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September 27, 2004

Movielink #1 in VOD

NPD, a leading market research firm, released a press release reporting market numbers for Video On Demand services. Picking through the public data:

  • 0.3% of videos purchased or rented came from VOD sites.
  • MovieLink is the leader in this emerging market with 33% of sales, followed by MovieFlix
  • 80% of consumers are male
  • Half the consumers were under 35
  • Leading title downloaded this quarter: Independence Day

I think there are a couple of issues hampering growth for VOD. One is obviously the lack of titles given that Independence Day, released in 1996, is the leading title downloaded. To be fair, there are some 2004 titles at MovieLink, but they are all $4.99, which is a bit pricey.

Second, there are a limited number of conduits to the television and PC viewing of movies doesn't thrill the majority of home users. There's the output side of things where users can route video from PC to television. That seems to becoming less of a problem. There is also the input side as well and I think many people also want to be able to select the video for download from the comfort of their television as well. Microsoft Media Center Edition has this feature already and Tivo/Neflix will do so in the future.

If I were in the business, I'd really look into adopting a different strategy for distribution. I'd partner with Hauppauge or a far east manufacturer and come up with a cheap hardware solution like MediaMVP that would work seamlessly with their service. I'd then offer it to users at a low cost, or create a value by bundling it with a number of pre-paid downloads (e.g. pre-pay 20 rentals for $79 and get the Movielink connector kit free). Not only would that help remove the conduit problem but also create a barrier against rivals stealing my customers.

(Hat Tip: SlashDot)

Posted on September 27, 2004

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