Two studios seen joining Disney on iTunes post holidays
Two major motion picture studios have indicated that they expect to join Walt Disney in offering their film content on Apple Computer's iTunes Store within six months, says one Wall Street analyst.
PiperJaffray analyst Gene Munster made the comments in a research note on Tuesday, after having met with four of the six major film studios to discuss various topics, including issues related to offering content on services such as iTunes.
In a summary of his findings, Munster said he believes there are three key reasons why other studios are taking their time in opening up film libraries to iTunes -- mainly "retaliation" concerns on the part of retailers, copy protection issues, and a desire to have a more flexible pricing model.
Retaliation
Studios, which generate a major portion of their revenue from DVD sales, have long relied on big-box retailers, such as Wal-Mart, Target, and Best Buy to fuel their profit margins. But new services such as iTunes often undercut DVD pricing and have generated concerns from retailer about the impact it will have on their DVD sales.
"It is possible that retailers will shift focus to other products if DVDs become less profitable due to lower priced online competition," Munster told clients. "Some of the studios refer to this as "retaliation" and they are concerned that this could significantly disrupt current business models in the DVD market."
Content protection
While Munster said the disruption of the current DVD business model was the biggest issue brought up by the four studios he met with, each is also concerned about the protection of content.
"For most studios, they are happy to see Disney serve as a 'guinea pig,' and we expect that if Disney's content continues to appear to be relatively safe from casual pirates, other studios will become more comfortable with offering content on iTunes," the analyst explained.
Studios still unhappy with limited pricing flexibility.
Meanwhile, Munster said that two of the four studios he met with indicated that the pricing on iTunes is a significant hurdle. Specifically, those studios want to have the ability to price certain movies at a premium to less popular content and are opposed to Apple's rigid pricing strategy, he said.
More studios to join iTunes within six months
"A couple of the studios indicated that they expect to have content on iTunes within six months, but it may require some tweaks to Apple's pricing guidelines to get them there," Munster told clients. "We would not expect additional studios to sign on with iTunes before the holidays, however, as most studios recognize that this change could disrupt their holiday business at retailers."
The analyst maintains an "Outperform" rating on shares of Apple Computer with a "Medium" volatility indicator. His twelve-month price target is set at $99 a share.
PiperJaffray analyst Gene Munster made the comments in a research note on Tuesday, after having met with four of the six major film studios to discuss various topics, including issues related to offering content on services such as iTunes.
In a summary of his findings, Munster said he believes there are three key reasons why other studios are taking their time in opening up film libraries to iTunes -- mainly "retaliation" concerns on the part of retailers, copy protection issues, and a desire to have a more flexible pricing model.
Retaliation
Studios, which generate a major portion of their revenue from DVD sales, have long relied on big-box retailers, such as Wal-Mart, Target, and Best Buy to fuel their profit margins. But new services such as iTunes often undercut DVD pricing and have generated concerns from retailer about the impact it will have on their DVD sales.
"It is possible that retailers will shift focus to other products if DVDs become less profitable due to lower priced online competition," Munster told clients. "Some of the studios refer to this as "retaliation" and they are concerned that this could significantly disrupt current business models in the DVD market."
Content protection
While Munster said the disruption of the current DVD business model was the biggest issue brought up by the four studios he met with, each is also concerned about the protection of content.
"For most studios, they are happy to see Disney serve as a 'guinea pig,' and we expect that if Disney's content continues to appear to be relatively safe from casual pirates, other studios will become more comfortable with offering content on iTunes," the analyst explained.
Studios still unhappy with limited pricing flexibility.
Meanwhile, Munster said that two of the four studios he met with indicated that the pricing on iTunes is a significant hurdle. Specifically, those studios want to have the ability to price certain movies at a premium to less popular content and are opposed to Apple's rigid pricing strategy, he said.
More studios to join iTunes within six months
"A couple of the studios indicated that they expect to have content on iTunes within six months, but it may require some tweaks to Apple's pricing guidelines to get them there," Munster told clients. "We would not expect additional studios to sign on with iTunes before the holidays, however, as most studios recognize that this change could disrupt their holiday business at retailers."
The analyst maintains an "Outperform" rating on shares of Apple Computer with a "Medium" volatility indicator. His twelve-month price target is set at $99 a share.
Comments
I think the studio's concerns regarding content protection and retaliation are for the most part justified. However, I can't for the life of me understand their obession with the pricing. They themselves price 2 disc dvds higher than single disc dvds. Why? Because they offer more. Exactly the relationship between iTunes and DVDs. DVDs offer more, they cost more.
If any stuios are reading this, listen. Before the iTunes store came along I hadn't bought a music album in over a year. Since then I have bought two albums and numerous single songs through iTunes. What does that tell you? Just as I hadn't bought an album in over a year, I havn't bought a movie in nearly a year. A year after the iTunes store starts selling movies in my country, I doubt I could say I haven't bought 5 movies in the last year.
Ya read me?
first post! YES! (this is my first first post)
I think the studio's concerns regarding content protection and retaliation are for the most part justified. However, I can't for the life of me understand their obession with the pricing. They themselves price 2 disc dvds higher than single disc dvds. Why? Because they offer more. Exactly the relationship between iTunes and DVDs. DVDs offer more, they cost more.
Well spotted, and well articulated.
With regard to pricing some higher and some lower, I understand the studios' view. Just like with music, they want to price the big hits at a premium since the demand is there, while pricing the "didn't even know the movie was in the theatre" stuff at a lower price. DeaPeaJay's comment seems to have more to do with the retailers concern about pricing lower for iTunes than for DVDs, which is different from this; I think the studios are okay with charging less to iTunes but in this aspect are concerned about retaliation (as the article says).
To be honest, I don't see iTunes movies being anything more than a novelty for the time being. They can't be burned to DVDs, they look choppy full screen on your computer, it's rather impractical to watch movies on an iPod, and the only way you'll have to get them on your T.V. would involve spending $300 on Apple's upcoming iTV. And they don't come with the extras from the DVDs. Most places don't have the broadband bandwidth for these or HD movies either.
Actually it's quite simple, and much cheaper than you say to get them onto a TV. A lot of people own laptops with s-video connections and can easily connect them for the price of an s-video cable ( < $10). Others simply have to purchase a vga or dvi adapter to s-video. I just leave my s-video cable coiled behind my TV and hook it up to either my MBP or Acer Tablet whenever I want to view content on the TV.
If the studios are comfortable with Fairplay protection, they should allow iTunes to rip DVDs into a Fairplay protected DRM file, as an in-between solution. That would make purchasing DVDs more attractive as it removes the ambiguity concerning the legality of ripping DVDs for the mainstream population.
That would be great. Though I don't think most people would think twice about ripping their own DVD's for their own use, no one can bring it mainstream because the programs for getting around CSS have been deemed illegal by the idiotic DMCA and the courts for idiotically upholding that part of the DMCA.
simple yet extremely inconvienent. so is plugging your iPod up to your tv.
I don't think using the iPod to watch video on a TV is inconvenient at all. Just plug it in and go. Works great.
Changing the subject, being able to rip our DVDs into iTunes would be very nice, but what's to stop me from ripping the Netflix DVDs? Are we on our honor? I'm afraid we don't really have very much honor. So, no go for ripping DVDs.
What I want to know is, when is freaking finding nemo going to be for sale? I'm curious to give the service a whirl, and finding nemo is what I want to purchase, dang it.
If it's fish you fancy, at least The Little Mermaid is out. I'd imagine Finding Nemo is back in the vaults by now, no?
Actually it's quite simple, and much cheaper than you say to get them onto a TV. A lot of people own laptops with s-video connections and can easily connect them for the price of an s-video cable ( < $10). Others simply have to purchase a vga or dvi adapter to s-video. I just leave my s-video cable coiled behind my TV and hook it up to either my MBP or Acer Tablet whenever I want to view content on the TV.
Alternatively you could save your films onto an iPod video and then use something like HomeDock to watch the film via your TV. I don't know what the quality would be like?
To be honest, I don't see iTunes movies being anything more than a novelty for the time being. They can't be burned to DVDs, they look choppy full screen on your computer, it's rather impractical to watch movies on an iPod, and the only way you'll have to get them on your T.V. would involve spending $300 on Apple's upcoming iTV. And they don't come with the extras from the DVDs. Most places don't have the broadband bandwidth for these or HD movies either.
You could have said the same thing for MP3s back in the 90's.
I recently found my old Rio 600 with a whopping 32MB of storage.
You had to use an extremely low bit rate to be able to fit a decent number of songs on it.
But now the technology is mainstream and MP3s can be played on many devices.
Do you remember the slide from the last keynote that said something like...
- Apple is in your den
- Apple is in your pocket
- Apple is in your car
And then Steve said that Apple is working on getting into your living room.
Everyone isn't going to run out and get an iTV the day it is released but, this is all part of Apple's long-term strategy.
Maybe later they start selling 50" LCD TVs with iTV built-in.
Maybe next year we will finally see the true video iPod.
Maybe next year they will start selling a car stereo.
How many parents would love to have 20-30 Disney/Pixar movies stored in their car stereo to keep the kids busy in the back seat?
Remember those big CD wallets we used to all carry in our cars?
The same thing is going to happen to DVDs.
If it's fish you fancy, at least The Little Mermaid is out. I'd imagine Finding Nemo is back in the vaults by now, no?
Screw the god damn vault. I hate the vault...........
Interestingly, in college I got the nickname flounder from animal house, but this cute girl on my floor decided I was like flounder from the little mermaid. Good times
I just skimed through the article but WHO are these two studios?
simple yet extremely inconvienent. so is plugging your iPod up to your tv. I truly think that the iTv will be the best solution although the price is kinda steep.
It's really not "extremely inconvenient". I would say mildly inconvenient. I will probably purchase an iTV, but not just to avoid this inconvenience. Rather, I'm very impressed with all the other things I'll probably want to do with it, like photo slideshows, and playing music with the Album artwork displayed or perhaps a nice visualizer. Watch the keynote, it convinced me.
By the way, I figured out how to get the keynotes to play with Comcast or really any other ISP, if anyone is interested. It's really pretty simple, but you might never find the setting if you didn't know where to look
If it's fish you fancy, at least The Little Mermaid is out.
Isn't Flounder in the cast of that movie?
Isn't Flounder in the cast of that movie?
Yup, see my post above.
This gives Apple over 6 months to show the studios some kind of results at the ITS through Disney's offerings, and plenty of time to settle the pricing issues, which will end up less of an issue after Apple signs a separate agreement with Walmart. The pricing issue is at least part negotiating tactics on both sides. Apple often allows higher pricing on selected albums in the music sections, and notice that PBS just put a lot of their regular shows on ITS, with Nova going for a higher $7.99 per episode.
So higher pricing isn't the issue; setting up a two-tier pricing schedule is. Apple doesn't want a regular, two-tiered schedule; they'd rather the studios price selected movies higher based upon special criteria, such as length, special timely content, or extra offered content such as director cuts, etc.
If Apple can get the studios on board with that idea, they'll jump on board the ITS bandwagon so fast Walmart's head'll swim. After all, it's an extra revenue stream with very little overhead.
Give this time. Apple obviously isn't flying blind here, and they seem to be sticking to a game plan. Their game plan worked with iTunes and music, there's no reason to think this'll fail - it's certainly too early to make any claims one way or another.