Retailers Seek Piece of the Action As TV Set Makers, Studios Accelerate Content Deals
Look for a lot more experimentation and frustration as Hollywood and video equipment manufacturers tinker with new ways to handle Web-delivered digital content directly to the living room. Despite a few recent deals - such as this month's Best Buy/TiVo alliance and the Blockbuster/Samsung collaboration - the role of retailers in this new home video assault is still very murky. Most significantly, there is no formula yet for revenue sharing among all the parties in the evolving digital distribution value chain. It took a decade for a never-quite-satisfactory VHS rental revenue share arrangement to emerge. The scope and complexity of the digital streaming and downloading environment promise even more complicated negotiations.
Count on the studios to start from models such as the one used for theatrical releases. In that approach, studios capture dominant stakes in new releases - sometimes 100% of box office revenue during the first week, relegating theater owners to income from popcorn, soda and concessions. Theaters start sharing in the box office gross if the movie has legs to stand for several weeks. The home digital distribution process, of course, has many more hands clawing for a piece of the action. So the formula will be even harder to create.
The major CE makers have assigned personnel to make content deals for their Web-enabled TV sets and DVD players, game consoles and other devices. The results so far are scattered deals, such as Sony's relationship with Netflix, LG's alliances with Netflix and CinemaNow and the Panasonic Viera-cast connection to Amazon's video-on-demand service. Other pacts are in the works with short-form video providers, including YouTube and countless online video start-ups. We expect a continuing trickle of content deals - bolstered by recent studies, such as The Diffusion Group report "Evolution of Over-the-Top Video," that predicts 100 million Web-connected TV sets by 2011.