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New Digital Media Model Offers Better Margins

New Internet and mobile video services will pose an increasing challenge to the traditional film and TV industry, argues a new report from Screen Digest and consultancy Rightscom. The way forward lies in developing effective digital download-to-own services that mimic the DVD business model that has generated billions of dollars of profit for movie studios and broadcasters.

Sometimes called 'electronic sell-through' or 'digital retail', the download-to-own business model allows companies to charge a higher price (and hence extract a better profit margin) than other forms of video-on-demand. Pioneering examples of such Internet services include Movielink � an online joint venture founded by a group of the largest studios, the new UK venture recently announced by Universal Studios and new entrant LoveFilm and the German In2Movies offering being established by Warner Brothers.

Critical to the success of these new Internet video-on-demand ventures will be the deployment of flexible and robust digital rights management (DRM) systems. Screen Digest's report is the first comprehensive analysis of the way that DRM technologies are being used to reinvent the film and TV industry in the 21st century.

The report examines the lessons learnt from the music industry's digital experience and also analyses the way in which DRM systems might allow movie release windows to be radically changed in future. All the key players in the DRM space are scrutinised and the report highlights the groundbreaking business and distribution models developed by firms like Akimbo, BrightCove, CinemaNow, Comcast, Greengrass, Lovefilm, Kontiki, RipeTV, and TiVo.

There are a number of critical positions within the movie value chain. The most fundamental is the studios' control of distribution and their scale advantages when it comes to financing big movies. However, this could be threatened by a completely digital value chain, in which consumer pull becomes ever more powerful. This has been seen in the music value chain where the threat to existing record companies' business models has mainly been the ability of consumers to act as unauthorised redistributors of music content rather than as originators of it. This threat is very much at the forefront of studios' concerns.

At present, content owners feel comparatively secure in the walled-garden world, where content is substantially confined. However, walled gardens come at a price and that cost is the relationship with the network operator who controls the headend and access to the consumer. In the open network environment of the Internet, it is possible to make much more direct contact with consumers, and thereby reap significantly better profit margins.

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