Internet Movie Downloads vs Store DVDs – a quick biz lesson

Rich Greenfield of Palicapital had another great research note about the economics of video downloads , in particular how they apply to Unbox, Amazon.coms new video download program.

Here is his email summary of his research note, below it are my comments explaining why the studios and anyone who sells to retail is in no rush for video downloads, particularly of movies, to succeed.

Maybe the Studios Do Not Want Legal Internet Downloading to be Successful Right Now?

Richard Greenfield

Mark D. Smaldon

Yesterday evening, Amazon launched its new movie and television download to own/rent service called Unbox (

The rules and pricing scheme of Unbox, make us believe that movie studios do not want legal movie downloading to be terribly successful in the near-intermediate term.

Exhibit A illustrates the Unbox download-to-own pricing ($19.64) for a recently released movie, Family Stone.

· $4.65 premium (31%) to the cost of the same physical DVD available on Amazon as shown in Exhibit B (albeit you do have to buy at least two DVDs to qualify for free shipping from Amazon, with no sales tax on the download or physical DVD).

· Unbox Internet download-to-own allows you to playback the movie on two computers and two portable devices, but you cannot burn the DVD for playback on a standard DVD player. Consumers need to connect their computer to their TV.

o What makes no sense to us about the inability to burn a DVD, as well as limiting to two PCs/devices, is that the studios are competing against increasingly easy to obtain, albeit illegal, ripped DVD versions that have no restrictions on PCs/devices that can be burned for playback on any DVD player.

o Exhibit C illustrates an illegally ripped version of Family Stone. The “torrent” file was found by simply entering the words “family.stone torrent” into a Google search window (bittorent client application must also be installed once). The illegal version has no cost, no restrictions on use/playback, and can be downloaded far faster than the Amazon version as it utilizes BitTorrent peering technology to accelerate the download (relative to the 1 hour 50 minute download time stated by Amazon for a 2-hour movie file on a 3 Mbps connection).

§ The fact that Amazon is not using P2P technology to accelerate downloads also means that they are bearing all the bandwidth costs to transmit the files, versus leveraging their users’ bandwidth to offload a significant portion of those costs.

· Unbox Download-to-Rent – why bother? Amazon’s unbox rental service is constrained by the studio’s pre-existing subscription deals with HBO, Showtime and Starz Encore. The reason why Unbox rentals expire 24 hours after you begin watching (although you do have 30 days to start your 24 hour viewing period), is that anything over a 24 hour rental is a violation of the pay cable subscription window output deals. This has been the underlying problem affecting previous online rental services such as Movielink and Cinemanow.

o Given that pay TV output deals are critical to movie industry economic health, not to mention that the majority of these pay TV output deals last until 2010-2012, it is unlikely that online download-to-rent terms of service will improve in the near-future.

o The $3.99 rental price (see Exhibit D), is the same as renting a physical DVD from a video store (such as Blockbuster), and again you cannot burn the file to a DVD to watch on an existing in-home DVD player, users must watch on their PC, a portable device or connect their PC to a television screen.

Restrictions on use should drive a cheaper price to the consumer, not the same or higher pricing, especially because the studios’ cost to produce and distribute is lower in an online world. In turn, the rules/pricing of online downloads-to-own/rent appears to be intended to ensure that they have no meaningful impact on the movie/television studios existing (and highly profitable and important) physical DVD business. While this will surely change in the future, the goal today appears to be to protect incumbent physical DVD distributors such as Wal-Mart.

· At a premium price point we also question who is the target market? Illegal movie downloaders are unlikely to be attracted at these prices and physical DVD purchases are unlikely to be interested in dealing with primarily PC-based nature of the downloadable files (with heavy movie renters far better off with Netflix or Blockbuster than Amazon Unbox).

We are quite interested to see how Apple’s new movie store changes the game next week (September 12th launch). Speculation is building that the service will go beyond simply allowing full-length movie downloads to an improved video iPod; with some form of hardware/software solution to enable (ease the process for) viewing of downloaded movies on home televisions (home theatres).

· We hope the Apple service is significantly more innovative than the Amazon service, as the studios need to accelerate the attractiveness of digital delivery to prevent illegal P2P from capturing too much market share (particularly as cable system/RBOCs are continuing to increase bandwidth provided to consumers as competition to control the broadband IP-pipe into the home continues to heat up).

First of all, i dont agree that the illegal P2P market will capture any more market share than it has now. As I have said many times, its too much hassle for anyone other than those who have lots of time on their hands, and those people will borrow DVDs from their friends before they would buy the movie.

However, his google search for a movie torrent does raise the question of why the studios and MPAA dont go right to Google and ask them to use all that amazing search technology they have to block illegal torrent sites the MPAA provides them. Its not like the MPAA cant put in the same search terms and then provide a list of sites.

But lets get back to why Studios are smart in not pushing Internet Downloads of ANY products they sell in packaged goods to retail. The simple answer is that download sites pay a license per download while retailers buy inventory.

The complete uncertainty of how many licenses/downloads may occur vs the far greater certainty of product that has been shipped selling one way or another with an expected return percentage makes downloads not very desirable to big media companies.

Its one thing to allow downloads of yesterdays TV show and create a market and revenue that didnt exist last year. Its another thing to mess with your biggest revenue stream.

What makes downloading even less desirable is that the sites offering the downloads don’t believe in their ability to sell enough to pre buy a given number of licenses. IN other words, I can’t go (so far anyway) to CinemaNow or MovieLink and say “we need you to place an order for at least 10k licenses in order to get the same price as 10k DVDs shipped to a retailer”. They won’t do it.

I will give you the gist of an exchange i had with a torrent site that promotes that it reaches 70mm unique users and growing. They wanted us to offer our content for sale through their site. I told them I would be happy to if they placed an order for a number of units that made it worth our while to encode the content, deal with the management of the content and working with their systems. All that is overhead to me, and I was absorbing the risk. So if they placed an order like a retailer or rental outlet would, i would be happy to work with them. They wouldnt put up a nickel. They wanted us to absorb all the risk . Which in turn tells me they dont trust their platform.

Compare this to Netflix. This is one of the reasons Netflix has been so successful compared to any and all download sites. They believe enough in their product and systems to know and trust what they will rent and how many turns it will generate. Which in turn allows them to offer guarantees and minimums on products they want to offer.

So the choice for studios comes down to simple economics. Make a real sale, and get the revenue minus a historical rate of product returns or hand over an encoded file and hope it sells with no assurances of ever making a nickel or covering your administrative and management costs.

And as far as the perspective of giving users what they want and they want downloads. If we dont offer them downloads, they will find downloads on their own , jus
t as we saw in the music business… Nope. This aint the music business. This aint 3 minute songs that download in under a minute and allow users the option of getting the 1 song they like instead of a package of 10. IF movies were sold in prepackaged albums of 10 movies. Maybe. If movies were 3 minutes in length. Maybe. If watching on a computer or on an Ipod was as good an experience and often better than watching on the smallest TV in the house, maybe. But its not.

Watching video on a computer or on a PDA/Ipod is a 2nd class experience. It works amazingly well as a time killer on a bus, plane, lunchroom. It works good enough in a dorm room or your apartment bedroom, but its not going to replace watching on a real tv. It will always be a niche market in every manner.

and for all you “but i can and do download everything ” types. Good for you. Get up and away from your computer and go see how the rest of the country lives. And when you hit 27, get a real job or move out of your parents house, whichever comes first, tell me if you are still downloading 10 movies and burning them for your friends and creating 10 playlists for Itunes every week like you did in college or when you first graduated. At some point you realize the time you spend downloading and burning to a DVD is worth more than the 10 bucks to go to a movie or 20 bucks or less to buy the movie. When that happens you will have figured out that all that time you spend burning DVDs and trying to manage space on your hard drive wasnt worth it

63 thoughts on “Internet Movie Downloads vs Store DVDs – a quick biz lesson

  1. I really agree with this blog….!

    Comment by Ashley -

  2. Interesting post!!

    Comment by Calanthe -

  3. Now that you can download movies,video and music online people are using it in various PSP devices wich is easier for them to benefit from the downloads.

    For instance you can watch the videos and movies on you ipods, as well as listen to music.

    I have a page at my website where you can download music,movies and videos, if anyone would like to check it out it\’s at or you can just go to and follow the links.

    I think it\’s much better to be able to enjoy what you want when you want!

    PS: If your into videogames try our link for those on a FREE trial and then you can try out a game before you actually purchase it. That link is

    Comment by John -

  4. I\’m reading most of these posts more than a year after they were made. I find a lot of truth in Mr. Cuban\’s post that started this thread. It seems to me that a few years ago… especially pre-VHS days… that \”circumventing\” the system as has been mentioned several times would NOT have even been a part of a moral make-up. I would have never thought of \”owning\” a movie with out paying for it… or even a magazine for that matter. One of the by-products of the internet age is this attitude that we\’re entitled to possess whatever we\’re technically capable of downloading… like if we pay for internet access whatever\’s availiable on the internet is our right. You see this claim regularly made in matters of internet porn.

    Comment by Ronzo -


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    Comment by rsgoldsky -

  7. How do you burn DVDs from your PC to be able to watch at home on your DVD player?
    I have downloaded the wizard of OZ for the kids to watch its an oldie i could not find in shops. I can not convert properly for watching on DVD.
    Its in windows media player format they can watch it here on my PC but i like to surf sometimes.
    Also I am JCVD fan if anyone knows how i can take my old original cd that is becoming damaged and convert it also.
    I have read it needs some sort of decoding i have heard macros etc but do not know what this is.


    Comment by joe weiner -


    Comment by rsgoldsky -

  9. Why would anyone drive to a video story to buy something they can download at home? The only reason would be that the ease by which you can download then watch on your TV is not quite there yet. Once that gets straightened out, it’d a done deal.

    Comment by girls basketball -

  10. To post #52.

    Good article, I enjoyed it and I agree with it in many ways.

    Comment by David G -

  11. I agree the pay-per-download sites are pathetic.

    I am going to have to disagree with the author’s assertion that it takes a lot of time or effort to download movies as opposed to renting or buying.

    I am 28, have a wife, a kid, and a full time job. I spend about 10 minutes a day on “babysitting” of my digital downloads. I download games, movies, music, and applications. I typically have between 2 and 8 downloads going simultaneously at any given time. I simple queue the torrent, and walk away. Once or twice a day in the morning before work or at night before bed, I check on the torrents in order to see which have finished.

    Throughout the week I simple make note of movies, games, or applications I hear about or want, and then I look for them during my 10 minute timeframe that night on my home PC. I have bandwidth settings customized so that the hit on my total cable modem bandwidth does not negatively impact my or my families other internet activities (gaming, browsing the net, online banking, etc).

    With between 2 and 8 downloads happening at any given time, I am always up to date on all the latest releases. I only download DVD quality movies, none of the lame “cams” or pre-releases copies. So basically the moment something is out on DVD, if its worth having, I have it within a few days. All on 10 minutes a day. My PC is connected via component HD to my large screen LCOS 61″ display and at 1080i, the movies/videos we watch from the PC rival any DVD on the market.

    As an additional hobby, I spend probably about 1 hour a week catalogueing all my movies, organizing them, getting cover art for them, and entering details about them into a database which I make available via a secure web portal to friends and family who connect to my PC from the web to see what I have, and then let me know they would like a copy. They are in no rush, I usually pick a night a week and burn everything friends and coworkers want to a DVD or two, and then bring it to work the next day where my co workers happily reimburse me with a blank DVD and their gratitude shown via springing for a cheap lunch one day in the future.

    I fail to see how this minimal time or monitary investment requires me to be >27 and living with my mommy, “wasting” all my time on this. ??

    Do I consider all of this stealing? Nope. Why? Simple, because I wouldn’t pay for the stuff anyhow. I simply can’t afford to buy DVD’s. I never have, never will. I pay to watch about 1 movie a month at the theatre, on average, and that’s it. If there wasn’t free downloading from the net, I simply would not have the movies and other digital content which I have, and it wouldn’t be a big deal. I am not taking a dime out of the pockets of the content creators, because I would never pay for it to begin with. This is an added luxury that I have, but could easily live without and would be forced to do so if what I was doing wasn’t possible.

    There are friends of mine who are different, who have large DVD library collections. More power to them, I choose instead to invest my extra money in video game subscriptions, PC hardware upgrades, and large screen TV’s, etc.

    In the end, all my money goes right back into the American Economy the same as my the salary of an avid DVD collector does.

    Comment by David G -

  12. I just ran across a book titled “The Long Tail” which addresses some of the ideas expressed in this article. Here’s a five page article about it that I think everyone should read ( Very enlightening.

    Comment by Steve Watson -

  13. One question i had after reading this was why downloading a movie via bitTorrent would be SOOO much faster than downloading from a service like Amazon’s? I can see how P2P would always be faster, but a company like Amazon can afford to spend a *lot* (if they choose) on Internet b/w, with servers located close–from a network perspective–to the Internet backbone. I’m sure this is the case already. I guess when you’re talking about lots of customers, piping that many large files directly to customers over the Internet is just too much even for big pipes (OC-48s, OC-192s etc) to handle? Is this the real bottleneck? Or is it processing power and interface speeds on the servers? Or both? Like I said, I can see how a distributed solution via P2P should be faster, but given enough $$$, like I would think Amazon would be devoting to their video store, I thought the download speed gap as actually realized by customers would not *that* huge. To use the words in Rich Greenfield’s research note, “..can be downloaded far faster than the Amazon version…”

    Comment by Mike -

  14. I hear blu ray and hddvd recorders are going to make it so we can pirate movies in high definition now.

    Comment by blu ray -

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  16. On N-flix believing in their product…it’s less belief than simply reading the queues. Brilliant that the average customer shares in advance 9 to 10 months of viewing habits. Blockbuster stores and download sites just don’t have the data. If the N-flix patent sticks the others may not even get the chance. The DVD, once in hand, still rules the day.

    Comment by 11nong -


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  19. 69. Well, I have some ideas for your Movie Theatre Challenge.
    I know you have probably lost or wont read all the inputs, but, what the hey.
    1: The big stores, WalMart, Best Buy, and others offer discounts on DVDs bought the first week. The theatres, instead of competing, should offer a rebate when you go to the movie, and then, say, $5 off the purchase of the DVD. This would benefit both markets, and if the customer doesnt like the movie enough to buy the DVD, no loss, and the theatre at least gets the sell. The tickets already have the name of the movie on them, so no increased technology, or cost to implement this rebate or discount when purchasing the DVD.

    2: Another would be for the theatres to offer sort of a raffle, the tickets are already numbered, so they could give away a years free movie visits, 12, one for each month to the lucky winner. Just advertise on the screen for a month the number of the lucky winner, and that also entices people to buy more tickets to more movies just in hopes of being the one to win a 12 month free pass. These two ideas are totally in line with operations and technology already in place.
    I have a few more, but these hopefully will get your attention. Hope to hear if youve read these.

    Posted at 12:27PM on Sep 5th 2006 by Lynn Hughes 0 stars

    Comment by Lynn Hughes -

  20. I always prefer not to go to threaters to watch movies. I rather enjoy watching movies at home. I will download the lastest movies if they are not available in market. Today I noticed that these P2P clients have all the latest full movies to download for free 😐 , isn’t that illegal ?

    Comment by merrell -

  21. Apple is going to change the game for online movie downloads, much in the same way they did for music downloads. They will make it easy, fast an accesible to all and give you the ability to stream the file to your HD TV. Just get ready to eat your words, it’s coming.

    Comment by Jay Benson -

  22. we totally agree with your idea, thanks

    Comment by wood wine box -

  23. very good idea

    Comment by wood vent -

  24. we really agree on all idea here

    Comment by wood vent -

  25. Hey Mark! Hope all is well. As I said earlier even time for working stiffs is important. To me it seemed like getting opinions from NASA guys to make a vanilla milkshake.Unless its the Olimpics or maybe say an NBA championship game that I won a few bucks on,by the way thanks for that one,I thought downloading and burning opposed to spending a few bucks renting a disc was a no brainer but thanks for the thoughts.

    Comment by Frankie from Lawnside -

  26. The cable guys have been trying to get rid of physical media for years. With PPV, VOD, SVOD and the MSOs still can’t break into the big leagues even though they are in the right place with nearly the right product. Why should download sites do any better than these powerhouses?

    Comment by Mario -

  27. Mark,
    You nailed it. Flawless analysis.

    The game will change in 10 years when broadband network speeds increase to where a movie can be downloaded in 3 minutes (the time it takes to go to the bathroom), the movie can be easily ported to any device in the household and when the downloaded movie is cheaper to acquire than the inconvenience factor and real dollar cost to the consumer.

    So, if I were in the movie business, I’d work with serious electronic distributors who have a vision to get to market with a serious solution that will be ready in 10 years or so. Unlike the music business, embrace technology and learn to make money with it.

    Comment by Herschel Horton -

  28. Interesting thoughts about sending DVDs by UPS 🙂 I remember to have read that in Tannenbaum’s networking book some time ago. Inteersting how people need to be reminded of basics every so often

    Comment by fullTosh -

  29. Great article. We are all suffering the massive resistance of the current media distribution and sales architecture. There have historically been such massive profits in being the middlemen that there is a lot at stake and the stakeholders will resist the inevitable with all their resources. Watershed events (bittorrent’s invention) will cause adjustments but eventually the old players need to adapt or we will all form habits which circumvent the inconveniences of DRM and flawed pricing models.

    As I discuss here:
    the old business model will do whatever it can to shore up the status quo as long as possible. It is up to the innovators to come up with new solutions. Unfortunately while we have new solutions to the distribution problem, the large rights holders don’t want to give them a try. So we end up with highly controlled experiments in online sales of marginal value (iTunes) instead of something the consumers can really embrace because it saves them time and money. Currently you have to pay more to be part of the experiment. Eventually you will probably not have to pay anything directly to the distributor to download and watch a movie, as their will be alternative models of compensation.

    Awesome article and analysis. And thanks for providing a forum in which to discuss it.

    Comment by Ian Rae -

  30. All this changes when you offer consumers a *real* digital movie player. Tivo with a download service. People could even preorder movies before they are released, and they’d automatically download overnight while they slept, ready to be played on release day. They could even have a rental setup like Netflix, although the turnaround time could be hours instead of days.

    Website downloads are a waste, I agree. I honestly don’t know why they are even bothering right now. Broadband DVRs are clearly the future.

    Comment by Jason -


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  33. I think net-flix is successful because of automated monthly charges on customer credit cards and automated movie choices per customer habits. Most Americans are passive and they like to be supprised once in a while. The automated credit card charges handles the passive personality, and the suprise movie based on habits takes care of the rest of the passive personality. This technique could be applied to any retail business and they may be just as successful.

    Comment by Mitchell -

  34. Comment by S. -

  35. Mark,

    I think the approach in your last paragraph is flawed:
    Downloading movies via BitTorrent is just about as quick and hassle-free now as it was five years ago to download mp3s, and it will only get easier as times passes by. I can come home from my real job, read about this movie director in a magazine, think “hmm, i’d like to see his previous work”, get on the computer, google his name and in under 10 minutes I clicked on 5 torrents for five of his earlier movies. A day or two later, the files are on the hard drive.
    You don’t even have to burn movies on a DVD. Connect your laptop to the TV and receiver and you can enjoy a full-screen surround sound movie on your 42″ plasma. The quality isn’t even that bad, and now, provided that you have the space on your drive, you can download HD versions of movies, which beats DVD. If you think that not everybody is set up to do this today or has a PC input on its TV, rest assured that it won’t be long before that happens.
    True, I don’t spend nearly as much time downloading and cataloguing music like I did back in college; and I’m the type of person that will gladly spend $10 several times a month (often several times a week) to go see a movie in the theater ; no matter what some think, nothing replaces seeing a movie in a theater.
    But there’s only a handful of movies showing at a theater and they only last for so long. Before long, the movie is gone, or maybe you were out of the country for a while and you missed it. Maybe it didn’t even show at all in your area.
    I think it’d be a big mistake to think that movie downloads are fundamentally different from music downloads. You don’t even need to buy a DVD player anymore. (HD-DVD and Blu-Ray will certainly not enjoy the same fate as DVD did. Physical media is on the way out, sonner or later.)


    Comment by Hugo -

  36. Hilarious – I definitely voted for you Mark

    Comment by Ryan -

  37. I would buy and download “Akeelah and the Bee” and show it to my kids on our TV tonight if this option was available. Can anyone point me to a legal version of this that I can buy and download right now? I have a mac mini in my living room with the Equinux MediaCentral media manager which will play any quicktime, real, windows media, or flash video … but not with DRM. I can do iTunes on that box. I’d be willing to tote my XP laptop into the room (with s-video out and external speakers) if I need some sort of Windows DRM to make this work. What are my choices here?

    Comment by Erik Herz -

  38. Sorry, but I don’t think you are allowed to post Richard’s private mail to the public. Or I missed something?

    Comment by Jacquard -

  39. Benefit of Movie Download
    Convenience no waiting and no driving to the store
    you can watch the newest movies as many times as you like on your computer instantly

    Comment by theaones -

    Woke up Sunday Morning and decided to peruse to see if any new HD DVD movies have been released.Low and behold I did see something I had never seen on Amazon before. They are now offering movie downloads! I looked through the various selections, not much in the way of movies that I would want to download. The biggest title was The Matrix. A bunch of televison series and specials which were actually more appealing to me. I like the History Channel and they had a lot of content in that area. I also like the original “Outer Limits” so I decided to take my first leap into Amazon Downloading with an episode of that. At first glance it appears to be a great deal, $1.98 for the download. You also have to download the Amazon player which only took a couple of minutes. It is also a download to your hard-drive(as compared to streaming) so I could watch the episode as many times as I want. The next big issue to me was compatability with my portable device. I own a media iopd which I have just about every Law and Order episode, ScarFace, Saving Private Ryan. I have Bose headphones and use it while I am on the ellipitcal trainer at the gym, it is amazing ,you absolutely forget were you are while you are working out. The max time to copy Saving Private Ryan to my ipod was about 20 minutes, not bad at all in my book for a 2 and 1/2 hour movie!(you do need special software to convert to Ipod format but you can find it for free on the internet.) It turns out that Unbox is NOT compatible with Ipod so you can not transfer it to your Ipod to watch. If it is not already out there, I think its only a matter of time before there is software that will convert Unbox movies to the mpeg format usable by Ipod. Then you have the hassle of having to go through the lengthy download process and then the conversion process. One Amazon Unbox claim which I found to be completely false is that it is a progressive download. This means you can watch the movie on your computer while it is still downloading.The two shows I tried to watch as they downloaded would not work in that manner. What’s good about Unbox, there is a ton more movie and show content that you will find on Ipod so they have the one up there although I hear Ipod is trying to cut some deals to get more content. Of course what would the Unbox service be worth without Amazon unveiling the portable Zen Player for $298.00 which will play the downloads. So assuming there is no converstion utility availalble you are talking about a 400 dollar investment for the Iopd player and a 300 investment for the Zen Player. I dont think so!!! The big downside. I dispute the claim on progressive downloading AND even with a DSL line, the 20 minute Outer Limit episode is still downlading as I write this 25 minutes later. Think how long the Matrix would take!!! Moral of story, movie coverting to a usable IPod form from an existing dvd is cool but movie downloading will always just be a curiousity without a major jump in download speeds and technology

    Comment by Brian -

  41. First off, I don’t think that Apple’s announcement on Tuesday, September 12th is going to be *just* about adding movies to iTunes. It’s going to be about the concept of an entertainment device for a household; in the same way the iPod got people thinking ‘different’ about music portability, this concept/device is going to move us forward into the next phase in terms of how we access and use our entertainment.

    Secondly, I think what you’re seeing with the film industry (Hollywood) regarding this paradigm shift away from cinemas to home theatres is predicated on fear. In the same way the music industry (an anally-retentive, luddite bunch if there ever was one) dragged its feet over non-CD/LP music access. And from my point-of-view, it’s actually quite ironic, because the future for them is in the home, not in the cinema. To explain quickly, once the consumer has another option for new releases other than the cinema, then more and more Hollywood’s revenue will be coming from home downloads for rental and purchase, as well as store versions of the same. (Yes, this is where Apple’s imminent innovation will break the trail.) Anyone who doubts this will happen is either a) a cinema-lover in denial (I’m a longtime cinema palace worshipper, but I don’t have blinkers on) or b) someone wholly unfamiliar with how the landscape is changing. Hollywood’s fears need to be dealt with before it can willingly ‘give’ up what it has already in actuality given up, but refuses to rationally address. Once this happens, then the paradigm shift will occur…and things will never be the same again.

    Until then, I see more pointless speculation and chin-rubbing from the sidelines…but then, that too, is part of the process.

    Comment by P. Robitionate -

  42. Mark Cuban is the greatest man alive. when You want to look up american dream in the dictionary’ their should be a picture of Mark Cuban..He is like a God on earth and to me one of if not the smartest man on Earth. If I had 1% of what he has I would be unstopable.
    Thank you Mark Cuban for letting us into your world. To shake your hand would be a dream to me. If the United States had a spirit? It should be yours!

    Comment by Daniel Rivera -

  43. What is it with all this broadcast/movies stuff? OK, I’ll say it. When are you going to discuss HDTV integrated with the Internet (ie. IPTV, etc.)? Clearly, that is the direction that HDTV will take.

    And please don’t discuss PCs, laptops, or PDAs to run the Internet HDTV movies. Instead, when is someone going to produce a device to replace that TV box sitting in front of every living room couch. Multiple windows (or a single window) can display movies, browser content, or anything simlar on a TV style screen.. No keyboards or mouse allowed. Instead, wireless voice recognition, voice to text, and movement all via wireless headsets and maybe wireless joysticks.

    That device will be as huge as the PC, and may replace it.

    So, MIT is getting close?

    Comment by -

  44. Of course it’s not going to work. It hasn’t the “critical mass” infrastracture and usability features, for yet another 10 years, to make it a big draw item. The only reason it’s being presented now is to gain a foot in the door and influence future “format wars”.

    The referenced article pretty much sums it up. Distribution is a saturated commodity, whether it’s broadcast, P2P, Postal Service, Retail Store, email attachments LOL, etc. It really needs something new to reallocate consumers. Broadcast media distribution cannot survive without “value-added”.

    These broadcasting companies should introduce something new, something that the internet is inherently good at providing. In addition to its other strengths, internet media distribution excels at providing realtime capabilities. In addition to downloading movies, these broadcast companies should add other features of a realtime nature.

    Contests and it’s derivatives are examples of a value-added that exhibit a realtime nature. Contest hints, today’s clues, today only ads/sales, etc. are examples. Like audience contests that are added to prime-time reality shows, realtime features and freebies increase usage/viewer share and could benefit movie provider’s bottom line.

    Comment by -

  45. Mark You called this along time ago! – but thanks for backing it up with firm evidence

    Comment by tech blog -

  46. Come on, encoding your content is an upfront cost to you?

    This is precisely the reason movie studios aren’t flourishing online. Go with as many distributors as possible to get your content to the consumer. Encoding the content is hardly a major financial burden, if some guy with a home PC and a DVD can do it, you can. Or just give the P2P seller your DVD and let them rip it.

    I’m sure they trust their platform, perhaps its your content generating sales that they’re unsure of. These firms exist on the idea that the more content they sell the better. Caving in and spending startup money to insure a studio’s bottom line is not a smart move.

    In the end, you lose both lose by not moving forward. What’s your risk? encoding your content is not that costly a process and you’ll have to do it sooner or later anyway. Isn’t it worth taking that risk to gain a few extra sales?

    Comment by Adam Cains -

  47. When Mark posted on this two weeks ago, he made valid points and he has once again. What it boils down to for me is this: that if you have the tech and the time, go for it. If you can actually hook your computer up to your TV, sit down and watch the movie in the 24 hours you have to watch it in, great. I couldn’t do that unless I stayed up until the wee hours of the night so there were no interruptions. What happens if your get interrupted and can’t get back to the movie in the 24 hours? Do you have to buy it again? That would frustrate me to no end.

    I would just rather have the DVD. I usually buy used from Blockbuster and Hollywood Video and never pay full price to begin with. I also get this ‘too little too late’ feeling since people have been downloading movies illegally for a long time now… and probably will after the movie downloading business tanks like it seems it will.

    Comment by Rebeccalee Coventry -

  48. The reason Netflix is sucessful is becuse of the ease of Rent ,Rip and return .

    There are plently of one click tools that remove the Studios copy protection so you set and forget come back an hour later and your movie is ready to compress with a Tool like DVD Shrink and DVD shrink will automaticly laod your Burning program for you.

    So less than 5 minutes of time opening and closing my DVD drive and a few mouse clicks a 30 cent DVD blank and you have a DRM free DVD .

    Give me a download service that eliminates most of those steps and I might use it .

    Comment by Matt -

  49. I agree with all users on this blog!

    Comment by Lambp -

  50. On N-flix believing in their product…it’s less belief than simply reading the queues. Brilliant that the average customer shares in advance 9 to 10 months of viewing habits. Blockbuster stores and download sites just don’t have the data. If the N-flix patent sticks the others may not even get the chance. The DVD, once in hand, still rules the day.

    Comment by Mario -

  51. Mr. Cuban assumes that you would have to press the button and sit in front of the screen through the download.. With readily available RSS podcatchers this becomes a non issue.. I’d rather subscribe to an RSS feed with episodes of my favorite series attached.. No hassle downloading, and then connecting my computer or NAS device directly to my TV is as simple as connecting a VCR..

    Comment by Andy -

  52. I really agree with the last paragraph!


    Comment by Nathan Pham -

  53. Mark, I’d agree that the movie download business doesn’t make much sense for the movie companies right now – content that doesn’t benefit as much from the ‘HD’ treatment may be an exception because you can compress the heck out of it and it doesn’t look much worse than standard digital cable w/ 2.0 sound. But DVD- and HD-quality movies and TV shows are too big right now. Even with P2P technology, the download times will be too long. Heck, I won’t even use Pay Per View services because the picture and sound quality are crap – about the same as your average DiVX rip (at least on my cable system).

    I don’t, however, thing that this is the result of any cost-benefit analysis on the part of the studios – they’re just obstinate and resistant to change. And not very smart – look at how they’re handing the DVD to HD-DVD / BluRay changeover (at least from the perspective of “me”, who is what they would call a “good customer” – I own several hundred DVDs). Let’s see – delay the products and cripple their usefulness with some copy protection scheme that will be broken in 1/100th the time and with 1/10000000th the resources used to create it, then allow two companies to duke it out in the marketplace with incompatible standards. In the mean time, I’ve gone from purchasing 3-10 DVDs per month to almost zero – why should I buy content that will be re-released later in a better format? I can’t buy it now because I don’t have any sort of assurance the format I choose will be a good investment. So I just sit around on the sidelines. There are plenty of other things competing for my entertainment dollar.

    Back to downloads – media companies should take advantage of the fact that downloaded movie quality is inferior and create cheap, crappy but legal versions for people who can’t afford to spend significant dollars on DVDs. Even if they just break even or lose some money, at least they keep some market share vs. other forms of entertainment instead of watching more of their customer base discover video games, walks in the park, mountain climbing, etc. They should keep their junkies hooked until they turn 27 and start making some $jack and start wanting the pimped-out movie experience.

    Comment by Erik Carlseen -

  54. 27? I’m 39 and living the dream. The Today Show covered my ability to live the life of Kramer and keep my wife from beating me with a frying pan. Plus Campbell Brown seemed turned on by my lifestyle. (click on my name and see the footage from the show).

    Although downloading 10 titles a day is pretty overdoing it. Are there enough films to really keep doing that for a couple years? There are certain films and series I want to get, but after a few months, there’s that law of dimishing returns.

    Remember Mark that if it wasn’t for guys who live in their parent’s basement and watch the folks HD sets with HDNet on the cable box, you’d be out of luck. Quit slapping the faces of those who feed you. If it wasn’t for losers across the country that wanted to listen to the ball game instead of being Mr. Super Businessman, you wouldn’t have a fortune.

    Don’t you pay someone to plan out various playlists for your network? Don’t you pay someone good money to come up with the order of music and jumbotron weirdness for the Mavs game?

    And never talk about growing up and gaining responsiblity since you are insisting on putting Dennis Rodman back on TV. That by the way is something I won’t be downloading under any circumstances.

    Comment by Joe Corey -

  55. I have to agree with Adam. Pretty much any computer literate person out there knows how easy it is to rip a DVD. Although illegal, I have seen and heard enough in casual conversations that tells me it’s a pretty common practice. The free-ware ripping applications are readily available, the technology is cheap, and the time investment is minimal and certainly less than downloading. I’m aware of several people that routinely rent from Blockbuster or Netflix and copy the movies to keep in their own DVD libraries.

    As a matter of fact, when I first heard of this, it was obvious I had been living under a rock, because everyone involved in the conversation acted as if it was as common as filling your car up at the gas station – and that was a couple years ago.

    Comment by Jay -

  56. I used to burn tons of movies from Netflix, but then I realized that I never watched the burns. It’s no fun to watch the same movie when you already know what’s going to happen.

    Comment by fast eddie -

  57. I generally agree with your assessment. The current downloading options have more strings attached than the violin section of the Boston Symphony Orchestra! Except for the APPLE/IPOD combo, as far as I can tell, few if any of the other D/L services have spent two seconds considering the USER EXPERIENCE. As you correctly point out NETFLIX succeeds because the USER EXPERIENCE is outstanding. The better theater chains draw audiences because the USER EXPERIENCE (stadium seating, clean screens, great sound, adequate parking, decent snacks, etc.) is great. As everyone and their proverbial grandmother jumps on the downloading/IPTV/portable media device bandwagon, the concept of user experience and even (god forbid) “standards” has been completely overlooked. “Plug and Play” is as elusive as ever as average (read “most”) consumers are faced with scratching their digital heads in bewilderment as they try to grasp what they are actually getting if they choose to purchase downloadable entertainment content. Where and on what and how (and how many times) can they actually watch what they just paid and waited for? Until the issue of the “last 10 feet” between the PC/Hard Drive and the 42″ Flat Panel Screen in the Den/Family room is seamlessly resolved, none of these services have a chance of reaching true critical mass. Tivo is trying… the rumored Apple Airport Express for Video could help… but the clutter and confusion has to go away, and the GREAT USER EXPERIENCE has to arrive before this market can mature and reach its potential. Until then, its cool, and fun, and will work in a pinch if you’ve got NOTHING ELSE available to watch/entertain you… but it is not ready for primetime…

    Comment by JWS -

  58. I have to agree with Jody. Downloading from torrents is very easy, and what’s more important very easy to show a non-techie how to do. I’ve introduced my girlfriend to it and she watches more TV now than she did before.

    You make it sound like that when you download a huge movie file you sit there and wait for it and all that time is wasted. Well, like Jody said, you just start it up and let it run and come back in a couple of hours. Time-wise, it’s more or less the same time it would take to go to the video store, find the movie, line up, deal with traffic, etc; diffence is, you can do it right at home, anytime you feel like it.

    However, Marc, you do have a point in your earlier articles about the imminent bandwidth shortage. It’s funny, right around the time you started mentioning this problem in your articles me and a coworker got on the topic; he’s a comp-sci guy and basically he said ‘software (i.e. P2P, QOS, etc.) can’t keep it up, eventually hardware has to catch up.’ You are right on the money with that problem; whichever company can solve that problem is golden.

    Comment by Jason Ip -

  59. I think the last part of your post completely misses the point. Like you, Mr. Cuban, I’m an IU grad. In college I subscribed to the Blockbuster rental service where they would send me 5 discs at a time and I could keep them as long as I wanted. Well, typically I would rip the discs to my hard drive (which takes less than an hour per disc and takes up 4.5 gigs of space per disc, which is okay since I have three hard drives: an 80 gig, 250 gig, and a 160 gig external, all of which cost me no more than $200 total), then burn them to DVD (which takes ten minutes, tops, with a 16x DVD drive). I’m not a cracker by any means, but by using publically available tools I haven’t found a copy protection that makes it so hard to circumvent that it’s not worth circumventing. I’m 22, and work for a major healthcare software firm. But even with my salary, I still prefer to not buy movies, and rather invest in blank DVDs and a Blockbuster membership. In the end, my cost per DVD, between the time spent to rent it, rip it, and burn it, comes out to less than a few dollars a disc, if that. Unless the cost of a disc is lower than or close to the cost of just ripping it myself, there’s no point in buying it. Moreover, there’s no DRM on anything I burn. I can copy it, rip it, edit it, do anything I want to it, without worrying about it infecting my PC with some nefarious copy protection. That is why all these pay-for-download services will fail. Until they can convince users like me to buy into it and make it worth my while, I’ll just keep doing what I’m doing.

    Comment by Adam Licht -

  60. Hey Mark … Thought you would be interested in the voting for Mark Cuban VS Donald Trump over at

    My vote was for you . . . Scott

    Comment by Scott Prock -

  61. Amazon has shown in the past that it understands a lot about making the online shopping experience work well for consumers. It’s too bad they were unable to transfer that knowhow to video downloads.
    The Unbox offering has all the problems of just about every other video download offering out there.
    1. It only works on Windows.
    2. Extreme Copy protection.
    3. Limited usage.
    4. High prices compared to alternatives.

    Rather than making the content portable, you basically get to download two files: one that must stay on the computer you downloaded it on, and one that can be transferred to an approved (i.e., has Windows media copy protection) mobile device.

    You can burn the movie to a DVD… but it’s of almost no additional value, since that DVD will only play on the computer you downloaded the movie to. While it’s quite likely that the Hollywood folks put many of these restrictions on Amazon, it’s a disappointing service.

    Comment by bobby -

  62. You know, I usually agree with you here, but I think you’re under-estimating the amount of work it takes to download torrent files.

    Last year, if I missed an episode of Lost (or god forbid my wife missed a Desperate Housewives or Gilmore Girls), I would download the episode and convert it to DVD. While the conversion was a bit of a hassle it was worth it.

    Half way through the year, I bought an LG DVD player that does Divx/Xvid. Now there’s huge ease of use. I can download a whole season of 24 overnight (I never watched before because I missed the opening) and drop all 24 files right on 2 DVDs — nice, surround sound on my 32 inch tv. (non-HD, I’m more of the average user and can’t justify current HD prices, although I’d love to upgrade). There’s no video conversion to do with one of these players.

    Here’s the kicker, whenever my wives friends would miss an episode of Lost they’d freak – and I’d be downloading and converting again. Divx DVD players are everywhere in Canada now.
    Everyone we know has broadband, and several of them have gone out and bought cheapo $35 Divx DVD players at Walmart. Within 1/2 a seaon at least 15 average suburban families have been exposed to it!

    Now, a nice Divx rip of a dvd movie at full quality and AC3 surround takes two hours to download over a ‘light’ (low speed) broadband connection (about 2gig). Although I don’t generally condone this, the download is probally easier than dragging my wife to the video store. It’s definitely as easy or fast as netflix.

    By the way: I’m 35, have 2 kids, don’t play video games and generally spend all my spare time with my family. Uncondoned downloads are coming, I think they should be taken seriously.

    Comment by Jody -

  63. What they all don’t seem to understand is, I would gladly pay $7.50 to download a new movie that was just released at movie theaters at the same time if it wasn’t available as a DVD at that time too just because going to the movie theater is a pain in the ass & I’d rather watch a movie at home. If it was also available for rent as a DVD, why would I bother downloading it? They’re all greedy & stupid. 1% of 10 billion is worth alot more then 100% of 1 million, if you know what I’m saying!

    Comment by Hershon -

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