The Apple of Disney’s Eye
Less than one week after Amazon launched its UnBox movie download service to underwhelming reviews, Apple Computer announced it would begin selling 75 full-length Walt Disney films online.
New releases from Disney will be offered for download from Apple at $14.99 each while older titles will be sold for $9.99.
Industry analysts, such as Michael Gartenberg of Jupiter Research, see Apple beginning its service with a clear advantage. “It comes down to the consumption of the content on devices and the popularity of those devices,” he said. “Apple has the most popular mobile device on the market.”
Mr. Gartenberg said the iPod is the key to Apple’s success. “People forget at the end of the day the iPod drove people to iTunes, not the other way around,’ he said.
Disney CEO Robert Iger said of the new service, “We are here today to take the next step. We believe it’s a natural progression and what we believe will take traditional media to new platforms.”
Apple’s entry puts obvious pressure on Amazon and adds urgency for others, such as Netflix and Wal-Mart, to launch long-rumored download services of their own.
A report in the Financial Times said Wal-Mart has begun advertising for a business manager of digital video, suggesting it has worked out the technical and legal issues of the business.
The same report said Wal-Mart has exerted pressure on movie studios to not sell digital movies to Apple that may undercut the prices it charges for physical DVDs.
New releases at Wal-Mart are normally priced at $15.87, compared to Apple’s digital download price of $12.99.
Discussion Questions: What type of market do you see for digital movie downloads? What will be the key factors in the success and/or failure of services
such as those offered by Apple Computer and Amazon?
There is a market for movie downloads. The size and staying power of the market is another question. However, there is a group of people who want to see what they want to see when they want to see it. If they are comfortable viewing TV shows on their iPod, viewing movies is not a big stretch. There is a large demand for immediacy for a large group of consumers. They will want to download movies. In addition, the movies can be downloaded to computers and not just iPods from iTunes. The market of people who watch movies on the computers is even larger. The market for downloads seems to be growing so there may be great potential here. Meantime, Apple will make money from the people who demand immediacy.
I think this is merely a first, measured step for Apple in the movie space. Amazon is a retailer, Apple is trying to extend an existing media ecosystem. I found it very telling that they preannounced a media streaming device (iTV). It tells me that the current movie retailing model has been carefully optimized for their existing ecosystem — iPods and laptop viewing, but they are signaling that there is more to come. I would expect a bump in available resolution (they currently sell 640×480 which is standard def TV) when the new device launches. Notice there was no “and you can burn it onto a DVD for yet another price.” Apple knows that if you wanted a DVD you’d buy one. You can archive the data onto a disk, but this first step is about extending what you can do in the Apple world, not retailing per se.
Apple has learned from Microsoft — embrace and extend. That’s why Apple’s announcement, which in many ways was less impressive than Amazon’s, seemed so much more like a natural next step, and was not greeted with the “wha?” when Amazon started selling downloads with complicated pricing and limits and for more than the DVD.
Before we all get over-excited and make wild predictions about millions of downloads per second, note that music and movies are two different kinds of content and are consumed in two different ways. People buy and download music to use over and over again — we listen to our favorite songs and tunes hundreds of times each. But people do not watch a movie over and over (except for kids sometimes). How many times you have played the DVDs you actually own — four or five times? Ten? Each one is at least an hour and a half long; who has time to play a collection of even only 20 favorite movies a hundred times each? (That is almost an entire year of doing nothing but watching your DVDs!) Apparently, it is also simply something people do not want to do, time for it or not.
The sky is the limit for Apple; by allowing people to download movies, it only increases the value of the iPod which can only result in more iPod sales which in turn will result in more downloads. How Wal-Mart chooses to respond will be interesting as they’re just now starting to push their Tuesday video release promo which is being promoted heavily on Monday Night Football. This battle is only going to heat up and and I’m sure every studio exec is having to make some hard decisions right now regarding lining up with Apple or Wal-Mart, etc.
This is a huge market. Ask anyone who rents DVDs or purchases DVDs, especially if they have children who watch DVDs repeatedly. One of the keys to this success might be co-partnering with a cable company or a broadband provider to deliver easy access to their Apple service. On top of this, Apple can easily reach out and “touch” their customer database of iTunes users in their store and gain instant exposure and recognition to develop and move forward with instant sales and product takeaway. As we become more savvy in downloading content, the delivery of product via broadband will become more and more accessible. The key to the product’s immediate success is moving forward with access to the right market who already has broadband access. Apple’s iTunes platform gives them an instant springboard for this.
So “Ben Hur” or “The Ten Commandments” wouldn’t look good on a small screen but I bet Clerks 465 or American Pie 1,974 will be just fine. Apple knows its market.
I have a bit of trouble with the concept of viewing feature-length films on the tiny portable screen. Maybe it’s my 1960’s Zenith black & white sensibilities that are holding me back…
Some people do collect movies in quantity, but I suspect more to have them than to view them.
Burning your own movie DVD’s is a nuisance and at $12.95 per download plus a buck or three for the blank, label, storage case, etc., you might as well buy the retail package at Wal-Mart.
Maybe our teenagers take a different view of this, but for the most part, I’d rather rent movies (or borrow classics at the public library), than invest much cash in a collection.
Apple was/is and will be a brilliant marketing company. Look at what they accomplished with iPod. The iPod has crossed generations to become the “must have” device. We have become a society of “need it now, want it now, must have it now”…instant gratification. If the Apple/Disney partnership is able to offer DVDs at a better price and with instant gratification, this will be another Apple success story. Hats off to Steve Jobs. Steve, you may have done it again!
There may be legal trouble down the road if Wal-Mart or anyone else tries to force content providers (movie studios, music companies, TV producers) to limit their markets or limit their pricing. Apple’s iPod music success is based on keeping the appliance, procedures, and pricing ultra-simple, with a huge content selection. Simplicity combined with choice and low price: what a deal! All Apple has to do is repeat that formula and they will sweep the movie race, too. Furthermore, the www.YouTube.com formula could be adapted by Apple. YouTube’s popularity is huge, all the content is only a few minutes long so it’s easy to watch on a tiny screen, and the content costs YouTube nothing. Furthermore, iPod music wasn’t aimed at ending the prerecorded CD business, it’s a complement to it. Apple doesn’t need to end the prerecorded DVD business to be successful with its movie business.
All you have to do is observe the number of teens and young adults going to movie theatres. Few….
But the Baby Boomers and their parents are still movie theatre customers.
It is only a matter of time and Boomers, moving on that, will further spur movie downloading and lost theatre business.
Disney, Apple, and the rest will surely consumer market its programs and advantages. Demographics and phychographics are in play! Hmmmmmmmmmmmmm