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Monday, June 11, 2007

What's So Scary About iTunes?

Why do Sony, Fox, Universal, and Warner Brothers opt not to sell their movies on iTunes?

Three big reasons:

1. They worry about Apple being the only game in town, as far as digital distribution; on the music side, Apple controls more than 70 percent of the download market. That kind of dominance gives Apple the power to dictate price, and all kinds of other deal terms, to their suppliers.

2. They worry about encouraging consumers to stop buying DVDs. DVDs are the studios’ cash cow – they brought in almost $25 billion in 2006. The studios are also hoping that high-def DVDs will keep consumers shelling out $25 for a physical product that they can own – as opposed to $14.99 for a digital download.

3. Apple’s Steve Jobs isn’t making studios happy with his anti-DRM crusade. Remember, studios have always been more aggressive with copy-protection on DVDs than the music industry has been with CDs (you need special, illegal software to rip a DVD onto your laptop).

The transition from DVDs to digitally-delivered content is going to be painful. Consumers aren’t willing to put up with punitive DRM constraints, and they’re not going to pay the same price for a digital file as they did for the DVD.

But do I believe that there are going to be lots of new opportunities in the digital world that didn’t exist in the world of DVDs and videotape? Absolutely. Studios have just been slow in chasing them. There are classic movies people are dying to see – if studios would only clear the rights and make them available online. People would be willing to pay 99 cents to buy scenes from their favorite movies to store on cell phones and video iPods – if studios would sell them. If studios offered some of their best behind-the-scenes footage and making-of featurettes (the stuff that appears on DVDs as bonus material), film fans and wanna-be directors would buy those.

Studios simply haven’t put enough digital product out there, with innovative pricing models, for fear of cannibalizing DVD sales and antagonizing big DVD sellers like Wal-Mart and Target. That’s fostering piracy, and it’s allowing Apple to emerge as the dominant player in digital distribution.

If the studios really want to help create a strong rival to iTunes, why aren’t they giving exclusive content (like celeb interviews) to’s Unbox, or packaging a free download of the soundtrack with a purchase of a digital movie file? Why aren’t they promoting Movielink, a service they created in 2001 but have since let wither, or CinemaNow, which is majority-owned by Lions Gate?

Here’s the LA Times article that got me thinking about this…

…and also in the news today are some hints that Apple will start renting movies on iTunes this fall. (Stories in Forbes and the Financial Times). Would rental make it easier for more studios to play with iTunes? Yes, particularly if Apple is willing to let them offer movies for rental only. Retailers wouldn’t feel threatened, since they’re not in the rental business. But it’d be time for Netflix to start sweating…

As for Apple and iTunes...why not open the gates to indie content while the studios dither, rather than letting other sites (like become the go-to destinations for lesser-known but high-quality films?

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