Future of Movies at Home

I’ve been thinking about this for a little while. I like movies. I signed up for Netflix really early. Like, 2000 early. It was a great way to get movies, and I’m sort of a geek, so it was a cool way to demonstrate that to my wife. I quit after a couple of years because of lots of scratched discs and, the last straw, a disc completely broken in half (The Corruptor with Mark Wahlberg and Chow Yun Fat. I’ve still not seen it…).

So, I quit. But I couldn’t stay away. After a few years of rental stores, I came back last year and I love it again.

I admire Netflix. It’s a mix of antiquated technology (USPS), current technology (DVD) and the future of technology (Internet). Brilliant. But I’ve always thought their days were numbered. There’s been a way to download movies illegally just about as long as you could download music from the awesome and original Napster. But bandwidth, memory capacity and lack of video quality did not lead to as quick adoption of movie downloads as music.

Well, the bandwidth problem is going away. Something like 42% of the country is on broadband. Computer hard drives regularly have upwards of 60 to 80 gigabytes and more. External hard drives are being used by less-than-geeky people. And blank DVD-Rs and CD-Rs are selling in insane numbers. The only issue still outstanding is quality. Simply, because the better quality you want, the more bandwidth and memory you need. And with people accustomed to DVD quality and 42 Plasma HDTVs the general assumption is that people will only aspire to get better quality and bigger TVs.

Well how about this?

Consumers have been known to sacrifice quality for the sake of ease and convenience. Think back to the most referred to event in the history of consumer electronics - betamax vs VHS. It is generally acknowledged that BetaMax was the better technology, yet VHS won by having more partners and better distribution.

The concept of movie downloads, too, has more partners and better distribution.

And besides that: It’s Already Happening. Look at DirectTV, Dish Network, Vongo … These are video on demand sources that let you view a movie as many times as you want in a 24-hour period. The only thing that will hold up the concept of movie downloads is giving consumers the option to keep the downloaded movie file. I believe most people only buy DVDs for the repetition. So their kid can watch The Incredibles two times a day, everyday, for three months. But notice I said “hold up the concept” back there. That’s because it’s going to happen. Even if the movie companies get dragged along by the arm… by iTunes… or some college drop-out programmer in Albuquerque…

Band aids like TiVo, is going to be up to you. It’s going to do the same thing: pull files on demand from a source on the other end of your coax cable, phone line or satellite dish. And if that sounds familiar, it’s because that’s what happens now, every time you log onto the internet.

NOTE: So I’ve finally realized the real industry drawback to movie downloads. There is a reticence on the movie studio and distributors part because they are running out of things to sell. TV shows to package, movie sets to compile. Movie downloads give consumers too much freedom. But, man, consumers are going to drag movie companies along, just as they did to the RIAA.

NOTE 2: It may be slow, but it's coming...
Netflix says mulling options for downloading
Apple's iTunes Movie Store Hurdles - 2007?

Oh, Advertising. I Hate You... yet I'm strangely attracted...

I’ve had an unexplainable attachment to M&Ms for most of my life. I don’t remember the attachment initially, but as a child you could push me down on my diaper-covered toddler butt and I'd be fine, but taking away my little bag of M&Ms meant trouble. So I was surprised when Elliot threw down the Reese’s Pieces to coax E.T. out of the bushes. But in hindsight, it’s better to sacrifice your Reese’s Pieces. Save the M&Ms for yourself. Anyway, I gave a lot of thought to this subject. And Reese’s is probably happy about it. Because they paid Spielberg $20,000 to have their product featured in the movie, and their sales jumped 66% overnight. It’s one of the seminole moments in the marketing in movies. Along with Jaws being the first summer blockbuster. Another source of advertising revenue was found. Paid Placement.

As a marketer, I’ve bought magazine ad space. I’ve bought local newspaper ad space. I’ve even arranged for an on-location radio event for a warehouse sale at our headquarters.

But couple those things with my knowledge as a media consumer (ie. I read magazines and watch TV) and I am an expert in my mind.

And advertising is going through some growing pains. To a large degree, advertising dollars are a zero sum game. There are only so many dollars that will be spent on advertising. The dollars get shifted around from format to format. Old forms of advertising die. Types of companies that advertise change.

Take radio. It’s gone from a national advertising medium to a local and regional advertising medium. But it’s still viable for local businesses. TV is giving way to the Internet. The best commercials made for TV never get shown on network TV but become an Internet phenomenon. Ad words and banner placement based on the context of the searches made by browsers is giving way to behavioral advertising over time.

Internet business models have gone from “make money by selling stuff” to “build a killer app that people use and sell advertising to those who want to make money by selling stuff”. That’s a big part of what caused the dot com bubble to burst. There are only so many dollars in the online-ad well. Even still, I am amazed at how many successful companies are still popping up with this model. Though I hear we are on another bubble. And what are the chances that at some point we’ll see Google-Like ads appear somewhere on the screen during your favorite TV shows.

But here’s my product placement vent. When I was reading the Fog, I was amused and engaged when I read that a bottle Ragu was smashed over someone’s head. Because we had a jar of Ragu hanging out in the cupboard. But now, if this were pulled off in a movie, I’d immediately view this as product placement, done for a fee by the movie producers, and call all of my friends to bitch about it.

Sure: TV, movie, music and pc gaming producers and artists need to make money on their product. I get it and support it. If TiVO, disappearing CD sales, slacking box office receipts and online digital media theft are going to eat up their profit, go ahead and make it up on the front end. But remember that if it looks like advertising or smells like advertising, it will look untrustworthy and suspicious. Make your creative people be more creative.

A Partnership in the Making

So, first let me say that there are many things that I do not know. But for the sake of this post I am going to focus on this: I do not know how many DVDs Netflix purchases of new releases. For example, when The Aviator was released last Tuesday, I don't know how many copies they purchased to meet their subscribers' demands. Since they have more than 3 Million subscribers, I am going to be assume it is a substantial number.

Now you might remember that a few weeks ago Wal-Mart gave up on the mail-order renting-DVDs thing. Wal-Mart actually partnered with Netflix, agreeing to refer customers to Netflix for online DVD rental, in exchange for a link on the Netflix site reminding people that they can buy new DVDs at Wal-Mart.

So here's my thought: What is Netflix doing with all of their previously viewed DVDs? Netflix does offer an opportunity to buy previously viewed movies on their web site, but it's on a select group of titles. and I can't imagine they move a ton that way (of course, I'm sure it's more than I would guess). Are we going to start seeing bargain bins at Wal-Mart filled with previously viewed movies from Netflix? This would be a pretty smooth move, since Netflix could also stuff a coupon in with the movie for a discounted membership and Wal-Mart can cross sell new releases. The Netflix/Wal-Mart partnership door has been opened. There has got to be more action on the way.

Don't tell the MPAA, but...

... I am making my own DVDs! It all started when I wanted to test the DVD-R burner on my computer. It seemed silly to use this DVD-R as a larger capacity CD-R. I wanted to do something I could only do with the 4.7 gig capacity disc. My office mate said this: "Hey, check out DVD Shrink."



Of course, I wanted to just make a copy of my Ocean's Eleven DVD, just to see if I could do it. But most prerecorded DVDs have two layers of data. So they have something like a 9.4 gig capacity. So to get the movie to fit onto a 4.7 gig DVD-R, you have to trim all of the extra stuff away and just make a copy of the movie. That's what DVD Shrink does.

So I put the Ocean's Eleven disc in my computer. DVD Shrink scanned the disc and showed me all of the files. I deselected all of the extra stuff I didn't need on the copy (you know, the French and Spanish subtitles, the extra scenes, the coming attractions, pretty much everything but the movie itself). That almost got it down to the size I needed. Then DVD Shrink reduced the file size just enough to fit on my disc. Awesome.

Then I heard about DVD Covers. It is this huge archive DVD Cover art. So, I can print cover art for the DVDs I am copying, er... making back ups.

All bow to Netflix

Seriously. Wal-Mart has. Wal-Mart.com is ending its online service for renting DVDs. If Wal-Mart has given in to Netflix, shouldn't we all?

There's kind of a "10 Percent" rule when it comes to Wal-Mart. When they enter a market they end up with about 10 percent market share and they cause the overall price in the category to drop 10 percent. Well, the price drop happened, but Wal-Mart appears to have given up on trying to get 10 percent market share. They are actually going to recommend Netflix to browsers at Wal-Mart.com. Of course, they'll make sure to remind people that you can buy DVDs at Wal-Mart, but when it comes to renting, Netflix rocks.

Sometime in 1999 I found Netflix. I was there for the padded shipping envelope debacle. Anyway, I used it for a couple of years, but I started getting some damaged discs. The first time I got a disc that was literally broken in half, I dropped the service. Then three months ago, I signed up again and am in heaven. They added distribution centers, went back to the original paper envelope and I couldn't be happier. They've got it down. So much so, that even Wal-Mart doesn't care to complete.

I guess my only question for Netflix is: do you have a plan for a Post-DVD-download-movies-over-the-Internet world?

NOTE: And it just keeps coming. As reported in Yahoo! today, Blockbuster is hiking its prices! You might remember that a few months ago, when Blockbuster started hitting the online rental market pretty hard, it priced its service at $14.99 to undercut Netflix's $17.99. Well, now Blockbuster is matching Netflix's price. Blockbuster is saying the "promotional offer" is over. But maybe Netflix just does it better.

My Elf is Skipping!

So, I got Elf last week. It came from Netflix, of which I am a HUGE fan. But right at the part where Buddy (Will Ferrell) is in the Doctor's Office with James Caan and Jon Favreau, and he's eating the cotton balls, the movie started skipping. Then it actually jumped back to the part where he gets hit by the taxi. How frickin' irritating.



Fortunately, I found this site and found what to do. Allsop has a bunch of products to help with problems from renting DVDs. I used a little DVD scratch repair solution and the movie played through great.

And for a quick review, even though I'm not a huge Will Ferrell fan, this movie had a few laugh out loud moments. It was a good time.