My Thoughts on VUDU's Business Strategy
The VUDU's big value proposition to us consumers is this:
Buy or rent from a library of thousands of movies/TV shows in the comfort of your home, watch them instantly, and discover new movies in ways never before done.
I think it's a compelling value proposition, but two major competitors are emerging: NetFlix and AppleTV. Here's what I think their value propositions are:
NetFlix:
For a limited per-month fee and for a one-time purchase fee, rent from a larger library of thousands of movies/TV shows in the comfort of your home, watch them instantly, and discover new movies in ways never before done.
AppleTV:
Download movies/TV shows from iTunes and watch on your AppleTV. Also discover new movies in ways never before done, play your music, watch home movies, view pictures, and discover new content in ways never before done.
So what's happening is that the core service is "guy/rent movies instantly" and we're starting to see the different dimensions on which consumers will judge the quality of these offerings:
(1) Available Movies
Probably the most important...
(2) User Interface
Important still not as important as available movies
(3) Setup Cost / Per-Movie Cost
(4) Extra Features
Playing music, viewing photos, etc.
The VUDU is an amazing technical achievement, but in order to effectively compete over the next 12-18 months, they've got to really differentiate themselves in these four areas. If I were VUDU, here's what I would do. Obviously, each new feature costs money and takes time, but assuming those issues can be addressed, here's my strategy:
(1) AGGRESSIVELY build the library
The user interface is superb and extra features are not yet major influences for most consumers. The cost is what it is but it's competitive with AppleTV. The most important thing VUDU can do in the next few weeks is to BUILD THAT DAMN LIBRARY.
I'd say that when I go hunting for a movie on the VUDU (my most recent example: "A Beautiful Mind") I only find it 50% of the time. That's pretty bad. And while iTunes is no better, NetFlix kicks complete *** here.
On the other hand, NetFlix will almost surely have an inferior set top box, so the only way to neutralize the NetFlix advantage is to have an AWESOME library. So far, VUDU has, in my opinion, failed to achieve this. It's the best library there is for a device of its type, but, to be perfectly honest, it still kind of sucks.
Case in point: Russel Crowe is one of my favorite actors. I was excited to rent Gladiator, A Beautiful Mind, etc. I did a Russel Crow search and came up with a whopping 4 movies. This even inspired me to make denigrating comments about the VUDU in conversation.
The system right now is, in my opinion, good enough to inspire buyers. But now, it's the library, stupid.
(2) Extra Feature #1: Streaming Music
In the registration survey, VUDU asked us how much we care about streaming from Rhapsody Music Service. Whatever people actually wrote in their responses, this is the most important auxiliary feature VUDU can add. For $13/month, you can stream over 4.5 million songs. Wow.
TiVo added this feature, their interface is TERRIBLE and I still use it all the time. My friends see me using it and get excited and jealous. If they saw the movies piece and the Rhapsody piece and it actually had a good interface, I think they'd be inspired to sign up.
Rhapsody is also key because, for obvious reasons, AppleTV will NEVER have streaming music the way Rhapsody offers it (where you pay $13 and can play millions of songs for free). Even though the iTunes "pay to play" model is the dominant player for digital music, if VUDU can be the "$13/month for 4.5 million songs" alternative, that's a great place to be. Now you give consumers a choice instead of just trying to be an imitation of something else.
As a second feature, VUDU needs to develop an iPod plugin interface. This won't achieve the level of iTunes integration that AppleTV can offer but it will at least give the indecisive people a reason to justify choosing VUDU instead.
(3) Extra Feature #2: Integration with Flickr
It doesn't matter who VUDU integrates with, but they'll need a photos feature, too. Frankly, this can and should be basic for now. Just get it up so that people can use it and that AppleTV can stop claiming they're the only ones who can do it.
(4) Develop a User Interface that Obviates the Cable Subscription
This last one is more of a medium-term/long-term position, but once in place will be a HUGE deal. VUDU needs to adjust their user interface so that everything we see today becomes the "Movies" section, but that we can alternate between "Movies" and "TV".
Movies can basically stay the way it is; it works great. But TV should be a special interface that breaks out shows by time of day, channel, most watched shows, most controversial (measured by number of comments posted in forums or something like that), etc. We should then be able to "subscribe" to certain TV shows and have them auto-downloaded once a day.
For example, I could get up in the morning, and just start watching the Today Show. It doesn't matter that it actually starts at 7am. It finished downloading by 5am and then the software "activated" it at 7am and I can start watching it.
VUDU will have to figure out how to deal with advertising. Personally, I think VUDU needs to advocate for context-sensitive links that email me information about products I see reviewed during or used on the show. VUDU can effectively try to usher in a new era of television viewing.
LIkewise, I should be able to watch "Live" TV like basketball games or American Idol. VUDU should compile this content for me and let me maintain something like "My Shows".
This would be so much better than the horrific excuse for a television solution we use today. I still can't believe how accustomed we all are to the "push" model of television with its forced advertising. It only ever makes sense for live TV. All other TV programming is much better equipped for a digital download.
Final Thoughts
So, that's pretty much what the game is going to look like. Right now, only "innovators" (I'm using the term in the Geoffrey Moore sense) have purchased these devices right now, and the reality of AppleTV is that only Apple iTunes users will even consider purchasing AppleTV. But even early adopters haven't jumped on the bandwagon just yet.
But they will in the next 12 - 18 months, and when they do VUDU needs to be ready to explain why it's a better choice.
The decision will come down to the four dimensions I identified above, and if the consumer perceives a special value with VUDU they can't get anywhere else, the $60 difference in price won't matter, and +$1/movie for the rentals won't matter either.
Good luck, VUDU. I want you guys to succeed, but you've got a ways to go.
Josh
Buy or rent from a library of thousands of movies/TV shows in the comfort of your home, watch them instantly, and discover new movies in ways never before done.
I think it's a compelling value proposition, but two major competitors are emerging: NetFlix and AppleTV. Here's what I think their value propositions are:
NetFlix:
For a limited per-month fee and for a one-time purchase fee, rent from a larger library of thousands of movies/TV shows in the comfort of your home, watch them instantly, and discover new movies in ways never before done.
AppleTV:
Download movies/TV shows from iTunes and watch on your AppleTV. Also discover new movies in ways never before done, play your music, watch home movies, view pictures, and discover new content in ways never before done.
So what's happening is that the core service is "guy/rent movies instantly" and we're starting to see the different dimensions on which consumers will judge the quality of these offerings:
(1) Available Movies
Probably the most important...
(2) User Interface
Important still not as important as available movies
(3) Setup Cost / Per-Movie Cost
(4) Extra Features
Playing music, viewing photos, etc.
The VUDU is an amazing technical achievement, but in order to effectively compete over the next 12-18 months, they've got to really differentiate themselves in these four areas. If I were VUDU, here's what I would do. Obviously, each new feature costs money and takes time, but assuming those issues can be addressed, here's my strategy:
(1) AGGRESSIVELY build the library
The user interface is superb and extra features are not yet major influences for most consumers. The cost is what it is but it's competitive with AppleTV. The most important thing VUDU can do in the next few weeks is to BUILD THAT DAMN LIBRARY.
I'd say that when I go hunting for a movie on the VUDU (my most recent example: "A Beautiful Mind") I only find it 50% of the time. That's pretty bad. And while iTunes is no better, NetFlix kicks complete *** here.
On the other hand, NetFlix will almost surely have an inferior set top box, so the only way to neutralize the NetFlix advantage is to have an AWESOME library. So far, VUDU has, in my opinion, failed to achieve this. It's the best library there is for a device of its type, but, to be perfectly honest, it still kind of sucks.
Case in point: Russel Crowe is one of my favorite actors. I was excited to rent Gladiator, A Beautiful Mind, etc. I did a Russel Crow search and came up with a whopping 4 movies. This even inspired me to make denigrating comments about the VUDU in conversation.
The system right now is, in my opinion, good enough to inspire buyers. But now, it's the library, stupid.
(2) Extra Feature #1: Streaming Music
In the registration survey, VUDU asked us how much we care about streaming from Rhapsody Music Service. Whatever people actually wrote in their responses, this is the most important auxiliary feature VUDU can add. For $13/month, you can stream over 4.5 million songs. Wow.
TiVo added this feature, their interface is TERRIBLE and I still use it all the time. My friends see me using it and get excited and jealous. If they saw the movies piece and the Rhapsody piece and it actually had a good interface, I think they'd be inspired to sign up.
Rhapsody is also key because, for obvious reasons, AppleTV will NEVER have streaming music the way Rhapsody offers it (where you pay $13 and can play millions of songs for free). Even though the iTunes "pay to play" model is the dominant player for digital music, if VUDU can be the "$13/month for 4.5 million songs" alternative, that's a great place to be. Now you give consumers a choice instead of just trying to be an imitation of something else.
As a second feature, VUDU needs to develop an iPod plugin interface. This won't achieve the level of iTunes integration that AppleTV can offer but it will at least give the indecisive people a reason to justify choosing VUDU instead.
(3) Extra Feature #2: Integration with Flickr
It doesn't matter who VUDU integrates with, but they'll need a photos feature, too. Frankly, this can and should be basic for now. Just get it up so that people can use it and that AppleTV can stop claiming they're the only ones who can do it.
(4) Develop a User Interface that Obviates the Cable Subscription
This last one is more of a medium-term/long-term position, but once in place will be a HUGE deal. VUDU needs to adjust their user interface so that everything we see today becomes the "Movies" section, but that we can alternate between "Movies" and "TV".
Movies can basically stay the way it is; it works great. But TV should be a special interface that breaks out shows by time of day, channel, most watched shows, most controversial (measured by number of comments posted in forums or something like that), etc. We should then be able to "subscribe" to certain TV shows and have them auto-downloaded once a day.
For example, I could get up in the morning, and just start watching the Today Show. It doesn't matter that it actually starts at 7am. It finished downloading by 5am and then the software "activated" it at 7am and I can start watching it.
VUDU will have to figure out how to deal with advertising. Personally, I think VUDU needs to advocate for context-sensitive links that email me information about products I see reviewed during or used on the show. VUDU can effectively try to usher in a new era of television viewing.
LIkewise, I should be able to watch "Live" TV like basketball games or American Idol. VUDU should compile this content for me and let me maintain something like "My Shows".
This would be so much better than the horrific excuse for a television solution we use today. I still can't believe how accustomed we all are to the "push" model of television with its forced advertising. It only ever makes sense for live TV. All other TV programming is much better equipped for a digital download.
Final Thoughts
So, that's pretty much what the game is going to look like. Right now, only "innovators" (I'm using the term in the Geoffrey Moore sense) have purchased these devices right now, and the reality of AppleTV is that only Apple iTunes users will even consider purchasing AppleTV. But even early adopters haven't jumped on the bandwagon just yet.
But they will in the next 12 - 18 months, and when they do VUDU needs to be ready to explain why it's a better choice.
The decision will come down to the four dimensions I identified above, and if the consumer perceives a special value with VUDU they can't get anywhere else, the $60 difference in price won't matter, and +$1/movie for the rentals won't matter either.
Good luck, VUDU. I want you guys to succeed, but you've got a ways to go.
Josh
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