What Future for Downloading, Streaming Video?

The conventional wisdom now is that movie downloading will replace DVD sales and rentals, and that this replacement is only a matter of time. The conventional wisdom may well be correct, up to a point. On-demand viewing, in one form or another, has been increasingly for decades.

To some extent, the rise of the cable industry was an early and crude form of on-demand viewing, to the extent that viewers began to break away from the "three networks" experience, starting a process of audience fragmentation that continues today in much more diverse forms.

But movie downloading isn't the only future. In fact, the way new visual media are being used suggests that consumers are taking an "all of the above" approach to media.

People might continue to rent DVDs as well. But maybe not in the same way. "Unless video stores are reinvented, it may be that in five years, there are tens of thousands of kiosks, millions of online DVD renters and very few video stores," says Reed Hastings, Netflix CEO.

If you look at any sort of DVD media as an example of "sideloading," as people sideload music onto their iPods and MP3 players, you get the idea. People download songs. But they also may stream or sideload. And though one often thinks online delivery is the only viable business format, one can imagine other ways to do things.

Price, for example, might be one way to differentiate the market. Online or to-the-TV downloads or streaming will have a higher price point, with a more "immediate" delivery format. But mailed DVDs will have a much-lower price point, with less immediate delivery. But the point is that the delivery time might not matter.

On the Netflix unlimited three DVD plan, can have as many as three movies "checked out" at any one time. And if a person is busy enough, viewing of those movies only happens on weekends. So "immediate" availability isn't required. The three selections have to be available on the weekend.

Release windows still are a factor as well. If you want to see a movie, and missed it in the theaters, you can view it about a month to 45 days sooner than any "on demand" outlet has the content, if you watch on a DVD. On an unlimited rental plan, the cost of any viewing is arbitrary.

Cable and Internet VOD costs something on the order of $4.00 per movie, and the content has to be viewed within a certain period of time, sometimes within 24 hours.

Selection probably will be an issue as well. It is hard to imagine an equivalent lineup of online titles as the Netflix catalog represents, especially in the "long tail" area of niche content.

"Despite the growth of VOD over the last five years, DVD rental has been stable, with online rental and kiosk rental making up for store losses," says Hastings. "In the United States, DVD spending, including purchase, is still approximately 20 times larger than cable and Internet VoD combined, according to Adams Media Research."

Just about everybody thinks this will change, at some point. The issue is whether online delivery is the only choice, or whether other delivery methods still will remain a significant part of the mix. Price, release windows, immediacy, and depth of catalog suggest there is room for multiple consumption modes.