Jan 252012

Your business model is broken and trying to fix it by hounding those that share content is probably not the best way to fix it.

 Let me explain.

A number of major studios have thrown their money behind a new digital content distribution system called ‘UltraViolet’, that in theory at least, allows you to rent or purchase a movie and watch it on multiple devices.

On the surface this is great.  Really, truly this is a great thing. Rather than rent a DVD or BluRay from Netflix, Blockbuster or RedBox for a couple of dollars, you can rent one directly from the studio; and you can watch the movie on any device.

Except an iPad, iPhone, Android Phone, Android Tablet, or a non-smart TV or connected device that does not support UltraViolet.

Oh and you need a fast internet connection too.

All of these are minor issues though and nothing a small investment in hardware or bandwidth cannot solve. Assuming of course the movies are available fairly quickly after they leave the cinema and that they are relatively inexpensive to rent/buy.

Sadly neither is true, a ‘High Definition’ movie is $19.99 and an ‘SD’ movie is $12.99 and the current plan appears to be to release the movies at the same time as the DVD/Blu-Ray.  Generally I can get most DVDs shipped to my door from amazon.com for about $10 or I can pay less than $20 for a BluRay, again, shipped to my door. Often Amazon will sell off movies a few months after release for $5 – $8 and there are many BluRays available for less then $10.

For example, one of the sixty movies that Paramount are launching with is ‘Rango’, their SD price is $12.99, the HD price is $19.99

  • I can rent the DVD from Redbox for $1.29 or $3.99 will get me the BluRay from Blockbuster.
  • I can buy the DVD that comes with a free digital copy that I can play on my tablet for $12.49
  • I can buy the BluRay/DVD/Digital Copy combo for $19.49
  • I can buy it on iTunes for $19.99 (HD)
  • I can watch it on Cinemax as a part of my $9.99 add-on to my basic cable subscription
  • I can buy it on Amazon Video On-Demand for $14.99 (HD Version)
  • It will be on Basic cable soon, so I can wait.
  • It is on torrentsRus with 10 million seeders for freeez !!!!1111oneoneeleven

In other words, UltraViolet, for this example movie is actually the most expensive (along with iTunes) and easily the least convenient.

UltraVoilet is a great idea, it has huge potential, but it needs to be easy to use, inexpensive and convenient. In its current iteration it is none of these things.

If I wanted to watch Rango (again), which is reasonably likely, UltraViolet is maybe not the most expensive way possible, but it is the most expensive of the methods that currently dominate our movie watching.

This brings me, neatly, around to the arguments put forwards regarding the costs of ‘piracy’.

The argument goes something like this.

If a million people download a movie, the industry has lost the ability to sell a million dvds at $12.99. Therefore the cost to the industry is right around the $13,000,000 level.

This is a flawed argument on virtually every level, the laws of supply and demand drive the sales revenue.

If a million people suddenly had no ability to download the movie illegally, they would not all rush out and buy the DVD, only a percentage of them would actually buy it, more likely they would choose the cheaper options.


  • Say 50% would rent it at $1.29 or via Netflix (fixed / month)
  • Maybe a further 20% would watch via Netflix on-demand
  • Maybe the remaining ‘pirates’ would be split over the dvd/BluRay, various digital copies (iTunes / Amazon)purchases and watching it on TV.
(note that it is likely that some of the pirates would probably enjoy the movie and then go out and buy a copy on BluRay or DVD)

The total ‘lost’ revenue for that one million pirates is probably in the hundreds of thousands of dollars, still decent money, but far from the tens of millions of dollars that are posited.

So, Hollywood, here is what you need to do:

Change your model.

Let’s assume that there are several markets for movies

  • Cinema goers, the current costs of watching a movie in a local cinema is $12.50, plus popcorn and snacks, which makes it a $50 date for a couple. Or nudging $100 if you take the kids to see Cars 6 or Snow White 17…..
  • Blu Ray buyers most new releases are around $15 – $20
  • DVD buyers –  Unless you shop at Walmart, you are probably going to spend $12
  • DVD/BluRay renters $1 – $3, RedBox, Blockbuster, Apple Movie Rental etc
  • Digital content consumers  many models (Netflix / Amazon VOD)
  • Cable Subscribers
  • Pirates (aaaaargggghh) its free on the high seas Jim Lad…

Hollywood you need to figure out why the pirate model is as popular as it is and how to monetize it without resorting to suing people and causing more and more bad feelings towards.

So, here is my idea.

Make as many movies as possible available digitally, at a price-point that makes sense, in as compatible a format as possible.

Do not forget to cover the popular devices

  • iPad
  • iPhone
  • Android Phones / Tablets
  • Smart TV’s
  • BluRay players
  • Roku  etc set top boxes.
  • PC
  • Mac

Allow the purchaser to download the movie to their devices to watch under their own terms.

Make it affordable.

  •  $20 is too much for a severely restricted usage movie in an awkward format.
  •  Heck, $20 is too much for an unrestricted use format movie in an awkward format that restricts its use.
  •  $20 is probably too much to play for a movie that was merely average.
  • Let the market set the price maybe – In Rainbows proved that this is an be a good idea, assuming the content is good.

I would probably pay $10 to buy a digital copy of, say, ‘The Incredibles’, but ‘Cars 2’ is probably worth only $6 – $7 in my view.

Make it compatible.

MKV or MP4 formats are considerable easier to deal with than the crazy UltraViolet format. Most smart TV’s can play streamed content, as can most connected BluRay players.


Available, Affordable, Compatible.


Putting it all together

Change the format to a useful one – say MP4 and/or MKV, include high end audio streams – DFTS preferably.

Allow easy streaming – ensure that the last couple of generations of dvd/BluRay/Smart TV/Set Top boxes support the streaming service.

 Change the pricing model

  • New Blockbuster movies – Buy for $12 on the DVD release date, digital download.
  • New Blockbuster movies – Rent for $5 on the DVD release date – stream only.
  • For ‘Straight to Video’ movies, maybe charge $5 or so.

Which brings me on to the quality / pricing argument. In order to sell more you need to set the pricing model to reflect the quality of the movie.

Base the pricing on the rating of the movie on IMBD or RottenTomatoes.com

  • If the movie gets 8/10, then feel free to sell it at $9
  • If the movie gets 3.4/10 then sell it at $2.50, very few people will pay full price for a crappy movie.

Employ internet savvy people in the content distribution teams, employ the hackers and the ‘pirates’ to help with the legal distribution channels.

Above all, get with the times…….

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