One issue the studios are going to have to grapple with, as they go with "date and date" release of DVD and video-on-demand movie content, is channel conflict. Specifically, Wal-Mart sells about 40 percent of all DVDs. Target sells about 15 percent. Add in Best Buy and you probably have half the market for retail DVD sales.
Those three mass market retailers won't be happy if DVD sales, used as loss leaders to drive shopper traffic, start to dwindle. Surely studio executives are thinking about this problem. Ultimately, they'll want to come up with some sort of kiosk operation allowing buyers to sideload rental or sale content directly to their iPods.
You'd think USB flash drives might do the trick. The issue will be the cost of storage required to hold a two-hour HDTV movie. And then there's the issue of moving that content directly to the TV for viewing.
The studios will figure this out, or somebody will help them figure it out. The studios won't want to make a key channel partner too angry.
Thursday, May 1, 2008
What About Wal-Mart?
Gary Kim has been a digital infra analyst and journalist for more than 30 years, covering the business impact of technology, pre- and post-internet. He sees a similar evolution coming with AI. General-purpose technologies do not come along very often, but when they do, they change life, economies and industries.
Video Substitution Coming
In the movie content market, all revenue streams beyond theatrical showings basically are substitutional: money made in the DVD segment tends to displace revenue that might have been earned in the pay TV or broadcast TV segments, for example.
With the recent movement towards "day and date" release of movie content to DVD channels as well as video on demand, one should logically expect some revenue to shift from the DVD channel to the VOD channel.
But there's a difference in the "quality" of the revenue, from a studio standpoint. Studios make 60 to 70 percent profit margins on downloaded or streamed content; only 20 to 30 percent on DVDs.
Aggregate consumer spending might not change all that much, but studios might make more money. That is the only reason they'd even agree to a different "day and date" scheme.
With the recent movement towards "day and date" release of movie content to DVD channels as well as video on demand, one should logically expect some revenue to shift from the DVD channel to the VOD channel.
But there's a difference in the "quality" of the revenue, from a studio standpoint. Studios make 60 to 70 percent profit margins on downloaded or streamed content; only 20 to 30 percent on DVDs.
Aggregate consumer spending might not change all that much, but studios might make more money. That is the only reason they'd even agree to a different "day and date" scheme.
Gary Kim has been a digital infra analyst and journalist for more than 30 years, covering the business impact of technology, pre- and post-internet. He sees a similar evolution coming with AI. General-purpose technologies do not come along very often, but when they do, they change life, economies and industries.
Apple Gets Earlier Access to Movies
All you need to know about where money gets made in the movie business are the three letters "DVD."
Studios make 14 percent or less from theatrical showings and about half their revenue from DVD rentals and sales. Less than 10 percent is earned from all cable, satellite and telco payments, including content shown as premium channels such as HBO and video on demand.
DVD is where the money is, and studios aren't going to make any really significant changes they think will damage those revenues. So they must have concluded that "the times they are a changing."
After years of negotiating with the movie studios, Apple finally has gotten the major studios to allow rental of iTunes movies on the same day they release new DVDs. That's a big change, and suggests studios now have evidence that they will make no less money, and possibly more, if they do so.
Disney has had that arrangement with Apple since September 2006. Now Apple will be able to distribute movies from 20th Century Fox, Warner Bros. , Paramount Pictures, Universal Studios Home Entertainment, Sony Pictures Entertainment, Lionsgate, Image Entertainment and First Look Studios.
New movies can now be purchased for $15 or rented for $4. Older movies cost $10 to buy or $3 to rent.
For any number of practical reasons, such as the fact that hard drives always die, it is likely iTunes will get more revenue traction from rentals than from sales. Up to this point Apple movie sales have been pretty low, volume-wise.
Rentals are not only are cheaper, but are congruent. Most movies are not compelling enough to watch more than once, and owning makes most sense for movies one thinks one is going to watch several times or more.
So the issue everyone now will be watching is how revenue shares move around within the movie ecosystem. Studios wouldn't be taking this move unless they think they'll make more money from downloads and streaming than from selling discs.
Sure, downloads probably will negatively affect DVD rentals and sales. But the profit margins on downloads are much higher than for DVD sales or rentals. So if all downloads do is cannibalize DVD sales and rentals, the studios win.
Studios make 14 percent or less from theatrical showings and about half their revenue from DVD rentals and sales. Less than 10 percent is earned from all cable, satellite and telco payments, including content shown as premium channels such as HBO and video on demand.
DVD is where the money is, and studios aren't going to make any really significant changes they think will damage those revenues. So they must have concluded that "the times they are a changing."
After years of negotiating with the movie studios, Apple finally has gotten the major studios to allow rental of iTunes movies on the same day they release new DVDs. That's a big change, and suggests studios now have evidence that they will make no less money, and possibly more, if they do so.
Disney has had that arrangement with Apple since September 2006. Now Apple will be able to distribute movies from 20th Century Fox, Warner Bros. , Paramount Pictures, Universal Studios Home Entertainment, Sony Pictures Entertainment, Lionsgate, Image Entertainment and First Look Studios.
New movies can now be purchased for $15 or rented for $4. Older movies cost $10 to buy or $3 to rent.
For any number of practical reasons, such as the fact that hard drives always die, it is likely iTunes will get more revenue traction from rentals than from sales. Up to this point Apple movie sales have been pretty low, volume-wise.
Rentals are not only are cheaper, but are congruent. Most movies are not compelling enough to watch more than once, and owning makes most sense for movies one thinks one is going to watch several times or more.
So the issue everyone now will be watching is how revenue shares move around within the movie ecosystem. Studios wouldn't be taking this move unless they think they'll make more money from downloads and streaming than from selling discs.
Sure, downloads probably will negatively affect DVD rentals and sales. But the profit margins on downloads are much higher than for DVD sales or rentals. So if all downloads do is cannibalize DVD sales and rentals, the studios win.
Gary Kim has been a digital infra analyst and journalist for more than 30 years, covering the business impact of technology, pre- and post-internet. He sees a similar evolution coming with AI. General-purpose technologies do not come along very often, but when they do, they change life, economies and industries.
Free Wi-Fi for All AT&T Wireless Customers?
AT&T hotspots have started providing iPhone users with free Wi-Fi access at Starbucks and other locations. AT&T Broadband customers also have free access. One wonders how long it will be before all AT&T Wireless customers will get access. AT&T has talked about that.
That's one advantage of customer and network scale. AT&T doesn't necessarily have to make much actual incremental revenue from the Wi-Fi service. What it does is make its wired and wireless service much more sticky.
And given its scale--100 million customers--AT&T is in position to create other "everybody is on network" services of various types, the same way Skype creates "free calling to all other Skype users."
The difference is that AT&T can mix and match services and features available on its in-region wired, national wireless and global network, including mobile and fixed broadband, mobile and fixed calling, messaging or other services with a "social" or "community" aspect.
Scale has many advantages.
That's one advantage of customer and network scale. AT&T doesn't necessarily have to make much actual incremental revenue from the Wi-Fi service. What it does is make its wired and wireless service much more sticky.
And given its scale--100 million customers--AT&T is in position to create other "everybody is on network" services of various types, the same way Skype creates "free calling to all other Skype users."
The difference is that AT&T can mix and match services and features available on its in-region wired, national wireless and global network, including mobile and fixed broadband, mobile and fixed calling, messaging or other services with a "social" or "community" aspect.
Scale has many advantages.
Gary Kim has been a digital infra analyst and journalist for more than 30 years, covering the business impact of technology, pre- and post-internet. He sees a similar evolution coming with AI. General-purpose technologies do not come along very often, but when they do, they change life, economies and industries.
T-Mobile Lighting 3G: Voice Only
T Mobile is lighting its 3G network in New York in voice-only mode, says Gizmodo. Don't ask me why. I cannot figure this out. Maybe the backhaul issues are serious enough that broadband really isn't available yet. If so, don't bother offering commercial service.
The voice network and EDGE data network already work. What conceivable value does a T-Mobile customer get from 3G speeds if all you can do is what you already are doing? Sure, it's just the first city of a national network.
But why not offer some new service that the network actually enables?
The voice network and EDGE data network already work. What conceivable value does a T-Mobile customer get from 3G speeds if all you can do is what you already are doing? Sure, it's just the first city of a national network.
But why not offer some new service that the network actually enables?
Gary Kim has been a digital infra analyst and journalist for more than 30 years, covering the business impact of technology, pre- and post-internet. He sees a similar evolution coming with AI. General-purpose technologies do not come along very often, but when they do, they change life, economies and industries.
Mobile Sites Significantly Lift Site Usage
TotalWeb, the new company created by Nielsen Online, says mobile Web sites provide a significant increase in usage. Weather-based sites, for example, see an average 22 percent lift in usage, compared to sites that are designed for PC access alone.So do entertainment sites, which get 22 percent more use when sites are rendered for mobile screens.
Game and music sites get 15 percent lift when authored for mobile use.
Nielsen says 87 million U.S. mobile users subscribe to mobile Internet services, and more than one in ten mobile subscribers (13.7 percent) actively uses mobile Internet each month.
Gary Kim has been a digital infra analyst and journalist for more than 30 years, covering the business impact of technology, pre- and post-internet. He sees a similar evolution coming with AI. General-purpose technologies do not come along very often, but when they do, they change life, economies and industries.
iPhone Sales to Double?
Apple is going to sell lots more phones (no surprise there) if AT&T does subsidize the new 3G iPhones, says Bernstein Research analyst Toni Sacconaghi, reported by Eric Savitz, Barrons columnist.
If AT&T does provide a $200 subsidy for the3G iPhone, bringing the phone’s cost for consumers down to about $200, where current models are priced at $399 and $499, sales might double, based on past precedent.
Sacconaghi notes that that sales of the Motorola RAZR doubled when its price dropped from $500 to $150 and doubled again when the price went to $100.
If AT&T average revenue per subscriber from the iPhone is in the mid-$90 a month range, compared to less than $60 for the average post-paid user, then AT&T has an additional $720 in revenue over the course of a two-year plan to offset the subsidy.
If AT&T does provide a $200 subsidy for the3G iPhone, bringing the phone’s cost for consumers down to about $200, where current models are priced at $399 and $499, sales might double, based on past precedent.
Sacconaghi notes that that sales of the Motorola RAZR doubled when its price dropped from $500 to $150 and doubled again when the price went to $100.
If AT&T average revenue per subscriber from the iPhone is in the mid-$90 a month range, compared to less than $60 for the average post-paid user, then AT&T has an additional $720 in revenue over the course of a two-year plan to offset the subsidy.
Gary Kim has been a digital infra analyst and journalist for more than 30 years, covering the business impact of technology, pre- and post-internet. He sees a similar evolution coming with AI. General-purpose technologies do not come along very often, but when they do, they change life, economies and industries.
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