Posts for 'Wal-Mart'

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Wal-Mart's news this week that it has more deeply integrated its movie streaming service VUDU into its web site and e-commerce operations is a good step forward in competing better with Amazon and iTunes. However, because the vast majority of users prefer all-you-can-eat subscription services, the reality is that VUDU's new visibility will likely have little impact on Netflix (except maybe for lighter users who are upset by Netflix's recent price change and aren't deterred by VUDU's per title rental model and restrictive expiration policies).

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Yesterday's announcement by retailing giant Wal-Mart that it was acquiring Vudu, the on-demand movie service, generated a flurry of reactions from industry commentators. Some think it gives Wal-Mart the juice it needs to finally be a major digital media player. Others believe that Wal-Mart's miserable record in digital media suggests that the deal will be much ado about nothing. I'm in the latter camp, but not because of Wal-Mart's track record, but rather because of Vudu's own shortcomings.

Vudu's problem is that its value proposition is hamstrung by both the deals the Hollywood studios insist on to give Vudu access to their titles and by the current state of technology. Each of Vudu's 2 movie delivery models - rental and download-to-own - has its own problems that severely curtail its consumer appeal. No matter how slick the service looks or how many CE devices it's embedded in, consumers will readily see these drawbacks and resist embracing Vudu.

The rental model is primarily handicapped by the ongoing provision that the rental period "expires" 24 hours after the movie was started. That means that if real life (e.g. a crying child, a call from an old friend, a household emergency) interrupts the Vudu's users' planned viewing window, they're out of luck. It's an absurd restriction, but all online movie rentals are laboring under it. Then there's the provision that most new releases aren't available for rental until 30 days after they debut on DVD. This kind of delay doesn't mean as much for a subscription service like Netflix (which of course just agreed to a new 28-day "DVD sales window" with Warner Bros.), because it has a huge back catalog to offer. But for Vudu (and Redbox) these delays are very noticeable to users.

The download-to-own model is even more challenged. First off, tech-savvy and value-conscious consumers are increasingly focused on cost-effective rentals or subscriptions, not purchasing films. The demise of DVD sales is ample evidence of this. The idea of creating a movie "collection" in a fully on-demand world is already on the verge of seeming as archaic as creating a CD collection has been for a while. And with download-to-own prices of approximately $20, which are more than a DVD costs, consumers will be even more hesitant.

But the real killer for download-to-own is the technology limitations, more specifically the lack of portability and interoperability. Say you're actually inclined to own movies using Vudu. What do you do, download them to an external hard drive? And when you travel, do you lug that thing around with you? When you get to your destination, what device will actually let you play back your movie from your hard drive? The issues go on. The reality is that ubiquitous, cheap DVD players and the compact size of the discs themselves have created a very high bar for digital delivery to exceed. "Digital locker" concepts like DECE and Disney's KeyChest are desperately needed to move digital downloads along, but even they are just a part of a larger CE puzzle.

So, although the Vudu service is very impressive, with a slick user experience and really nice quality video, the reality is that unless Wal-Mart is able to break through these challenges, the Vudu service is going to be marginally attractive to consumers at best. That means the Wal-Mart acquisition, in fact, makes little difference.

Maybe Wal-Mart has the clout to move the studios, but given mighty Apple's own difficulties doing so, I'm skeptical that Wal-Mart will have better luck. I continue to believe that Netflix's model - which combines the full selection of DVDs with the convenience and growing selection of online delivery (including TV shows by the way) - is a far better approach. Netflix may not have all the HD and user interface bells and whistles that Vudu has, but it's a far better value proposition for consumers. This is partly why Netflix has doubled in size, to 12.3 million subscribers, in the last 3 years.

What do you think? Post a comment now (no sign-in required).

As promised, each day this week I'm sharing one prediction for 2009, with each one getting progressively bolder as the week progresses (and yes, I'll concede - as a number of you privately pointed out to me - yesterday's forecast that the Syndicated Video Economy would grow in '09 was a pretty wimpy start). So moving out a little further on the limb, today's prediction #2 is that video delivered directly to mobile/wireless devices will take off in '09, finally.

For those of you who have been following mobile/wireless video delivery, this has been a market that's perpetually been "just around the corner." In fact, a little over a year ago when I was planning VideoNuze, several people suggested that I shouldn't just focus on broadband delivery (as I define it to mean high-speed wired delivery of video to a home or business), but also mobile/wireless video. But after doing some due diligence I concluded that the market wasn't there yet, and that the vast majority of new video activity would be focused on wired broadband. Indeed, I think that's how '07 and much of '08 have shaped up.

However, having tracked recent activity in the mobile video space, I think '09 is going to be a big year of growth and recognition for this new medium (in fact, an old friend gently chastised me over lunch last week for even drawing a distinction between wired and wireless delivery, saying, "come on, it's ALL broadband!" I think he makes a very fair point.)

What has traditionally held back mobile delivery are a lack of video-capable devices, voice and text-focused wireless networks and a closed "on-deck" paradigm, which is the wireless carrier's version of the cable and satellite industry's proverbial walled-garden.

These limitations have now been mostly addressed, or are in the process of being addressed. On the device side, the most notable video-capable device is of course the iPhone, which by my calculations has already sold over 13 million units and is on its way to almost 20 million by the end of the year. Everyone I know who has an iPhone - especially kids - are infatuated with the video feature (if you've never seen it, especially now using AT&T's 3G network, get thee to an Apple store immediately!). In '09, the iPhone is poised for even greater popularity as Wal-Mart begins stocking it, possibly for just $99. Recession or not, the iPhone is going to remain white hot.

Of course, all the cool devices in the world don't matter unless you have a robust underlying network and the freedom to view what you want. On this front, the wireless carriers' push to build out their next generation 3G networks finally allows sufficient bandwidth to view high-quality video (though not HD yet). Next up is 4G, first from Clearwire, the SprintNextel-Intel-Google-cable industry consortium that's deploying its WiMax network with speeds of up to 6 Mbps downstream being promised. There's also MediaFLO, Qualcomm's mobile broadcasting platform that has steadily built out an ecosystem of technology, carrier and content partners.

Last but not least are the consumer-focused services and applications. Until recently, this market has mainly consisted of packaged subscription services like Verizon's VCast and MobiTV, which itself recently announced more than 5 million subscribers. The combination of new devices and networks promises to bring an increase in on-demand, web-based, ad-supported video consumption (plus paid downloads to be sure, courtesy of the iPhone mainly). Another interesting twist is the advent of live broadcasting from mobile devices, powered by providers like Qik, Kyte and Mogulus. These all supercharge the Twitter micro-blogging phenomenon.

All of this underscores why the distinction between wired and wireless broadband really becomes meaningless over time. The mobile experience is going to seem more and more like the one you have sitting at your computer, with the added benefit of portability. To throw a blue-sky variable into the mix, one wonders if at some point you'll simply plug your phone into your TV and watch streamed or downloaded video that way, rather than through a set-top box or a wired broadband connection. There's a convergence concept for you!

What do you think? Post a comment now.

Previous, Prediction #1: Syndicated Video Economy Grows

Tomorrow, 2009 Prediction #3

Happy New Year and welcome to 2008!

With many of you taking last week off, a quick review of what you might have missed is in order:

1. iTunes-Fox download-to-rent movie deal rumors

The FT (reg. required) reported that Apple and Fox are close to announcing a deal under which Fox movies would be available for download-to-rent on iTunes. This would be a deviation from Apple's policy of download-to-own only. Call me a skeptic, but while some analysts think this deal is a big breakthrough, for me it's more of a ho-hum, for at least the following reasons.

Download-to-rent offerings have been around for a while (e.g. Movielink, CinemaNow, Amazon Unbox, etc.) and none have been grand slams. Admittedly none have enabled playback on an iPod. Yet, while many think iPod ubiquity is a killer advantage for iTunes rentals I disagree. It's one thing to watch a 30 or maybe a 60 minute TV show, but watching a 2 hour movie on an iPod? That's only appealing for a tiny minority of iPod owners. Further, while the rumored $2.99 or so price point is attractive, download-to-rent movies will come with the same cumbersome business rules (e.g. 24 hour viewing, window limitations, finite device sharing, etc.) that cause significant customer inconvenience. And DVDs, available for rental or purchase still offer superior portability and flexibility to any download model. Movie downloads' time will come, just not yet.

2. Wal-Mart Folds its Video Download Store

And speaking of download challenges, Wal-Mart decided to unceremoniously close its video download store less than a year since its launch. While it pointed its finger at its vendor HP, which decided to discontinue support for the technology underlying the Wal-Mart store, there are certainly other white label platform alternatives available if Wal-Mart had conviction about the download store's potential. It clearly didn't and so it folded its tent. More evidence of the challenges facing paid downloads.

3. YouTube's Top 2007 Videos Announced

Meanwhile over in YouTube land, the hits keep coming. YouTube released its top 10 list and the year's most popular video, with almost 23 million views, was "Battle at Kruger", which shows the fight to save a baby water buffalo from a group of lions and a crocodile. It's fascinating if you haven't seen it. Other top videos on the list were "Chocolate Rain", "Obama Girl" and "Leave Britney Alone", among others. If nothing else, this diverse group of videos shows that UGC is alive and well.

4. Queen Elizabeth and Roger Clemens Seek Out YouTube

And UGC wasn't for pure amateurs either. YouTube's reach was once again recognized as 2 celebrities, Queen Elizabeth and Roger Clemens posted videos serving their individual purposes. In a first for the 81 year-old queen, she posted her popular Christmas message on YouTube, augmenting its traditional broadcast. The Royal Channel - "The Official Channel of the British Monarchy" - also launched on YouTube.

Clemens, who's been fingered in baseball's steroid controversy, saw fit to post his proclamation of innocence on YouTube. Clemens is adamant in his own defense, and clearly believes that reaching out to fans with video instead of the usual press release is more compelling.

Trivia question: whose video do you think drew more views?

Answer: It's not even close: 741,000 for the queen vs. 274,000 for Clemens.

5. MTV Delivers 1.2 Billion Streams in '07

MTV self-reported that MTV.com, VH1.com and CMT.com delivered more than 1.2 billion video streams in '07, an increase of 30% vs. '06. It also reported the top 30 music videos it streamed, and number 1 was Gimme More by Britney Spears. Broadband is offering MTV an opportunity to return to its brand roots as the go-to destination for music videos even as more and more of the on-air experience is dominated by non-music video fare. As I wrote a couple months ago, music videos are becoming a sought-after new revenue stream for labels and aggregators. We'll see more emphasis on music videos in '08.