Perhaps the most enthusiastically received announcement came from Netflix Inc. to give its 8.2 million subscribers the option of watching movies without waiting for the postal service. The Los Gatos, Calif.-based mail-order movie service unveiled a $99 device to stream Netflix's movies to the TV. For now, at least, it lacks the rights to stream the latest blockbuster movies, and instead offers classics such as "Ben Hur" and independent titles such as "Pan's Labyrinth." The company says it is talking with the studios to offer more current fare.
But the future is slow in coming. Online distribution of films and TV shows through iTunes, Amazon and others is comparatively minuscule, accounting for $293 million in revenue this year and growing to $1.6 billion by 2012, Adams Media Research estimates. Cable's equivalent, video on demand, will reach $1.8 billion.
Indeed, studio executives don't expect any single technology -- video on demand, digital downloads or Blu-ray -- to replace the DVD cash cow. Within four years, Adams projects, the high-definition Blu-ray disc will partially supplant DVD and account for $14 billion of an estimated $26-billion market in the U.S.
"The closer we get to filling people's time in the most convenient way possible, and in as many ways as possible -- in the back seat of your minivan or on your iPod in the subway -- our business will increase," said Mike Dunn, president of Twentieth Century Fox Home Entertainment.
Such thinking is causing studios to reevaluate old business taboos.
Hollywood has repeatedly balked at providing movies to the cable industry's on-demand services because the companies have historically done a poor job of marketing and promoting films, and an even worse job designing a navigation system to find what to watch.
Nonetheless, all the major studios, except Sony, joined the nation's largest cable operator, Comcast Corp., in an 18-month test in Pittsburgh, Denver and later Atlanta to determine how simultaneous release of a film on DVD and for video on demand would affect sales. Time Warner Cable, the second largest, conducted a similar day-and-date trial in Greensboro, N.C.
Warner said the initial trials, with more than 140 movies, not only boosted video-on-demand rentals by more than 50%, it also spurred purchases of DVDs, which benefited from the added promotion on cable. Only video store rentals declined.
