Australian VOD: Online Distribution as Disruptive Technology in the Film Industry

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SPAA Conference, Melbourne
17 November 2010

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Australian VOD: Online Distribution as Disruptive Technology in the Film Industry

  1. 1. Stuart Cunningham Director ARC Centre of Excellence for Creative Industries and Innovation Queensland University of Technology Australian VOD: Online Distribution as Disruptive Technology in the Film Industry
  2. 2. Until 2010: Business as usual… <ul><li>As you already know: </li></ul><ul><li>Distribution contracts typically cover acquisition of all rights including VOD </li></ul><ul><li>Individual filmmakers can’t get onto iTunes except via distributors, content aggregators </li></ul><ul><li>VOD is currently a small ancillary market but is predicted to replace physical DVD (3-5 years?) </li></ul><ul><li>Distributors supply the major VOD platforms and providers in Australia just as they do in theatrical, TV etc </li></ul>
  3. 3. Until 2010: Business as usual… <ul><li>Distributors require large minimum guarantees which makes it difficult for small VOD providers to develop a commercially viable business. Paul Uniacke - Blockbuster quoted in The Australian in February said: </li></ul><ul><li>“ Studio greed is what's holding back video-on-demand,&quot; he said…. “the minimum guarantees studios demanded from video-on-demand partners in terms of up-front revenue payments that must be made whether the estimated number of downloads are reached or not, as well as revenue- share arrangements skewed heavily in favour of the studios, made video-on-demand a cost-prohibitive industry”…..Industry sources said studios negotiated different revenue-share arrangements depending on the clout of their partner, but payments could be as high as 70 per cent of a digital movie rental fee to the studio.” The Australian Feb 22, 2010 </li></ul><ul><li>http://www.theaustralian.com.au/business/media/studio-cash-grab-killing-net-flicks/story-e6frg996-1225832762744 </li></ul>
  4. 4. Key findings: Web typically used as a promotional channel <ul><li>No sign of any significant innovation from Australian film producers to leverage the Web…. </li></ul>
  5. 5. A rare VOD Success Story: “Somersault”
  6. 6. A rare VOD Success Story: “Somersault”
  7. 7. The real innovation online has been in…TV not films <ul><li>Marcus Gillezau’s transmedia strategies for “Scorched” and “Storm Surfers”. </li></ul><ul><li>Youku and Tudou in China </li></ul><ul><li>YouTube’s partnership program </li></ul>
  8. 8. Australian VOD – no real innovation until NOW… <ul><li>Rate of VOD uptake of movies via the Internet has been very slow </li></ul><ul><li>1999 - First commercial movie download service launched in US (Cinema Now) </li></ul><ul><li>2003 - IndieFilmWeb Australia’s first movies-on demand site launches and fails. Plans to offer an online library of Australian films halted when Canada’s CineClix can’t raise $$$ </li></ul><ul><li>2006 - Big Pond Movies launches first major commercial service in Australia Reeltime.tv launches </li></ul><ul><li>2007 - Reeltime fails AnyTime on Volt VOD service launches – what happened??? </li></ul><ul><li>2008 - iTunes offers movies to rent or buy </li></ul><ul><li>2009 </li></ul><ul><ul><li>TiVo-Seven-Blockbuster morphs into Hybrid TV’s IPTV service Caspa-on-demand </li></ul></ul><ul><ul><li>Foxtel Download (free online catch up TV service for subscribers) </li></ul></ul><ul><ul><li>Telstra announces T-Box </li></ul></ul>
  9. 9. Australian VOD – no real innovation until NOW… <ul><li>11 years later VOD via Internet (OLD) remains a very small ancillary market for distributors </li></ul><ul><li>Are we now at a turning point? – More service providers, more delivery devices, better content. </li></ul><ul><li>2010 Telstra launches T-Box providing unmetered broadband usage to BigPondMovies customers </li></ul><ul><li>Fetch TV – new IPTV service launches -1000 subscribers early November 2010 </li></ul><ul><li>Hybrid TV/CASPA has a team in place to target and package and promote Australian content </li></ul><ul><li>Apple TV is relaunched as a stream only movie rental service still via iTunes </li></ul><ul><li>QuickFlix to launch online service in 2011 + thinking innovatively about promoting Aussie films </li></ul><ul><li>Rumours of two new services– MadMan and Juno Interactive (subscription) </li></ul>
  10. 10. Innovation: iTunes Australia experiments with Aussie content <ul><li>Films from Dungog Film Festival on iTunes Australian store: </li></ul><ul><li>The Jammed </li></ul><ul><li>Black Water </li></ul><ul><li>Lake Mungo </li></ul><ul><li>Download-to-own: AUD $17.99 </li></ul><ul><li>Rent: AUD $3.99 </li></ul>
  11. 11. Innovative thinking & marketing at QuickFlix <ul><li>Launching a digital online service in 2011…. </li></ul><ul><li>“ the biggest challenge for any filmmaker who’s not part of a mainstream distribution network, is </li></ul><ul><li>what is your film about and am I even going to be bothered to spend 90 or even 10 minutes </li></ul><ul><li>checking it out?” …..Tim Parsons CTO & Director of Product Development (QuickFlix). </li></ul><ul><li>“ We have a very large library of 43,000 titles…we know from our database what each of our customers </li></ul><ul><li>rent and from their feedback what they like…we might say, so lets do a film festival that’s sponsored by </li></ul><ul><li>Sony and Red Bull, thinking of people who have sponsored things like Storm Surfers and so then we </li></ul><ul><li>generate 20 emerging producers and directors that have come out and we curate them and then we </li></ul><ul><li>have several film critics who will, you know put it together as a whole package. We aggregate it together </li></ul><ul><li>and then put that out to our audience at a sponsored festival. That’s the kind of thing QuickFlix can do” </li></ul>
  12. 12. Innovative thinking & marketing at Hybrid TV <ul><li>Special team dedicated to acquiring Aussie content - Very experienced packagers & marketers </li></ul><ul><li>Passionate about local product </li></ul><ul><li>http://contentoncaspa.com </li></ul><ul><li>Want good films with potential to find a dedicated audience – can build a festival or a program around </li></ul><ul><li>that – comes down to how you market that….we use an advertising and influence model – it can fund a </li></ul><ul><li>whole new industry – say an edgy clothes brand who sponsor a channel about edgy Australian content – </li></ul><ul><li>you can then target that audience - we will develop more channels – broader and deeper content – try </li></ul><ul><li>and package stuff up – (as a consumer) you may want to assemble your own channel …(consumer as </li></ul><ul><li>Programmer)… </li></ul>
  13. 13. Barriers to take-up <ul><li>File size (compression) & Bandwidth: Broadband infrastructure does not yet exist in Australia to provide required download speeds e.g. IPTV needs 2Mbps for standard definition and 8Mbps for HDTV ADSL2 runs at 24Mbps – but ultimately the NBN is the long term solution </li></ul><ul><li>Restrictive broadband plan caps in Australia are a financial disincentive to consumers to use downloaded movies & TV programs as a regular substitute for TV viewing e.g. 20 gig or 50 gig plans </li></ul><ul><li>Diseconomies of scale – more VOD streams = higher costs </li></ul><ul><li>No critical mass online market yet (except for pirated free content) </li></ul><ul><li>Premium content (Hollywood movies) is what really attracts consumers - Steve Jobs 2010 based on Apple TV research - Hollywood is currently restricting the flow of product to VOD </li></ul><ul><li>Smaller film libraries online - because Hollywood manages product flow via ‘windows’ to optimise revenues from theatrical, DVD and TV markets and to milk the last drop out of DVD before its demise </li></ul><ul><li>VOD rights already tied up in existing distribution contracts, so small start-ups can’t get global rights for films and also can’t afford large minimum guarantees demand by Hollywood for major studio movies </li></ul><ul><li>Small players disadvantaged by distributor requirements for MGs – often not required from major sites </li></ul>
  14. 14. Factors that will drive more rapid VOD uptake <ul><li>Big brand games consoles now offer movies on demand (Xbox - Live Marketplace & Sony’s PlayStation network Zune). PS3 is also a BlueRay player with wireless. </li></ul><ul><li>US/Europe console growth is a factor driving growth in movies on demand (Screen Digest 2009) </li></ul><ul><li>Increasing penetration of large screen HDTVs and 3D TVs in Australian homes </li></ul><ul><li>Some ISPs e.g. iiNet are offering unmetered deals for IPTV – some others are increasing limits </li></ul><ul><li>Better streaming capabilities (file compression) </li></ul><ul><li>Increasing movies on demand entertainment options – OLD, Cable, Satellite, IPTV </li></ul><ul><li>Improving Internet connectivity with next generation TVs i.e. Web-enabled TV sets or via STBs </li></ul>
  15. 15. Increasing range of VOD delivery services in 2011 <ul><li>iTunes – to computers, laptops and mobiles e.g. iMac, MacBook, iPad, iPod, iPhone + via the second generation Apple TV </li></ul><ul><li>BigPondMovies online and via the new T-Box from Telstra (Telstra claims 45,000 T-Boxes sold, 90,000 downloads) </li></ul><ul><li>Foxtel Download free catch up TV for Foxtel subscribers(on PCs not Macs) – Foxtel is also handling Xbox movie streaming </li></ul><ul><li>Caspa on Demand from Hybrid TV via TiVo, IPTV on Samsung TV sets and Wii – 12 linear channels </li></ul><ul><li>Fetch TV – subscription to 19 linear channels (14 big name channels) + 4 foreign language packages (100 channels) </li></ul><ul><li>Google TV is coming (online search engine with Google TV embedded in TV sets) </li></ul><ul><li>Sony Playstation Network Video Store via PS3 games console that has BlueRay and movie streaming - Sony TVs include IPTV </li></ul><ul><li>QuickFlix – soon online digital VOD services for movie rentals (subscription). DVD library 40,000+ titles order online sent via mail </li></ul><ul><li>MadMan moving into VOD? </li></ul><ul><li>Juno Interactive looking to package subscription content? </li></ul><ul><li>TV Networks offer catch up TV – Seven, Nine, TEN, ABC, SBS + alliances e.g. Yahoo PLUS 7 delivers films on demand via PS3 </li></ul><ul><li>TPG </li></ul><ul><li>Transact IPT </li></ul><ul><li>Other new local entrants? </li></ul><ul><li>Online VOD providers Jaman, NetFlix (US), Hulu Plus (US), Amazon VOD (US), LoveFilm (UK) also offer some Australian content </li></ul>
  16. 16. Business Models – DTO (download-to-own); Rentals (PPV); Subscription; Ad supported. <ul><li>iTunes to iMac, MacBook, iPad, iPod, iphone - DTO + rentals (PPV) + 2nd gen Apple TV has no hard drive so </li></ul><ul><li>rentals only </li></ul><ul><li>BigPondMovies online and via the new T-Box from Telstra – rentals (PPV) </li></ul><ul><li>Foxtel Download free catch up TV for Foxtel subscribers (only PCs not Macs) – Foxtel is also handling Xbox movie </li></ul><ul><li>streaming </li></ul><ul><li>Caspa on Demand via TiVo, IPTV on Samsung TV sets and Wii – subscription service + movie rentals PPV – </li></ul><ul><li>unmetered </li></ul><ul><li>Fetch TV – subscription -19 linear channels (14 big name channels) + 4 foreign language packages (100 channels) </li></ul><ul><li>Google TV is coming (online search engine with Google TV embedded in TV sets) </li></ul><ul><li>Sony Playstation is a media player – games console, BlueRay and movie streaming rentals (PPV) + Sony TVs include </li></ul><ul><li>IPTV </li></ul><ul><li>QuickFlix – soon to provide online digital VOD services for movie rentals to subscribers – PPV or part of subscription </li></ul><ul><li>package </li></ul><ul><li>MadMan moving into VOD? Subscription? Rental? </li></ul><ul><li>Juno Interactive looking to package subscription service </li></ul><ul><li>TV Networks offer catch up TV – Seven, Nine, TEN, ABC, SBS – ad supported </li></ul>
  17. 17. Australian feature film content? – visible titles in catalog counts <ul><li>iTunes –reflects theatrical distribution – mostly mainstream Hollywood content – visible Aussie films = 12 titles + </li></ul><ul><li>Dungog (3 titles) total 15 titles / 2381 movies (0.35%) </li></ul><ul><li>BigPondMovies - reflects theatrical distribution – visible catalog count - 34 Aussie films visible online </li></ul><ul><li>Foxtel Download – generally reflects theatrical distribution – mostly mainstream content from the Majors </li></ul><ul><li>Caspa on Demand – 1000 movies & TV titles – Australian film + TV content = 5% + N.B. deliberate strategy to </li></ul><ul><li>acquire Australian </li></ul><ul><li>Fetch TV generally reflects theatrical distribution – mostly mainstream Hollywood – small but unknown number </li></ul><ul><li>of Aussie films </li></ul><ul><li>Google TV is coming (online search engine with Google TV embedded in TV sets) </li></ul><ul><li>Sony Playstation - generally reflects theatrical distribution – 1000+ mainstream titles visible </li></ul><ul><li>Zune on Xbox 360 - generally reflects theatrical distribution – 1000+ mainstream titles visible </li></ul><ul><li>QuickFlix – 40,000+ DVDs ordered online for home delivery - 1-3% of total catalog is estimated to be Australian </li></ul><ul><li>content </li></ul><ul><li>MadMan ???? </li></ul><ul><li>Juno Interactive ??? </li></ul>
  18. 18. Content is King. Differentiation + value proposition are critical success factors to business survival. <ul><li>Not all new entrants into VOD will survive longer term. </li></ul><ul><li>Likelihood of casualties within 18 mths-2 years post- </li></ul><ul><li>launch is high. </li></ul>

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