The bottom line on online
August 16, 2007

A retailer friend of mine and I recently engaged in an e-mail discussion about the media coverage of video downloads—which he finds disproportionate given the small percentage of the populace actually using downloads and the small amount of revenue generated.

Of course, he has a valid point.

The reason video downloads are given so much ink, in this publication and myriad others, is because they’re new, the services and business models are many, and everybody pretty much agrees they are an important delivery channel for home entertainment. But nobody knows which model will eventually prove a keeper, providing new revenue, adequate copy protection and consumer appeal. Information about new technologies and consumer adoption habits is valuable currency.

Several new bits of consumer research, however, point exactly to what my retailer friend was getting at—Internet users may be intrigued by online movie services but so far are not using them heavily and are not terribly satisfied with the experience.

DEG last week reported on the results of a study its content committee commissioned from research firm SmithGeiger that found consumers prefer watching DVDs or live TV to Internet streaming or downloading. The survey of 1,035 broadband subscribers who used the Internet at least three hours a week showed that only 10% chose streaming or downloading as their preferred method of movie watching, while 41% preferred DVD and 32% preferred good old live TV. The respondents who used online video were more likely to watch movie trailers or clips that were forwarded to them.

When asked what types of video they would be willing to pay for online, the largest group—24%—said they would pay for a movie if they could burn to DVD for multiple viewings, or the ability to watch a movie online at the same time that it’s out in theaters.

Another report released earlier this month by The Diffusion Group showed that Internet users are intrigued by download-to-burn but highly price sensitive. TDG found that 29% of adult Internet users are likely to purchase a movie download if it could be burned to DVD, but only 6% would “definitely” do so.

DEG’s findings followed by a week a survey from market research firm Parks Associates that found few U.S. consumers are satisfied with videos downloaded from the Internet. Just 21% of all video downloaders said they were generally satisfied with the experience, and only 19% said they plan to download in the future. Only 13% of respondents thought downloads were reasonably priced, and only 15% thought the Internet offered good movie selection.

Director of research John Barrett’s conclusion: “People don’t see a reason to use video downloading services. Sure, it saves a trip to the video store, but it takes longer, looks worse, and you end up watching it on a 17-inch screen.”

The bottom line for video retailers may be laid out in yet another recent report by TDG, which in “Movie Rental Behavior and Proclivity to Use Online Services” finds that the dominance of video stores continues to give way to alternative sources such as direct mail, video-on-demand and pay-per-view. Online movie services, however, have a negligible impact at this time, according to TDG, with just 2% of adult broadband users having rented an online movie and only 1% doing so with any frequency.

Posted by Marcy Magiera on August 16, 2007 | Comments (0)