New Movie Download Ventures Threaten Netflix

The recent news that Wal-Mart Stores (WMT) will team up with Fox Broadcasting to offer movies and television shows on its new online download service, and the collaboration between Amazon.com (AMZN) and TiVo (TIVO) to offer recordable content for download, should have Netflix (NFLX) executives and investors feeling very nervous.

Netflix is already battling BlockBuster (BBI) over the movie rental by mail business, and now has to contend with not only home digital cable services, such as that provided by Comcast (CMCSA), but also the plethora of digital download websites that have seemingly sprang up overnight.

Wal-Mart and Amazon's new announcements are analogous to a new Wal-Mart store opening right next door to a small town variety shop.

Already, Wal-Mart is doing what it does best, undercutting its competition. It is offering TV episodes for $1.96, a discount of 4 pennies from its rival Apple's (APPL) iTunes store. The competition is already heating up and Netflix has yet to enter the field.

Netflix has to seriously think about providing downloadable content at a time when money is being spent competing with BlockBuster over a dying business. It might already be too late, as catching up to Wal-Mart and Amazon will not be easy to say the least.

NFLX 1-yr chart

Comments

[Rick Hanley:]

Cleared for Takeoff

Imagine 'in-store download and burn kiosks' in Wal-Mart, Target, Best Buy, and/or Walgreens? Extremely cost effective availability of tens of thousands of titles. The content owners, retailers, and consumers all win. And the environment, too. No more online, physical DVD rental models that involve millions of physical deliveries each week.



What had been the key differentiator for Netflix, catalog films, will now be widely available to retailers. Clearly, we all want to see the day when in-home download is as easy as using the TV is today. That is coming, too.



Video Business Online

Download-and-burn cleared for takeoff
Movielink plans summer test with new CSS-enabled discs
By Paul Sweeting -- Video Business, 2/8/2007
FEB. 8 | The DVD industry has cleared the way for retailers and consumers to burn movie downloads to DVD for set-top playback.

The steering committee of the DVD Forum on Jan. 31 formally approved technical specifications for a new type of recordable disc for use with in-home and in-store burning of CSS-protected movies, removing the last remaining administrative hurdle to commercial deployment of download-and-burn services…



Online download services have been waiting for the approval to give consumers the option of burning movies they can now only play on their PC or portable device.

Studio-owned download service Movielink plans to begin testing burn-to-DVD downloads this summer and offer it to all consumers by the fall, chief marketing officer Mary Coller Albert said…



Wal-Mart also is said to be considering adding download-to-burn for its just-launched service.

“We expect that to improve over the course of the year, and we’ll continue to aggressively explore/evaluate opportunities and models for this option over the next year,” Wal-Mart said in an e-mailed statement…



With the final specs approved, disc makers can now begin manufacturing DVD Download blanks for sale to consumers and in bulk for enterprise applications such as in-store burning kiosks.

The discs are similar to standard DVD-R’s but are “pre-keyed” with CSS decryption codes so they can accept encrypted data.

The use of CSS—the same copy-protection system used on commercially pressed discs—is considered critical to ensuring that discs burned from downloaded movie files will be compatible with all set-top DVD players…



Initially, download-and-burn may be a bigger opportunity for bricks-and-mortar retailers that bring in DVD burning kiosks rather than for online download companies…



“In theory, it can be a very nice revenue generator [for retailers] without having to give up any kind of significant footprint,” Goodman said.



© 2007, Reed Business Information, a division of Reed Elsevier Inc. All Rights Reserved.

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Rick

2007 Feb 09 06:40 AM