Apple and the Future of Movie Downloads

Movie download services have been about to take off for nearly 20 years.

In the mid-1990s, Time Warner spent $10,000 a customer in Florida to show downloading movies over cable lines was technologically feasible. In 2008, movie downloads are still mired in the "proof-of-concept" stage.

Apple’s announced plans today for an online movie rental service could be the spark that sets movie downloads alight in consumers’ minds.

Not because Apple is offering a fundamentally new twist on VOD. But because it’s Apple.

The movie download market today is remarkably similar to where online music was before Apple launched its first iPod. Back then, MP3 players were already on the market. But they were largely niche products and most music that played on them was pirated. Apple created the first cool digital music player.

Steve Jobs was also the first technology executive with the heft in Hollywood to actually cut deals with studio executives to allow enough legal content online to create a marketplace — and demonstrate that making money from digital music was at least possible.

In 2008, most consumers still aren’t all that interested in cable companies’ movie download offerings — largely because the studios are so worried about piracy and cannibalizing their existing TV syndication and DVD businesses that they haven’t supplied enough product to interest subscribers.

Movie downloads from services like Netflix and CinemaNow are still largely a curiosity for hobbyists and people who don’t know how to download the pirated stuff. 

Until now, Apple hasn’t fared  that much better. It’s sold only about seven million movies, compared to about four billion songs and 125 million TV shows.

Once again, Jobs has persuaded the studios to make vastly greater stores of content available to consumers in exchange for the tacit promise that he can create enough of a market to offset the inevitable increase in piracy that will occur when millions of new consumers realize how easy it is to download and share movies on their computers, iPods and TV sets. (Just look at the movie piracy rate in Korea, which has the world’s most ubiquitous broadband).

Apple’s movie rental service could be exactly the spark Hollywood needs to jumpstart its online cinema business. Or the spark could become a conflagration that devours industry profits. Or it could flop once again, just as so many for-profit video-on-demand ventures have since Time Warner first dipped its toes in Orlando.

The only certainty is the movie downloads — legal or not — are here to stay.

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About Michael Stroud

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