"It was no comparison," said Larry Kramer, former president of CBS Digital Media and now an investment advisor. "It was just clear the audience was more interested in free. But they were also willing to watch ads. Nobody knew that was going to be the case."
CBS isn't the only one making that discovery. Consumers spent about $29 million to buy or rent downloaded movies and shows in 2006, according to Adams Media Research in Carmel.
But online commercials, known as in-stream advertising, generated $402 million in revenue last year and were projected to reach $700 million this year, he said.
That hasn't stopped major players from trying to crack the digital download puzzle. Most think the missing piece involves letting people buy videos on their computers but watch them on TV or hand-held devices.
Amazon.com Inc. unveiled its Unbox download service last fall and lets TiVo subscribers watch the movies and TV shows they've rented or purchased on their TV.
Video gamers can watch movies or television shows through Xbox Live, an online service connected to Microsoft Corp.'s Xbox 360 game console.
And Apple's iTunes store has sold millions of TV shows and movies that can be viewed on the iPod.
Google Video downloads can be watched on a computer but not on an iPod or TV.
Google never disclosed how many videos it sold. But the failure of its video service came as no surprise to Ben Rekhi, a 28-year-old Santa Monica filmmaker whose movie, "Waterborne," was highly touted when Google Video launched.
Rekhi had turned down a six-figure theater and DVD distribution deal to distribute his film through Google.
"The online video revolution was in full swing," Rekhi said. "We had this opportunity to make history."
His gamble turned out badly. Although 80,000 viewers streamed his movie when it was available for free in the first week, just 300 people bought it in the following months.
Rekhi eventually pulled the film, which was selling for $3.99 a copy, off Google in July 2006.
"It was an exciting opportunity and amazing experience to be a pioneer in the digital distribution realm," he said. "But with any new technology, there's going to be a few lambs that get slaughtered. We just happen to be that."
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dawn.chmielewski@ latimes.com
alex.pham@latimes.com
