Stuart Cunningham - Distinguished Professor Director ARC Centre of Excellence for Creative Industries and Innovation, Queensland University of Technology.

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. Until 2010: Business as usual…
As you already know:
 Distribution contracts typically cover acquisition of all rights including VOD
 Individual filmmakers can’t get onto iTunes except via distributors, content
aggregators
 VOD is currently a small ancillary market but is predicted to replace physical
DVD (3-5 years?)
 Distributors supply the major VOD platforms and providers in Australia just as
they do in theatrical, TV etc

3. Until 2010: Business as usual…
 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:
 “Studio greed is what's holding back video-on-demand," 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
 http://www.theaustralian.com.au/business/media/studio-cash-grab-killing-net-flicks/story-e6frg9

4. Key findings:
Web typically used as a promotional channel
 No sign of any significant innovation from
Australian film producers to leverage the
Web….

5. A rare VOD Success Story: “Somersault”

6. A rare VOD Success Story: “Somersault”

7. The real innovation online has been in…TV
not films
 Marcus Gillezeau’s transmedia strategies for
“Scorched” and “Storm Surfers”.
 Youku and Tudou in China
 YouTube’s partnership program

8. Australian VOD – no real innovation until NOW…
Rate of VOD uptake of movies via the Internet has been very slow
 1999 - First commercial movie download service launched in US (Cinema Now)
 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 $$$
 2006 - Big Pond Movies launches first major commercial service in Australia
Reeltime.tv launches
 2007 - Reeltime fails AnyTime on Volt VOD service launches – what
happened???
 2008 - iTunes offers movies to rent or buy
 2009
 TiVo-Seven-Blockbuster morphs into Hybrid TV’s IPTV service Caspa-on-
demand
 Foxtel Download (free online catch up TV service for subscribers)
 Telstra announces T-Box

9. Australian VOD – no real innovation until NOW…
11 years later VOD via Internet (OLD) remains a very small ancillary market for distributors
Are we now at a turning point? – More service providers, more delivery devices, better content.
 2010 Telstra launches T-Box providing unmetered broadband usage to BigPondMovies customers
 Fetch TV – new IPTV service launches -1000 subscribers early November 2010
 Hybrid TV/CASPA has a team in place to target and package and promote Australian content
 Apple TV is relaunched as a stream only movie rental service still via iTunes
 QuickFlix to launch online service in 2011 + thinking innovatively about promoting Aussie films
 Rumours of two new services– MadMan and Juno Interactive (subscription)

10. Innovation:
iTunes Australia experiments with Aussie content
Films from Dungog Film Festival on iTunes Australian store:
The Jammed
Black Water
Lake Mungo
Download-to-own: AUD $17.99
Rent: AUD $3.99

11. Innovative thinking & marketing at QuickFlix
Launching a digital online service in 2011….
“the biggest challenge for any filmmaker who’s not part of a mainstream distribution network, is
what is your film about and am I even going to be bothered to spend 90 or even 10 minutes
checking it out?”…..Tim Parsons CTO & Director of Product Development (QuickFlix).
“We have a very large library of 43,000 titles…we know from our database what each of our customers
rent and from their feedback what they like…we might say, so lets do a film festival that’s sponsored by
Sony and Red Bull, thinking of people who have sponsored things like Storm Surfers and so then we
generate 20 emerging producers and directors that have come out and we curate them and then we
have several film critics who will, you know put it together as a whole package. We aggregate it
together
and then put that out to our audience at a sponsored festival. That’s the kind of thing QuickFlix can do”

12. Innovative thinking & marketing at Hybrid TV
Special team dedicated to acquiring Aussie content - Very experienced packagers & marketers
Passionate about local product
http://contentoncaspa.com
Want good films with potential to find a dedicated audience – can build a festival or a program around
that – comes down to how you market that….we use an advertising and influence model – it can fund a
whole new industry – say an edgy clothes brand who sponsor a channel about edgy Australian content –
you can then target that audience - we will develop more channels – broader and deeper content – try
and package stuff up – (as a consumer) you may want to assemble your own channel …(consumer as
Programmer)…

13. Barriers to take-up
 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
 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
 Diseconomies of scale – more VOD streams = higher costs
 No critical mass online market yet (except for pirated free content)
 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
 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
 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
 Small players disadvantaged by distributor requirements for MGs – often not required from major sites

14. Factors that will drive more rapid VOD uptake
 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.
 US/Europe console growth is a factor driving growth in movies on demand (Screen Digest 2009)
 Increasing penetration of large screen HDTVs and 3D TVs in Australian homes
 Some ISPs e.g. iiNet are offering unmetered deals for IPTV – some others are increasing limits
 Better streaming capabilities (file compression)
 Increasing movies on demand entertainment options – OLD, Cable, Satellite, IPTV
 Improving Internet connectivity with next generation TVs i.e. Web-enabled TV sets or via STBs

15. Increasing range of VOD delivery services in 2011
iTunes – to computers, laptops and mobiles e.g. iMac, MacBook, iPad, iPod, iPhone + via the second generation Apple TV
BigPondMovies online and via the new T-Box from Telstra (Telstra claims 45,000 T-Boxes sold, 90,000 downloads)
Foxtel Download free catch up TV for Foxtel subscribers(on PCs not Macs) – Foxtel is also handling Xbox movie streaming
Caspa on Demand from Hybrid TV via TiVo, IPTV on Samsung TV sets and Wii – 12 linear channels
Fetch TV – subscription to 19 linear channels (14 big name channels) + 4 foreign language packages (100 channels)
Google TV is coming (online search engine with Google TV embedded in TV sets)
Sony Playstation Network Video Store via PS3 games console that has BlueRay and movie streaming - Sony TVs include IPTV
QuickFlix – soon online digital VOD services for movie rentals (subscription). DVD library 40,000+ titles order online sent via mail
MadMan moving into VOD?
Juno Interactive looking to package subscription content?
TV Networks offer catch up TV – Seven, Nine, TEN, ABC, SBS + alliances e.g. Yahoo PLUS 7 delivers films on demand via PS3
TPG
Transact IPT
Other new local entrants?
Online VOD providers Jaman, NetFlix (US), Hulu Plus (US), Amazon VOD (US), LoveFilm (UK) also offer some Australian
content

16. Business Models – DTO (download-to-own); Rentals (PPV); Subscription; Ad supported.
iTunes to iMac, MacBook, iPad, iPod, iphone - DTO + rentals (PPV) + 2nd gen Apple TV has no hard drive so
rentals only
BigPondMovies online and via the new T-Box from Telstra – rentals (PPV)
Foxtel Download free catch up TV for Foxtel subscribers (only PCs not Macs) – Foxtel is also handling Xbox movie
streaming
Caspa on Demand via TiVo, IPTV on Samsung TV sets and Wii – subscription service + movie rentals PPV –
unmetered
Fetch TV – subscription -19 linear channels (14 big name channels) + 4 foreign language packages (100 channels)
Google TV is coming (online search engine with Google TV embedded in TV sets)
Sony Playstation is a media player – games console, BlueRay and movie streaming rentals (PPV) + Sony TVs include
IPTV
QuickFlix – soon to provide online digital VOD services for movie rentals to subscribers – PPV or part of subscription
package
MadMan moving into VOD? Subscription? Rental?
Juno Interactive looking to package subscription service
TV Networks offer catch up TV – Seven, Nine, TEN, ABC, SBS – ad supported

17. Australian feature film content? – visible titles in catalog counts
iTunes –reflects theatrical distribution – mostly mainstream Hollywood content – visible Aussie films = 12 titles
+
Dungog (3 titles) total 15 titles / 2381 movies (0.35%)
BigPondMovies - reflects theatrical distribution – visible catalog count - 34 Aussie films visible online
Foxtel Download – generally reflects theatrical distribution – mostly mainstream content from the Majors
Caspa on Demand – 1000 movies & TV titles – Australian film + TV content = 5% + N.B. deliberate strategy to
acquire Australian
Fetch TV generally reflects theatrical distribution – mostly mainstream Hollywood – small but unknown
number
of Aussie films
Google TV is coming (online search engine with Google TV embedded in TV sets)
Sony Playstation - generally reflects theatrical distribution – 1000+ mainstream titles visible
Zune on Xbox 360 - generally reflects theatrical distribution – 1000+ mainstream titles visible
QuickFlix – 40,000+ DVDs ordered online for home delivery - 1-3% of total catalog is estimated to be
Australian
content
MadMan ????
Juno Interactive ???

18. Content is King.
Differentiation + value proposition are critical success
factors to business survival.
Not all new entrants into VOD will survive longer term.
Likelihood of casualties within 18 mths-2 years post-
launch is high.