In our rush to monetize the digital world, content owners often overlook the basic needs of the consumer. And in many cases, legal eagles, marketing whizzes, and sales sharks think in absolutes--you
may do X, but you cannot do Y. If you do Y, then you may do Z--but only if there is a full moon and you surrender your Social Security number and first-born.
But I digress. In the
digital content world, Apple was really one of the first content services providers, through iTunes, to add the word "and" to the options list of things that consumers could do, legally, with their
content: they could download AND burn to CD AND stream from the PC AND etc.
The reason I bring this up is because Movielink just announced a partnership with a company, Sonic Solutions, that
will enable consumers to burn the movies to DVD. This is arguably an AND in the content world (and a refreshing one at that). You see, in today's day and age, we are mired in what we can't do versus
what a consumer wants to do. Consumers want the feeling of ownership; of being able to hold something in their hands. Even with an iPod, you are still holding what you believe to be all
your songs and all your videos in the palm of your hand. The hardware (the iPod) makes the software (the content) real. This got me thinking about an often-overlooked technology that
really hasn't solidified its place as a viable content distribution channel--yet. I submit for your consideration: the IP-enabled kiosk.
Now, I know that many of the music-related initiatives
that were centered on the kiosk as a primary distribution hub have not succeeded (I have my theories as to why, which I will save for another time). But there are several companies, one of which is
CustomFlix (which is owned by Amazon.com), that operate in the video market and are showing promise. And while there are problems, I will argue that they are not insurmountable. Besides, there has
been quite a bit of buzz of late with CustomFlix recently announcing a partnership with CBS News that aims to phase most of its video library online so that consumers will be able to create custom
DVDs from the network's archives of news video. Wal-Mart has also been rumored to be testing kiosks for video distribution--as have Target and even Best Buy.
Now, first things first: The
studios have said they like this idea of DVD-burning kiosks but have not endorsed them as a preferred distribution hub. And big-box retailers need to temper this strategy with the foot-traffic and
in-basket revenue that DVDs help to generate. So, in an effort to begin a dialogue, let's start with a short list of the potential upsides and downsides of implementing this kind of strategy by our
two constituents: the studios and big-box retailers.
Studios:
1. Create new windows. Upside--this would create a new window and new revenue channel. This could also be
used to bolster the 45-day DVD window as well as help drive event-driven product (i.e. new TV season, sequel theatrical titles, etc.)
2. Create new distribution points. Upside--this would
create a new point of distribution in a direct-to-consumer model that leverages IP or digital transition of library content.
3. Opens the library at lower costs. Upside--over time,
scale would make IP-based distribution a more efficient platform for accessing and delivering content from the library versus tangible media.
4. Possibility of piracy. Downside--it is
possible that consumers could break security measures on the DVD, replicate and illegally distribute the content. Then again, they have been doing that ever since I can remember. Just visit a street
corner anywhere on Manhattan's Sixth Avenue or Canal Street to see what I mean.
Big-box Retailer
1. Increase available inventory of titles at lower costs. Upside--with shelf
space getting tighter and title availability increasing (TV titles continue to hit the DVD market as well as other, untapped titles from the studios hit the proverbial shelves), it is cheaper to adopt
a store-and-burn strategy long term than to cannibalize square footage revenue for a zero-to-low-end margin product that is primarily used to drive foot-traffic.
2. Increase in-store time
spent. Upside--would increase in-store time spent, as consumers would be engaged with the content. Last year, Wal-Mart had Nielsen conduct a study of the efficacy of their in-house television
network. It was reported that customers spent 7 minutes on average watching in-store content programming (this is primarily advertising content). With something as engaging as movie-related content
on a strategically placed kiosk, it's feasible that total in-store viewing would continue to grow
3. Increase basket-revenue per customer. Upside--larger title availability would,
arguably, drive higher unit sales and contribute to an overall increase in basket revenue after the initial capital expense of the system was amortized. Also, it is conceivable that the product would
carry higher profit margins for retailers simply because the cost of distribution is drastically reduced, since you no longer have to deliver the product on trucks and in jewel cases.
4.
New revenue opportunity. Upside--in much the same way that an in-house television network provides an opportunity for advertisers (think Wal-Mart and its 2,600+ stores), a kiosk is also a point of
advertising. And in this case, it is highly desirable content and contextually relevant. Reports cite that advertisers were paying between $137, 000 and $292, 000 (in 2005) for one commercial to run
for four weeks on the Wal-Mart in-house television network (depending on reach, frequency and length of the advertisement). With the ability to generate 130 million views every four weeks from the
in-house television network, what studio wouldn't want to buy a piece of that traffic to run exclusive previews, behind-the-scenes and other targeted content that paired a video- centric kiosk with
television screen? For that kind of exposure, the cost is a rounding error in today's marketing budget for an "average" theatrical release.
5. System reliability. Downside--as with any
technology, a high failure rate of the system would negatively impact the consumer experience. There is also a risk that consumers would not use the system because of a perceived higher barrier to
entry (maybe they would not feel comfortable operating the unit), or they wouldn't be able to assess the benefits of access to a deeper library of content. Big-box retailers would also have to
consider on-site maintenance resources in order to ensure a low-failure rate and timely service.
Now, I am not saying this is the be-all, end-all. And this analysis is, well, really a
back-of-the-envelope hypothesis that needs to be fleshed out. But imagine the possibilities, people! There is nothing more real that something that you can hold in your hand, something that you can
consider your own. If I am totally wrong, then why did VHS eclipse the pay-per-view market? Or a la carte VoD versus the DVD market? How valuable is the ability to hold and believe that you own your
own media? I would argue that you can't even begin to quantify that kind of value to a consumer. Then again, I could be wrong. You tell me.