Daniel Borawski
What will be in store for the future of video renting? If the internet which has grown so much over the past decade could break the movie renting industry, what will break the internet distribution industry? With new technological advancements what will come in the future?
Online Distribution is the most recent way to watch motion pictures. There are dozens of websites that stream movies, television shows and even news programs. While the internet is expanding like the universe, many people are taking advantage of these websites for their personal gain. Illegal downloading and piracy are starting to become major problems. There is little that the motion picture companies can do to stop piracy. At the same time, online distribution means video renting from a video store is becoming extinct. Long gone are the days where a person will drive to a store, look through dozens of movies and wait in a long line just to rent for a night or two.
Video rental stores were a huge home entertainment business ten years ago. New Releases were shown in windows on posters; even on television. Every town had a video store; not everyone had a computer. For the past ten years technology has risen past expectations. Most of the public has access to a computer and the internet these days, and most people have the ability to watch a new motion picture on the internet. New online video rental chains have popped up, allowing the public to view new releases or even downloading new movies once they hit theaters. This means the demise of video rental chains and perhaps even movie theaters.
Film distribution online has become one of the largest sources of revenue for the motion picture industry. Websites such as Netflix and I-tunes distribute thousands of movies and television shows for customers to watch online. Other sites such as Cinema Now, Movieflix and Blockbuster.com allow a person to legally download a movie for a fee. These downloads come as either a purchase of the movie which allows the person to view the movie unlimited times or as a rental for 24 hours. Other websites have a monthly fee that allows the renter to view unlimited number of movies and unlimited number of times.
There are many reasons why people aren’t traveling to the old video store to rent movies. First there is the convenience of sitting at home and deciding what to watch online. Netflix and other online distributers have made the complex trip to the video store simpler. Instead of long lines and new releases being out of stock, these new video rentals give the consumer more choices in what to watch. If a movie turns out to be boring or too graphic for the view, he or she can simply turn the movie off and start another with no charge.
What are the pros and cons of viewing movies on the internet? The positives are that there is no waiting in line to check a movie out. Video stores are notorious for long lines. There are family settings that don’t allow R rated movies. Most video stores ask that a parent or guardian is present for the child, but with a family setting and a description of the movie online, the parents or guardians can screen the movie before renting. There is also the price which beats most video stores: Netflix and many other sites charge anywhere from five dollars to around fifteen dollars per month. The movies are always there to rent and that’s convenient for the renter. Most video stores have a limited number of movies they can rent. If a popular movie just came out, a video store will usually have between ten and twenty copies which means the first ten or twenty people get to watch it. Everyone else is stunk. There are also reviews on each movie which allows the renter to choose which one they would like to watch.
The negatives for viewing movies online are that there is always a monthly bill that is charged, even if the renter doesn’t rent a movie. Video stores only charge you if you rent. The quality of the movies online isn’t as great as a DVD version. The streaming of movies diminishes the quality of the film. With over a hundred thousand titles to choose from, it could become a hassle to find a movie to watch. Browsing through a hundred thousand titles can sometimes take more time than driving to the video store and picking a movie off the shelf.
The movie business was a lot stronger before the rise of the internet. During the early half of the 20th century Motion pictures were released in theaters. Customers had to go out to the movie theaters to watch some of their favorite motion pictures. This was the only possible way of viewing motion pictures at the time. During the 1960s television stations started to buy up the rights to some motion pictures and began to stream them on their stations. It wasn’t until the 1970s that customers could actually go out and purchase their favorite movie on what was known as Betamax.
The Betamax was SONY’s way of producing the home video experience. This was the first private home viewing format for the public. Customers could view cinematic movies and record their favorite television shows. After a year of Betamax hitting the market, VHS players became available to the public. VHS players were made by the JVC Company. VHS turned out to be a hit, not because of better quality, but because the VHS player was cheaper and more massed produced. Betamax was superior except in length of the tape. Betamax was only sixty minutes long while VHS was more than three hours long. This gave customers a longer period of viewing and recording their favorite television shows or movies. After a long decade of battling, VHS won the war. Both Betamax and VHS became obsolete with the introduction of DVD’s. (www.mediacollege.com)
DVD’s were introduced in 1997 as a replacement to VHS. DVD stands for Digital Video Disc or Digital Versatile Disc (media college). DVD technology allowed viewers a clearer picture and enhanced the sound of home movies. This also helped with computer technology. DVD technology allowed computers to handle the DVD style disc which allowed for more information stored. 4.7 Gigabytes could be stored on a single side of a DVD disc. Since DVD’s helped computer technology with storage, they have also been used as the starting point to piracy. (media college)
Piracy is a war-like act committed by private parties that engage in acts of robbery and/or criminal violence at sea (wiki). That was the definition long time ago, now piracy is when private parties steal movies and released them through downloading sites such as LimeWire and pirate bay. These sites have thousands of movies that take a couple of hours or a couple of days (depending on the computer) to download. The user has free and unlimited access to the movie for the duration of the computer’s life or the duration of the technology it’s stored on.
Video piracy is one of the largest problems facing the motion picture industry. Piracy occurs in many ways. The most popular way is through illegal downloading. These movies that are illegally downloaded are often products of pirates who sneak video cameras into movie theaters and record. In the beginning of illegal movies, pirates would sneak a video camera into a theater and record while sitting in their chair. These recordings were often poor and had audience noise more than the movie noise. The movies are usually sold on the streets or presented online. Pirates have become more professional with professional microphones placed near the speaker as to not pick up the audience in the background. The quality is still not as good as the real thing, but a viewer can easily watch the movie and never have to purchase it. A person on the street can easily own the new summer blockbuster a couple of days to a week after it’s released in theaters. (Butterfield)
There are legal ways of viewing movies; these come out as video rentals or movie sales. When a person enters a video store to rent a movie or to buy a movie they are participating in a part of the distribution process. Distribution through video stores is when a Distribution company will buys rights to the movie and then releases the movie on a DVD and then sells the DVD’s to video stores. These video stores will rent the movies out to customers and make a profit on each rental. Blockbuster was one of the first to make multi millions from this venture.
The path for a movie is a long journey. First there is an idea and an outline which a company will purchase the rights to. Actors, writers, and directors are chosen to make the film and then the film is completed and sent out to a distribution company with licensing agreements attached. The distribution company decides how many copies to make for theaters and for home viewing purposes depending on their estimates of how popular the movie will become. Potential buyers watch a special screening of the movie and then make bids on how many copies they would like. Movie theaters do not purchase the film; they lease the movie and give a percentage of the profits to the distribution company.
Most distribution companies have agreements that they can copy the movie on DVD’s for home viewing. The distribution company can receive anywhere from ten percent to fifty percent of the profits. The distribution company is also the one that takes a financial loss if the movie is a bust. Distribution companies have already thought this one out. More copies of movies starring big name actors or huge action flicks are made while independent films have fewer copies made. Fewer copies made means less money lost. An average printing of a movie for theaters costs between $1,500 and $2000. Since distribution companies make a percentage of the profits, the more people attending the movies, the more money they make. A distribution company will lose money if they were wrong about how many copies of the film to make. If a distribution company believes a film will be a huge success they will usually make mass amounts of copies. If the film is a failure and no one purchases these copies the company loses money. If distribution companies begin to lose money then the whole movie industry will be lost. (Tyson)
Online distribution is a different type of phase. Online distributors often will buy the rights for the movie or the television show and release it online. Since there are no copies to send out to movie theaters or to video stores there is almost no financial loss. A percentage of the profits are still given to the distribution company and the film company who put the picture together. There is much money to be made with online distribution and there is also much money to be lost.
Because of online distribution there was a major writer’s strike that stopped production on many television shows. In 1988 the Writer’s guild of America decided to go on strike against the new VHS. The guild believed that compensation should be given to the writers of these films that become reproduced on VHS. This strike was only the beginning to the more recent Writer’s guild of America strike that happened in 2007-2008. The Writer’s Guild of America decided to go on strike because writers weren’t making money off of online distribution of television shows or movies.
There was also controversy about reality television cutting profits from writers. The recent strike was the cause of recent online distribution also called new media. New media is the term for distribution on the internet. Companies could release movies on the internet without having to compensate the writers behind the films or television shows. The latest strike lasted a hundred days. It became enough time to ruin storylines in many of the upcoming summer films and cut many popular television series to half of their expected seasons. The strike finally ended when the two opposing sides made an agreement that would give the writer’s a higher percentage of the profits. (Cieply)
Online companies have been battling over how to make the most money and keep their consumers happy. Cacchi.com is a new website that helps with online distribution. The website promises 75 percent of the profits to any filmmaker interested in placing their film among the library of films at Cacchi.com. The website also claimed it would use social networking sites such as facebook.com and twitter.com to promote the movies. Trailers of the films would be placed on their facebook.com page and viewed by anyone who visited the social network. This is called viral marketing.
Viral Marketing is when a company uses an already popular social network to help advertise their product or business. Viral marketing is becoming a more popular way to promote of films through the use of blogs and social networking sites like Facebook or Twitter. With over 200 million people on Facebook.com and almost just as many on Twitter, these companies can help spread the word about their online distribution more quickly and more precise. (Howard)
When a potential consumer logs in to one of these social networking sites, the consumer may find a link that leads to the Cacchi.com. When this happens they interact with the website and either fined it entertaining or not. If a person happens to enjoy the site they will then spread the news to their friends who will tell more friends, thus Viral Marketing for online distribution worked. This is how many downloading sites have become so popular.
Then again Caachi.com had to close their website because of lack of resources. Not all online distribution is successful. The web team at Caachi.com does have an email address and a twitter account where they post what the progress they are making to help improve the way movies are distributed online. Caachi.com’s webpage simply says “We have decided to close the website and are exploring ways to continue our work in online film distribution” (Caachi.com).
Eyesoda.com is a website that helps promote independent films. The website offers members of Eye soda the opportunity to purchase tickets for online film festivals and watch other people’s independent film online. Eye soda has many different genres to choose from and has a search engine that lets you look for a director or the name of the movie or even a film description. Eyesoda.com is a neat way for directors and writers to network and watch indie films anytime they like, films that don’t appear in video rental stores or online rentals.
Magnet Media films is a production studio and an interactive marketing firm, which specialize in marketing online and advertising online. They are a digital company who reach out through digital environments. Magnet Media Films is responsible by advertising through the use of blogs and other media online to help promote many different types of companies. Paramount pictures used Magnet Media to help promote their film “Grease” the sing a long version.
Netflix is of course the most popular online renting company; they had reached over 1 billion rentals. Some of Netflix competitors are Red box which is located outside many grocery stores and only charges one dollar a day rentals. These rentals can be returned anytime for up to a month and then the movie itself is charged to their credit card.
Netflix started out as a typical rental company like blockbuster, charging 4 dollars a rental and a 2 dollar shipping charge which doesn’t sound very pleasing in the first place. They decided to do the flat rate rental where a person pays for one month and has unlimited DVD rentals. Netflix has signed deals with many gaming consoles so that it’s available via wireless on a television through consoles. This allows customers to stream right onto the television instead of watching movies through the computer. Netflix has agreed with Time Warner to not rent time warner movies for the first 28 days after each one is released for home viewing. This allows people to purchase the movie from the cable company before they could rent the movie from Netflix. Netflix is charged less because of this which helps keep their costs low. ( Kafka)
I have completed a history and overview of Online Distribution and now I will focus on what will happen in the future. There are technological advances happening that make online distribution a permanent place in our history. What are some opportunities motion picture companies can make to help produce and manufacture movies for online distribution? What can be done to help Online Distribution stop piracy? What other problems are there for Online Distribution and the motion picture industry? What will the future of Online Distribution bring?
The problem with Online Distribution that motion picture companies don’t like is the piracy. Every time a movie is released in theaters, there are always copies of it online for download. Motion picture companies have been trying to prevent this from happening, but it is nearly impossible. Dozens of commercials are shown which ask “would you steal a car? Why would you steal a movie” and similar lines. Millions of dollars are spent to try and prevent these acts from happening. A bill was just passed by the Senate (Mcullagh) that allows for the federal government to seize a website domain name and would require all credit cards and bank accounts related to that name to cease. This will stop the pirates from illegally downloading copy written material such as movies, songs and video games. This bill is called the Combating Online Infringement and Counterfeits Act. This act only combats sites that affect the residents of the United States. If there’s another website that is affecting another country (e.g., China) then the motion picture company can’t use this law against them. This bill only comes to play if the website in question is primarily designed and has no demonstrable, commercially significant purpose or use other than offering or providing access to unauthorized copies of copyrighted works. (Mcullagh)
The bill offers hope to motion picture industry that is losing billions of dollars to pirated material. It also offers action against sites such as Pirate Bay which are search sites and not really host sites. Pirate bay claims that it is a search site much like Google. While searching for bit torrents people come across other sites that host the material. Bit Torrents are a form of downloading that allows a person to download large files quicker and easier. Bit torrents usually contain small parts of a file and connect to different users. This makes it harder to upload a virus and allows the downloader to view what material is being downloaded and a graph that shows how long the download is going to take. Pirate Bay is legal and not committing any crimes, but they are helping users with illegally downloaded material.
The problem with the bill is that the website name would be gone, but the IP address would still be accessible. As long as the person knows the IP address of the website then a person could still visit the site and illegally download material. The bill passed in a Senate committee with a vote of 19-0 and with the backing of huge companies such as: Disney, Nike, and Time Warner (Palmer).
While a Senate committee was voting on a bill about piracy, a merger was taking place involving two major companies, Comcast and NBC. This merger must be approved by the Senate and regulated by the government before the deal becomes finalized. Comcast is a cable company and is in the middle of a merger with NBC to promote online streaming. Comcast has noticed a decline in its profits due to online viewing of television and movies. This has caused Comcast to switch its focus from regular cable distribution to online distribution. Comcast has made an online viewing station for its cable customers which allow them to watch their favorite shows online as long as they are a cable customer. (Stevens)
Level 3 Communications helps Netflix with online streaming and has filed a complaint against Comcast claiming it is practicing an anti-competitive behavior. Many anti-competitive practices are done by large companies which can stand to lose money as long as it hurts their competition. This can be done in numerous ways, either by reducing their price with no profit, refusal to deal with certain companies, or not allowing smaller businesses from entering competition by having fees and government regulations (Stevens).
Level 3 is complaining that Comcast is practicing an anti-competitive behavior. Comcast actually teamed up with Level 3 for free to help with Level 3’s internet traffic. Comcast saw that Level 3 was hosting Netflix’s traffic and decided to pull the plug. Too much downloading and broadband were being used for free and the possibility of Netflix taking business away from the cable company. Comcast decided to charge Level 3 for its share of the traffic being used. Netflix alone is using one quarter of the internet during the night. One quarter of the people using the internet is just using Netflix which proves that Netflix really does have an influence on our culture and society. Comcast may have done the right thing here since Level 3 was using its broadband and Comcast was not seeing any profits from this (Stevens).
Since Comcast wants to charge extra for its bandwidth to Level 3, does this interfere with Net Neutrality laws? Net Neutrality laws simply say that if two people spend the same amount of money on the internet then they should have the same access to the internet. Level 3 is claiming Comcast isn’t supporting the Net Neutrality laws and Comcast is claiming that they’re losing money hosting the traffic that Level 3 promised to Netflix (Stelter).
What’s at stake here is the ability to watch streaming video feeds online of your choosing (Deleon). Comcast is charging Level 3 which means it puts online companies at a disadvantage. The fee for using its internet is threatening the openness of the internet. Access to the content that users want is at risk. “Net neutrality, which posits that Internet traffic should be free of any interference from network operators like Comcast, is thought to be on the December agenda of the Federal Communications Commission” (Stelter).
If an open internet is being threatened, then online distribution is at risk. Does that mean that illegal piracy online will become even more popular, now that people can’t watch the content they want to view? Online sites such as Netflix allow customers to watch movies and television shows legally while paying a monthly fee. Since Netflix accumulates nearly a quarter of the traffic on any given night on the internet, that must mean that nearly a quarter of internet customers are subscribers to the Netflix. 266,224,500 people use the internet in North America, compared to the 344,124,450 as a population (Internetworldstats). That equates to almost 66,556,125 people using Netflix at night. Of course Netflix claims they only have 17 million customers (Sandoval). While people are looking for cheaper ways
of watching movies, the Motion Picture Company is trying to make a profit.
Motion Picture companies are trying to make movies cheaper, but with the same quality and sometimes even better quality. More motion picture companies are using digital filming which allows for them to create a movie without so many special effects. Instead of spending millions of dollars on high tech explosives, they’re using digital special effects to create these explosions.
Motion Picture companies have realized that they are losing money and they want to keep their costs low. If people are illegally downloading a movie and costing the company a few millions in revenue, then that cost has to be paid somewhere. The money lost reflects back on the company, and they decided to make cheaper movies. An interview with Peter Bart on PBS Front line discusses how ten years ago there would be three people in a room discussing the script and what needs work on it. “These days there are forty people in a room discussing how they’re going to make profits. What companies like Burger King or McDonalds are going to pay money and have advertising and what other companies would do business. Green lighting a movie isn’t about whether a movie is great or poor: it’s about whether the movie can make money. Seventy- Five percent of revenue from U.S. motion pictures comes from foreign countries. Europe loves action films that barely have dialogue. These movies are cheap to dub over since there isn’t much dialogue and most of the scenes involve high-powered explosives or shoot outs. Foreign countries watch North American movies perhaps more than North American movie goers watch foreign films. Since North America makes more movies each month than foreign countries it allows North America to expand and ship overseas to a much more devoted audience (Bart).
Disney has already launched its version of online distribution, releasing their Pixar films online for rent or for buying. Disney discovered that the only way to compete is to go along for the online ride. With DVD sales being at an all-time low, motion picture companies are finally realizing their mistake. There is even talk that some studios plan on releasing movies to a cable company 30 days after their release in theaters. Could this be a trend and could the movie theater business be hit hard by this? Subscribing for a month of access to Netflix is cheaper than going to see a movie in a theater. If new releases are released to cable companies for a pay per view tactic, then customers might wait the extra 30 days to watch a new movie and pay a lower fee. Some businesses are trying to cash in on the low rental fee; there are even vending machines for new releases.
Some companies are using vending machines for movie rentals. This has become a trend outside grocery stores. For only a dollar a day RedBox offers new releases and hundreds of titles to choose from. RedBox is even offering video games for rent through its services. There is an application on IPhones that allows a person to reserve a movie or to find a RedBox location anywhere. RedBox was owned by McDonald’s and is now owned by Coin Star. RedBox now controls at least nineteen percent of the video competition. Some distribution companies feel that RedBox could hurt the motion picture business just like online Distribution. While video vending machines may seem weird, these companies are still competing because of their low prices and easy access (Barnes).
New technology could come about for RedBox and other companies to rent movies through IPhones or perhaps even through the internet. RedBox has already completed an application which allows customers to do everything else besides renting the movie. One company has already made this vision possible. Cinema Now has already provided a service where people can rent a movie or download a movie to their computer at home with the use of a cellphone. The company allows customers to pay a rental fee or a buyer fee and then upload the movie to the computer. The computer must be on and the Cinema Now software must be installed on the computer. The technology is here, but will the technology to automatically download movies from your phone onto your computer stay popular? Or is it too much of a problem? (Yosokwits)
There are problems that online distribution companies and the motion picture company are going to have, but they have already overcome so many obstacles to allow distribution online. With online streaming of television shows and movies becoming even more popular and many companies facing the harsh decision to move along with online distribution, this is the future of watching movies. There is no more waiting in long lines at the video store handing over a few dollars to rent a movie for a night. The death of video stores is here and the birth of online renting has already passed us by. Online distribution will become even more popular as time goes by and technology passes by to those of us who still reminisce about the past.
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