Is the iTunes Movie Store a Good Idea?

by Chris Seibold Jun 22, 2006

The long lusted for iTunes Movie store (would Apple really give it a name that weak? Oh yeah, MacBook Pro, forget anyone asked) is making the rumor rounds yet again. This time you have your pick: Apple is either on the verge of, or very far away from, unleashing a method to purchase full movies via the ‘net. The plan will either involve fixed pricing ($9.99) or variable pricing. Disney is either going to be the first studio to jump on board or they are telling Steve Jobs to go pound sand. If you weighted all the rumors equally anything is possible. Filter the rumors for plausibility and the most likely scenario seems to be that Steve Jobs is pushing for a $9.99 fixed price movie download model and the studios are resisting strongly.

The reality leading to the rumors is actually uninteresting. The interesting thing is the reaction to the rumors. Normally, you’ll see Jobs portrayed as the white-hatted do-gooder wanting to bring simplicity and ease of use to the movie buying masses whereas the studios are, predictably, just trying to wring every red cent they possibly can out an underserved market. That the movie store, if one ever shows up, will be a big hit is just taken as a given.

Clearly Steve Jobs, if he is actively negotiating with studios as the rumors indicate, thinks that a movie store will make Apple’s financial fortunes soar even higher while cementing Apple as the premier purveyor of popular digital entertainment. Mac fans think along the same lines, and it is easy to see why: if the iTunes music store turned illegal file swapping into a legal way for users to obtain the music they desire surely, it follows, a movie version of the iTunes store would do for digital video what iTunes did for digital music files. A logical conclusion if one only takes a perfunctory glance at the situation, but not necessarily the case if you delve a bit below the surface.

First, we note the relative size of the markets. In 2004, Google tells us, CDs sold 800 million units while DVDs moved half as many discs. In terms of units, DVD is trailing but in terms of dollars, the race is much closer. More tellingly, for any would be digital video store, the swapping of DVDs over the internet is much, much lower than the number of songs swapped (actual figures are hard to come by). This result is hardly surprising, individual songs are very easy to swap while entire movies take a decidedly more dedicated effort. With respect to a would be movie store the result is relevant, Apple was walking into a hugely popular pastime when they stared selling songs, getting a small percentage of free song swappers to pony up made for a huge hit. Getting a small percentage of movie swappers to switch from bit torrents to paying won’t have the same impact.

Two more points worth considering: In the world of DVDs most movies are watched once and never seen again. Viewers might have every intention of rewatching Battlefield Earth but time constraints coupled with the fact that it was one horrible movie means that it will be watched exactly once. This replay value explains why people rent movies but buy music CDs. The exception to this rule is children. Kids, as every parent knows, will watch the same movie countless times. DVD retailers are aware of this and devote a seemingly expansive portion of shelf space for the predictable, blandly plotted kid fare. With that in mind ask yourself: Do you want your three-year-old watching Dora the Explorer on your computer while eating a jelly sandwich? A moments thought and you’ll see why that might be a problem for an online video store.

Finally, and perhaps the most important consideration, is value. This will not be a discussion of the perceived value to videophiles or the fact that you can get almost any physical DVD you want for $9.99 in the used bin at your local Blockbuster. While interesting points to some, the reality is that online stores are selling convenience as much as anything else. The part of the “allure equation” where an iTunes movie store would fail is the part of the equation where the iTunes music store really came through.

The highest value in the iTunes music store? The ability to buy one song without being forced to purchase the entire album. Sure, some may like the b-side stuff, you know the songs the band allows the guitarists write in exchange for a verbal promise not to shoot up during the recording session but, for the most part, those songs are pure dreck. Being able to buy only the songs you enjoy from an album was a huge value and customers responded predictably. The same thing won’t work with movies. In general, a movie is a complete work, you don’t just want one five-minute scene, you want the entire movie. Without the .99 cent hook expecting the iTunes movie store to go iTunes music store huge, even if shows up, is wishful thinking.


  • So what about the iTunes Movie *Rental* Store?

    Bad Beaver had this to say on Jun 22, 2006 Posts: 371
  • My reaction to the model as described is different based on whether I’m a consumer or content provider.

    As a filmmaker, I’m all for every available outlet to distribute my work.

    As a consumer, I’d probably never use it.  I rarely buy songs from iTM$ because a) I hate DRM and b) it still costs too much.  Movies would be even less of a compelling value since they would take exponentially longer to download and because I can get a DVD loaded with extras for not much more than $10.

    I think the rumored Netflix model is much more compelling.  It adds a downloadable component to an existing movie rental system.  It will be part of the rental price you already pay instead of costing $10, which means consumers can regard it as simply an added convenience to a system that is already pretty darned convenient.

    Beeblebrox had this to say on Jun 22, 2006 Posts: 2220
  • Interesting viewpoint - but then what is all the fuss about?  Presumably Apple want to augment their content as they focus on the home market.

    You are right about the reason for renting - I have a few DVD’s of japanese anime, Ab Fab which i do watch occasionally, but i have never understood why people would buy movies.  Lets face it, a lot of them are boring the first time around…

    The Apple iTunes Movie Store will have to offer movies at the same price as rentals, or less, in order to be successful.  Something tells me that Steve Jobs knows this already - Rent/Buy will all be the same thing.

    sydneystephen had this to say on Jun 22, 2006 Posts: 124
  • The fact I have not seen mentioned here is the true value of iTunes to Apple.  The point that your average customer might not find movie downloads valuable seems valid to me.  But remember Apple said the music downloads are not where the make money in-fact the profit margins are slim.  It’s all about the iPod!!!, and thats where the true value of the Movie store lies.  The public may eventually find movie downloads are overrated however most people are into features when selecting a new media player and the the iPod being the first that you could load legally downloaded commercial films to, comes off as a big selling point thus increasing Apple’s sales and goes with the spirit of being an industry innovator that we’ve come to expect for the best computer manufacturer in the world!!!

    Christopher Nice had this to say on Jun 23, 2006 Posts: 3
  • I think the rumored Netflix model is much more compelling.

    I certainly agree with that.

    sjk had this to say on Jun 23, 2006 Posts: 112
  • You’re right that movies seem less of an impulse item but why have people bought like 9 versions of TERMINATOR 2? as long as you’re in Costco and spending $150, what’s another $12 bucks for a DVD? Or if you’re about to get on the flight and YOU KNOW the inflight movie is a triple bill of BIG MOMMA’S HOUSE, STEALTH & THE POOH MOVIE - tell me, you’re not willing to spend $50 bucks to load 5 movies onto your ipod? It’s like when you’re on vacation in some cabin and on day 7, you will pay $24.99 for that copy of BIG MOMMA’S HOUSE just so you can stop watching the ratty VHS copy of Swiss Family Robinson, right? Our time is valuable also and to be perfectly honest, I’ve yet to rip a copy of a DVd that looks as nice as the video compression they do from a master digital file ...

    It’s not so much that movies are less “repeatable” than music but rather it’s just about convenience. Everyone who reads this page can rip their own DVD but that still requires renting a DVD and waiting an hour or two versus for the price of a latte & a scone, I can have a movie loaded onto my ipod.

    Just like many people who reviewed the original itunes store kept focusing on its “low fidelity,” it’s DRM, no artwork, etc ... but we live in a disposable and convenience culture now - how many movies have you rented the VHS several times, probably watched it on cable, bought the Vhs and now have bought the DVD? And evbentually might buy it for your ipod?

    What’s great is that is an option. We should have all the options - and we as consumers will decide - we’ll reject some (UMD), embrace others and see what else is new.

    They’ve only begun to tap the possibility but keep it coming.

    jbelkin had this to say on Jun 23, 2006 Posts: 41
  • A very attractive business proposition to perhaps professional jet setters with vPods. But I think this is a solution looking for a problem. That is the reason I have shied away from vPods. They do not meet my criteria for a movie watching experience - not even close.

    Say, Apple comes up with this movie store for $9.99 a shot (the chance the studios will win this round . Whether good flicks or bad B movies that were shown the door from your favorite stadium cinema, is that give me a good value

    Robomac had this to say on Jun 23, 2006 Posts: 846
  • Damn sensitive trackpad…let me continue..

    Say, Apple comes up with this movie store for $9.99 a shot (the chance the studios will win this round is the same chance they got with music - let’s discuss that some other time). Whether good flicks or bad B movies that were shown the door from your favorite stadium cinema, is that supposed to give me a good value for my ten bucks?

    If that content can’t be played other than a 4 or 5” backlit-less screen of some low-res variety then I would not consider that value. Now, if they were priced same as rentals - $4 to $5 at most per flick - then we are talking.

    For $9.99 it better be SD definition (640x480) or better to be a real value. Otherwise, buying it in DVD form, or better, renting from Netflix and rip with VLC to QT format, to DIVx or whatever you want. Then transcode that to the vPod screen format to get your vPod movie experience. I know this is tedious process but you get a “real” movie content then play it where it suits your tastes.

    I am not completely dunking the whole idea. I think it is an evolution of the music store. The pipes aren’t that wide at the present even at 15mbps, a full 5GB HD movie would be an awful long wait. I now play with our prototypes (approaching 1Gbps as I speak WPAN!) and even then, these HD movies I have encoded (1080p) takes too much lag to be enjoyable. When broadband pipes become wider as promised (look in FIOS from Verizon) and “unlimited” speeds are upon us, then this biz model becomes sensible and by then, my wish may finally come true, and I become a happy widescreen vPod camper.

    Robomac had this to say on Jun 23, 2006 Posts: 846
  • “What’s great is that is an option. We should have all the options - and we as consumers will decide - we’ll reject some (UMD), embrace others and see what else is new.”-JB

    Exactly what I am saying in my previous post. Just because some people scorn of the idea of plunking ten bucks for a low-res movie (myself included) doesn’t completely voids this business model. It’s when a big majority of “thumbs-downs” from consumers that the idea is nulled and becomes road-kill in cybersphere.

    The idea of this movie store may look feeble right now compared to your buying experiences at Costco or Best Buy. But look what happened to the music store - how it evolved from the early attempts. It has spawned several big “ideas” that we never thought of prior. Namely, these big ideas are coined podcasts and vodcasts.

    Podcasts and vodcasts opened another medium for content creators to distribute their stuff for free or almost free (ad tie-ins?). I don’t believe Apple is making a cent from each use of their technology in a royalty-bearing way such as in MP3’s case to Fraunhofer. Sure, they are perhaps charging podcasters for hosting their links inside iTMS but that’s not what I am referring to.

    “I think the rumored Netflix model is much more compelling.  It adds a downloadable component to an existing movie rental system.”-Beebx

    That would be very interesting, indeed. I’d like to see that become successful as iTMS in music. Netflix model was/is so original that BB, HV, and W*Mart will never equal both in convenience and value. I hope they will have the guts to compete with Steve in this space. We know how influential Steve is to the movie studios, specially behemoth like Disney with their ABC studios, ESPN network, Pixar? Disney Animation? All these under Steve’s very whims? I wish best of luck to NFlix.

    Robomac had this to say on Jun 23, 2006 Posts: 846
  • The Online Music and Movie Rental Myth
    According to proponents of this myth, the real road to obscene profits in movies, music, software, and other digital media lies with online subscription rentals, not direct sales. They’re wrong, here’s why.

    New Media and Free Market Choice
    New Media and Free Market Choice
    Five examples that prove that intellectual property, while offering some new challenges, still obeys the same market laws of supply and demand. Along the way, I’ll also prove why the market has rejected digital media rentals.

    Daniel Dilger had this to say on Jul 20, 2006 Posts: 4
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