Amazon has the Amazon Unbox on Tivo service, and both Netflix and Apple recently announced online movie rental services, and eventually you will be able to see Joost and Babelgum programs on TV. All this point to a market crowded with new ways to get movies fast and cheap over the Internet
Naturally, the incumbents – cable TV providers such as Comcast that deliver movies and TV programming over cable and satellite systems risk getting swept aside. Comcast is not waiting like a sitting duck. In early January, Comcast, the largest cable MSO in the U.S., announced Project Infinity to upgrade of its video-on-demand offerings and boosts the number of on-demand movies from 1,300 a month to 6,000. The cable operator says its video-on-demand services account for roughly 275 million viewings a month.
What Comcast has done to expand its movies-on-demand offering is to leverage its existing deals with Time Warner’s HBO, CBS’s Showtime, and Liberty Media Corp.’s Starz, something most others will find hard to do immediately.
At the same time, Comcast also announced the launch of Fancast, an online service at fancast.com [http://www.fancast.com] where subscribers can watch more streaming videos of TV shows from the likes of CBS and Fox and also use the site to order videos, get iTunes downloads, and program their digital video recorders to record TV shows while away from home. Comcast also plans to offer the service to other cable operators, making money from advertising and affiliate fees from DVD or download sales.
In the voice telephony world Comcast and others Cable providers are successfully taking on both VoIP providers such as Vonage and telephone companies such as at&t. In similar fashion, Comcast has a strategy to ward off anyone in the Movie and TV programming space. Comcast will not be able to stop Apple, Amazon, and Netflix completely, but will make a big enough dent in their profit plans.
Comcast in 2008 will offer High Speed Internet with speeds as fast as 160 megabits per second, which is a massive increase from its current maximum of 16 mbps. This is in many ways in response to competition from local telco’s such as AT&T and Verizon that are provide high speed Internet access over fiber optic networks. Of course, neither AT&T’s U-verse nor Verizon’s Fios has announced such high speed Internet offerings yet, but they certainly can have the capability to do so (Note: Verizon provides fiber optic all the way to the home, called Fiber-To-The-Home or FTTH, but AT&T and cable companies don’t), and it is this potential threat that is driving cable companies such as Comcast to one-up local telcos.
According to Comcast, this will allow a customer to “download a two hour-plus movie in high-definition in three minutes and 56 seconds”. No pricing has been announced yet. It might cost a pretty penny initially, with prices likely to fall once competitors start offering comparable download speeds.
Providing higher Internet speeds should be a boon for Comcast’s Internet business because it will help attract and keep customers that use high bandwidth servies such as gaming, video & music streaming and downloading, and Peer-to-Peer (P2P) applications extensively. However, this is a double-edged sword: Higher Internet speeds will fuel online movie and TV program downloads and streaming to a customers set-top box or TV from the Internet in a flash. This would be a great opportunity for companies like Netflix, which recently announced a deal with LG Electronics to develop a set-top box that can download movies and TV programs from Netflix over the Internet, and Amazon, whose Unbox service already sells movies to be downloaded to a Tivo. Apple with AppleTV, Moxi, Sling Media and others are also in the same arena.
Offering blazing Internet speeds will be great for Comcast in the short term, and Comcast will expand its Video on Demand service to counter the threat from the likes of Netflix, Amazon UnBox, and AppleTV, but in the long term this could very well be a double-edged sword that promotes online movie downloads and dampen interest in Comcast’s own Video on Demand service.
The battle for dominance in DVD formats made a
big turn towards Blu-ray when Blockbuster, the leading US video rental chain, today chose the Blu-ray format over the HD DVD format.
Based on results from carrying DVDs with both the Blu-ray and the HD DVD formats at 250 retail stores, where demand for Blu-ray was “significantly outpacing” rentals of HD-DVDs, Blockbuster would now expand Blu-ray to another 1,450 stores. The original 250 stores will continue to carry both formats. A total of 1,700 stores will carry more than 170 titles in Blu-ray and only 250 stores will carry the HD DVD format.
According to this, Microsoft notes:
Asked about Blockbuster’s move, Microsoft said in a statement that, rentals aside, the HD DVD format leads Blu-ray in sales of standalone players and the number of high-definition movies purchased per machine, known as the “attach rate.”
Blockbuster didn’t rule out HD DVD in the long run.
Apparently Lionsgate CEO Jon Feltheimer had told industry analysts that Best Buy and Blockbuster are set to enter the growing movie download business during a conference call yesterday (see Studio CEO: Blockbuster, Best Buy to launch movie download services). While neither company has officially announced it, this is how Feltheimer spilled the bean “We have nearly a dozen active agreements in place for digital delivery of our content with such major players as Apple, Amazon, Microsoft, Blockbuster, Best Buy, and Wal-Mart, with more to follow”.
Full length movie downloads will take many hours to download at current broadband speeds) – but this is the future. But in the meantime, Netflix, Walmart, and Amazon (among others) already offer online movie downloads, so retailers have to respond or risk losing business (remember how Blockbuster lost in-store customers to Netflix’s mail-in DVDs).
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