With Latest iTunes Deal, Will Consumers Transition Away from Physical Media Sooner Than Expected?
May 6th, 2008By Paul Erickson, Director DVD and HD Market Research
Recently, the entertainment and technology media have been abuzz over the implications of the significant announcement by Apple that iTunes would now offer day and date releases of movie titles in conjunction with their regular release on DVD. The deal involves most of the major studios in Hollywood, and marks the first time that a single online or broadband-enabled source of paid movie content has had both broad studio support as well as day and date releases.
Conservatively, one may look at previous attempts to sell movies over the internet (or broadband, more specifically), and view this deal with a bit of skepticism. Earlier efforts, some with proprietary set-top boxes, either failed or generated lackluster sales. Many of the hindrances that existed then continue to exist now—dependency on broadband penetration; limited ways to watch content (e.g. PC or proprietary set-top); real-time options that involve less waiting (such as the local video store or cable VOD) and so on.
On the upside, however, are the prospects for success given the state of the market now and the broad acceptance of iTunes as a content delivery channel. Higher broadband penetration, as well as a significantly large installed base of video-enabled iPods (and an accessory market with video docks to accompany them) both strengthen the chances of iTunes-driven uptake of paid digital video downloads versus previous propositions. Pricing of $3-4 for 30-day rentals is also fairly palatable to the consumer.
As for whether this event serves as a bellwether for a long-term shift by consumers toward digital downloads and away from DVD and other forms of physical media, it may be an overblown assumption. Though certainly a boon for iPod Video and AppleTV owners, the mass market success potential of the model remains constrained by certain real-world factors that apply to most avenues of digital downloads. First, the transportability from room to room or house to house is not comparable to that of physical media. Second, it is difficult to overcome the ease and comfort of watching a film on traditional DVD in the typical bedroom or living room, versus additional hardware and/or effort being needed to watch the typical digital download in those environments.
What is clear is that the mix of available options for the consumer continues to expand when it comes to consuming video. The increase of content availability over the internet, and not just iTunes, shows renewed interest in a new and potentially profitable revenue stream for studios and others in the media industry, particularly notable given recent announcements from NPD that Blu-ray Disc hardware sales have not benefited greatly from the demise of HD DVD. Though physical media sales are expected to continue for quite some time, consumers are expected to gradually consume a greater amount of video over broadband connections. The big question is, how quickly and aggressively will the shift take place?
With content providers from major movie studios to television networks moving quickly to make content available online or via broadband delivery partners, the stage has never been more aggressively set for the public to begin consuming video via the internet. The focus now shifts to the consumer, and the industry will continue to watch alongside analysts to see if these latest efforts will finally trigger a notable shift in consumption behavior.
