We just took another step into that brighter entertainment future, in which new content will be available in a plethora of convenient formats on the theatrical release date, and the consumer chooses not only what to watch, but also when, where, and how to watch it. Apple's
An urge to jump on the digital bandwagon isn't the only motivation here. Time Warner CEO Jeff Bewkes explains that "the margins on taking a customer and moving that person from rental physical over to VOD day-and-date, it's like a 60% to 70% margin instead of 20% to 30%, so it's about a three-to-one trade. Very good for the film company." The company's test runs have also shown that VOD releases don't seem to hurt DVD sales at all: "In fact, they went up a little, because you are not seeing competition from used rental inventory when you do this."
That's also why Apple was able to convince everyone from Warner and Sony
Time Warner's move to release VOD on the same day as DVD releases is a good start, and this exercise will let the studios get comfortable with the idea that movie releases can be profitable without a physical artifact changing hands in a store somewhere. Aligning downloads, DVDs, and on-demand with theatrical release dates is really where it's at, but it will still take a few years before any of the major players dare to attempt such an audacious stunt. Until then, Jake and Johanna Consumer will just have to wait a while before loading up Iron Man on their iPods and media-center PCs.
How does this help Reed Hastings?
All of this might sound like tough cookies for the likes of Netflix
One of the biggest problems with the Netflix "watch it now" service has been a dearth of digitized content. You pretty much have to settle for a DVD or Blu-ray mailing if you want Netflix to hook you up with Juno right now. The studios seem unwilling to hand out licenses for digital distribution of their precious new-release babies, but Apple just plucked that forbidden fruit and handed it to Eve, metaphorically speaking.
If anything, this news is bad tidings for bricks-and-mortar rental stores, which is why CEO Jim Keyes is smart to move Blockbuster out of pure movie rentals and into a more diversifiedentertainment retailing format.
The whole entertainment business is about to turn on its ear. Make sure you're invested in the likely rulers of the new world order, like Apple and Netflix.