In a golf tournament, it can be advantageous to putt after another player because you learn the contours of the path to the hole. In a similar way, you’d think Hollywood would have learned from the rough path the music industry took in transitioning to the world of digital distribution over the web. Unfortunately, it looks to be on the verge of missing the putt as well.
On the surface, it seems like Hollywood is doing a better job of getting consumers to use their approved methods for transferring content over the web — but the reality is that it’s a mess. And the only reason piracy isn’t so rampant in the US is that our broadband speeds, for the most part, suck.
Sure, there are a lot of channels to get films legally over the web. iTunes, Xbox Live, Amazon, Netflix and Hulu are all doing a fairly good job at making the content they’re given, accessible. Unfortunately, it’s the content that’s the problem. If you go to any of those services looking for a specific movie, there’s a very good chance that it won’t be available. And that can be true even if it was available on the service in the past. It’s a nightmare.
Farhad Manjoo had a good article yesterday on Slate outlining some of the major problems. One of the biggest ones is that Hollywood’s archaic syndication rules are in play with digital distribution over the web. For example, Hollywood now gives some movies to services like iTunes for rental immediately or soon after they’re released. But because of the deals studios have in place with premium content channels like HBO, after the pay-per-view window closes (iTunes and the other services’ rentals systems are considered pay-per-view), these movies have to be pulled off of the rental services so that the premium channels can get their exclusive rights to broadcast them.
Those movies then stay exclusive to the premium channels for 15 to 18 months — let me repeat 15 to 18 months! And from there it only gets worse. After the year and a half in premium channel jail, movies then go to the regular cable channels and big networks for airing. As I understand it, some online rentals are again okay during this time, but then, they often go back to the premium channels for a second run. That means they get pulled once again.
This whole process often lasts for seven years or more, as Manjoo notes. It’s only after that time period that movies are really free to be distributed a bunch of different ways. That includes Netflix’s popular Watch Instantly streaming feature — so now you see why the selection of movies on that service is mostly older films. In fact, basically, the only newer ones they offer is because of their deal with Starz, the premium cable channel. That deal may have been one of the smartest ones Netflix has made yet, because at least it gives us access to some movies this side of 2002.
The fact that online distribution has to play in this foolish game of broadcast rights tennis, is of course, bullshit. The brick and mortar rental stores of yesteryear, like Blockbuster, don’t have to play by these ridiculous rules. Movies don’t vanish from their shelves because they’re playing on HBO for the next 18 months. If they did, Blockbuster would have been in trouble a lot sooner than its most recent woes (tied to its failure to get out in front of new forms of distribution).
So how can anyone really expect any of the online movie services to flourish under such restrictions? They shouldn’t, because none of them truly will until Hollywood changes these rules. And with billions of dollars at stake, Hollywood probably isn’t going to do it anytime soon. In fact, I’d venture to guess that the only thing that will force their hands is if services like BitTorrent, which people use to distribute pirated movies, continue to gain popularity as broadband access and speeds improve.
In other words, things may change when Hollywood starts getting screwed just like the music industry got screwed.
Seriously, search for a bunch of new movies you want on iTunes rentals, Netflix Watch Instantly and a torrent tracker. Which has the best selection? It’s certainly going to be the torrent tracker — and that gives you the movies for free.
The success of iTunes music store has proven that people are willing to pay for content (it’s now the largest music retailer, bigger than even Wal-mart), but the key factor is ease of use — of which, selection is a big part. It’s beyond frustrating to search a service for something you really want to pay to watch, only to find it doesn’t offer it. Hollywood is leaving money on the table.
I could go on about other ridiculous things is doing to screw up online distribution. For example, the fact that while a lot movies are available to buy on the day they’re release, most cannot be rented online until a few weeks later. But it’s all part of the same problem.
Hollywood is scared to embrace the move to online distribution. It’s still holding out hope that Blu-ray will catch on and become their next multi-billion dollar cash cow. That’s not happening. For most people, Blu-ray simply doesn’t offer enough of an improvement over DVD. Online distribution, with its instant access, does. Will Hollywood realize that too late?
Harry…I took care of it.
Petey didn’t even have a head!
People figure out how to file share illegally because of the red tape over doing it legally ($250,000 fine and 10 years in prison). These execs need to realize the trend.
trends are not a reason for business models to change.
The founder of netflix was interviewed on CNN a while ago and asked why all movies are not available on NF streaming. He replied that DVDs are still too profitable for Hollywood.
if you take a $8.99 a month unlimited netflix membership and multiply it by say 20 streaming movies a month, the DVD sale loss would be at least $100 if not more.
Canadians can’t even view streaming movies at all, and are forced to use the far slower Canada post with inferior services like Zip.ca or worse watch indy movies on iTunes, because their iTunes is a stripped down version. They can’t even use TiVo to get content because Rogers/Videotron/Bell up there have signed legal monopoly contracts with the socialist government in exchange for job guarantees to underskilled locals.
I am still amazed at the great streaming selection we have in the USA. It’s not that bad and it’s practically free.
The reason they don’t want to switch new titles to streaming is obvious. One leader will have to emerge and take that first step which forces the rest to follow.
plus they have no postal service on Saturday, because they are lazy. Mail gets delivered at 4+PM at night there, because their postmen can’t get up in the morning. Or speak-ed teh English for that matter.
Another thing is that the government sanctioned illegal monopoly in Canada limits subscribers’ bandwidth, so they can’t possibly use streaming movie services even if they did exist. They can typically only download 20Gb a month, where a movie on iTunes is 2GB per movie.
They also have port 80 blocked so they can’t run Apache at home on windows such as WAMP or linux such as LAMP, forcing them to buy external website hosting.
This is all done because they are dumb evil franch nazi bastards. The creators of the evil that is law 101 need to be hung publicly. Thank you 1rst ammendment.
I am amazed. I’m from Canada, and I download what I want when I want at far higher speeds than available in the US. United States companies will not allow itunes and others to offer the same services in Canada as available in the US – not the Canadian government. When you haven’t a clue about something, please don’t make it public!
http://www.vide...omparer-ihv.jsp
“high speed” internet
30 GB
combined*
By combined they mean upload and download
en.wikipedia.org/wiki/Rogers_Hi-Speed_Internet
Rogers “Express” high speed internet
Express 7.0 Mbit/s 512 kbit/s 60 GB $44.95
Both of these have port 80 blocked so that people have to sign up to $200 + “business” services to run as little as a home WAMP(Windows/Apache) server to have their website run off of a home PC
Let’s go to mobile now:
thomaspurves.com/2007/04/09/canada-worse-than-3rd-world-countries-when-it-comes-to-mobile-data-access/
Canada Worse than 3rd World Countries when it comes to Mobile Data Access
Movies on the G1 ???
Oh yeah, that’s right, you can’t have a Google Android phone can you?
Apple has an exclusive contract with AT&T/Rogers, and they have the only 3G network thanks to ITAC, the government of Canada, and the fact that the minister of public works was a geniune Mafia gang boss, Namely A. Gagliano from Ontario and Montreal.
That’s who was dishing out the IT contracts with YOUR money Canadian dumbasses. I was in Ottawa and I sat in on their board meeting where they discussed illegal trust activity. I asked for documents from the public works department and was denied because they didn’t want me to make them public. They would NEVER speak on the record.
And they drive VERY, VERY NICE CARS for people on a public servant salary. VERY NICE CARS. Cars that are far beyond their means.
That is your government of Canada.
en.wikipedia.org/wiki/Airbus_affair
en.wikipedia.org/wiki/Sponsorship_scandal
citynews.ca/news/news_20128.aspx
Want to know who BDC invests in or EDC??
Oh, you’re Canadian, you simply blindly trust the italians, uneducated, and idiot franch, and first nation indians that run your life.
Burn down Ottawa. Do it. That’s the only way you can possibly make your pathetic country any different. When we threw tea in the harbor, you sat there picking your noses, wanking off wondering when you were going to get more “rights”.
Here’s a 6 degrees of Kevin Bacon Techcrunch style for you. The CEO of the parent company of Videotron, QuebecOr’s son is the Tyler Cavell of mediascrape. The same Tyler that threatened to sue TechCrunch and failed. The same Tyler’s who’s best friend Conrad Black is sitting in a federal penitentiary in Florida.
http://www.cbc....open.html#78519
Why wasn’t Conrad sought after in Canada? Because of their cars. Those nice cars all the low pay public servants in Gatineau and Ottawa drive.
So Tyler’s dad is directly responsible for Canadians not being able to stream movies or use TiVo. Him and a few select others including your ministers. If you could download a movie at $2.99 like we do Rogers/AT&T, and Quebecor could no longer force you to buy their preconfigured DVRs or use their on demand movie services.
that last sentence was not finished.
If you could download a movie at $2.99 like we do Rogers/AT&T, and Quebecor could no longer force you to buy their preconfigured DVRs or use their on demand movie services, they would lose money. A lot of money. The same money that keeps them in those cars.
Chris,
You’re an idiot.
It’s ‘the way things are’ and naturally you don’t challenge that, oh no… well, until you’re forced to. Best of luck to the whole entertainment industry.
Amen.
Why I love MG’s columns? There’s no bullshit to be found.
Hey thx Brandon. Though I did technically manage to squeeze the word “bullshit” in there
Good job too at that too!
While I agree it is inconvenient as hell, especially for those with an out-sized sense of entitlement, it’s not stupid. There’s just more money to be made Hollywood’s current way than MG’s way. That won’t always be the case and then, someday, MG will be happy (or at least have one less thing to complain about!).
Sometimes the fees paid for exclusives far exceed the revenues you’d get without them. A good example of that is the NFL’s exclusive with DirecTV for its Sunday Ticket package. It could stop the exclusive and get many more subscribers. But it doesn’t, because it wouldn’t add up to the premium DirecTV pays for the exclusive.
And it’s not crazy on DirecTV’s part either, (they just bumped up the licensing agreement for it from ~$700 million a year to $1 billion a year). How long HBO, Showtime, etc, are willing to pay
premiums for exclusives and how quickly all digital content agreements for movies get rejiggered? Who knows, but I’d guess you will more or less have what you want online distribution wise in 5 years or so.
Sure Robert, but my point is that Hollywood, in sticking with the outdated model for too long risks a similar fate as the music industry as broadband access and speeds increase.
If what I want is five years away, Hollywood may be okay, or maybe not depending on the broadband situation. But some like Reid Hoffman think Hollywood are at least 10 years away from changing the structure. That’s too long.
NFL/DirectTV situation is a bit different cause that is based around live sporting events. I’m mostly talking about movies here.
MG, I’m talking about money and the premiums HBO, Starz etc are willing to pay for exclusives are far closer to the DirecTV/NFL model regardless of the live event nature of sports.
Money is what gets those movies made to begin with. The comparisons with digital distribution for movies and digital distribution for music are flawed for several reasons. But none of that matters. Distribution is an issue in both instances, but the barriers to making a studio movie ensure there’s nowhere near the competition for the pipeline.
Demand seems to remain constant overall. The movie studios seem to be thriving even in a down economy, despite ubiquitous Internet access.
Overall, Hollywood has been MUCH quicker to embrace the Internet when it made sense (more people had broadband). Hulu is better than any similar service offered up by big label recording studios.
Yeah but Hulu is mostly television, sure there are movies, but it’s the same catalog problem that Netflix and others face.
Movie studios are doing okay at the box office (thanks in part to the ridiculous rate at which ticket prices increase versus inflation), but DVD sales (Hollywood’s real easy cash baby) are down. Blu-ray sales are improving, but I really think that’s already a lost cause.
TV is Hollywood too (though it’s Vancouver and NY as well)! I agree with you 100% that the physical media cash cow of DVDs is a lost cause, but they will milk the cow as long as there is a drop of milk to be had. I
I also agree that overall box office has been kept afloat by ticket price increases, but rentals, and particularly pay-per-view/on-demand are still doing very well.
milk from cows is only possible because of pesticides.
You’re exactly right. Hollywood is falling right into the same trap the music industry did. The music industry had a value to price problem that they just couldn’t let go of in time, the entertainment industry is doing the exact same thing. In this recession that’s why Netflix kicked Blockbusters ass. If they think I won’t use bittorrent which I can now stream over my Tivo box onto my flat screen tv in my surround sound room, they are crazy! That’s why the Indie market is dying a rapid death. I’m not going to pay $12 to see an Indie movie that I could enjoy more in my living room but have to wait 2 months to be able to rent it. I’ll just download the damn thing and see it before it even comes out in the theatres.
I would add the movie industry is getting screwed BECAUSE it won’t embrace online distribution. There’s already plenty of newly released pirated content. If they provided good quality video online as a rental immediately after it left theaters, people would pay for it rather than have DVD that either skips or goes dead.
So let me get this. The studios invest millions (billions) into movies. The only reason to do this is to make money — on their intellectual property. You completely blank out on the whole property rights and profit thing and recommend that people steal (via torrent) the studios’ intellectual property so that you can get it for free or very cheap on a schedule that meets your whims. Hmmm…
Sounds like a tantrum by a dressed up looter or thug to me. Is your car or a part of your house or a percentage of your earnings up for grabs just because I feel like I deserve it?
The studios have the right to distribute their products as they please. By pushing the theft of those products, you are (at least morally if not legally) an accessory to looting.
Re-read.
+1
I re-read this quote of yours. Am I missing something here?
“In fact, I’d venture to guess that the only thing that will force their hands is if services like BitTorrent, which people use to distribute pirated movies, continue to gain popularity as broadband access and speeds improve.
“In other words, things may change when Hollywood starts getting screwed just like the music industry got screwed.”
Yes, you are. How is that me telling people to steal shit? That’s me saying that I think people will start stealing shit. Obviously, the two are very different.
Not buying it MG. This is your article in a nutshell.
1. You say, “The fact the online distribution has to play in this foolish game of broadcast rights tennis, is of course, bullshit.”
2. This is I love, “Hollywood is leaving money on the table.” So let me get this. Keytapper MC Siegler is smarter than those greedy bastard studio execs who it seems from his “smarter than thou” approach, have not read any article about online distribution over the past five years (including MC’s). So MC is enlightening them about how to make more money. This is too much to believe. Have you sent the link to this article to shareholders about the millions/billions that the stoooopid execs are leaving on the table? I am sure the shareholders will be grateful. Maybe we will see real justice – they will make MC a studio CEO.
3. You are inviting people to loot movies. The first half of your article is about how online distribution is “bullshit”. Then you say that it will only change if people start looting studio intellectual property — “that the only thing that will force their hands is if services like BitTorrent, which people use to distribute pirated movies.”
And then you provide BitTorrent company info and a link. You have loaded the gun, laid it on the table, with written instructions on who to shoot, how, and why.
Guilty of accessory to looting.
Okay.
thats a pretty big nutshell.
Biggest nutshell I´ve seen in years. No doubt about it. Some nutshell, really. Wow. If we are talking nutshells this is the one we should be talking about. Other nutshells better stand back, because this ones a biggie and it will never stop. This nutshell does what it wants and does give a rats ass about what you think about it. It just kicks ass. Get out of the way because this nutshell is on a roll. If you think you´ve seen nutshells you aint seen nothing til you sen this one. This nutshell makes grown men weep and children cover their eyes. You know when this nutshell is in town. That´s pretty much all I´m saying.
Finally some posts on techcrunch are worth the read!
“…an improvement over DVD. Online distribution, with its instant access, does. Will Hollywood realize that too late?”
can’t agree more. the economist and blogger mike masnick over at techdirt.com has taken to calling these dinosaurs a “legacy industry”, a description i, again, agree with.
specifically, fighting a format change so vigorously only dooms the participants in this business model.
I think there’s a decent opportunity here for other smaller movie studios studios to get some eyeballs where new hollywood content is leaving a huge void.
We’ve seen how youtube has changed our perception of what people really like to watch, couldn’t this be the same for feature length films as well?
How dare you suggest that I might “steal” or “loot” something thats free, on demand with near instant gratification. Surely, you jest?!?
That’s Blasphemy!!! We ALL know nothing good will ever come out of anything unless someone is making money from it!!
Thats whats up yoooo!! Down with the Monetary System For LIIIIIFE!!!! ya dig?
I even gots that pyramid tattooed on my forehead to remind me I will never make it to the top unless I’m selfish, fiercely competitive with complete and total disregard for anything that doesn’t make me more MONEY cuzzzzz
I get money, the money I got!! I GET IT I get money the money I got!! I GET IT I get money the $$$$$$$ I got!! I GET IT I get MONEY the MONEY I got!!
That’s all that really matters to me
pssssh as if
Citizen reactions – news concept site launches and has immediate adoption. http://hookk.com
But even in the rare case they do offer new movies online, they still think in geographic bounds:
For example: in the US iTunes store you can buy Battlestar Galactica pretty much right after the TV airing.
However, if you live somewhere in Europe you have to wait at least 6 months, only to get a crappy synchronised version, because it must be first shown on TV, of course
True Alexander. Good point, that’s yet another complicated layer here.
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$50.8M for BiTorrent, Amazing :S
great article MG, I love your writing style. Anyway I totally agree, once they feel the same pinch that the music industry is still feeling and fighting (to no end) they will have to change their model which would increase their sales and revenue anyway.. I believe its that or some new younger blood in executive roles that understand online distribution and the riches that it holds.
It’s strange to know that Hollywood, with all its smart people and case studies on what works in digital content distribution, still continue to work on this antiquated model.
Point 1: Some excellent recent Indy movies on NetFlix instant play. Very thankful for that. I’d like NetFlix to figure out a premium instant play fee to get access to a few more of the Indy films. I’d like more of the recent big movies, but realize that’s not going to happen with current Instant Play fees. So I’m pretty happy with the mixed mode of disks and Instant Play. I’d say our ratio of viewing is now about 10% disk and 90% Instant Play.
Point 2: Big Hollywood has a cost problem which I rarely here anyone talk about. The budget for big name stars and directors is absurd unless a studio can package and market the film as a block-buster. The probability of that happening is going down fast, but salaries, revenue shares, etc. are not fully reflecting that.
If Angelina, Brad, Russell, etc don’t want to work for $1 million per picture, there are tons of equally (probably more) talented actors who will. My wife went to both Bejamin Button (which I’d never see) and Slumdog (which I did see). Hands down winner in every category (acting, story, directing, etc.) was Slumdog. Check that, Benjamin had better CGI. Slumdog did less than $200 million I think, but I’m sure it was way, way more profitable than Benjamin. It’s not that Slumdog was so much better than other Indy films, that’d be unfair to many other very good movies.
Oops, didn’t finish point two: Current distribution is geared toward milking every penny from a blockbuster. Cost structures, distribution, etc. have been optimized for that. Studios, like many VCs, are optimized for living off the big score. The huge cost structures for big budget films reflect that. Studios need to reorganize around less costly films which can be profitable using narrow-band distribution channels like video on demand.
narrow-band profitable to finance a picture? hahahahahahahahahahahaha… i just snorted.
All-you-can-eat movies for a set monthly cost are probably a pipe dream. But why can’t the studios at least get out of the way of simply streaming online rentals of movies (a-la itunes or amazon)?
I presume they have negotiated per-stream fees and get paid every time there’s a rental … so they are clearly leaving money on the table here.
A more detailed writeup / rant on the topic (written a couple of weeks ago) can be found here: I argue that even providing an interface that lets you effectively browse the movies for rent would reduce the friction consumers experience (something amazon and itunes can do without negotiating with the movie studios).
http://www.jona...ant_i_just.html
What I don’t understand is what makes it more profitable to make/distribute DVD’s when you only have to make 1 copy of a movie digitally and then distribute electronically millions of times? If you have to make a million DVD’s doesn’t that cost more?
I understand there are streaming cost, but isn’t that cost shared buy the consumer? And wouldn’t that cost be the similar to shipping all the DVD’s to Netfilx, Blockbuster, Wal-Mart, etc.?
The real issue is the media company. DVDs are a big part of the monetization of movies, yet movies are only a small part of media company profitability. Most of the media company profits are from cable channels.
The second you start distributing movies and TV content freely online, consumers move away from cable. Once that happens, media company profits dry up.
Unlike the recording industry, the media company’s don’t have all of their eggs in the CD (or in this case DVD) basket. Therefore, they can fully resist online distribution. They really just need to keep the Internet-to-TV link fully DRM protected (read: block Hulu to Boxee).
I experience this almost daily on my VUDU Box. It really is terrible.
Digital distribution is not the same as pay-per-view and should be treated as such.
Studios are missing out I think on more profits if they would allow digital movie rental and download than by keeping the existing model.
The other problem on the horizon is with Netflix. I’ve just dropped my monthly rate to one DVD a month plus unlimited streaming. I wonder how much this is happened and is Netflix cannabilizing themselves? Also, since distributors also want to be retailers (Hulu and TV.com), a battle looms. Ultimately the studios make money off of exclusive control of content and if Netflix gets too successful they will shut them off (which they are already doing apparently). Netflix’s only alternative will be to take the risky step of financing their own content (i.e. Red Envelope). Either Netflix is going to be studios out of business or vice versa. My guess is Netflix should restart Red Envelope. They were only 2 years ahead of their time. Indie films have completely died at studios so the opening is there.
1. Big media will make as much money from us for as long as it can – until there is a countervailing force.
2. Big media isn’t stupid.
3. It’s unlikely to be leaving money on the table, because if there was money on the table, media would be adept enough to take it. See #2
4. Piracy it pecking away at the empire, but alone will not be enough. However, it is hastening change.
5. In the next 2-4 years market changes + piracy + alternative online sources will precipitate quicker change.
6. Big media will make available movies online – when the money is there.