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Long wait for video download profits

Marketplace Staff Feb 9, 2007

Long wait for video download profits

Marketplace Staff Feb 9, 2007


MARK AUSTIN THOMAS: Everywhere you turn these days it seems video downloading is in the news. This week alone there were two big stories. First Wal-Mart announced it would offer a beta version of its online movie store. Then Amazon and TiVo said they were partnering on a deal that would allow customers to download movies from their computers to their TV sets. What’s going on? Mike Speier is the managing editor for Daily Variety. He says these companies are lining up early for a truckload of profits that hopefully will come one day.

MIKE SPEIER: It’s way down the road, because we’re talking a very small piece of the piece of the pie right now that very few people are making any money in and very few people know how to do it right. But everybody thinks that, this is the future and why not get into it?

THOMAS: Does this make sense for Wal-Mart?

SPEIER: Of all the companies, it makes sense for Wal-Mart. It’s estimated that they sell about 40 percent of all DVDs in the United States in general so if any company is the one that has the power, they certainly do and certainly their price points that they came out with this past week, they showed that they can be cheaper than iTunes and they can be cheaper than a lot of other companies. But they still have to do it and Wal-Mart is usually a brick-and-mortar kind of company in the Midwest and they have the big stores. They’re not quite the online behemoth that other people are.

THOMAS: Well then I gotta ask, if downloads become popular is this gonna hurt DVD sales?

SPEIER: That’s probably gonna happen. I mean . . .

THOMAS: One just sort of cannibalizes the other.

SPEIER: Right. It probably will cannibalize it or it can go the other way and just make it a big free-for-all and everybody wins. But the DVD market is already hitting a downturn. We’ve seen that this past year where the sales weren’t as much and the rentals weren’t as much as previous years. So, this can only ding it because it’s yet another way that a college kid or someone at home can get a movie.

THOMAS: How is this gonna affect services like Netflix or Blockbuster?

SPEIER: Well Netflix tried to get into this space a while ago, and Netflix and Blockbuster are in their own little war because they want to get control of 100 percent of the rental market. But obviously if this takes off and this flies, then if you can get something online and download it and keep it, that certainly will put a dent in the business of the rental market and the purchase market. And that’s what Wal-Mart and Amazon and TiVo hope.

THOMAS: Amazon’s been doing pretty well without this. Is it TiVo that really needs to reposition itself with this kind of deal?

SPEIER: TiVo has always needed to reposition itself. It’s really the market leader in terms of the brand name. Everybody knows TiVo, it’s a fun word to say, and people in the industry have TiVo, and everyone says I TiVo’d something, but they’re not the leader when it comes to technology. Certain DVR, digital video recorder, devices from cable companies like Time Warner are certainly more popular and more prevalent. Right now TiVo only has about 1.3 million of these compatible machines with the Amazon product. That’s really not a lot of consumer base when you think about it. When box office comes out, a movie tries to get to the widest amount of people possible. TiVo, they only have X amount of people and it’s not a big amount of people and that’s assuming everyone downloads and they’re not gonna download. So they really do have to try to get an audience base that’s bigger than what they have now.

THOMAS: Thanks Mike.

SPEIER: My pleasure.

THOMAS: Mike Speier is managing editor for Daily Variety.

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