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OPINION: Web kin

By Paul Sweeting -- Video Business, 8/10/2007

Paul Sweeting is editor of Content Agenda

AUG. 10 | BLOCKBUSTER AND NETFLIX have been copying each other’s moves for years, so it’s no great surprise that the bricks-and-mortar chain would make a move to buy Movielink.

Netflix was already in the electronic distribution business, with its “Watch Now” streaming service, giving it a feature Blockbuster didn’t have, so naturally Blockbuster had to do something in the electronic space.

Besides, the rumors of a deal for Movielink had been around so long it was almost a running joke.

But the two online distribution systems are not exactly alike, and their differences could have some bearing on which retailer, if either, is successful at sending movies over the Internet.

Most important, Movielink is a download service, while Netflix has concentrated on streaming video.

Since Netflix is only in the rental business, a streaming platform makes some sense. From a security point of view, it’s easier to control, since it doesn’t leave a permanent copy of the movie behind on the user’s hard drive (although, ironically, reports surfaced last week that hackers had found a way to permanently capture a streamed Netflix movie).

From an applications point of view, streaming is also simpler than downloading, likely resulting in fewer customer service calls.

And the “Watch Now” feature fits neatly into Netflix’s existing user interface.

The downside is that streaming requires an uninterrupted connection between user and head-end for the duration of the movie, which can strain available bandwidth.

The need for a constant connection also makes streaming unsuitable for portable applications.

MOVIELINK’S DOWNLOAD approach permits electronic sell-through, making it potentially more attractive to the studios than rental-based streaming.

It’s also more suitable for portable applications. Movies can be downloaded directly to portable devices or transferred from a PC to a portable device (under carefully DRM’d conditions, of course).

The biggest problem with downloads is that they take too long, robbing users of the instant gratification that people tend to be looking for on the Internet.

According to a new study from research firm Parks Associates, in fact, only one in five movie downloaders report being satisfied with the experience.

Streaming also offers advantages in terms of getting the movies to a TV screen. Without the need for permanent storage or complex applications, movies can be streamed directly to a set-top box, as Netflix is reportedly working on.

Downloads, on the other hand, require storage, which generally means a PC or a set-top box with a hard drive and a browser, still relatively rare.

Movielink’s proposed solution was to allow users to burn their downloaded movies to a DVD for playback on a set-top DVD player.

But like the rest of the industry, Movielink is still waiting for a license to begin CSS-enabled burning that would guarantee compatibility with all DVD players.

Although specs for CSS burning have been approved, a final license is still not yet available from the DVD Copy Control Assn., which oversees CSS licensing.

SO WHO HAS got the best model?

Part of the key will be how well Netflix and Blockbuster are able to leverage their core businesses to exploit Internet distribution.

Given both retailers’ sizable investments in the online subscription rental business, the logical strategy would be to offer an electronic complement to that business, by developing a subscription-based video-on-demand platform on the Internet.

For now, however, that route is blocked by the studios’ exclusive subscription Internet VOD deals with Starz! Entertainment’s Vongo service.

Paul Sweeting is editor of Content Agenda. Get more of Sweeting's analysis here.

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