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February 8 at 8:23am

There Is No Online Rental Business

By Ted Hope

As I write this The Weinstein Company’s top rental on YouTube is Michael Moore’s SICKO, with a whopping 151 views.  In reading PaidContent’s article on the TWC/YTube alliance, you can’t help wonder if there IS any business to be had in online rentals.  Is the online one-off transactional content-rental business completely non-existent?  And if so why?

I think we are starting to move away from the impulse buy mentality. It just doesn’t fit with the world we are living in.  Even with the convenience of online rentals, there is not enough value in it. If we are going to offer films in a single transaction, we need to offer more than the film.

My netflix queue, or rather my family’s queue, is almost 2500 strong, including the WatchInstantly.  I know what I want.  I know what it is on the queue.  I also have at To Watch list at home that is close to 500 titles.  I recognize that those that don’t try to earn a living in the film biz may not have such a robust list, but who in their right mind would rent a film that might be mediocre, when for twice the rental amount they can have unlimited streaming for the month.

A world of surplus and access require a different business model from one of scarcity and control.  Single transactions — without a richer context — are an old world model.

If we build a social world around that film, it may be enough to jump me from my already planned choices of viewing.  If we build a ramp of consistent discovery to that film, it may divert me from what I already scheduled.  If you offer me additional rewards for my viewing, I may opt in.  But if you ask me to fork over my hard-earned cash, all you give me is a film, particularly if it is not guaranteed to be great, and you ask me to watch it all alone, I will go elsewhere.  And evidently everyone else is too.  Well, everyone other than those 151.

Addendum: The failure of TWC titles to gain traction on YouTube has caused much reflection.  What other factors contributed to the dismal performance?  Scilla Andreen blogged the other day that the fit between content and platform was off.  What else?

Addendum 2/10/11:  LA Times reported a few days ago that downloads in US are up 40% to $385M/yr.

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  1. Henri Melingui / Feb 8 at 8:23am

    It's not that I don't think you're making some valid points, but are you trying to tell us that if you see a great trailer that gets you excited, and the only wat to see it is on the filmmaker's website for example, you won't rent it just because he wasn't twitting or facebooking enough? Or because he didn't sell a T-shirt or a coffee mug to go with it?

    I personnaly think the bigger issue is the lack of promotion and awareness (in the case Youtube rental for example), the fact that some movies have been already out in theaters a few months earlier, and also some movies not having trailers or clips that really gets an audience excited to see it.

    Also, I really hope you're wrong because I'm a filmmaker from Cameroon (Africa) and I'm about to release my next film on my own website as a rental since all the theatres in Africa are closing.

  2. nwrann / Feb 8 at 8:23am

    I think more specifically there is no YouTube Rental Business. To determine if the entire on-line rental market is dead you would have to include iTunes and Amazon VOD in the mix. With all things being relative I'm sure that whatever revenue the studios collect from on-line rentals is completely inconsequential to them in the grand scheme of things. But for an independent doc like “Helvetica” their itunes rentals and purchases were very valuable.

    I think that impulse buying is still very much alive. But it is also very much tied to specific product in specific locations. A physical DVD is unlikely to be impulse ordered at Amazon, but will be impulse purchased at wal-mart (physical impulse buy exists in the physical world). A VOD isn't necessarily going to be impulse purchased at Amazon (where there are too many steps to get it to your TV) but it will be impulse purchased through a cable box.

  3. nwrann / Feb 8 at 8:23am

    BTW I have a feature available on YouTube Rentals ( http://www.youtube.com/watch?v… ) and Amazon VOD (http://amzn.to/h01g92) and neither one of them have generated any kind of substantial sales.

  4. nwrann / Feb 8 at 8:23am

    The Scilla Andreen link doesn't seem to be working.

  5. Ajuhasz1 / Feb 8 at 8:23am

    I am a bit baffled by the world you project. 2500 social worlds? 500 ramps of discovery! How many hours are you willing to give from your life to these (film) lives that will be built for and around you? While I understand the (eonomic) impulse to use social networking to bolster the indie decline do we really want a film culture that substitutes as a life-maker? One or two discovered social worlds a day? When and if films legitimately create social worlds it is because they tap into worlds and communities and discoveries that were there before the film and will live past the film: places and issues where people live, act, are committed, and make the things that others discover, i.e. the niche of the indie world I sit in. Queer/black cinema does not need to build surplus (although obviously building buzz doesn't hurt): those feelings and ideas are already built in the community by living in the world.

    Now the matter of YouTube is another thing entirely, and in this case, I'd say that it is because vernaculars of viewing are already “badly baked” (see my free online YouTube “video-book” from MIT on this) and people only want to watch fast, funny, innane things when they put their browser there.

  6. Blake Calhoun / Feb 8 at 8:23am

    As nwrann said, the YouTube rental biz isn't very viable at this point in time. The Sundance experiment last year proved that too. I don't think having 99.9% free videos on a site mixed with some PPV is a good fit. Most people go to YouTube for quick free entertainment. Also, YouTubers have their own “stars” like Mystery Guitarman, Shane Dawson, Phillip DeFranco and (ahem) Fred. It's a different world over there in terms of viewers (for the most part) and a lot of narrative stuff struggles anyway.

    I actually have an online series on YouTube called “Pink” (http://www.youtube.com/pinktheseries) that has been rather successful with just shy of 7 million views – but all for free – and with little financial return to us (however it has opened a lot of doors). The ad rev share hasn't amounted to much either. We've considered offering new stuff “for rent” but haven't done so yet on YouTube (or anywhere). But we are looking at Amazon, iTunes, etc.

    Btw, I just read this in today's Cynopsis Digital…

    “U.S. consumers spent more buying/renting movies online last year ($385 million – up 38% y/y) then they did renting and purchasing online TV shows, for the first time, according to research from IHS Screen Digest. Apple's iTunes continues to dominate the business (although it has seen its market share shrink somewhat,) accounting for 64.5% of all digital movie spending in 2010, down from 74.4% in 2009. Apple is now facing competition not only from Microsoft's Zune and Sony's PS3 store, but also from newer players (represented by IHS in an “others” category) such as Amazon and Wal-Mart. The latter, which acquired online movie streaming service Vudu last year, could quickly become a major player in the sell-through space as it builds out that part of its business – Wal-Mart registered more than $3.5 billion in physical sales of movies on Blu-ray and DVD last year, notes IHS Screen Digest.”

    While those online numbers aren't huge compared to physical disks, they do show some promise. So I wouldn't say there is no online rental business, I'd say it's a nascent industry that is growing, but definitely not there yet.

  7. Jason Brubaker / Feb 8 at 8:23am

    As a filmmaker and content consumer, I can tell you I've been a little bit upset about the demise of rentals as a viable way to bring in at least a little deal…

    At the same time, I am addicted to NetFlix streaming. I have spent just about every night for the last two weeks watching episodes of Battlestar Galactica and I look forward to COB, so I can repeat the process tonight.

    But on the other hand, companies like NetFlix offer the absolute worst deals for indie filmmakers. So I guess, sooner or later, I need to decide what side I'm actually on.

    Jason Brubaker
    Filmmaking Stuff

  8. Jason Brubaker / Feb 8 at 8:23am

    Do you have a website for your movie? If so, how is your traffic?

  9. nwrann / Feb 8 at 8:23am
  10. nwrann / Feb 8 at 8:23am

    I use Netflix Instant as well. With it I've been able to make some great finds like Valhalla Rising, Bronson, Dogtooth,. Enter The Void, Party Down tv series etc. I also use Redbox alot too. But, to a lesser extent I've used VOD to see Nice Guy Johnny, Catfish, Hatchet 2, Winter's Bone etc. So even though I use Netflix Instant for, probably twice as much content, I do use VOD for some exclusive stuff or if I don't want to wait for it to be available on Redbox.

  11. Jason Brubaker / Feb 8 at 8:23am

    Ok. Email me outside of this thread. I'll send you some resources that may help.

    Jason Brubaker

  12. Cptsolo29 / Feb 8 at 8:23am

    when is everybody gonna come to the reality that people DO NOT enjoy watching movies on a computer! being in front of a computer is psychologically viewed as work by adults and by kids only to quickly chat on camera. Movies are not work. You sit down, you turn on the TV press play and eat something. Only when they perfect the Google TV when you can call ANY movie ANY time you want, only THEN will online viewership will take off…

  13. Dave / Feb 8 at 8:23am

    can't watch your film in Canada on youtube or amazon…lame.

  14. James / Feb 8 at 8:23am

    Sicko is an obscure title (in the scheme of the movie world of Batman and Avatar) and Youtube Rentals have not had a legitimate commercial launch, nor an obvious commercial presence (this will come later in 2011). These are not good examples by which to judge the rental online market. Its true that Netflix subscription rentals are not good for the individual rental transactions business and this is part of the reason majority of Netflix streaming library is long tail content (Studios do not want to be comingled with other lower performer suppliers nor do they want to to have unequitable share of revenue). Apple's online rental consumer spending (iTunes and Apple TV) is between $500M and $600M a year (they keep about 30% share) and growing double digits. Unfortunately for indies in online rentals, rather than an 80/20 rule (that is 80% of sales volume is generated by 20% of titles), its more like a 99/1 rule due to the nature of limited discovery tools now available yet nearly unlimited shelf space. This 99/1 means its top studio releases (Avatar, Batman, etc.) driving much of the volume. This will change as Apple, xBox, Amazon (the top 3 players in transactional digital rentals) introduce innovation in consumer discovery thats equal to or better than Netflix today. And there are about 15 startups working on this discovery problem as we speak. In fact Youtube announced the acquisition of fflick last week.

  15. nwrann / Feb 8 at 8:23am

    I agree. That is lame.

  16. nwrann / Feb 8 at 8:23am

    I don't watch movies on my computer. I have a blu-ray player that hooks up to my TV. Through that blu-ray player I can watch VOD on Amazon, Youtube, Netflix, Hulu and a bunch of other apps. And I think that the $385 million spent on watching movies on-line last year would disagree with your assessment. Granted it doesn't compare to the billions spent on theatrical or disc but it's 385million that I wouldn't mind having in my pocket.

  17. Dave / Feb 8 at 8:23am

    Hey NWRANN, i saw your trailer on youtube…pretty cool. It reminded me of a 16mm film I directed back in 97 called “DRONE”. I'd like to talk to you about maybe selling your film in Canada through my new online system. Would you be interested in having a chat sometime?

  18. nwrann / Feb 8 at 8:23am

    If you're on twitter follow me at http://www.twitter.com/nathanw… . I'll follow you back and we can DM from there. Or you can find my e-mail near the bottom of the page at http://daltongang-productions…./

  19. Mike Busson / Feb 8 at 8:23am

    Sorry, Ted, but I think you're wrong on this one. I believe that online rental will be a fundamental part of the viewing experience over the coming years. Personally, I haven't rented a DVD or visited a cinema in over two years but have seen dozens of films.

    Why isn't the YouTube experience working? As Blake Calhoun says in his comment, people aren't tuned into using YouTube for online rental. It's not a good mix. Equally, as other commenters have mentioned, you're ignoring other platforms such as iTunes or Amazon VOD.

    From my perspective, online rental and purchasing will only increase when content delivery platforms drop the ridiculous concept of geo-blocking. Release windows based on geography are going the way of the Dodo with mainstream films so it's time the progressive online content providers follow suit. It's crazy that here, in the UK, we can't get Amazon VOD. Likewise, Netflix, Hulu and all the other major players you guys in the States get access to.

    The other part of this is the ability to stream via your TV. Over in the States, you guys have more options than the rest of the world. There are very few internet enabled TV's or set top boxes available for non-US viewers to use.

    From my experience with our film Stag Night of the Dead (http://www.snotd.com), the feedback we've had is that people want to watch the movie on their TV sets rather than their computers. Crucially, it's not because they want a physical product (i.e. a DVD) but want to be able to stream the movie via Netflix, Lovefilm or their set top box.

    If a content provider were to come up with 1) a solid platform 2) non geo-blocked 3) set top box/gaming console/iPad/etc. service for indie films then my bet would be that they would make a mint for themselves and for the filmmakers.

    At the moment, everyone is scrambling around trying to make sense of the new world whilst still clinging to vestiges of the old…

  20. Michael Herzog / Feb 8 at 8:23am

    I can get so many discounted DVDs or BluRays for a few Euros that I don't really understand why I should pay more than cents for digital rentals. But maybe I'm just a minority that likes to have real media I can keep for real money. ;)

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