Top 10 Film Industry Stories of 2006 #7: Movies migrate to various VOD services
By David Mumpower
December 28, 2006

iTunes is long as you're not shopping on the day after Christmas.

September 12, 2006 was a landmark date for the film industry. After years of rumors and speculation, iTunes finally added movie downloads to their online catalogue. Since Apple and Pixar's CEO, Steve Jobs, became a member of Disney's board of directors in January, this move was hardly a shock. The instant Pixar merged with Disney and Jobs became the Mouse House's largest shareholder, it was considered inevitable that at least Pixar content would be available on iTunes. Now that he was in a position of power at the world's largest movie studio, Jobs took the opportunity to merge both of his interests, movies and downloaded online content, into a respectable catalogue of titles. Anyone with a computer was able to purchase such popular titles as Pirates of the Caribbean: The Curse of the Black Pearl, Chicken Little and Cars. Download times were considered adequate although there have been complaints about the video quality. Overall, iTunes is considered the best downloadable content experience on the net at the moment, just as one would expect of a Steve Jobs project.

September 7, 2006 is already little more than a footnote in terms of downloadable movie content. On this day,, the largest online retailer on the web, beat iTunes to the punch by launching its own downloadable video service. The project, Amazon Unbox, is...well, let's be blunt. It's not good. Despite the fact that the catalogue is one of the strongest, Amazon screwed up in terms of data delivery as well as digital rights management, the process by which studios protect their intellectual properties from piracy. Technology wonks found any number of snafus with the service, not the least of which is the fact that the software requires constant interaction with a server...even if you are neither downloading nor playing a video. Privacy experts were up in arms over this to the point that Amazon was forced to almost immediately deliver a software update that negated such invasive practices from their software. Even though it was the first of the three major launches to reach the marketplace, Amazon's service is barely more than an afterthought in the minds of most consumers, though that could change at a moment's notice if the giant retailer grew to take this undertaking more seriously. Having a large catalogue overrides a lot of other concerns for the average consumer.

November 22, 2006 was the first anniversary of Xbox Live Marketplace, a new product Microsoft had designed for their next generation videogame console, the Xbox 360. To celebrate their successful first year of providing downloadable videogame content for gamers, Microsoft wanted to do something splashy. Their endeavor was the same as Apple's. They too made television and movie programming available for direct download. 2006 releases such as V for Vendetta, the Poseidon re-make and The Lake House could be purchased by consumers with the click of an Xbox controller. At this point, there are still only a few dozen movies available for purchase, and the digital rights management and speed of download have been widely criticized. Since the service is barely a month old, however, such glitches are to be expected. With millions of gamers automatically connected to Xbox Live the moment they turn on their 360s, Microsoft has a ton of potential consumers who could be easily trained in the art of purchasing movies over the Internet to play on their already connected HDTVs. Whereas the quality of Apple and Amazon's services is shaky, Microsoft's is pristine. They currently offer the closest thing to a true theater experience in the home.

Although they are the largest examples of the emerging technology, iTunes, Amazon Unbox and Xbox Live Marketplace are not the only examples of how movie studios are gradually shifting their focus from exhibitors to downloadable content. Instead, the surprising leader in this regard was an unheralded company that went from unknown to Google acquisition in a calendar year. The Web site, YouTube, has the simple logo of 'broadcast yourself'; however, studios discovered they could advertise much more than that. After a wary period early in the year wherein studios became aware of the potential copyright issues with such a service and lawyered up, there was a methodical move to placing free content on the service. It is now a standard practice for studios to upload the beginnings of movies on YouTube in order to entice younger consumers, the backbone of the movie industry, into wanting to watch the whole thing. And rare is the movie trailer that does not wind up on YouTube. The viral nature of the Web site's customer base assures studio execs that as long as they provide desirable content, word will spread rapidly about their product's potential. Never before has Hollywood been so directly in touch with their possible clients. And the next step for YouTube is obvious. Perhaps this is why Google completed purchase of the service in November. The natural evolution of YouTube into the product Google always expected their Video on Demand service to be seems inevitable now.

What makes these isolated examples add up to such an important industry story? The answer is obvious. Hollywood has resigned itself to the fact that downloadable content on demand is no longer a theoretical. Instead, it is fledgling marketplace wherein the MPAA will struggle to secure its intellectual property rights. As long as they are able to do so, however, this is the future of the industry. No longer are consumers forced to work around the set exhibition schedules of local cineplexes. Technologically savvy consumers with broadband connections are but a few computer clicks away from watching the movies they want on their terms. The moment exhibitors have feared for years now is finally at hand. VOD is no longer vaporware. Major corporations such as Microsoft, Google, Disney and Amazon have all tossed their hats into the ring, attempting to garner a long term competitive advantage by being the first to dominate the marketplace. As soon as methodology is in place to quickly transfer large files while offering acceptable digital rights management in the process, a hallmark change in the nature of movie exhibition is at hand.