The Consumer Electronic Show at the beginning of 2006, two years ago, was the start of many announcements of new US, and European film services that delivered over the internet, and now on the second anniversary of those early announcements there are a number of public announcements which are effectively ‘starting over’ on the subject of successful video download services.
Instead of 2006 being the year of the video download, it was the year of the video download rethink, with most services failing to attract widespread attention and User Generated Video stealing the limelight, a theme that has continued through 2007.
Liberty Media launched Vongo in early January 2006 and by the time CES was over that year other services were announced by Google; Sony, through its Connect service; Clear Channel; 4Flix.Net; and Blinkx. Later that year we saw movie services from Arvato, LoveFilm and NTL in Europe, and had one promised by DirecTV. As a result of all these, along with later arrivals from Amazon, Wal-Mart and Netflix, and the sale of Movielink to Blockbuster and of Disney’s Moviebeam to the Movie Gallery and many other attempts to dominate movies over the internet, none of the studios thought to give Apple any kind of leverage in the market.
By the end of 2006 Apple had a deal with Disney and some of the Pixar movies, which Disney then acquired, making Steve Jobs the biggest shareholder at Disney. But Apple entirely failed to get the pricing that it wanted for online movies and so it failed to get the type of lead that it garnered when it launched its iTunes Store.
But the rumor mill this week is that Apple is finally getting its way. After two years in the wilderness, and after the continued success of iTunes, and the rampant success of the iPhone, leading movie studios, led by 20th Century Fox as a first mover, have begun to see the Apple point of view.
US news reports, all claiming to have spoken to people close to negotiations, say that a new 20th Century Fox deal will be online rental only, but will involve new releases at the same time that they come onto DVD, rather than the older titles that are sold on iTunes from Paramount, Metro-Goldwyn-Mayer and Lionsgate.
Other deals are also supposed to be in the middle of negotiations, with companies like Sony and Warner Brothers and Paramount, and the results are hoped to be announced at MacWorld later in January, though they may not all be ready at that stage. These remaining studios are going to offer up to date releases both for download to own and for rental, and all of them are also supposed to include something of a breakthrough on the Apple DRM system Fairplay.
The idea is that in return for the online rights, Apple will prepare a file to go on DVDs which is already encrypted using Fairplay and which can only be read with Fairplay. These can then be copied onto a video iPod, and immediately will come under the protection of Fairplay. Presumably the DRM license is transferred from the DVD at the same time as the file, but independently in a way that most non-professional hacker types will not be able to find and anyway it will be encrypted, and only decryptable by an existing video iPod.
This means Apple gets Fox and all those retailers which sell DVDs to help push sales of Video iPods, which is rather clever. It would be tantamount to anti-trust if it cuts similar deals with the other big US Hollywood studios.
To us this looks like Apple is finally getting a lot of what it wants in the way of film content, along with leverage to sell even more devices. Pricing however is understood to still be up at the same kinds of levels that Amazon offers for its Unbox video service.
Get ready for all of those existing online film services to cry foul when this is announced in a week or so.
When these new deals are seen alongside last year’s Apple TV announcement, which allows PC and Mac held video to be played across a special wi-fi link to the TV, then suddenly Apple’s iTunes can genuinely reach a new dimension in video delivery, especially if, as many expect, a new version of Apple TV emerges shortly which allows navigation of iTunes Store directly from the TV set.
So far Apple has only sold around 2 million movies from iTunes, which compares badly with the 100 million TV shows and 1 billion songs it has claimed to have sold. These deals might fix that.
Naturally, with most online video services not yet taking off, they too are trying to rejig their business models to find more success. Netflix, the US online DVD rental service has dumped its internal efforts to develop a set top that will take online movies straight to a TV set, and instead will take a device from Korean CE manufacturer LG Electronics.
This isn’t really a rival to iTunes, at least not yet, since Netflix finally launched its online film service in January 2007 after three years of promising it, but is using it only to cement membership of its online DVD rental service ‘ members get access to around 1,000 movies then, rising to around 6,000 pieces of video now – to stream for free, as long as they are one of its 7 million members. Its online DVD rental service has access to around 90,000 pieces of video by comparison.
Almost as if it is obligatory for each existing service to make a statement of new direction at CES, CinemaNow, said that it has added a deal with content protection specialist Macrovision. They said they have integrated their technologies so customers can download films directly to a digital TV, set top or disk drive.
The idea is that any device which is already Macrovision enabled using its Connected Platform software, can be registered at CinemaNow and can then download and view premium content. We think the platform is based on Macrovision’s Mediabolic PC Media server, and it can also handle photos and streamed music as well as video.
Back in November Macrovision announced that it had signed an agreement with an unnamed leading set top box manufacturer for its Connected Platform in the US, so potentially it could be one of the big guys like Motorola, Scientific Atlanta or Thomson or a smart outsider like the UK’s Pace Microsystems, now strong in the US. The company says its Connected Platform enables hardware providers to create wired and wireless digital home products that can access the internet and store content from the internet, while keeping up copy protection. Presumably this platform will soon include the Gemstar EPG technology, which Macrovision acquired just before Christmas.
Traditionally CinemaNow technology has been based on Microsoft’s Windows Media format and Windows Media DRM plus its own PatchBay online media management technology, so much may have to change further there.
But perhaps the biggest news in online film download, was an item that slipped out over Christmas, with Wal-Mart discontinuing its own online film service, according to various reports, including one in MediaPost. The service relied on downloading an online file for now, then sending the DVD along behind it in the post, and the closure was blamed on the fact that equipment supplier Hewlett-Packard had discontinued some vital product that was used in the Wal-Mart service. Of course if things had been going well at Wal-Mart it is unlikely that HP would have discontinued that technology.