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Is there any future for DVD rental companies? Yet another UK firm, ChoicesUK, is about to call in the administrators, having previously complained about the threat of piracy in the entertainment industry, along with ‘unseasonably hot weather’.
While piracy may have played a role in the company’s demise, it is more likely that it has been ground down by pureplay online DVD rental firms, including one operated by mighty Amazon, which launched its service in late-2004. For starters, online DVD rental pureplays have much lower overheads than ChoicesUK, which seems to have been strangled by the costs of maintaining 170 shops and 1,800 employees.
But hold on. I’m starting to wonder whether the pureplays themselves will last the distance, in the face of changing consumer behaviour.
The online DVD rental sector is still relatively juvenile, especially in the UK. A few VC-backed online rental firms launched in the post-crash doldrums - around 2003 – after the US leviathan Netflix paved the way.
The efficient Netflix model was adapted by upstarts in the UK such as Screenselect, Video Island and LOVEFiLM. Perhaps tellingly, all of these once-independent and VC-backed firms have merged, suggesting that this highly competitive sector is somewhat commoditised.
So will the online rental sector grow into adulthood, or will it wither and die? My bet is that only a few firms will survive an impending cull, brought on by shifting consumer behaviour. The ones that live on will be required to rethink their means of delivery. Why? Because consumers Want It Now!
The advent of YouTube and other video-on-demand startups have familiarised people with the idea of watching video and TV via the internet, but that’s not the real story here. The point is, they want video instantaneously, and YouTube gives it to them. So does the BBC iPlayer, and Joost, and any number of other video apps.
But do people actually want to watch TV and movies on their laptops or desktop PCs? Not if they have a 42” Sony Bravia in their lounge! The future of entertainment is going to be joined up and on-demand, and onto a primary device (the TV) rather than a secondary device (a PC). The conduit might be an Xbox or some other set top box, or an integrated TV with internet connectivity, or, more clumsily, via a PC. But that’s what people will increasingly want, and that’s what rental firms must give them.
And to this end, we’re seeing some action. As ever, it is a question of timing and achieving critical mass, which is determined by factors largely outside of the control of these firms (eg faster broadband speeds, adoption of integrated hardware, aggregation of content, etc).
LOVEFiLM has sown a seed by providing a limited download service for consumers who want to buy movies, while Amazon has been priming itself to do battle with Apple (see Amazon Unbox, a joint venture with TiVo) with regards to online movie rental, with both companies manoeuvring with intent. Apple has the ear of lots of top players in the entertainment space, according to reports.
There are many dozens of other firms staking out this space, including some of the biggest content owners in the world – the very same folks who have watched YouTube’s rise with a mixture of envy and high loathing.
ChoicesUK might well be right with regards to its comments on piracy, but this growing consumer need – the Get It Now mentality – should provide instant markets for the classy legal download services of the future.
Ask yourself a question: forgetting about the lure of the sexy iPod for a moment, would iTunes have been such an immediate success were it not for the likes of Kazaa and Napster?
That people still engage in P2P file-sharing activity to illegally download movies and music is simply a fact of life, yet it is one that might actually benefit the entertainment industry at large in the future. After all, it is not easy to change consumer behaviour en masse. “Heresy, heresy!” cry the movie executives of the world.
As an aside, I think ChoicesUK's lack of search engine marketing skills may have also played a key role in its demise. Like choosing a holiday, searching for a movie from a list of thousands is made much easier online. And I'm not convinced that ChoicesUK achieved the right level of visibility on Google to match its status as "the second biggest UK rental firm".