Cart (0)
VIDEOTrendspotting: Investing in Video on Demand
By
Carol Kopp
Sep 08, 2010 9:15 am
Blockbuster may be ending its run just as everybody else jumps into the movie-delivery business.
 |
|
It’s a peculiar fact of 21st century life that long-established habits, like stopping by the video store, don’t really die, they just fade away, and they fade away fast these days if they fail to adapt to changes in consumer technology.
Even bankruptcy, which the Los Angeles Times first reported, wouldn’t kill Blockbuster, at least not immediately. It could, however, allow it to close another 500 of its 3,400 stores, on top of about 500 already shut down this year.
Then, if you’re a real optimist, Blockbuster could emerge from bankruptcy, build up its online streaming-video business (yes, it has one), and compete against the two faster, smarter newcomers that ate its business: Netflix (NFLX) and Redbox, owned by Coinstar (CSTR). It’s already in penny-stock purgatory, so shareholders can only hope.
That is, unless somebody faster and smarter can deliver the goods better than any of the above. There's no shortage of current contenders in the entertainment delivery business, and many more companies are working on it.
The price wars have already begun, which is particularly worrisome in this business. Most of these competitors don’t own any of the content they’re selling, and the actual owners out in Hollywood are wondering what, if anything, they’re going to get out of these deals.
So, it’s fairly early in the game. About 36% of American consumers still rent videos at real-world stores. Mostly, that means Blockbuster because its chief rival, Hollywood Video, is already dead. Another 19% use vending machines. That would be Redbox, primarily, which has 27,000 strategically placed kiosks of current best-sellers, and just announced its billionth rental. And 45% use subscription services, dominated by Netflix.
Here are a few of the major competitors, now and short-term future, with some guesses about their prospects:
Familiar Logos
Did you know that Walmart (WMT) tried streaming video a couple years ago? Nah, nobody else knew either. If Blockbuster can’t rent movies using a different delivery system, a company with no real credibility in the content or the technology doesn’t look like a born winner.
On the other hand, Best Buy (BBY) sensibly branded its video-streaming service CinemaNow, although it doesn't lack clout on the hardware side, where it's working hard to get TV-to-Internet connectivity into homes.
One spoiler could be Amazon (AMZN). Its early efforts at video rentals didn’t make much of an impact, and rumors that it would buy Netflix haven’t panned out. Instead, it's launched Amazon Video on Demand, with a “click and pay” model that may turn into a monthly subscription offer, directly competing against Netflix.
Pro Wrestlers
Google (GOOG) and Apple (AAPL) practically tripped over each other last week, with dueling announcements about their Internet TV products. The revamped Apple TV and the new Google TV are different approaches to the same goal: at-home video with the limitless programming of the Internet and the ease of use of television.
In addition, the Financial Times reports that Google is in talks with movie studios to stream videos on its YouTube site. That should be an interesting sideshow all by itself: Will YouTube users pay to see Clash of the Titans when they can watch the amazing meringue-dancing dog for free?
And that's exactly the sticking point for Google, Apple, and everyone else in this business. None of them own the programming that they hope to offer, or want to create it. Each of them is trying to cut deals with movie and television producers to offer their programming.
And many of those producers are as puzzled as the rest of us about whether this is a potential new revenue stream, a threat to their existence, a direct conflict of interest with their core businesses, or all of the above.
The deals in place or in the works are numerous. For instance:
- Apple TV will offer movies for $4.99 and television shows for $0.99, but only from Fox (NWSA) and ABC Television (DIS) initially. Netflix will be available on Apple TV as well as iPhone and iPad devices.
- Blockbuster still has deals with Fox Television, Sony (SNE), and Warner Brothers (TWX) for 28 days of exclusivity on new movies.
- Netflix announced it will be the exclusive distributor of movies from Paramount, owned by Viacom (VIA), MGM Studios (MGM), and Lions Gate (LGF).
But here’s where it gets really messy: Hulu reportedly is considering a paid subscription service, followed by an IPO. Hulu is currently owned by Disney, News Corp. aka Fox Television, and NBC Universal, which will soon be controlled by Comcast (CMCSA). Wonder who’s going to get that exclusivity deal?
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
