Analysis for 'FIlms'

  • Electronic Sell-Through of Movies in U.S. Reached Nearly $1.6 Billion in 2014

    Digital purchases of movies in the U.S. boomed in 2014, to $1.55 billion, up 30% from $1.19 billion in 2013, according to new data from the Digital Entertainment Group. However, the $360 million increase was more than offset by a decline in purchases of physical movies (DVD and Blu-ray) of $844 million in 2014, to $6.93 billion, an 11% drop. In fact, as the chart below shows, physical sales have declined by over $2 billion since 2011 when they were nearly $9 billion. 

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  • It's Hard to See How Streaming Movies Will Surpass DVD/Blu-ray In 2012

    Last Thursday night, a Bloomberg headline, "Online Film Viewing in U.S. to Top Discs in 2012, IHS Says," caught my eye. The article reported that media research firm IHS Screen Digest is forecasting that "legal online viewings of films will more than double to 3.4 billion this year from 1.4 billion in 2011." Meanwhile IHS is forecasting that DVD/Blu-ray viewing will decline from 2.6 billion viewings in 2011 to 2.4 billion in 2012.

    Over the weekend, as I kept seeing other publications essentially reiterating the Bloomberg story, I started wondering how IHS arrived at its forecast, the details of which I haven't seen. Doing a little back of the envelope analysis, as I show below, it's awfully hard to see how streaming movies in the U.S. will more than double from last year, unless some very unexpected things happen with Netflix (IHS notes that 94% of streaming movie volume was subscription-based, and of course, Netflix massively dominates this segment). Rather, it seems likely DVD/Blu-ray will hold on for another year.

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  • 4 Items Worth Noting for the Jan 4th Week (Netflix-WB Continued, comScore Nov. '09 stats, TV Everywhere, 3D at CES)

    Following are 4 items worth noting for the Jan 4th week:

    1. TechCrunch disagrees with my Netflix-Warner Bros. deal analysis - In "Netflix Stabs Us In The Heart So Hollywood Can Drink Our Blood," (great title btw) MG Siegler at the influential blog TechCrunch excerpts part of my post from yesterday, and takes the consumer's point of view, decrying the new 28 day "DVD window" that Netflix has agreed to in its Warner Bros deal. Siegler's main objection is that "Hollywood thinks that with this new 28-day DVD window deal, the masses are going to rush out and buy DVDs in droves again." Instead, Siegler believes the deal hurts consumers and is going to touch off new, widespread piracy.

    I think Siegler is wrong on both counts, and many of TechCrunch's readers commenting on the post do as well. First, nobody in Hollywood believes DVD sales are going to spike because of deals like this. However, they do believe that any little bit that can be done to preserve the appeal of DVD's initial sale window can only help DVD sales which are critical to Hollywood's economics. Everyone knows DVD is a dying business; the new window is intended to help it die more gracefully. And because new releases are not that critical to many Netflix users anyway, Netflix has in reality given up little, but presumably gotten a lot, with improved access for streaming and lower DVD purchase prices.

    The argument about new, widespread piracy by Netflix users is specious. With or without the 28 day window, there will always be some people who don't respect copyright and think stealing is acceptable. But Netflix isn't running its business with pirates as their top priority. With 11 million subscribers and growing, Netflix is a mainstream-oriented business, and the vast majority of its users are not going to pirate movies - both because they don't know how to (and don't want to learn) and because they think it's wrong. Netflix knows this and is making a calculated long-term bet (correctly in my opinion) that enhancing its streaming catalog is priority #1.

    2. comScore's November numbers show continued video growth - Not to be overlooked in all the CES-related news this week was comScore's report of November '09 online video usage, which set new records. Key highlights: total video viewed were almost 31 billion (double Jan '09's total of 14.8 billion), number of videos viewed/average viewer was 182 (up 80% from Jan '09's 101) and minutes watched/mo were approximately 740 (more than double Jan '09's total of 356).

    Notably, with 12.2 billion views, YouTube's Nov '09 market share of 39.4% grew vs. its October share of 37.7%. As I've previously pointed out, YouTube has demonstrated amazingly consistent market dominance, with its share hovering around 40% since March '08. Hulu also notched another record month, with 924 million streams, putting it in 2nd place (albeit distantly) to YouTube. Still, Hulu had a blowout year, nearly quadrupling its viewership (up from Jan '09's 250 million views). But with 44 million visitors, Hulu's traffic was pretty close to March '09's 41.6 million. In '10 I'm looking to see what Hulu's going to do to break out of the 40-45 million users/mo band it was in for much of '09.

    3. Consumer groups protest TV Everywhere, but their arguments ring hollow - I was intrigued by a joint letter that 4 consumer advocacy groups sent to the Justice Department on Monday, urging it to investigate "potentially unlawful conduct by MVPDs (Multichannel Video Programming Distributors) offering TV Everywhere services." The letter asserts that MVPDs may have colluded in violation of antitrust laws.

    I'm not a lawyer and so I'm in no position to judge whether any actions alleged to have taken place by MVPDs violated any antitrust laws. Regardless though, the letter from these groups demonstrates that they are missing a fundamental benefit of TV Everywhere - to provide online access to cable TV programming that has not been available to date because there hasn't been an economical model for doing so. In the eyes of people who think that making money is evil, the TV Everywhere model of requiring consumers to first subscribe to a multichannel video service seems anti-consumer and anti-competitive. But to people trying to make a living creating quality TV programming, the preservation of a highly functional business model is essential.

    These advocacy groups need to remember that consumers have a choice; if they don't value cable's programming enough to pay for it, then they can instead just watch free broadcast programs.

    4. 3D is the rage at CES - I'll be doing a CES recap on Monday, but one of the key themes of the show has been 3D. There were two big announcements of new 3D channels, from ESPN and Discovery/Sony/IMAX. LG, Panasonic, Samsung and Sony announced new 3D TVs. And DirecTV announced that it would launch 3 new 3D channels by June 2010, with Panasonic as the presenting sponsor. 3D sets will be an expensive proposition for consumers for some time, but prices will of course come down over time.

    Something that I wonder about is what impact will 3D have on online and mobile video? Will this spur innovation in computer monitors so that the 3D experience can be experienced online as well? And how about mobile - will we soon be slipping on 3D glasses while looking at our iPhones and Android phones? It may seem like a ridiculous idea, but it's not out of the realm of possibility.

    Enjoy your weekend!

     
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  • 4 Items Worth Noting for the Dec 14th Week (New pre-roll ad data, Paramount movie clips, Thwapr mobile, next week's preview)

    Following are 4 items worth noting for the Dec 14th week:

    1. New pre-roll data shows format's strength - Though many in the industry still scorn the pre-roll ad, this week 2 ad networks, ScanScout and YuMe, released data showing its continued prevalence as well as innovation that's improving its performance. ScanScout said its "Super Pre-roll" unit, which allows for integrating overlay graphics on the video that viewers can engage with, is driving 350% higher click-through rates compared with typical pre-rolls. In this example for Unilever's Vaseline, note how the creative nicely reinforces the messaging. The enhanced interactivity feels like the start of a new trend; another pre-roll that offers something similar is Innovid's iRoll unit. ScanScout separately announced this week a host of new premium publishers have joined its network.

    Meanwhile YuMe released its Video Advertising Metrics Report for Jan-Nov '09, which showed that, at least within YuMe's network, 90%+ of all ads served were pre-rolls, with 30 second spots generating a 1.8% overall click-through rate, a 50% higher rate than the 1.2% that 15 second spots achieved. The volume of 30 second ads also grew 50% faster than 15 second volume in Q3 '09. Kids age 6-14 achieved a 3.7% click-through rate, the highest of any group, which YuMe's Jayant Kadambi told me could be explained by the more engaging nature of child-focused ads (e.g. click to play games, etc.). Jayant believes the sizable amount of existing creative for TV ads that can be easily repurposed for online is a key reason pre-rolls continue to dominate.

    2. Paramount clipping site powered by Digitalsmiths is slick - I was impressed with a demo of Paramount Pictures' newly launched ParamountClips.com site that I got this week. The site is only open to Paramount's business partners, allowing them to either choose from an existing stock of clips from over 80 different Paramount movies, or to easily create their own. Desired clips are moved into a shopping cart and released for download, per previously determined licensing terms.

    The site is powered by Digitalsmiths, which indexed all of the scenes from the movies using their proprietary recognition process, and then generated meta-data for each, which makes searching a snap. The new self-service site replaces the laborious previous process of a Paramount staffer working with each partner to extract jus the scene they want. As a result, a new highly-scalable licensing opportunity has been created. Paramount is taking advantage of Digitalsmiths VideoSense 2.5 release announced last week that is focused on clip generation, for both on demand and live streams, improved asset management and more integrated reporting.

    3. Thwapr launches beta of mobile-to-mobile video sharing - Continuing the buildout of the mobile video ecosystem, Thwapr, a new mobile-to-mobile content sharing platform, launched its beta this week. Duncan Kennedy, Thwapr's COO told me that although there's been a proliferation of video capable smartphones, there's currently no easy, fool-proof way of sharing videos from one device to another (e.g. from an iPhone to a BlackBerry). Enter Thwapr, which lets the user upload videos to Thwapr and then have them shared with their contacts. Thwapr identifies the receiving phone's "user agent" so that it can dynamically decide the optimal format the video should be viewed in. The user simply clicks on a link and the video plays. I can attest that it worked beautifully on my BlackBerry Pearl.

    Thwapr's raised about $3 million from angels and has a very strong team, including Duncan and others who worked on Apple's QuickTime. I'm a fan of how video, social/sharing and mobile intersect to create new opportunities, though there are business model unknowns. For now Thwapr is focused on a free ad-supported model, with a particular emphasis on geo-tagging videos to make advertising especially appealing for local merchants. Still, YouTube has illustrated how difficult it is to monetize user-generated content. Thwapr also envisions a business-grade option for real estate, travel, dating type applications which sound promising. I wonder too about whether a freemium model should be explored, though Duncan said Thwapr's analysis suggested this would be a relatively small opportunity. We'll see how things shape up.

    4. Next week is 2009 wrap-up week on VideoNuze - Keep an eye on VideoNuze next week, as I'll be summarizing Q4 '09 venture capital investments and deals in the broadband/mobile video space, reviewing my 2009 predictions and looking ahead to what to expect in 2010. It's been an incredibly active year and based on the pre-CES briefings I've been doing, there's lots more to look forward to next year.

    Enjoy your weekend!

     
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  • 4 Items Worth Noting (comScore, Viral videos' formula, Netflix, VideoSchmooze) for Sept 26th Week

    Following are 4 news items worth noting from the week of Sept. 26th:

    1. Summer '09 was a blockbuster for online video - comScore released U.S. online video viewership data early this week, providing evidence of how big a blockbuster the summer months were for each metric comScore tracks. The 3 metrics that I watch most closely each month showed the healthiest gains vs. April, the last pre-summer month comScore reported. Total videos viewed in August were 25.4 billion, a 51% increase over April's 16.8 billion. The average number of videos watched per viewer was 157, up 41% from April's 111. And the average online video viewer watched 582 minutes (9.7 hours), a 51% increase from April's 385 (6.4 hours).

    Also worth noting was YouTube crossing the 10 billion videos viewed in a single month mark for the first time, maintaining a 39.6% share of the market. According to comScore's stats I've collected, YouTube has been in the 39% to 44% market share range since May '08, having increased from 16.2% in Jan '07 when comScore first started reporting. Hulu also notched a winning month. While its unique viewers fell slightly to 38.5M from 40.1M in April, its total video views increased from 396M to 488.2M, with its average viewer watching 12.7 videos for a total of 1 hour and 17 minutes. It will be very interesting to see if September's numbers hold these trends or dip back to pre-summer levels.

    2. So this is how to make funny viral branded videos - I was intrigued by a piece in ClickZ this week, "There's a Serious Business Behind Funny Viral Videos" which provided three points of view - from CollegeHumor.com, The Onion and Mekanism (a S.F.-based creative production agency) - about how to make branded content funny and then how to make it go viral. The article points out that a whole new sub-specialty has emerged to service brands looking to get noticed online with their own humorous content.

    Humor works so well because the time to hook someone into a video is no more than 2-3 seconds according to Mekanism's Tommy Means. Beyond humor, successful videos most often include stunts or cool special effects or shock value. Once produced the real trick is leveraging the right distribution network to drive viral reach. For example, Means describes a network of 100 influencers with YouTube channels who can make a video stand out. After reading the article you get the impression that there's nothing random about which funny videos get circulated; there's a lot of strategy and discipline involved behind the scenes.

    3. Wired magazine's article on Netflix is too optimistic - I've had several people forward me a link to Wired magazine's article, "Netflix Everywhere: Sorry Cable You're History" in which author Daniel Roth makes the case that by Netflix embedding its streaming video software in multiple consumer electronics devices, the company has laid the groundwork for a rash of cable cord-cutting by consumers.

    I've been bullish for sometime on Netflix's potential as an "over-the-top" video alternative. But despite all of Netflix's great progress, particularly on the device side, its Achilles' heel remains content selection for its Watch Instantly streaming feature (as an example, my wife and I have repeatedly tried to find appealing recent movies to stream, but still often end up settling for classic, but older movies like "The English Patient").

    Roth touches on this conundrum too, but in my opinion takes a far too optimistic point of view about what a deal like the one Netflix did with Starz will do to eventually give Netflix access to Hollywood's biggest and most current hits. The Hollywood windowing system is so rigid and well-protected that I've long-since concluded the only way Netflix is going to crack the system is by being willing to write big checks to Hollywood, a move that Netflix CEO is unlikely to make. The impending launch of TV Everywhere is going to create whole new issues for budding OTT players.

    Although I'm a big Netflix fan, and in fact just ordered another Roku, I'm challenged to understand how Netflix is going to solve its content selection dilemma. This is one of the topics we'll discuss at VideoNuze's CTAM Summit breakfast on Oct. 26th in Denver, which includes Roku's VP of Consumer Products Tim Twerdahl.

    4. VideoSchmooze is just 1 1/2 weeks away - Time is running out to register for the "VideoSchmooze" Broadband Video Leadership Evening, coming up on Tues, Oct 13th from 6-9pm at the Hudson Theater in NYC. We have an amazing discussion panel I'll be moderating with Dina Kaplan (blip.tv), George Kliavkoff (Hearst), Perkins Miller (NBC Sports) and Matt Strauss (Comcast). We'll be digging into all the hottest broadband and mobile video questions, with plenty of time for audience Q&A.

    Following the panel we'll have cocktails and networking with industry colleagues you'll want to meet. Registration is running very strong, with companies like Sprint, Google/YouTube, Cox, MTV, Cox, PBS, NY Times, Morgan Stanley, Hearst, Showtime, Hulu, Telemundo, Cisco, HBO, Motorola and many others all represented. Register now!

     
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  • Forrester’s New Report on Paid Downloads: Right on TV Shows, Wrong on Movies

    Forrester released a new report last week entitled, “Paid Video Downloads Give Way To Ad Models”. Since I’ve had some requests to comment on it (and the paid video market as a whole), I’m weighing in here.
     
    I was able to read the full report, but if you can’t, then their press release is here. It provides the gist. In short, I think Forrester’s conclusion that “The paid download market is, however, ultimately a dead end” is mostly right regarding TV shows, but completely wrong for movies. Lately broadcast and cable TV networks have ramped up deals with many aggregators to distribute streaming versions of their programs. And with advertisers falling all over themselves to support these, it is certainly likely that the concept of paying to download and own a TV program is heading for a decline.
     
    However, when it comes to movies, it’s a different story altogether. First off, at a minimum, today’s $15+ billion/year home video market (DVD sell through only) more than demonstrates that people want to own certain content (i.e. mainly movies). This provides a pretty rich pot of revenues for paid downloads to tap for growth. Paid downloads (or “electronic sell-through” as some call this activity), hold the potential to be a far more efficient and flexible way to get content into the hands of those willing to pay for it. Granted there are some current usability issues (namely broadband-to-TV connectivity) to overcome, but these will certainly be resolved in the near future. Ignoring this dynamic (as Forrester does by neglecting to mention, even once, how it expects home video market to evolve in the digital era) is a significant omission.
     
    It leaves me wondering how Forrester thinks this vital revenue stream fits into its conclusions. Piggy-backing on this omission, the report also concludes (absent an explanation that I can find) that “Movie studios whose content only makes up a fraction of today’s paid downloads, will put their weight behind subscription models that imitate premium cable channel services." I think this conclusion is way off base. Studios love home video revenues. For many movies, home video revenues ARE the business model, long since displacing theatrical revenues as the main source of profitability. It’s inconceivable to me that, in the digital age, studios are going to move away from emphasizing a la carte purchases to instead take a share of a 3rd party’s monthly subscription revenues, as Forrester believes.
     
    That’s not to say there won’t be a place for subscription services (e.g. Netflix). But studios have rich e-commerce-based business opportunities ahead (fueled by all the merchandising tricks folks like Amazon have mastered in other product categories). These have been limited to date by lack of instantaneous product fulfillment (i.e. broadband-delivered downloads). On the cusp of pursuing these opportunities, to suggest that, instead, studios will forsake them for subscriptions, just doesn’t make sense.
     
    Finally, Forrester’s prediction that because “only 9% of online users have ever paid to download a movie or TV show”, there is unlikely to be a mass market for paid downloads, is very tenuous, given that broadband video delivery itself has only burst into the public’s conscious in the last year or two. Scant adoption of any new technology in its early days is a pretty unreliable indicator of future potential. For example, consider how few people owned a cell phone in the early days when they were expensive and brick-like. Now cheap and sleek, they are ubiquitous.
     
    Paid downloads are not a “dead end” as Forrester asserts. Rather, they are an early-stage business opportunity evolving from an existing business model -- namely home video. While key catalysts are still needed to fuel paid downloads’ growth, these will inevitably come. Digital strategists at studios who dismiss paid downloads’ potential for movies in particular at this early juncture do so at their peril.
     
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