Want Movie Downloads? Pay Up!

It's official, if not particularly surprising: Movie downloads have arrived. Consumers are clearly interested in video downloads, but Monday's news from the major movie studios looks like a pricey experiment.

The major movie studios -- General Electric's (NYSE: GE  ) NBC Universal, Time Warner's (NYSE: TWX  ) Warner Bros., Sony's (NYSE: SNE  ) Sony Pictures, Viacom's (NYSE: VIA  ) Paramount, and News Corp.'s (NYSE: NWS  ) Twentieth Century Fox -- will begin to sell downloads of movies simultaneously with the films' DVD releases. The studios will distribute the movies through Movielink LLC, which is owned by several of the major film studios. (Movielink rival CinemaNow has also made a similar deal with Sony and Lions Gate.)

However, consumers will pay through the nose for their digital flick fix. News reports say the download fees will be a steep $20 to $30 for new releases, although older flicks will be considerably cheaper. Although buyers will be able to burn backup DVDs of the movies and watch them on up to three computers, those DVD copies won't yet play on regular DVD players. (That feature is still being developed, although it apparently won't be available for several months). Downloads will take about an hour on high-speed Internet connections, although viewers can start watching before they are complete.

Given the fees and the limitations involved, it seems to me that this development mostly pays lip service to the nascent digital downloading industry. In reality, the movie studios seem to be discouraging viewers from taking the download option. (It's also worthwhile to note that the studios don't want to cause a rift with the bricks-and-mortar retailers who peddle DVDs -- Wal-Mart, for example.) Although movie studios want to discourage digital piracy, I think such high price points are likely to backfire. (When the music industry was besieged by digital piracy, Apple's (Nasdaq: AAPL  ) iTunes breakthrough arguably hinged on its relatively consumer-friendly $0.99-per-song price point, after all.)

Recent rumors that Amazon.com (Nasdaq: AMZN  ) was in talks to offer package deals to its customers -- supposedly allowing customers to download a digital version of the DVD they'd purchased while waiting for its delivery -- were compelling. (There's no new word on that yet.) And of course, Apple really solidified the idea that consumers would be willing to pay for video downloads with its gradual addition of music videos and TV shows to its iTunes Music Store. To date, however, Apple hasn't struck a deal with the movie studios.

Movie downloads may be here, but given their limitations and high price, I doubt they'll be a force to reckon with just yet. I wonder if the movie industry will make some of the same mistakes as the music business has; its desire to charge premiums will only serve as a steep psychological barrier to sales, and it might drive tech-savvy consumers to piracy. Nice shot, Hollywood, but this volley seems to have missed the mark.

For more recent related stories, see the following Foolish articles:

Amazon.com and Time Warner areMotley Fool Stock Advisorselections. To find out what other companies David and Tom Gardner have recommended, click here for a 30-day free trial.

Alyce Lomax does not own shares of any of the companies mentioned.


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