Hollywood studios in video talks with Apple
By Matthew Garrahan in Los Angeles
Sunday Jun 10 2007 17:15

Apple is in advanced talks with Hollywood's largest movie studios about launching an online film rental service to challenge cable and satellite TV operators.

The service could be significant for Apple. If it signs enough studios, the group will get access to more premium film content.

Apple already sells films that can be downloaded and owned, and has distribution deals with Walt Disney and Paramount. Other studios have shied from tie-ups with Apple because of concerns that digital downloading may hit DVD sales.

But studios will be more enthusiastic about joining its video-on-demand service. Films downloaded to rent are unlikely to affect DVD sales.

Apple, which declined to comment, is believed to be aiming for an autumn release.

A film would cost $2.99 for a 30-day rental. Its digital rights-management software would allow films to be moved from a computer to at least one other device such as the video iPod or iPhone. The software would prevent movies being copied.

One studio executive said the service would "compete against cable companies and anyone else offering VOD into the home".

VOD is a growing revenue stream for cable companies, such as Comcast (NASDAQ:CMCSA) , and satellite operators, such as DirecTV. Online services also offer VOD, including Microsoft's Xbox Live, Movie­link and Unbox, a joint venture between Amazon and TiVo.

However, none of these has a customer base as large as Apple.

Sony Pictures Entertainment, 20th Century Fox, Paramount, Metro-Goldwyn-Mayer, Warner Bros and Disney declined to comment. Privately, though, the studios are excited about Apple getting into VOD. "When you think about Apple customers they are so connected to the brand they will try anything to do with it," said one senior studio executive.


Apple aiming to tempt traditional TV viewers
By Aline van Duyn in New York
Wednesday Mar 21 2007 13:50

Millions of video clips are available for viewing free on the internet, through video sharing sites such as YouTube or MySpace and hundreds of other websites.

Yet the appetite for watching traditional television does not appear to be waning. Nielsen, the media research company, released a study this week showing that the average US home now receives a record 104 television channels, eight more than a year ago.

The actual television set itself is also featuring more prominently than ever before: the average US home now has more televisions than people, according to Nielsen, with 2.8 sets compared with 2.5 people.


Connecting the 110m US households that watch television with the hundreds of channels that they increasingly demand is a hugely profitable business for cable and satellite operators, such as Comcast Corp (NASDAQ:CMCSA) , Time Warner Cable and DirecTV.

However, there is a question whether the imminent introduction of Apple TV – potentially the most user-friendly device yet to allow people to set up a wireless connection between their television and computers and watch video content stored on their hard drives – could undermine the business of cable and satellite operators.

"It [Apple TV] isn't the first attempt at solving the 'last 10 foot problem' of connecting the PC to the TV but in light of Apple's track record with music it is likely to be regarded as the most credible," says Douglas Shapiro, analyst at Bank of America.

Yet to have any impact on the business of providing multi-channel television, such online video needs to be a replacement for the services offered by cable and satellite.Operators are increasing choice for the viewing public by making popular programmes available on-demand.

Also, in the US the growing use of digital video recorders means people can easily record favourite programmes and watch them when they want.

Indeed, the focus is on providing more high-definition channels to allow the growing number of people who are investing $500 and more in top-range, flat-panel televisions to watch high-quality content. In contrast, internet videos, such as that on YouTube, are generally of relatively poor quality, and short in duration.

The Apple TV does not offer unlimited access to video on the internet but instead mainly allows users to watch content stored on Apple's iTunes online music and video service. As a result, Mr Shapiro says it is a "supplement to traditional pay-TV: it isn't a threat to cable or satellite within a reasonable investment time horizon".

Indeed, large cable companies such as Comcast have stressed that the growing demand for internet video is good for them, not bad, as it is one of the factors fuelling consumer willingness to pay for faster broadband connections, many of which are provided by cable operators.

For the media and entertainment companies that make movies and television shows, the introduction of Apple TV and other digital outlets is also increasingly being regarded as an opportunity to make more money, not less.

Beth Comstock, president of digital media and market development at NBC Universal, said even a year ago there was a concern that digital distribution would eat into television audiences.

"Growth [of digital businesses] is not at the expense of TV audience," Ms Comstock said. "The internet does not cannibalise our TV audience, a fear we had even a year ago. We find it reinforces and actively builds brands."

Apple's iTunes service is already one of the most popular ways of watching professionally produced video content on computers. Many media groups are licensing their movies and shows to iTunes, and people are paying to download them.

Yet in terms of concrete revenues, these distribution methods are barely significant relative to the large amounts generated from cable and satellite operators and the sale of DVDs.

Ms Comstock herself is charged with ensuring that NBC Universal generates $1bn of digital revenues by 2009. Although significant, even such an ambitious target compares to total revenues last year of more than $16bn.

The real loser of a successful Apple TV launch could be DVD sales and rentals. "Efforts to connect the PC to the TV, particularly Apple's, could eat into the home video rental or DVD sales pie," says Mr Shapiro.


Comcast hails US video-on-demand trials
By Aline van Duyn in New York
Thursday Apr 26 2007 13:56

Comcast (NASDAQ:CMCSA) , the biggest US cable operator, on Thursday reported success in early trials to make movies available through on-demand downloads on the same day as they are released for sale on DVDs.

The trials, which are taking place in Denver and Pittsburgh, include movies from seven studios: NBC Universal, Warner Brothers, Paramount, Disney, Fox, Lions (NYSE:LGF) gate and New Line Cinema.

Comcast said its revenues from pay-per-view movie downloads had grown steadily in the past few quarters. For the first time the company released specific information about this segment, saying that, in the first quarter of the year, pay-per-view revenue was $181m, up 26 per cent on the previous quarter.

"The trials show an increase in purchasing of movies," said Steve Burke, president and chief operating officer at Comcast. He said the service, with movies priced at $3.99, would be extended to at least one other city and could be made available to all of Comcast's customers.

The trials, which started a few months ago, are part of Hollywood's efforts to find new ways to distribute movies digitally.

The profit margins of digital distribution - either through cable companies or the internet - are higher because there are fewer costs but there are concerns that these new methods might eat into other source of profits such as DVD sales or movie sales to television networks.

Although there are efforts to build up distribution of movies online, there are concerns about piracy, which is less worrying when distributing on a closed system like a cable network.

Comcast itself is also moving into online video distribution, recently acquiring movie information site Fandango.com and announcing plans for a site to distribute professionally produced television and movie content on the web.

As well as selling cable television services, Comcast offers high-speed internet connections and telephone connections, and demand for these has soared, especially as Comcast offers broadband speeds which are faster than some telecom offerings.

"Cable is now unmistakably regaining market share [from telecoms rivals] in broadband," said Craig Moffett, analyst at Sanford Bernstein.

Specifically, Comcast, increased its quarterly profits by 80 per cent to $837m (including a one-off $300m gain from the dissolution of a cable partnership), and saw revenues increase by 32 per cent to $$7.39bn.

Source: Financial Times


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