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Interest Grows for Video-On-Demand Opportunities

With the DVD rental market continuing to dwindle, we are again seeing interest emerge for online video-on-demand, with both the large Hollywood Studies and online content distributors making recent strategic moves in this direction.

Internationally, there are already a number of large Video-On-Demand (VoD) providers, including Netflix, Amazon, Wal-Mart and Apple, which introduced a rental streaming service via iTunes in early 2008.

A sign of the times came with the 2010 bankruptcy of Blockbuster, once one of the largest move rental companies. In April 2011 it won final approval to sell its assets to Dish Network Corp for $320 million. Blockbuster attributed its bankruptcy to the economic downturn and increasingly competitive environment in the US, via services from NetFlix and Coinstar’s Redbox. At the time of bankruptcy, Blockbuster had 5,600 stores in operation.

The Blockbuster name is a marketing tool in itself however, as it has strong brand recognition attached to it. Dish Network hopes the acquisition of Blockbuster’s assets will provide an opportunity to expand its services and cross-marketing initiatives while also complimenting its existing video offerings.

Other digital media players showing renewed interest in the VoD sector include the industry heavyweight, Google. It initially launched an online movie rental service in 2010 called YouTube Rental and in April 2011 it increased its competitive position by forming partnerships with large Hollywood studios Sony, Warner Bros and Universal.

Not to be undone, Facebook has entered the VoD market via a partnership with Warner Bros; signalling the beginning of merge between social networking and VoD services. By using Facebook credits, users can purchase a movie and watch it in their browser. Titles are available for both purchase and rent. Some points to note regarding the Facebook service include:

  • Facebook users must allow the Warner Bros App access to limited personal information, just as with other apps.
  • At this stage only Facebook credits can be used to purchase movies. While this system allows for international users to make purchases as it is not based on currency—it also limits consumers to those who are prepared to purchase credits.
  • In the future the combination of using demographic data might be tied into the VoD service and prompt suggestions for other movies that consumers may like.

The Hollywood studios have long generated a large revenue stream from physical DVD rentals and it will be quite a task for online channels to make as much money. However the economics of online distribution seem to be improving and with DVD rental kiosks like Coinstar proving popular and services like Netflix gaining in popularity; it certainly appears that the writing is on the wall for traditional video outlets.

By Paul Budde, Managing Director of Paul Budde Communication

Paul is also a contributor of the Paul Budde Communication blog located here.

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