titles.” This guy clearly just does not get it. He’s not a film person and why in the world any responsible and half-way intelligent person responsible for turning around a business like Blockbuster hire someone like this is beyond me. FAIL.

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Blockbuster used to be the 900 lb. gorilla in this space. It was dominant. And they did nothing to extend that dominance into the 21st century. Content to rest on this 80’s-90’s business model of retail foot traffic, Blockbuster basically put its head into the sand and held its breath. For a company with the kind of cash flow it had and market power and brand awareness they simply mismanaged their business into the ground, all the time telling shareholders that their business was doing great.

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And then there was the Circuit City possible acquisition for $ 1.35 billion. I guess someone figured that expanding the brick-and-mortar business was a way to increase Blockbusters business. Why you want to expand the brick-and-mortar business when over the last 18 months, Blockbuster closed 412 stores (including Gamestation stores), presumably because they were operating at a loss or weren’t terribly profitable. FAIL. But it gets even better.

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In August of 2007, they acquired ‘Movielink’ for $20 million dollars. Then one year later rolled out to the general public in ‘beta’ a service for ‘downloading’ of movies online. It included 5,000 titles. The downloading prices started at $8; and rental fees started at $2. It didn’t matter that it took nearly as long to download one movie as it did to get the same one in the mail from Netflix. Nor did it matter that once you spent the $8.00 and a day to get the film, it was laced with DRM making it unwatchable anywhere else but the device you received it on and unwatchable after 24 hours. Very consumer friendly indeed. If you were an executive in the business, you knew that Movielink was already dead long before Blockbuster bought it. CinemaNow and Movielink were both dead. You had to be living under a rock to believe that Movielink with its ‘PC windows’ download client manager with DRM was the future of the online movie business. How management at Blockbuster managed to convince their board of director to use $20 million dollars of the companies funds to buy Movielink is nothing but pure stupidity and mismanagement of funds. If I were a shareholder, I would have sued them. FAIL once again.

DISCLAIMER: (I started iWatchNow.com in late November of 2003 with a partner)

Fast forward to 2006, we had started an online film and TV distribution service called iWatchNow.com. My partner knew how to sling code something wicked and I knew where and how to get the content. We were one of the very early entrants in this area, next to CinemaNow and MovieLink. Neither iTunes, Hulu, Amazon, Reeltime, Veoh, Joost, Babelgum, etc., were there yet in 2003 when we were around. But they were coming big time. We acquired over 3,000 movies and TV shows. Everything from Jack Nicholson’s ‘Little Shop of Horrors’ (the Roger Corman public domain (PD) classic) to non-public domain goodies like ‘Tunnel Vision’ with Bill Murray, Gilda Radner and the original Saturday Night Live crew. It was eclectic, fun and as irreverent as we could make it showing rarely seen and hard to find content. We gave away some content for free with advertising. Other programming cost $ .99 cents per rental/24 hrs to stream.

But there were 4 things that we felt were important; to stream instead of download, to not use a client to stream but use the browser, to make the search on the site for content lightning fast and purchases easy with as few clicks as possible. We didn’t focus on ‘new’ releases because we knew that in a short time, EVERYONE would be showing them. The advances were too big from each studio for our little company, so we focused on the ‘long tail’ and convenience.

We thought that we had created a pretty good framework for a start-up online company and launched in January 2006. Then in March I decided to call Blockbuster and invite them in to our offices to see our system for the expressed purpose of selling it to them so they could jump start their online business. So, two executives showed up at our offices; Dean Wilson and Richard Jenrud. They looked under the hood, saw the library, kicked the tires and then left. We never heard back from them. Then we heard they paid $20m for a failing ‘Movielink’ service. What I am saying here is that Blockbuster probably had not only our service to look at but many others in the fledgling marketplace, yet they chose a dinosaur to spend $20m and buy Movielink. What in the world were they thinking?

Whatever happened to…Joost?

Lots of hype, supposedly one million users (probably downloads and not users) and a whole bunch of Media exec’s praising the new internet ‘TV’ service, whatever happened to Joost? joost.jpg The stepchild of the Skype boys ( Niklas Zennstrom and Janus Friis ) has virtually disappeared from the press, media hype and from sight. Remember, Joost was going to eat YouTube’s lunch? And everyone else’s breakfast and dinner. The founder’s reputation preceded Joost (also founders of the infamous content application thief, Kazaa kazaa.jpg ). Perhaps everyone thought that since these guys figured out how to deliver content illegally to users with Kazaa that if they applied themselves to a legit service, like Joost then consumers could then order TV online the ‘legit’ way.

Joost lost their CTO recently and is now in search of a business model. It turns out no one wants to download an application or client onto their computer (TV is web based now online, try Hulu.com and many others). The content on Joost was sub-par. People don’t want to watch TV on the web like they watch it on TV, they like to program their own line-up of content. So, my hunch is that Joost will eventually merge with another online content provider or turn their service into an online web based service or shut down. But I don’t believe it’s a long-term player anymore in the TV end of the spectrum online.