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LA Times: ‘Digital Media Won’t Be Sideshow’
By Joseph Menn
Los Angeles Times Staff Writer
November 19, 2007
Today's puny sales of movie and TV downloads makes one wonder: Why are striking members of the Writers Guild of America so intent on getting a cut of Internet profits?
Only about $20 million worth of movies were sold online last year, according to Parks Associates, a Dallas-based research firm. Compare that with $9.5 billion in theater tickets, $16.3 billion in DVD sales and $7.4 billion in DVD rental revenue.
But the entertainment giants have proclaimed that the future lies online and are acting accordingly — posting videos on the Web and striking deals to speed digital distribution through such retailers as Amazon.com and Blockbuster Inc. and fresh faces like Hulu.com, which streams shows from NBC Universal, News Corp. and others.
Estimates for how quickly the market will grow can vary greatly. Movie download revenue should rise to $1.8 billion by 2011, said Parks principal analyst Kurt Scherf. Streaming video that includes advertising is likely to be even bigger.
"The real winners from the writers holding out are the people in five or seven years," said analyst Laura Martin of Soleil/Media Metrics.
Exactly how entertainment will be delivered in the future is a matter of speculation. "In 10 years, there will be a monitor on the wall in the family room, and it will be connected to a box — maybe an Xbox, maybe something else — and I'm going to watch [content] on demand," said Richard Wolpert, an L.A. investor and former chief of strategy at RealNetworks Inc. "That's not going to be delivered over cable, it's going to come over Internet protocol."
Bypassing broadcast and cable delivery could wipe out a big chunk of residuals that writers now collect when their material is rerun. Wolpert said that explains why the writers are so intent on staking a claim to all new modes of transport into the home.
At the moment, technical hurdles are delaying such a transition. For instance, Apple Inc.'s Apple TV, which allows people to capture entertainment on their PC and ship it to their TV for viewing, hasn't changed the world the way the iPod did. That's partly because consumers don't want another box in their living rooms.
Eventually, though, such barriers may fall. "Consumers would rather watch on their own schedules," Wolpert said, adding that personal video recorders "are just a place-holder technology" until Internet connection speeds surge and the networks and studios put their vast libraries of TV shows and movies online.
About 30% of the people who have both high-speed Internet hook-ups and cable or satellite TV say they would consider scrapping their pay-TV service if they could get the shows they want online, according to a survey by research firm In-Stat.
"We were surprised at the number — we thought it would be about 5%," said In-Stat principal analyst Gerry Kaufhold.