Two studios seen joining Disney on iTunes post holidays
Katie MarsalTwo major motion picture studios have indicated that they expect to join Walt Disney in offering their film content on Apple Computer's iTunes Store within six months, says one Wall Street analyst.
In a summary of his findings, Munster said he believes there are three key reasons why other studios are taking their time in opening up film libraries to iTunes — mainly "retaliation" concerns on the part of retailers, copy protection issues, and a desire to have a more flexible pricing model.
Retaliation
Studios, which generate a major portion of their revenue from DVD sales, have long relied on big-box retailers, such as Wal-Mart, Target, and Best Buy to fuel their profit margins. But new services such as iTunes often undercut DVD pricing and have generated concerns from retailer about the impact it will have on their DVD sales.
"It is possible that retailers will shift focus to other products if DVDs become less profitable due to lower priced online competition," Munster told clients. "Some of the studios refer to this as "retaliation" and they are concerned that this could significantly disrupt current business models in the DVD market."
Content protection
While Munster said the disruption of the current DVD business model was the biggest issue brought up by the four studios he met with, each is also concerned about the protection of content.
"For most studios, they are happy to see Disney serve as a 'guinea pig,' and we expect that if Disney's content continues to appear to be relatively safe from casual pirates, other studios will become more comfortable with offering content on iTunes," the analyst explained.
Studios still unhappy with limited pricing flexibility.
Meanwhile, Munster said that two of the four studios he met with indicated that the pricing on iTunes is a significant hurdle. Specifically, those studios want to have the ability to price certain movies at a premium to less popular content and are opposed to Apple's rigid pricing strategy, he said.
More studios to join iTunes within six months
"A couple of the studios indicated that they expect to have content on iTunes within six months, but it may require some tweaks to Apple's pricing guidelines to get them there," Munster told clients. "We would not expect additional studios to sign on with iTunes before the holidays, however, as most studios recognize that this change could disrupt their holiday business at retailers."
The analyst maintains an "Outperform" rating on shares of Apple Computer with a "Medium" volatility indicator. His twelve-month price target is set at $99 a share.
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23 Comments
first post! YES! (this is my first first post)
I think the studio's concerns regarding content protection and retaliation are for the most part justified. However, I can't for the life of me understand their obession with the pricing. They themselves price 2 disc dvds higher than single disc dvds. Why? Because they offer more. Exactly the relationship between iTunes and DVDs. DVDs offer more, they cost more.
The studios are retarded! The fact that the pricing is not too complicated, is the main reason the thing will work. If they fuck around with that, then they'll kill what is being created, and they'll stifle sales. The studios need to realise it's only a matter of time before all digital content will be available for download. The shop is dead, long live the web.
If any stuios are reading this, listen. Before the iTunes store came along I hadn't bought a music album in over a year. Since then I have bought two albums and numerous single songs through iTunes. What does that tell you? Just as I hadn't bought an album in over a year, I havn't bought a movie in nearly a year. A year after the iTunes store starts selling movies in my country, I doubt I could say I haven't bought 5 movies in the last year.
Ya read me?
first post! YES! (this is my first first post)
I think the studio's concerns regarding content protection and retaliation are for the most part justified. However, I can't for the life of me understand their obession with the pricing. They themselves price 2 disc dvds higher than single disc dvds. Why? Because they offer more. Exactly the relationship between iTunes and DVDs. DVDs offer more, they cost more.
Well spotted, and well articulated.
To be honest, I don't see iTunes movies being anything more than a novelty for the time being. They can't be burned to DVDs, they look choppy full screen on your computer, it's rather impractical to watch movies on an iPod, and the only way you'll have to get them on your T.V. would involve spending $300 on Apple's upcoming iTV. And they don't come with the extras from the DVDs. Most places don't have the broadband bandwidth for these or HD movies either.
If the studios are comfortable with Fairplay protection, they should allow iTunes to rip DVDs into a Fairplay protected DRM file, as an in-between solution. That would make purchasing DVDs more attractive as it removes the ambiguity concerning the legality of ripping DVDs for the mainstream population.
With regard to pricing some higher and some lower, I understand the studios' view. Just like with music, they want to price the big hits at a premium since the demand is there, while pricing the "didn't even know the movie was in the theatre" stuff at a lower price. DeaPeaJay's comment seems to have more to do with the retailers concern about pricing lower for iTunes than for DVDs, which is different from this; I think the studios are okay with charging less to iTunes but in this aspect are concerned about retaliation (as the article says).