Movie download services have been about to take off for nearly 20 years.

In the mid-1990s, Time Warner spent $10,000 a customer in Florida to show downloading movies over cable lines was technologically feasible. In 2008, movie downloads are still mired in the "proof-of-concept" stage.

Apple’s announced plans today for an online movie rental service could be the spark that sets movie downloads alight in consumers’ minds.

Not because Apple is offering a fundamentally new twist on VOD. But because it’s Apple.

The movie download market today is remarkably similar to where online music was before Apple launched its first iPod. Back then, MP3 players were already on the market. But they were largely niche products and most music that played on them was pirated. Apple created the first cool digital music player.

Steve Jobs was also the first technology executive with the heft in Hollywood to actually cut deals with studio executives to allow enough legal content online to create a marketplace — and demonstrate that making money from digital music was at least possible.

In 2008, most consumers still aren’t all that interested in cable companies’ movie download offerings — largely because the studios are so worried about piracy and cannibalizing their existing TV syndication and DVD businesses that they haven’t supplied enough product to interest subscribers.

Movie downloads from services like Netflix and CinemaNow are still largely a curiosity for hobbyists and people who don’t know how to download the pirated stuff. 

Until now, Apple hasn’t fared  that much better. It’s sold only about seven million movies, compared to about four billion songs and 125 million TV shows.

Once again, Jobs has persuaded the studios to make vastly greater stores of content available to consumers in exchange for the tacit promise that he can create enough of a market to offset the inevitable increase in piracy that will occur when millions of new consumers realize how easy it is to download and share movies on their computers, iPods and TV sets. (Just look at the movie piracy rate in Korea, which has the world’s most ubiquitous broadband).

Apple’s movie rental service could be exactly the spark Hollywood needs to jumpstart its online cinema business. Or the spark could become a conflagration that devours industry profits. Or it could flop once again, just as so many for-profit video-on-demand ventures have since Time Warner first dipped its toes in Orlando.

The only certainty is the movie downloads — legal or not — are here to stay.

See Also

• Apple Unveils Online Movie Rentals, Ultra-Thin Laptop Computer
• Time Warner’s ‘Time Machine’ for Future Video

Posted under Uncategorized

The music industry is broken. Any business whose main product is stolen far more than it’s bought can’t be considered anything else.

But how to fix it? Online and mobile music sales are still in their infancy; and it’s still unclear whether the vast  majority of people will be willing to buy songs for

their iPods they can simply download from their friends’ hard drives.

That’s why ad-supported music deserves a look.

The very idea probably seems heretical to music purists. But how obtrusive is putting banner ads on a music site? Even putting short ads in front of songs is not as unseemly as we might think; that, after all, is essentially what radio is.

Imeem, a fast-growing social community built around music, video and other media offers a hint of what music’s future might look like.

You can stream as much copyrighted music as you want for free. Banner ads by Discover, Microsoft Live Search and other advertisers help cover the royalties Imeem pays every time someone listens to a copyrighted track.

The concept has taken Imeem from zero to 18 million unique visitors a month since March 2006.

"We’ve signed three out of the four major and stream their entire catalogs," says Director of Business Development Ethan Applen, who is speaking Tuesday at iHollywood @ AFM in Santa Monica. "Our entire business model is built around given them a share of the ad revenue."

Users who wish to download music are directed to iTunes or Amazon to buy; Imeem gets a percentage of the revenue.

Labels or studios may also choose to pay for ads themselves to call attention to an act or movie. Members can also place their own material for free on the site. If enough users enjoy it, Imeem posts ads on the page and gives the content creators a share of the ad revenue, too.

Undoubtedly, you could poke plenty of holes in Imeem’s business model. But isn’t it nice to find someone in the music industry besides Apple who actually has one?

Posted under Uncategorized

When I picked up today’s morning latte at Starbucks, I also picked up a free iTunes download of Brandi Carlile’s Turpentine.

From Oct. 2 through Nov. 7, Starbucks is handing out 1.5 million "Song of the Day" cards, including Carlile, Bob Dylan, Joni Mitchell and many others. Not surprisingly, you can also download the entire albums — at a cost.

Starbucks is also demo’ing the future of the music business.

As retail music sales continue to decline, record companies and artists will become increasingly open to the idea of packaging their products as add-ons to other products — coffee, perfumes, groceries, anything.

And just as websites turn free customers into paid subscribers by first offering them free content, artists and labels will need to give away free songs to entice customers to buy.  

This is a concept I’ve heard repeatedly ridiculed by music industry executives as cannibalizing CD sales and destroying the "value" — whatever that is — of their artists.

That’s silly. The ultimate value of artists lies in how much people enjoy their work; people will always be willing to pay for something once they decide they love it.

Starbucks, which gives customers free tastes of new coffees, knows all abou that. Hopefully, the music industry will also take the hint.

See Also

• Starbucks to offer free iTunes Song of the Day
• Complete artist lineup for the Starbucks/iTunes giveaway
• Dave Goldberg to Record Labels: No DRM, Please

Posted under Uncategorized

The long-awaited Wi-Fi iTunes Store opens for business

Apple takes aim at yet another longstanding bug in the mobile content eco-system with the release Friday of its Wi-Fi iTunes Store. Owners of the iPhone and new touch iPod were treated to a firmware upgrade that adds an icon to the interface for iTunes. When within Wi-Fi range, you can access the iTunes catalog and buy and download a tune directly to the devices.

Posted under Michael's Blog

Ringtones Have a Mixed Week

Industry analysts have predicted for years that the mobile ringotne fad had to ebb sometime. While there have been signs that European taste for tones has come to a bit of a plateau, the latest M:Metric figues suggest that the U.S. still has a hearty taste for the custom ring-a-dings. About 9.4% of U.S. mobile subscribers, more than 20%, still download a ringtone in a given month, while about half as many do so throughout Europe.

For reasons that are not entirely clear to me, the mobile press has made a very big deal over Verizon pulling then restoring the Bob Marley ringtone catalog to its phones this week. Sure this involved a rights issue with the Marley family, but was it really worth all the ink I have seen?

Similarly the silly "ringles" story  seems even more emtpy than the Marley saga. That music publishers want to add a ringtone to CD singles as a way to revive that market just seems like a desperate attempt at packaging novelty.

Lost in the shuffle of less important stories is the actual launch of Apple iTunes ringtones. You can right click on a song you have purchased and make a ringtone within iTunes that will pass on to your iPhone. The tool is very clever and easy to use. You get up to a 30-second clip, and you can drag the ringer window across the length of the audio timeline interface to make a ringtone of any piece of the song you want. This move toward true customization of ringtones in such an easy interface should be bigger news. Alas, Apple does not seem to have secured many labels in this deal, and the iTunes store makes it very difficult to find songs that are enabled for ringtones. This is one of Apple’s few missteps recently, but it certainly suggests the kind of tension that exists between the media industries and Apple’s iTunes model.

See Also

• Apple

Posted under Michael's Blog

There is more to the Apple/NBC dispute than pricing

After NBC announced last week it would not be renewing its contract with Apple to distribute its premium content on iTunes, most industry insiders understood this to be a pretty big bite out of Apple’s online store. After all, various sources peg NBC being responsible for up to 30% of video sales on the service, with shows like "The Office" and "Heroes" among the top sellers. But on Friday, Apple bit back announcing that it would not carry this season’s new shows from NBC because it didn’t want to end their runs abruptly when the contract ran out later in the year. 

While Apple claims in its provocative press release that NBC wanted to double the wholesale price of its episodes, Mediapost reports that the negotiations were more complex than that. NBC was looking to tweak disappoiting revenues from the iTunes partnership by bundling episodes with NBC Universal film offerings as well. Apple felt this would "confuse" the market. NBC came back with its own release arguing that Apple’s business model for iTunes is really about selling hardware, not media.

This is an argument that has been a long time coming. This situation very much resembles early TV and radio, when the hardware makers considered on-air programming simply the sweetener that sold the TV and radio sets. While it is true, Apple is a hardware company, it is also now a media company and it needs to better understand the eco-system that supports ambitious programming.

On the other hand, NBC’s pressure on iTunes may have something to do with its own disappointing up fronts and a weaker-than-expected reception by media buyers for digital. This was one that everyone should have seen coming too. The major media companies were coming to the upfront table with all of these prime time shows running online, as if they were supposed to sell themselves. But the industry is still trying to sort out what kind of ad formats work on digital video, how much people really want their prime time on desktops, and what reasonable pricing should be.

This war is only beginning as distributors and content providers both struggle towards workable business models for digital video. The fact of the matter is that no matter how many eyeballs veer online, the digital ad market still only produces a fraction of the revenues that TV can. How digital distribution supports a robust eco-system of prime time prodcution remains an open question that neither Apple or NBC can answer.     

Posted under Michael's Blog