Industry executives say getting a subscription model that works will be key to growing legit services.
Movie and music executives staunchly believe that subscriptions will be the primary model by which they'll deliver films, TV shows, and music to consumers online, but they say it's going to take time to transition from the a la carte approach that's still dominant. At the Digital Hollywood conference in Los Angeles this week, they said the key element that's holding up this evolution is not technology, or even economics, but rather consumer education. In other words, if consumers don't even know that legitimate services such as Movielink or Rhapsody are delivering movies and music now, it's tough to turn them into paying customers.
Scott Kauffman, CEO of FullAudio Corp., said he's amazed by how little people know about what types of online entertainment services are already available. He said he constantly talks to people at social gatherings who are afraid that their kids are on the verge of being subpoenaed by the Recording Industry Association of America. "And they all say they'd pay for a service to prevent that," Kauffman said.
But even getting knowledgeable online users to pay for services when they can easily get free content from the illegal file-sharing networks is no easy feat, says Tyler Goldman, VP of business development for Movielink, a year-old movie-download service backed by five of the major film studios. Goldman told InformationWeek that Movielink faces pressures not only from content piracy, but also from the fact that it's not an early "window" in the value chain Hollywood uses to wrench the most revenue possible out of each film. "We're not going to compete on price, and we're not going to compete on windowing," he says. "We need to offer a great user experience."
First, however, it has to make people aware that it's out there. So far, it's succeeding, with the number of movies downloaded increasing 25% each quarter, Goldman says. But there's still a long way to go.
Seth Skolnik, senior VP of business development for Paramount Digital Entertainment, said the cultivation of affinity groups will be key to the success of online subscription services, because devoted fans are more likely to pay more for access to customized content from the shows and movies they love. But getting budget dollars to invest in doing everything it can with its 55,000 hours of movie and TV archives will require more of a track record. "The driving force now is that we [need] a win in this space. We don't know enough about what consumers will buy today that would allow us to go to management and demonstrate the return on investment."
Until consumers are not only widely aware of what's available, but also have experimented with various services, it's best not to develop too complex a business model, says Amanda Marks, senior VP of Universal Music Group's E-labs. "Simplicity is better when you're trying to create a market from nothing."
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