State of Video on Demand

[RonV]

Well the folks at Gizmodo have tried to make heads and tails out of what is going on in the world of video distribution. Its a good read and VUDU does get mentioned.

http://gizmodo.com/5013346/state-of-...-battle-royale

[paulrus]

Re: State of Video on Demand

Leave it to Gizmodo to class things up by using "clusterf--k" in an article.

That's classy with a capital K.

Now I remember why I deleted them from my RSS reader...

[RonV]

Re: State of Video on Demand

The use of 4 letter words seems to be the number one comment. But if you discard the colorful language the article does give better insights to what is going on in the VOD world.

[NA9D]

Re: State of Video on Demand

The use of 4 letter words seems to be the number one comment. But if you discard the colorful language the article does give better insights to what is going on in the VOD world.

Except it's not completely factual. They state that one of the biggest problems is that each studio has to encode video in a different format for each and every provider. We know that Vudu does the encoding for the Vudu boxes and I imagine the others do too. So the studio probably gives an uncompressed master and each service provider encodes it however they want.

[Rusdude]

Re: State of Video on Demand

Except it's not completely factual. They state that one of the biggest problems is that each studio has to encode video in a different format for each and every provider. We know that Vudu does the encoding for the Vudu boxes and I imagine the others do too. So the studio probably gives an uncompressed master and each service provider encodes it however they want.

Actually, that is what a movie exec told Giz, so if there's a confusion, you can't blame it on Giz. It's actually a rather nice article.

[Nded]

Re: State of Video on Demand

Actually, that is what a movie exec told Giz, so if there's a confusion, you can't blame it on Giz. It's actually a rather nice article.

That's what I find so frustrating about Giz and similar sites - they put themselves out as "experts", when they are so often just parroting back what they've been told. They don't seem to have the time/talent to dig into things and uncover the truth. We're talking about the same folks that couldn't figure out that they had to use the HDMI port to get HD quality out of the Vudu.

[Rusdude]

Re: State of Video on Demand

If bona-fide journalists at WSJ/NYT/Newsweek, can't get everything right, what do you expect from blogs like Giz and Engadget? Since Giz keeps me entertained while I'm taking a break from my job, I'll keep reading and correcting all the Vudu stories.

[Nded]

Re: State of Video on Demand

How long before "bona-fide journalists" is offered in dictionaires as an example of an oxymoron?

[vino17]

Re: State of Video on Demand

Except it's not completely factual. They state that one of the biggest problems is that each studio has to encode video in a different format for each and every provider. We know that Vudu does the encoding for the Vudu boxes and I imagine the others do too. So the studio probably gives an uncompressed master and each service provider encodes it however they want.

Actually, while this would be the easiest way for content providers, it unfortunately is not the way it works. It's a complete case by case basis... some digital services will do the encoding (like Vudu), and some expect delivery in only their approved format.

The article does a pretty good job of simplifying for readers some of the more pressing issues facing the digital industry. There is one glaring omission however, and it's an issue that has been discussed on these forums at length, which is the availability of VOD rights.

The reason digital services do not have complete catalogs, or titles that appear and disappear at random, is the availability of VOD rights. When studios enter into deals with TV companies, the TV companies either a) take VOD and SVOD rights exclusively for the term of the license, or b) require that those rights are held back from any form of digital solicitation by the studio for the duration of the term (as opposed to being granted those rights).

The studios often argue and fight over definitions and language that may allow them some wiggle room, and some TV companies are more progressive and lenient than others - for example some will allow transactional VOD during their licensed terms, but almost all prevent any form of SVOD or free ad-supported streaming - but the bottom line is that the money that TV comanies pay in the form of an up-front license fee dwarfs any current revenue potentially generated by digital distribution.

And while it's easy to simply dismiss this as Hollywood greed, the discrepancy between the revenue potential is so large that there really is no argument to be made. Even for big box office movies, you're looking at millions of TV dollars (up-front, no less), versus tens or hundreds of thousands of digital dollars (which may or may not come, and which is slowly paid as actual transactions and purchases are made by consumers).

In most cases, I don't believe there are any clandestine reasons for studios not providing their content digitally. The margins are potentially better than DVD because costs are less, and it requires less overhead to manage. But as the article mentions, the lack of uniformity and broadband constraints means that studios cannot afford to throw their full support behind digital distribution just yet, because they risk alienating the DVD and TV accounts that generate 99% of their business.

Let's say for a minute that you were a very wealthy investor. You've been doing business with certain companies for years and years, and they've made you untold billions of dollars. Then you meet a young guy that pitches you on his idea. The idea is great in concept, but still relatively half-baked logistically. Further, this new concept is in direct competition with those other companies you have supported, whom you need to continue to support for the foreseeable future. If you pull your funds from the other companies, with whom you have years of working relationships (and often personal relationships) and give it all to this young guy and his great idea, you're going to lose a lot of money while he works out the kinks, builds a market, educates consumers, etc. So what do you do?

The logical thing is to support the young guy enough that he remains motivated to iron out all the wrinkles in his business model to a point where any additional investment in his model (which is also a direct decrease in investment from your traditional partners) is proportional to the increase in revenue from that new model. Eventually, if all goes according to plan, your ROI should be proportionate to the decreased return from your traditional outlets, who also would have hopefully learned a trick tor two from the young guy and adapted their traditional model to take advantage of the concepts from the new one.

And that's pretty much where the studios are at this point. They're supporting the digital industry enough that progress is being made without damaging current relationships and revenue sources. Digital distribution cannot yet provide the same revenue that traditional models offer, and eschewing traditional models in favor of new media just for the sake of technological progress would collapse their business altogether.

But, as the article mentions, it's pretty clear that we're moving in that direction... it simply takes time. Also, I think it bears noting that Vudu owners are likely very technologically savvy, early adopters. While we may be clamoring for more content and flexibility, we're currently the vast minority of entertainment consumers. So while I, too, personally cannot wait until digital distribution is fast, easy, portable, and uniform in compatibility with devices, I'll just take comfort in the knowledge that the day is coming, and I'll be ready to take full advantage of it when it does.

[NA9D]

Re: State of Video on Demand

vino17,

I think that was one of the best 1st time posts I've ever read. Very informative and insightful.

Thank you!

[HeadHodge]

Re: State of Video on Demand

If you pull your funds from the other companies, with whom you have years of working relationships (and often personal relationships) and give it all to this young guy and his great idea, you're going to lose a lot of money while he works out the kinks, builds a market, educates consumers, etc. So what do you do?

In IBM's case you tell Bill Gates to take a hike and completely ignore Michael Dell in order to protect your revenue stream.

I think the revenue problem can be solved with venture capitalists and other investors who are rich enough to deal financially up-front with the studios while taking a risk for getting their ROI in the long term from the little guy.

Anyways, no matter how it really turns out, that was an awesome post.

Regards

[vino17]

Re: State of Video on Demand

I think the revenue problem can be solved with venture capitalists and other investors who are rich enough to deal financially up-front with the studios while taking a risk for getting their ROI in the long term from the little guy.

Regards

Thanks.

I was just trying to paint a broad picture with my example, but it is almost exactly as you've laid out. The companies involved now are either brand names who have the vast resources to spend immediately to secure a place in new media (Apple, Microsoft, Amazon, Netflix), or start-up ventures utilizing verteran silicon valley leadership and venture funds which cater to a niche or the development of alternative distribtuion methods (Vudu). In either case, ROI is based on long-term projections.

[vino17]

Re: State of Video on Demand

vino17,

I think that was one of the best 1st time posts I've ever read. Very informative and insightful.

Thank you!

Been lurking for a while, and this topic in particular interested me, so I figure I'd just go ahead and jump in the deep end.

[HeadHodge]

Re: State of Video on Demand

One of the things that frustrates me is that Box Office movies like Fools Gold and 10,000 BC are now starting to become available the same day as DVD.

But I'm still renting many of my movies from DTV because they offer both the above mentioned movies in HD/DD5.1 and VUDU doesn't.

It not only makes no sense, but it's very discouraging that I'm not using VUDU as much as I would like.