• by Wendy Davis  @wendyndavis, March 13, 2006

Online retailer Amazon reportedly is gearing up to expand its entertainment franchise by selling downloadable DVDs and CDs, in addition to the hard copies. The news accounts of the plan to sell downloadable videos, which surfaced late last week, came on the heels of reports last month that Amazon intends to launch a downloadable music service.

Some analysts see the prospect as a good move for Amazon, which already has a built-in consumer base for entertainment--both because it already sells DVDs and CDs through its e-commerce store, and because it owns IMDB.com, which offers encyclopedic information about movies and TV shows.

What's more, the success of Apple's iTunes--which has sold more than 8 million video downloads, and more than 1 billion music downloads--shows that consumers crave downloadable music and movies.

In a report issued Friday, Pali Capital proposed that a download to use movie distribution model would be "very attractive" to consumers. But the report also pointed to challenges, including the fact that most consumers will likely want to watch shows on TV screens, not computers or small video iPods. "The far more mass market opportunity is to provide content that consumers can watch on their living room television sets whether that be through download-to-own DVDs or content streamed from a computer to a television set via Microsoft's Windows Media Center or Apple's Front Row," stated the report.

The report also noted that the service, which would require large bandwidth, might have implications for a debate now underway about "net neutrality"--the principle that Internet service companies should provide equal access to all types of sites. "How will distributors react to content owners leveraging P2P technology to minimize their bandwidth needs, by utilizing bandwidth the distributors provide to their subscribers?" asks the report.