ShareIt’s quite possible that by the end of the summer of 2007 you will be able to instantly watch on your television almost any movie you want to see, without resorting to DVDs. How?
The startup that will bring this to you is called Vudu (vuduinc.com). It has built a $300 box (the price should drop rapidly) that hooks directly to your TV and to your broadband connection. Through some technological magic, as soon as you click on a movie it starts playing the movie, rather than making you wait for a download. Vudu has already signed deals with all the major studios except Sony for movie content. Unlike the Apple TV, this box doesn’t require you to have a personal computer, a wireless network, or be on iTunes.
Here’s a NY Times profile: http://www.nytimes.com/2007/04/29/business/yourmoney/29vudu.html?pagewanted=1&ei=5088&en=1605d6e7e6acc068&ex=1335499200&partner=rssnyt&emc=rss
The type of service Vudu Inc. provides is to my mind the next evolution of the entertainment industry. Does it challenge Netflix and Joost? Let’s compare:
Netflix is distribution of DVDs in the mail, where you are sharing them with other customers. With Netflix, the content creator gets paid for the DVD. Movie studios are happy to provide their content on DVD, because DVDs are an encrypted, closed system (there is software to easily hack DVD encryption but it’s too much bother for many people to use). Netflix cleverly shares the same DVD with multiple customers. It has relatively low content costs (the studios can’t jack up the price of DVDs easily), medium content and service distribution costs (better than a video store but requires a warehouse and mailing costs), but one big disadvantage: it takes time for the movie to get to you.
Joost is streaming video, using freely downloaded software on personal computers to display and store the content. Each Joost user’s personal computer stores some of the content other people will watch (a peer to peer system). With Joost, the content creator gets paid for their content, through a share of advertising. Studios are happy to provide their content on Joost, because the Joost player is an encrypted, mostly closed system (it’s possible to copy the video feed, but it’s too much bother for most people to try). Joost has relatively low content costs (the studios could jack up the price of their content but they are competing with each other on the Joost system and are getting a share of advertising), very low content distribution costs (download the Joost software, use their customer’s PCs to store much of the content, and free ride their customer’s broadband), low service distribution costs (viral growth of the Joost download by word of mouth), and instantaneous gratification with a video stream, but it usually isn’t connected to your TV.
Vudu is downloadable video, using a Vudu device you buy that’s hooked up to your tv. Each Vudu user’s Vudu box stores some of the content other people will watch (a peer to peer system). With Vudu, the content creator gets paid because Vudu can bill customers of their system or potentially sell advertising. The content is encrypted, on a closed, very secure system. Its content costs depend entirely on what the studios want to charge, low content distribution costs (buy the box, use their customer’s Vudu boxes to store much of the content, and free ride their customer’s broadband), moderate service distribution costs (get people to buy a $300 box), and give you instantaneous gratification.
I think Vudu will do well. It’s a new approach to creating distribution for people who want to be paid for their content, but it also is easy for the ordinary customer to use. It may be a threat to Netflix’s business model or its growth rate, although how it all shakes out will depend partly on how much customers want instant gratification and how much the studios require Vudu to charge for it.
