Once Again, You Don't Compete With Innovative New Services By Being Lame

from the in-case-you-weren't-paying-attention dept

A couple years back we pointed out how the entertainment industry kept trying to “compete” with new (legal and not-so-legal) online services, but always seemed to do so by being incredibly lame. And, you don’t compete by being lame. It appears that this message still hasn’t quite gotten through to some yet. With the movie industry facing new challenges concerning online distribution and innovative services like Redbox, here are two stories of old school players trying to “compete” but missing out on the part where they make their offering compelling.

The first comes from Josh in CharlotteNC, who points out that Blockbuster is trying to compete with Redbox and its widely available kiosks (and Netflix with its larger library of downloadable movies) by setting up kiosks in its stores where you can download movies. But… you can only download them to proprietary SD cards, and then it can only play on special proprietary hardware that participants in this program need to have. How is that a better experience then, well, anything? If you want a movie that can be downloaded, why not just let people download it at home? Why have people go out to download it?

Then we have a story sent in by Loydster, about how Sony Pictures is offering owners of new Sony/Bravia HDTV’s the chance to download and watch the movie Cloudy With a Chance of Meatballs before the DVD release. While that is actually a nice tie-in between Sony’s content business and its consumer electronics business, Sony (of course) has to screw it up. That’s because the company thinks it can charge $25 to download the movie. The company seems to admit that it’s charging this much because it doesn’t want to piss off its retail partners (like WalMart), but it’s difficult to see why it’s worth doing the project at all if the pricing is going to be so ridiculous.

Experimenting with ways to compete is good… but being so obviously lame is not.

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Companies: blockbuster, sony

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Comments on “Once Again, You Don't Compete With Innovative New Services By Being Lame”

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25 Comments
Arnoud Engelfriet says:

BREIN pleads for inclusion of online environment in ACTA

BREIN pleads for inclusion of online environment in ACTA

In a letter to undersecretary for Economic Affairs Heemskerk, BREIN clarifies why the organisation thinks it is important that the ACTA negotiations do include digital distribution.

According to BREIN, the production of intellectual property contributes for 5,9% to the Dutch economy and is an important export product for The Netherlands. When copyright is not enforced, not only content producers suffer, but indirectly also society as a whole through missed tax income, loss of employment and decreasing culturl diversity.

Therefore, BREIN requests the undersecretary to make policies to counter any kind of piracy in the ACTA negotiations, including piracy in the online environment.

http://futureofcopyright.com/index.php?page=news&id=639

iNtrigued (profile) says:

Re: Re: $25 to download a movie?

So are we getting anything other than a digital copy. I might say it was worth the $25 if we would get a free copy of the dvd when it was released. But then what is the point of charging $25 to begin with, just charge $5 for the digital then $20 for the dvd or some variation of that.

I guarantee that most people wouldn’t even know how to download the movie to begin with and the ones that do are the ones downloading them for free anyways so whats the point? I mean Really!? Who are these “meatheads” in charge and why is it so hard for them to grasp these things?

Sometimes I think far too many companies are run by a bunch of meatwads. *ATHF anyone?

zaven (profile) says:

Incorrect Blockbuster Description

I read something a little different about the blockbuster program. From what I heard these kiosks were more or less going to placed in public places like airports and such. The idea is that a lot of people have spare SD cards for backups and such. Users can rent movies to watch on their flight at the last minute. There is no issue of returning the movie as it’s digital and it’s on your SD card. It just expires and can no longer be watched. Not all airports have public wi-fi for this singular purpose, its a bit more useful than say renting a movie on iTunes.

Overall I think it’s a dumb idea but it does kinda serve a purpose.

Anonymous Coward says:

Re: Telling

The term “piss off retailers” isn’t exactly correct. It’s more like “screw up the retail market”. If they under price the download sale to a point signficantly lower than the retail on the DVD, they are only hurting themselves and their retail partners.

Consumers naturally go down the path of least financial resistance. Why pay $25 for DVD if you can pay $4.99 for a download? It’s the same thought process that has many more of them renting than buying, or using services like Netflix rather than purchasing.

There is little indication that moving to downloads below the cost of a DVD would increase sales enough to make up for what would be lost in the DVD market. If you sell it at even half the price, you need twice the number of customers to arrive at the same gross sales numbers. Further, it might push retailer to either demand a signficiant cost price drop on the DVDs, or it might encourage them to offer less shelf space to certain DVDs, which would only go further to hurt gross sales.

It’s not a hard decision really. The general public has shown a fairly strong willingness to pay in that range for a DVD, why drop the price just to drop the price?

Michael (profile) says:

Re: Re: Telling

“Consumers naturally go down the path of least financial resistance”

There is lots of evidence to the contrary. Consumers do not just want everything at the cheapest price (or free). Consumers have been found to be happy to pay a premium for better service, additional options, and convenience.

That is why companies make billions selling coffee for $1.50 that you can make at home for 15 cents.

Pricing it the same as the DVD or even less than the DVD will not cripple the DVD sales. In fact, if you price the movie low enough, you may entice customers to buy the DVD to get some extras it includes.

Anonymous Coward says:

Re: Re: Re: Telling

That is why companies make billions selling coffee for $1.50 that you can make at home for 15 cents.

There is a nice expression, but pretty much completely false.

First off, you can’t make coffee at home for 15 cents. Most people have coffee machines that require about 50-75 cents of coffee to make a decent brew (they don’t do single cups), you have to pay the power, you have to buy the coffee machine, you have to go to the store to buy the coffee, you have to buy cream, sugar, and put your time into it. I am a huge coffee fan, and I have long since discovered that for a one or two cup per day drinker, it isn’t any more expensive to buy made coffee retail than it is to make it at home – and you don’t have to spend them time to clean up after either.

That isn’t a question of just price, it is also a question of convenience. People are paying for the time they save by not doing it themselves.

Pricing it the same as the DVD or even less than the DVD will not cripple the DVD sales. In fact, if you price the movie low enough, you may entice customers to buy the DVD to get some extras it includes.

Yes, you may entice SOME. But at the same time, you have to look at the other direction – would a lower price for the download to a key version entice some people NOT to pay for a DVD but to buy the cheaper download instead? You have to think in both directions, what part of normal DVD sales would be lost?

iNtrigued (profile) says:

Re: Re: Telling

Assuming your scenario is correct, just because someone busy a digital version of a movie doesn’t me they won’t buy the dvd. Or that they would have bought a dvd without the digital version. Most people aren’t technically savvy enough to burn a digital version to a dvd or vice versa. It is just convenient to have it already converted for you.

Really, if they are going to put so much restriction on downloading and/or charging an exorbitant amount of money for them, why even bother putting out downloads? Reinvest the money into making better product or heaven forbid a little costumer service.

nasch (profile) says:

Re: Re: Telling

There is little indication that moving to downloads below the cost of a DVD would increase sales enough to make up for what would be lost in the DVD market. If you sell it at even half the price, you need twice the number of customers to arrive at the same gross sales numbers.

Isn’t net profit more important? Anything paid for a download is pretty much pure profit (on margin, which is what matters). DVDs have per-unit distribution and production costs that must be recouped before you start getting to profit.

Anonymous Coward says:

Re: Re: Re: Telling

Isn’t net profit more important?

Net profit is very important, but it is only part of the deal here. Getting the biggest net profit in each market segment is the most important. That doesn’t just mean on a single movie, but over the long term, over all of your products, in all of the ways possible.

Retail is exposure. Walk into a Best Buy or whatever, and they have racks and racks of movies that people browse, look at, and potentially buy. They often don’t buy what they were looking for, but something they just decides like that to buy. Christmas time is especially excellent for that, as people pick up box sets and whatnot that someone on their gift list will love. They might not have seen it shopping online or standing and a kiosk.

So by maintaining a strong DVD marketplace and maintaining prices where the DVD market remains viable, they are working the net profit across their full line, not a single product. Those box sets are some of the most profitable pieces out there, often based on material that has long since paid for itself, giving a significantly better profit margin than anything else they can do. So they trade off some profit on newer DVDs in order to keep other products in front of consumers. It’s a bottom line thing.

Cutting the retail price of a movie, no matter they method that it is delivered in, would potentially push retailers to stock less material, to lower overall prices, or both, which would negatively affect the overall net profitablity of the company’s product line.

It’s the reason why you cannot look at any one part of the movie food chain individually, as it often has a knock on effect to other parts of the business.

John Fenderson (profile) says:

Re: Telling

“This is why established companies tend to be bad at innovating. They’d rather piss off their customers than their golfing buddies.”

Actually, it’s more like they’d rather piss of their customers than get sued up the wazoo. I’m assuming here that their business works like the software business, in which case they probably entered into a contract with retailers in which they promised they wouldn’t undercut the retailers business by directly selling the same items at anything less than the MSRP.

Tom The Toe says:

Re:Telling

It shouldn’t piss off any one since the only people that will be offered the download will be those purchasing a new Sony TV. Sony should offer it for free with a $25 rebate going back to the retail store that sold the TV. If Sony thinks this is a good way to introduce new customers to a download service they better think again. I think Sony and the retailers still believe anything free is a lost sale, (which it isn’t).

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