If the stories about Apple's recent talks with Hollywood studios around providing streaming video "rentals" are accurate, the industry seems to be taking another step toward models of temporary access over ownership of digital film. Does this signal an end (or abatement) of the digital distribution-related fears of the film industry? Will digital video-on-demand become a widespread reality, given the recent series of deals and acquisitions?
Beyond the much ballyhooed need to "do something" in digital distribution channels, particularly in streaming movies over the internet lately, it's already proven to be a profitable way to make money on films post-theatrical release. According to the Wall Street Journal, the DVD sale market is worth about $16B, but it is in decline. Meanwhile, margins on cable VOD are 60-70%, compared to 15-20% on video store rentals. If one assumes that going through iTunes carries a similar per unit cost, likewise without the unease about unauthorized copying, it seems like a very worthwhile route.
Unfortunately, consumers aren't necessarily as keen on online video as one may assume. I've seen very little solid data on how big the market is at the moment for long-form video downloads and streaming. That type of information becomes even more crucial with a film format, which would seem to lend itself more to watching in front of a television at home than for a short break or "background noise" at home or at work, the way we often use television and shorter video.
As Sam Ford wrote on the C3 blog, a recent report found that only about 20% of American consumers who downloaded a video would do it again. Granted, this was about downloading, not streaming. However, some of the reasons that downloading was problematic, such as slow Internet connections, could be a factor in turning people away from accessing film online as well. At the same time, VOD through cable has been profitable for the studio, suggesting that the best "hardware" for watching movies at home is still the television.
Perhaps the Apple brand its new sleek hardware with bigger and brighter screens, might be enough of a draw to consumers to ramp up demand for film through iTunes and make it worthwhile for the studios to risk cannibalizing of the "bricks and mortar" content market, which may be in decline, still involves lots of money and relationships with retailers. I don't think it will, at least not until the hardware facilitates people using the formats in a way that fits their lives and how they actually use film. The viewing experience is a more integral part of a film than with television content and shorter video; I don't think that iPods are the future means of consuming films. If Apple came up with a better product than Apple TV, however, that could be better integrated with the existing television viewing experience people are used to, the story would change a bit.
This is not the first time that the studios have tried to bypass the "middlemen." MovieLink, a joint venture by the studios to provide a 'one stop shop' for film online, and recently acquired by Blockbuster for as little as $20m after at least twice that had been invested in it by the studios. The official line for MovieLink's less than stellar performance is that the site was failing because the studios didn't put enough promotional muscle behind it. Possibly, but again, I think it may have more to do with consumer behavior than promotion.