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It’s tough out there for traditional broadcasting outlets like cablecos, IPTV providers and satellite dish networks, as they struggle in a declining ad market to increase revenue with on-demand high-definition content. But it’s about to get tougher: Apple Inc. this week has expanded its TV and movie offerings at the iTunes Store to include HD purchases and rentals. And thus, it’s officially become a threat to those legacy players. It used to be that Apple’s HD content was available to Apple TV users only, and only on a rental basis, but this expansion allows video to also be purchased, and also downloaded and played on desktops and laptops. And why is this a threat? Quite simply, in a digital age where home gateways bring computing capabilities to televisions and you have a populace becoming increasingly comfortable watching video on a PC or Mac, where time-shifted and on-demand models are mainstream, and where Internet streaming is everywhere online, the television is no longer the default entertainment device. And that is taking video out of the hands of broadcast networks. On-Demand a Gateway for New Entrants It’s clear the audience is comfortable with the on-demand model. Consider Steven Soderbergh’s “Che,” which has shown up in limited release in theatres, but has already reached 150,000 viewers through the Independent Film Channel’s video-on-demand service. The problem is, on-demand is so appealing that content owners are considering “going rogue” on their traditional broadcast partners. Take the case of “Alexander the Last,” a film by Joe Swanberg, which premiered at the South by Southwest Film Festival in March. But the thing is, it didn’t really premiere in Austin. Because the film had been available on IFC Festival Direct all day, which is an on-demand service linked to cablecos like Time Warner Cable, Comcast Corp. and Cablevision Systems. Swanberg said he was fielding all manner of e-mail from fans that watched it at home, on-demand, ahead of the Austin launch. “Joe will have his world premiere here, a lot will be written about it and people will want to see it right away,” Janet Pierson, producer of the South by Southwest film festival, told the New York Times. “Publicity is very expensive, and this is a very economical way to reach and grow the fan base.” Accordingly, Swanberg said he doesn’t “care what kind of screen they watch it on...I don’t really care how the audiences access the work.” And neither does IFC, which ironically is owned by Cablevision. Jonathan Sehring, president of IFC Entertainment, said he looks forward to a time when movies have premieres on iTunes, or Amazon’s Unbox video player. Verizon FiOS? You have been warned. Beyond the Online Streaming Threat In the past year, much has been made of the threat service providers face from online video sites like YouTube and Hulu.com. That’s a conversation that’s been extended thanks to new streaming deals struck between game console providers and video distribution players, and the potential to extend downloads to all manner of devices. Xbox Live and the Playstation Network offer online video markets, with a streaming service from movie rental bigwig Netflix available on the former. And Curt Marvis, president of digital media for Lionsgate Entertainment, told Variety that he believes gaming devices are the future. "I think when we see the Wii come into the market with the ability to stream movies, which I think is maybe going to happen as soon as this year, I think that’s going to be a big marketplace for digital distribution,” he said. Then there’s Blockbuster, which offers rentals and sales of more than 10,000 movies that can be sent to desktops, mobile phones, portable media players, Internet-connected televisions and Blu-ray disc players. “Blockbuster is a ubiquitous entertainment presence in the physical world...we plan to become a ubiquitous presence in the digital world as well," Jim Keyes, Blockbuster's CEO, said in a statement. "Our goal is to offer consumers the most digital content, the most accessibility, via the most devices, both in and out of home." But it’s just movies, right? Will traditional service providers really need to worry? Well, yes. Streaming video (and music) distributed across the Internet or directly to a mobile handset is fast becoming a “mainstream entertainment delivery vehicle” that will generate more than $27 billion in network-derived and content-derived revenue into the U.S. markets by 2011, if one believes Insight Research Corp.. That’s $27 billion that largely will not be reaped by incumbents, unless they change their strategy. But Apple could be even more game-changing. iTunes is not a streaming service, and it also offers current television offerings, and in that regard actually has the potential to be an even bigger threat to incumbents. The iTunes approach frees users from bandwidth-related quality concerns and makes alternate distribution to non-television devices that much more attractive. And, the non-subscription model appeals to impulse renters. Even pre-HD, Apple’s video strategy has been successful. iTunes offers more than 40,000 TV episodes, and more than 5,000 movies. Apple has already sold more than 250 million TV episodes and sold or rented more than 33 million movies. So, cablecos and telcos: perhaps it’s time to really make good on those three-screen strategies you’ve been talking about for so long. You want to take a bite out of Apple, rather than the other way around. Right? By Tara Seals
03/20/2009
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