If content is king, one of its princes-in-waiting is Movielink, an Internet-based purveyor of digital movies that also happens to have the backing of five major studios: Metro-Goldwyn-Mayer Studios, Paramount Pictures, Sony Pictures Entertainment, Universal Studios and Warner Bros.
Thanks to side deals with Artisan Entertainment and Buena Vista Pay Television (which gives Movielink access to certain titles from Walt Disney Pictures, Touchstone Pictures, Miramax Films and Dimension Films), Movielink's digital library in many cases surpasses, or at least rivals, that which cable operators can offer via VOD or pay-per-view. Plus, Movielink can deliver that content via broadband connections to PC hard drives without sharing revenue with operators.
But perhaps cable shouldn't view Movielink as an adversary it can't control. According to company CEO Jim Ramo, Movielink is eager to buddy up with cable operators and create a technical and business plan that works for both sides. He recently discussed Movielink's plans for cable and beyond with CED Editor Jeff Baumgartner. An edited transcript follows.
CED: You've been available commercially for less than a year. What can you tell us about Movielink's usage figures, number of registrations, download statistics, etc.?
Ramo: Because Movielink is a private company, we don't release our numbers, but I can say that since we launched the business in November, we're happy with the growth. We think the growth has been excellent and above that of the broadband industry in general. In particular, we're having excellent repeat conversion from repeat customers.
But I think it's fair to say that delivering movies over the Internet is still very much a business that is building. We are building our catalog and our network infrastructure, and we're building our customer base.
There are two overriding market forces here that are in our favor...and yet need some time to materialize. The first is the growth of the broadband footprint in general. It's now over 20 million homes. That's a big number, but that does not yet compete with, say, basic cable and satellite households or broadcast households. Secondly, we think that today we deliver onto primarily a PC display device, and as time goes on, we expect home networking to change the definition of the display device and make that...a device that is connected to the Internet. That will, in addition, grow Movielink significantly.
CED: In the meantime, while you wait for some of these factors to materialize, what demographics have been most attracted to the service? Are you seeing a lot of business travelers and college students?
Ramo: We think about 60 percent of our customer base is men, primarily [ages] 25 to 49. About 15 percent take the service and connect it to a TV set. About 40 percent deliver onto a laptop and probably use it for mobile-type applications.
[Our customer base] is primarily men, and it's older than we would have thought when we first launched.
CED: What's happened to traffic and usage patterns since the RIAA (Recording Industry Association of America) started to go after alleged digital pirates? Have you seen any noticeable uptick?
Ramo: We haven't particularly [witnessed more traffic] that we can attribute to that specific action. But let's remember that the RIAA is music, not movies. Movies are different than music with respect to piracy. Piracy is, of course, a problem with movies, but because the movie file is so big–ours, for example, is half a gigabyte– it takes a long time to download a movie.
When a consumer goes to a pirate site, they're really dealing with risk when they download a movie–the risk that it will take a long time before they will get it; the risk that when they get it, it's not going to be of good enough quality or it's not really going to be the movie that they intended it to be. There's always the risk of using Spyware or getting caught with Spyware stuck on your computer and viruses, etc.
A specific music cut might take 15 seconds to download or less. A movie can take a half-hour to three to four hours if it's in MPEG-2 format on a pirate site.
CED: What download times have your customers been getting recently?
Ramo: On a cable modem when nobody else in the neighborhood is on, it might be 15 minutes. Generally, though, you might say that 1.5 megabit last-mile connection speeds [are] probably a half-hour. 1 megabit is probably 45 minutes; 350 kilobits-per-second might be about an hour-and-a-half. It depends on the last-mile speed.
CED: Although it's still early, what are you doing to crack the broader market of moviegoers?
Ramo: We're really in a building mode, so part of that is adding content. When we launched, we had 175 titles. We'll probably enter September with about 400 titles or so.
We are building functionality. We are constantly adding ease-of-use to the site, whether that's searching or browsing capability or easier purchasing capability. Lastly, we're specifically marketing to target market segments that are right for us, such as the travel market or student markets or sci-fi fans, or whatever.
CED: When it comes to functionality, it seems like DVDs have never been hotter. Are you trying to attract more people to the product by offering that kind of value-added material that DVDs offer, such as deleted scenes or "making of" documentaries?
Ramo: We have some of that now. The people who rent our movies can get extras. We have clips; we have photographs today. But probably more importantly, we have a different shopping capability and a different shopping experience. It's an online e-commerce experience, as opposed to having to drive to a brick and mortar store and walk around and try to alphabetically figure out what movies are where. We have a real ease-of-use in terms of browsing.
And, as compared to cable VOD, we have, we think, a neat interface that allows for non-linear searches in just a much easier way, whether you're looking for movies by genre, movies by actor, director, by title. It's easy to search our site in those ways.
CED: Where is the discussion these days with the cable operators regarding potential partnerships other than using that high-speed cable line into the household? Is there anything more formal going on?
Ramo: We are having discussions with almost all of the MSOs now. There is, I think, an opportunity for a real win-win. For them, we offer an application on the IP side that will allow them to acquire and retain customers, allow them to open up tiering–either above a standard speed for a certain price by adding content, or lowering speeds so they can broaden the price range and products that are available.
We only sell to broadband, but we allow people who have 128 kilobits (per second) and above to get into the site. That's one of the advantages to downloading as opposed to streaming. Streaming at 128 kilobits...You just couldn't do it, whereas you can download at that speed. Now, it's slow. You'd really want a faster connection, but it's certainly doable.
We think there's a deal there and a reason for the cable operators to want to do a deal with us and take us on as a premium application. From our standpoint, we can always use marketing that a cable's portal can provide and a quality of service on the technical side that's not available on the standard Internet.
CED: So, if a customer wanted to download a title, maybe one option would be for them to open up the bandwidth for the period of time it takes to download the movie, and charge for that extra bandwidth?
Ramo: What I was thinking of is, as operators want to move people up the price value curve, they could provide a premium application like movies. Then we become a better product offering to consumers as the speeds go up. You could see marketing with a bundled premium offer to either acquire or retain a customer or move them up that price value curve.
CED: So, you'd use content as the carrot?
Ramo: Exactly. Think of us as HBO and/or VOD on the cable video side.
CED: Any thoughts at this point on encoding titles in more advanced compression formats? MPEG-4 is one that's discussed a lot, but something beyond MPEG-2 at this point?
Ramo: Today, we don't do MPEG-2; we use Windows Media 9 and Real [Video] 9. Those are highly compressed formats and they are really high quality. We could, I guess, always increase the bit rate of our encoding to get prettier pictures, but the tradeoff is a longer download. Over time, if MPEG-4 were really to become a [widely-used] standard, we would encode in that, but we'd want to make sure it has an associated digital rights management system that comes with it. We need DRM to provide encryption and to enforce our business rules.
CED: How much will things open up when set-tops with DOCSIS cable modems begin to appear?
Ramo: I think that's a few years out. It's nothing that's a 2003 or even 2004 product. But having said that, yes, I think that's the kind of service that will grow Movielink. I think Movielink needs the cable industry as a partner to grow into that environment. We're looking forward to doing that. Once our kinds of applications get added on, I think you'll see a broader adaptation of home networking, the ability for cable operators to consolidate [their] transport to be IP based. I think it's a real win-win, but again, I think it's a few years out.
CED: Since that's a few years out and there are a few people out there who transmit [Movielink] content on their TV sets, is Movielink doing anything proactive in this area to offer the type of technical options because some people have to create this from scratch to do that?
Ramo: We're an application, not an operator. We, I think, create an environment that gives incentives to the box makers and the operators to deliver this additional functionality in the future. I don't think you'll see Movielink driving set-top boxes. We're certainly not buying them or placing them or designing them. I think that's an operator's and a hardware vendor's job. But as a content provider, as a premium application, we do provide incentive for those guys to start thinking about those things.
CED: So, although you have access to Disney's content, you're not at this point creating a Moviebeam-like, datacasting service with a separate set-top for storage and playback?
Ramo: That's correct; we're not. We're an IP-based platform primarily using the Internet as a primary channel of distribution.
CED: Are there any thoughts now of allowing customers, for a price, to own the titles they download, and removing the 24-hour self-destructing mechanism you use now under the rental format?
Ramo: I think it's fair to say that we launched the business with our first business model, which was the classic, 24-hour viewing experience that you described–a classic VOD/rental model. As time goes on and as we get more comfortable with DRM, I think you will see us open up the business model to alternative revenue streams, alternative forms of purchase.