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 Source:
brokenremote.tv
February 7, 2003
By Ken Nelson
With broadband now in nearly 20 million U.S. homes, movie and recording
studios are starting to follow the credo of the e-commerce industry in the
late 90s: “Cut out the middleman.”
The future of digital media distribution will be determined by how successful
these efforts are, and what solutions entertainment companies hatch to add
value to their content.
The recent launches of Pressplay and Movielink show that the studios plan to
deliver their content directly to consumers online, eliminating physical
distribution costs and retailer splits.
Pressplay, which has received strategic investments from Sony and Universal,
is offered to consumers through affiliate programs. It allows consumers to
download an unlimited number of tunes for only $10 per month. The service
does not fully protect the content’s intellectual property, since users can
make as many copies as they wish once they burn a track. Nevertheless,
Pressplay’s existence could deter outlaw and legitimate sites from offering a
similar service because the labels, which own the copyrights, can prevent
digital media distribution services if they do not have 100% copyright
protection.
Movielink, a joint venture among MGM, Paramount Pictures, Sony, Universal and
Warner Bros., currently offers only a rental (pay-per-view) option, but its
movie studio backers might adopt a download-for-purchase strategy similar to
Pressplay’s in order to block other services from engaging in online film
piracy. Movielink has already forced the Intertainer, a legal online film
provider, to close shop. The Intertainer is suing the studios over allegedly
breaching existing distribution deals.
Whether or not ventures like Pressplay and Movielink survive may hinge in
part on arguments like those expressed in a lawsuit filed last week by Kazaa,
the controversial peer-to-peer file sharing service. Kazaa filed suit against
the major music labels claiming those labels have monopoly power when they
band together, as they have in Pressplay. The Department of Justice also has
an ongoing anti-trust investigation in regard to Pressplay.
Meanwhile, traditional retailers are fighting back with their own online
strategies. In response to the new online ventures, six music retailers last
week launched Echo, a group devoted to helping the retail industry eliminate
the physical costs involved in digitally distributing music content. Echo’s
supporters include Best Buy and Hastings Entertainment.
The idea is that the retailers affiliated with Echo will leverage their
existing retail customer base along with in-store promotions and print
marketing to compete with the Pressplays of the world. Echo will provide a
new, yet-to-be-determined digital distribution method for their customers to
purchase music online, potentially saving the music industry millions in
customer acquisition costs.
“Ninety-eight percent of all music purchased today is still through offline
and online retailers,” says Dan Hart, CEO of Echo. “The consumer needs to be
educated on the benefits of digital music distribution in order for this
service to be widely adopted.”
In the long run, the most promising new development in the digital media wars
may be that offered by San Jose-based Interactual. It involves a new
technology called “enhanced DVD” that enables movie studios and record labels
to extend the life span of a CD or DVD movie by enabling new content to be
added after sale.
With this technology, DVD owners can use a broadband Internet connection to
retrieve new content and footage from the DVD menu, while audio CD owners can
do the same to add music videos that are not even available when a CD is
published.
To the consumer, it feels as if it’s just a new section on the CD or DVD, but
for the studios, it allows them to build a relationship with the consumer and
receive additional revenue by adding new content.
For example, six weeks after “Spiderman” was released, Sony added an actor's
commentary by Toby Maguire and J.K. Simmons. When playing this DVD through a
PC DVD-ROM, Interactual's software will allow the user to watch the DVD movie
and stream the commentary from Sony at the same time. Likewise, Lucasfilm offers
new content every six months for their “Star Wars Episode I” DVD that
supports Interactual's technology.
"Our technology extends the life of a DVD for the consumer, making it
more compelling to purchase the DVD than rent," says Clint Ludeman, VP
of Marketing at Interactual. "As the perceived value of a physical audio
CD has diminished, we are working with labels to enable their audio CDs and
music DVDs to support supplemental content after the sale."
Consumer purchase patterns change very slowly, but the demand for solid
content still remains a major motivator of media purchases. Using the
Internet as a means of providing new content to consumers, and extending the
life of their media purchases, will enable content owners and retailers to
work together to provide a better experience for consumers. Instead of
confusion, this strategy offers real value. Entertainment companies should
take notice.
LINKS
www.movielink.com
www.pressplay.com
www.kazaa.com
www.echo.com
www.interactual.com
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