Digital Video | Entertainment Trends | Media Consumption | Web Video | Streaming Video

Indeed, consumer demand is now firmly in the “On Demand” camp. Netflix, the largest subscription service for streamed and by-mail DVD delivery of movies and TV episodes, reached a milestone in its first fiscal quarter of 2010: 55% of all Netflix members were receiving streamed video content over the Internet.

The digital delivery business has done something else besides revolutionize the way viewers receive video: It has spawned new brand names and re-shaped the way many firms in the business operate.

When Blockbuster started opening movie rental stores in 1985, commercial DVDs didn’t even exist. But VHS movie rentals were booming; just three years later, in 1988, annual video rental revenues reached $5.15 billion, exceeding the $4.46 billion in theatrical box office receipts for the first time.

Blockbuster was joined in the burgeoning movie rental business by such brick-and-mortar competitors as Movie Gallery which, in a sign of the times, announced last month that it was closing its doors. Blockbuster maintained a leadership position throughout the ’90s, expanding its network of stores in the United States and worldwide.

A decade later, video delivery saw its first major digital implementation in the form of the DVD. Introduced in 1997, the DVD player soon became the most rapidly adopted consumer electronics product in history. Only one year after its introduction, a brand was born that would signal the beginning of Blockbuster’s eventual downfall. That brand was called Netflix.

Netflix was a remarkably simple idea: The subscription-based business model called for members to pay a monthly fee to rent as many DVDs as they wanted, ordering them online and receiving them by mail, one at a time. Members would simply return each DVD in a pre-paid mailing envelope when they were finished watching it. Members could keep a DVD as long as they wanted and there would be no late fees – a major differentiating feature that provided a significant edge over the company’s much larger rival, Blockbuster.

Simple as the idea was, it would take Blockbuster seven years before it would eliminate late fees, and almost another year before it would introduce its own Netflix knock-off, Blockbuster Total Access. This online program allows Blockbuster customers the option of exchanging DVD movies through the mail or returning them to a Blockbuster store. But Blockbuster didn’t achieve the success of its rival: the number of Blockbuster customers using Total Access is today somewhere south of 4 million, less than a third of the nearly 14 million Netflix members.

Fast forward to the present and witness the harsh impact of progress. What the technology gods giveth, they taketh away. Today, Blockbuster is reeling from the unanticipated rush to online digital delivery. The company is, in fact, trying to avoid bankruptcy. It is furiously closing stores, cutting deals with movie studios for faster rental distribution, and jumping head first into online and smartphone digital video delivery.

Netflix, meanwhile, is re-engineering its business on the fly, as a majority of its customers wants movies over the Internet instead of movies via DVD. In addition to traditional DVDs, the company offers instant downloads of movies via computer and directly to a TV, with the help of a streaming device.

And now, another digital video retail brand, Redbox, is causing fits for both Blockbuster and Netflix. Redbox got its start in 2002, interestingly within McDonald’s Ventures, which was working to identify new ways to drive traffic to the fast food chain and provide added convenience to customers. Through consumer testing, new DVD rentals emerged as the most appealing item for distribution through kiosks. (Maybe the service should have been called “McDVD.”)

Redbox now has almost 25,000 kiosks nationwide. Each fully automated kiosk holds about 630 DVDs, which are available for $1 a day. If customers keep a DVD for 25 days, rental fees cease and they own it. Blockbuster has countered by opening up its own rental kiosks in partnership with ATM-maker NCR, who projects placing as many as 10,000 “Blockbuster Express” kiosks by year’s end.

But as the song says, “We’ve only just begun.” Increasing penetration of broadband and continuously improving mobile data networks have now made streaming digital video commonplace. U.S. cable operators, which have been busy with their own evolution from pay-per-view movies to video-on-demand rentals, are also looking at how to leverage their broadband strength to test new models of online video rentals.

Their foe isn’t just satellite TV players (namely, DirecTV and Dish Network) or telco-delivered TV such as Verizon’s FiOS and AT&T’s U-verse, but digital video brands that truly leverage PCs and wireless devices: YouTube, Hulu, and iTunes.

YouTube, which just turned five years old and is owned by Google, is now serving up record streams to a voracious audience for its free videos. Last month, it streamed an astonishing 14.6 billion videos, according to comScore. But, increasingly, YouTube is actively pursuing the paid rental market, too. The site just struck a deal with World Wrestling Entertainment to offer pay-per-view access to WWE events. It also offers movies from the Sundance Film Festival and will add movies from indie studios and Bollywood to its paid repertoire.

The three-year old Hulu already delivers “premium video content” online from over 200 content companies, including numerous film studios. Users can customize their viewing experience online and watch digital video content free because of Hulu’s advertising supported model. It’s expected to unveil its formal "Hulu Plus" subscription service any day.

iTunes, a division of Apple, may function largely as a music store, but the service also rents movies and episodes of TV shows. iTunes offers the added advantage of enabling digital video viewing on Apple’s iPod and iPhone devices.

Then there’s Best Buy – yes, Best Buy – who recently said it will offer a video rental service called CinemaNow that will appear on connected TV sets. CinemaNow is scheduled to launch some time this summer.

And if all of that isn’t enough to make your head spin, get ready for “Google TV.” One of the newest digital video developments, it is described by Google as “an open platform that adds the power of the Web to the television viewing experience.”

Google TV will ultimately enable consumers to “search and watch an expanded universe of content available from a variety of sources including TV providers, the Web, their personal content libraries, and mobile applications,” says the company. Intel co-developed Google TV; Intel’s chief executive, Paul Otellini, believes, “The revolution we’re about to go through is the biggest single change in television since it went color.”

Google is sure to upset a few apple carts. Ralph Schackart, a digital media analyst with Chicago investment firm William Blair & Co., says Google TV “will enable premium movie sales from many [third-party] stores such as Amazon VOD, [Blockbuster On Demand, Vudu and Best Buy’s CinemaNow].” Schakart adds that film studios could potentially deliver Video On Demand (VOD) movies at a higher profit margin directly through connected TVs which could “take market share away from Redbox and Netflix.”

In a business that continues to rapidly evolve, Blockbuster may become a casualty, while an unexpected player like Google may succeed by transforming digital video delivery into something entirely new. As technology and consumer demand converge, we can be certain of one thing: renting movies and episodes of TV shows will simply never be the same.

[25-Jun-2010]

Barry Silverstein has been a frequent brandchannel contributor since 2007. He has thirty years of advertising and marketing experience and is currently a freelance writer and marketing consultant. He founded and ran his own direct marketing agency and held executive positions with Epsilon, a leading database marketing firm and Arnold, a major ad agency. Silverstein is the author of three marketing books, including the McGraw-Hill book, The Breakaway Brand, which he co-authored with Arnold CEO Fran Kelly.


commenting closed	bookmark	print
suggest topic	recommend ( 2 )	email

brandchannel home archive

2013 | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | 2001

Dec 23, 2010	Fake Out - Can Brands Stem the Counterfeit Tide? -- Barry Silverstein
	Why counterfeit and pirated goods are the bane of brands worldwide — and what’s being down to crack down.

Dec 7, 2010	Sonic Truth: Nylon Studios Helps Brands Get In Tune -- Sheila Shayon
	Brands and Sound - Nylon Studios aims to evoke brand essence through music.

Nov 5, 2010	Social Media Marketing - Asian Brands Aim to Do it Right -- Adeline Chong
	Social Media Marketing - Asian Brands Aim to Do it Right

Oct 8, 2010	All in the Family: Famous Names that Have Become Famous Brands -- Barry Silverstein
	Some of the world’s biggest brands are family-owned — Barry Silverstein looks at some of the more interesting family brands.

Sep 24, 2010	Diesel Power Burnishes its Green Patina -- Dale Buss
	As consumers look for greener cars, diesel rolls into the spotlight.

Sep 3, 2010	FitFlop: Stepping Up Its Game -- Jennifer Gidmann
	Serial entrepreneur Marcia Kilgore leverages her success in launching the Bliss Spa chain and Soap and Glory brands into footwear inspired by her son.

Aug 27, 2010	Youth Olympic Games: Reaching out to Generation Z -- Adeline Chong
	A sporting party of sorts for athletes aged between 14 and 18, the Singapore 2010 Youth Olympic Games was a host of firsts.

Aug 5, 2010	How Marketers Use Predictive Analysis to Target Their Branding Efforts -- Barry Silverstein
	Brand marketers know they must leverage the power of social media, but they face a dilemma: How do they truly measure social media’s effectiveness? IBM helps answer that question with its predictive analysis software.

Jul 23, 2010	Gorilla Underground: The Evolution Will Be Televised -- Sheila Shayon
	The Gorilla Underground, a movement started by two former ad agency creative directors and social strategists, aims to engage consumers to think about how brands are using social media.

Jul 16, 2010	Brand South Africa Reinvented by the 2010 FIFA World Cup -- Mandy de Waal
	The biggest legacy the 2010 FIFA World Cup leaves behind for host South Africa: changing the nation's brand perception.

Jul 13, 2010	Back to Basics: As Banks Look Ahead, They Must Concentrate on Fundamentals
	Eileen Zicchino and Michael Rosenberg from J.P. Morgan Treasury Services discuss how prominent financial institutions can build customer loyalty and differentiate their brands.

Jul 1, 2010	Brands at Sea: The Ups and Downs of the Cruise Industry
	Cruise brands are struggling. In the choppy sea of brand differentiation, it is getting more difficult to tell Carnival from Royal Caribbean from Norwegian. The problem: similar routes, ships, and offerings.

Jun 18, 2010	2010 FIFA World Cup: Social Media Gooooool!
	Social media changes and challenges brands, fans, players and FIFA during the 2010 FIFA World Cup

Jun 11, 2010	One Year Later, What Does General Motors Mean to America? -- Dale Buss
	The crash in the U.S. auto market, the historic political calculations, the wrenching financial pain for everyone from executives to bondholders to car dealers to employees – all of those epochal developments are beginning to recede, each at its own pace, into the 102 years of history of the General Motors Corporation.

Jun 4, 2010	Probiotic Brands Prompt Gut Reaction by Americans -- Dale Buss
	The global craze for probiotic foods finally makes inroads in the U.S. market.

May 25, 2010	Bravo: TV’s “Affluencer” On-Air and Beyond -- Sheila Shayon
	Bravo TV touts its audience of “Affluencers” as the most loyal and sophisticated among U.S. cable TV networks

May 21, 2010	As U.S. Market Slowly Recovers, Auto Brands Jockey for Share -- Dale Buss
	The U.S. automotive market is up for grabs as opportunistic car brands vie for significant slivers of the market.

May 14, 2010	New U.S. Food Pyramid Promises Steeper Climb for Consumers, and Brands -- Dale Buss
	New U.S. Food Pyramid Promises Steeper Climb for Consumers – and Brands

May 7, 2010	2010 UK Election: Britain’s Political Parties Still in Need of a Rebrand -- Melissa Davis
	Despite experimenting with social media, the UK general election was shaped by traditional media - television - and old-fashioned character values of the parties' leaders.

Mar 4, 2010	Heartbreak Hotels: Beijing’s Oversupply of High-End Hotels -- Laura Fitch
	Beijing Hotel brands burdened by vacancies.

RSS

| Privacy Policy | About Us | Contact Us | FAQ