There is an old saying that those that fail to learn from history are doomed to repeat it. It is sage advice that the major movie studios need to take to heart...

 

When Sony launched the PSP, they introduced a new format  - UMD - for playing movies on the device.  UMD is basically a reduced resolution version of a DVD that comes on a small disk.  It started out well, but never really took off.  Prices for UMD movies were basically the same (or even at a premium to) the same movie available on DVD.  Recently WalMart seemed ready to drop the format from their stores, and studios have been canceling or delaying their UMD product launches.  While I still think the UMD format is a bad idea that’s headed for a slow death, an interesting thing has happened with it that the industry should pay attention to.

 

Warner Home Videos cut the price of UMD videos in Japan to about $8.50 per title, and found that they had a ten-fold increase in sales...

 

As bellweather of the future of UMD, I wouldn’t read much into Japanese consumers buying into a Sony proprietary format -   Sony is the home team over there.  The significant takeaway from this is that consumers are not willing to pay the same price as a DVD for content of inferior quality or in a vendor specific format with limited extras and few playback options.

 

Why has it been so hard for the studios to understand this?...

 

Amazon finally launched their video download service ‘Unbox’ last Thursday (see my previous post), and I got to spend a little time with it.  It is based on Windows Media DRM and, disappointingly, is an underwhelming ‘me too’ version of CinemaNow. It has a limited selection, restrictive playback options, and No ability to burn movies to DVD for playback on DVD players. It has ‘Terms of Use’ that combine the most draconian whims of all of the studios’ legal teams into one laughable agreement. But what is most disappointing is the pricing.

 

Downloaded movies cost almost the same as the DVD versions...  

 

If this reflects the deals that Amazon has spent the past year negotiating, I believe that have squandered their opportunity to provided a viable offering.  Late to the game, they needed something really compelling.  Something to really address the market in a way the consumers wanted.

 

Unfortunately for Amazon, ‘Unboxed’ is D.O.A...

 

With the DVD market maturing and DVD sales declining, the studios need something to takes its place.  The current stalemate in the HD-DVD vs BluRay format war is going to stall sales of the new high-definition formats, so they won’t find much love there.  Downloads are it.

 

 

While it’s the hardware that gets all the press attention and speculation,  the real success of the service has everything to do with what kind of deal Steve Jobs was able to cut with the studios.  If all we see is a clone of the terms and pricing Amazon agreed to, Apple will likely have a failure on their hands (at least as far as the movie portion of the announcement goes).  I really hope that that is not the case.  It would be better for Apple to only start with a few of the more progressive studios - like Disney - that kinda get what needs to happen for this market to take off.  Even if that means less content available at launch, it will mean getting the model right and having a small success.  If they can do that, the less enlightened studios will eventually fall in line and get onboard.  That’s how they started with downloadable television programs, and it’s probably the same approach they will take with movies.

 

Apple is probably the single best chance the studios have to make digital movie downloads a success.  I hope they figure it out before it’s too late.