Over the last couple of weeks, I’ve looked at availability of movies and TV shows that came out in the past year. But what about movies that came two years ago? Are those more available today than they were a year ago? Let’s look at the data.

2010: Box Office Winners availability

A year ago, I went through the list of box office winners and looked at their availability online. I pulled the information again in January 2012, a full year after the initial data set. The 2012 data looked like this:

Aggregate Rental data

When you tally it up, the rental only chart (excluding movies you can purchase) looks as follows:

The data seems to show that hits from over a year ago are still difficult to get. Netflix fares best, capturing 26% of the titles but pay-per-view services like Amazon, iTunes, and Vudu turn in a paltry offering with only 15% of the 2010 box office winners being available for rent on these services.

So, having run the data for 2 years in a row, are we seeing improvements in the market?

The picture here actually shows something fairly disastrous to people who hope that things are improving in terms of availability of movies along the long tail. While Netflix turns in a stronger performance, more than doubling availabilities of 2010 box office winners from 10 to 26, all other online services are seeing availability drop by 31% or more. This means that almost one third fewer 2010 box office winners are available this year as rentals as compared to last year. The strategy here seems to call in question the existence of a long tail in terms of media availability as far as rentals are concerned.

While the cost of storing a movie is a marginal one, it appears studios prefer to not make titles available as rentals online. There is some humor in the fact that whatever corner DVD rental place is still in existence near your home probably has a higher selection of available titles from 2010 than could be found last year because ALL 2010 box office winners are now available on DVD.

Aggregate Rental and Sales data

So, with a strong suspicion that sales numbers may be better, let’s see what happens if we had movies that may not be available for rent but can be purchase (ie. are more expensive to get)

The first one notices here is that the number of titles legally available online is still relatively low a full year after all the titles have been released. While DVDs have come out, legal online streaming services online offer a bit over half of the 2010 box office winners, with Amazon having the most extensive catalog. The availability of legal movie streams, when compared to DVD, is still a challenge.

But have things improved since last year? To figure that out, let’s look at the availability of the same titles over the last couple of years:

My initial hunch was that we would have seen improvements in the sales of legal streams from one year to the next, just as we would would have seen for DVDs because of availability.

But the picture is actually surprising as the availability of legal streams for 2010 box office winners has dropped in the last 12 months. On their face, one might expect sales of legal online streams to see patterns similar to sales of DVDs, even if they would trail the plastic medium. But what’s surprising here is that it appears studios have decided to pull their movie catalogs back offline.

There is still a long way before legal online streaming matches DVD sales as it appears movie studios are still addicted to selling pieces of plastic than they are to selling movies in any form available.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Streaming held back. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Last week, I looked at the availability of 2011 movie box office winners as legal internet streams. The results seem to incense Netflix supporters, who pointed out that the comparison was unfair because Netflix was more focused on TV fares. This week, I turn my attention to availability of popular TV shows as internet on-demand streams.

Approach

As I did a year ago, I pulled the data from Deadline.com’s Broadcast series ranker and cleaned it up. I took out every live and reality TV shows as the archival value of such show is limited since they are primarily marketed as “events” and, as such, loose most of their value to the viewer after the initial broadcast.

Where part of one of the seasons was available, I gave the service a partial availability. Where seasons prior to the 2010–2011 years were available, I did not give credit if the 2010–2011 season had no availability because I was focusing the effort on availability of last year’s shows.

From a service standpoint, I focused on services that allowed for streaming to most internet-enabled television. This meant that Netflix and Hulu were the main subscription based offerings and Amazon on-demand and iTunes were listed as pay-per-view services.

The list

With­out fur­ther ado, here’s the list of top 2011 TV shows avail­able for stream­ing on the internet:

While it is fun to check if your favorite show is available or not, the real interesting trending data only comes when you re-group the information. For this purpose, I looked at two different sets of data: first, I looked at whether all the episodes of the 2010–2011 season were available for a given series. Then I re-ran my research, giving full credit to the service for having “some” episodes from that season.

The results were as follows:

As one would expect, the pay-per-view services are doing better than the subscription based ones but what is surprising is how little content is actually available on the subscription-based services: Hulu only offers some episodes of half of the most popular shows, while Netflix barely has any offerings, clocking in with just above a third of the shows having some kind of stream.

When trying to access full seasons, the data is even worse, as Netflix offers full seasons on only 9 (or 18%) of the top 50 shows, while Hulu gives you access to the 2010–2011 season for 18 shows (or 36%). The amusing thing is that Hulu appears to give you access to as many full seasons as Netflix has as partial ones. The data shows that if you want access to popular TV shows via subscription, you’re better off going with Hulu than you are going with Netflix.

What seems to be hurting those services is the fact that CBS, one of the large TV networks has decided to go it alone when it comes to their own shows and show them on their own sites instead of making them available to stream aggregators.

Another interesting thing is that Netflix seems to pick up cancelled shows more readily than any other service. In my research, I found that if a show had been cancelled over the last year, it was more likely to be available on Netflix than on any of the other services.

On the pay-per-view side, Amazon and iTunes have now reached parity, as both service offer 43 (or 86%) of the shows on either per-episode or per-season fees. Their pricing seems to be roughly the same, with shows average between $.99 and $3.99 per episodes and full TV seasons passes going for $20.99 to $40.99. I would not be surprised if next year, we saw those services having the full set of shows available for instant streaming.

Breaking it down

Looking at the distribution, one might wonder how each of the services fares on sub-sets of the overall group. Furthermore, in terms of getting a better sense of trends, if is useful to overlay this with last year’s data and see whether progress has been made:

Overall, it looks like top 10 shows are less available onall-you-can-eat  subscription-based services this year than they were last year, while there is an increase in availability on pay-per-view services.

Netflix continues to trail other services in terms of making full seasons available and it seems it is a gap that will not narrow any time soon as Hulu, Amazon, and iTunes continue to aggressively grow their catalogs. In fact, the big story in this graph may be the big push Amazon is making in adding new titles to its streaming library. It has now matched Apple’s iTunes store in terms of offering, closing the gap it had last year.

When looking at partial availability, we are still seeing some differences:

Here, Netflix appears to have actually list some ground when it comes to the top 10 list, while all the other players have made substantial progress. This may point to another weakness for Netflix moving forward. Also of note is that while Apple used to be the go-to source for all TV series, Amazon has closed the gap in the last year, establishing itself as a strong second player in the market.

Conclusion

Many people look to online TV streams as the key to increasing the number of people cutting the cord from their cable companies and moving to internet-only offerings. This year’s data seems to indicate that it is now possible to do so but that the costs associated with such a strategy may not necessarily represent a huge saving for people who consume a lot of TV content.

The greatest amount of available content in terms of legal online streams can be found on pay-per-view services and subscription-based services like Netflix and Hulu still have some ways to go before providing a TV-like selection (this may explain why both of them are starting to turn further in the direction of producing their own content). However, viewers who watch only a few select show may be able to get this content from services like Amazon and Apple iTunes for a fee.

People watching this space should pay closer attention to Amazon’s aggressive push in this arena. As the company continues to expand its digital offerings, it seems to have earmarked video as one of the areas in which it is willing to go big and it has quietly grown its catalog over the last year.

Meanwhile, while Hollywood is trying to push for laws against online piracy (things like SOPA and PIPA), creating frictions with the tech community in the process, maybe it should focus on making content available through legal channels first, before complaining that people are stealing content. One of the reason people may be drive to piracy is the lack of availability of the content through legal means. Fill that gap, and you will see substantially less piracy of content happening on the internet.

Next week, I’ll take you through last year’s box office winners and how available those are. There are more surprises there, I promise; so stay tuned.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Legal streams for 2011 TV hits. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

A year ago, I looked at the availability of recent blockbuster hits in online stream and discovered some interesting patterns in online stream offerings. This year, I’m doing the same with the 2011 list of box office hits. The great news is that we appear to see some progress.

2011: Box Office Win­ners availability

For each movie of the top 100 movies at the box office, I pulled data on for streaming info on Netflix, Amazon on Demand, iTunes, and Vudu. I also pulled up availability of DVDs to use as a yardstick in terms of overall movie availability. The final chart looked like this:

But the information, in a raw form, doesn’t really tell us much. To get a better sense of where we are, we need to re-aggregate the info.

Aggregate rental data

Looking at the rental market, we can now see the aggregation providing us a clearer picture

The data shows that Netflix appears to be missing the Flix part of its name when it comes to streaming, as it offers only 5 of the top 100 box office winners of 2011. By comparison, pay-per-view seems to be doing a better job at making top hits available for streaming, with the numbers declining as you go deeper into the list. So top movies seem to be widely available this year (in fact, 64 percent of the top 25 movies were available for streaming only 9% short of what’s available on more traditional formats like DVD).

Another interesting thing to note here is that the data seems to be relatively consistent across online pay-per-view services with Amazon, iTunes, and Vudu apparently getting access to the same movies, leading one to think that there is little differentiation between those products (of note: Vudu has actually tried to differentiate on offering by providing 7.1 surround sound and 3D movies to available TV sets.) With prices across those services being roughly the same (movies are renting for $3.99 to $5.99 on average), there is a question as to how those services will be able to provide a differentiated experience in the future.

But the big advantage of doing this again this year is that we can compare the information against last year’s data and see if progress has been made:

The story here isn’t that pretty for Netflix, which has lost substantial ground from last year’s position, offering less than half of the hits it used to offer last year. If you think of their recent moves towards creating original content, it appears that Netflix is slowly moving away from its initial strategy of providing online streaming of movies on a subscription basis and moving more to a model more akin to that of a TV network.

Another interesting development here is that online streaming seems to be some losing ground compared to DVDs. One could assume that, as a new technology, online streaming would be gaining ground on DVDs but that doesn’t appear to be the case. Granted, we only have a couple of data points so next year’s data will provide us with a better understanding as to whether hollywood is trying to slow down the progress of online streaming.

Sales Data

If we are witnessing such a slow down, one of the reason may be that movie studios are looking to maximize revenue coming from sales.

The first interesting item to show up here is that we are now seeing remarkable consistency in availability of titles on streaming services. However, the availability of legal movie streams is still trailing the availability of movies on DVDs. This gap seems to be less pronounced when it comes to the top of the list than when ones goes further back into the box office records.

Once again, looking at how availability this year compared to last year’s availability provides some interesting information:

As opposed to online rentals, sales of streaming movies seem to be gaining on sales of DVDs, with an increasing parity in availability of movies as bits (streams) or plastic (DVDs). This appears to confirm the suspicion that movie studios are trying to protect their sales revenue at the expense of promoting pay-per-view.

Conclusion

The past year has seen an increasing alignment in the libraries of titles offered by online streamers in an on-demand basis. At the same time, we have seen Netflix apparently abandon its strategy of offering popular movies on a subscription basis. Next week, I will look at whether Netflix’s efforts are getting more focused on television streams or whether we are seeing them pull back across the board in terms of availability of more recent content.

We are also seeing Hollywood now treating online as more equivalent to DVD sales, offering titles for sale online at roughly the same rate as they do on DVD. Let’s hope that this trend continues to hold and that the industry sees the wisdom of providing online streams in an earlier release window. A few independent movies have done simultaneous releases online and in theaters this year and Hollywood has a potential to increase its revenues if it were to increasingly go in that direction.

Two sets of data only provide a small view into an overall trend but I promise I will continue growing the data set and revisit those numbers next year, giving us a better sense as to whether there is any changes in this segment of the media distribution puzzle.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Where the hits are streaming in 2011. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

With a new year kicking in, it’s time for a new batch of predictions.

Business

One of the easiest predictions to make is that Facebook will go public this year, and it will manage to do so in a very successful IPO. I suspect that this may actually be the high watermark for the current boom cycle as Facebook is the most successful of the companies that were born of the Web 2.0 cycle. In a fashion similar to what happened with the Netscape IPO in 1995, the Facebook IPO may create a small window of opportunity for many other companies to go public.

On the private end of the spectrum, I think we will see the following companies see some form of liquidity event via either acquisition or IPO: Twitter has a strong chance of being acquired by Apple, which will quickly merge the offering into all of its products; Another possibility is that Twitter and Tumblr merge to create a mico-blogging powerhouse spanning both ends of the country. Meanwhile, Foursquare will either IPO or be acquired by Facebook or GroupOn in a share-only deal. Meetup will go public, creating another great story for the New York technology scene.

When it comes to Google, we will see the company continue its integration of Google+ into everything it does, with the biggest impact being the move to migrate all Orkut users to the new service. This will create an outcry in countries like India and Brazil, where Orkut has been popular but will leave many in the American media to wonder what the big deal is as Us customers have mostly left already.

Meanwhile, a lot of the companies that went public in 2011 will meet some strong headwinds as the rigor of the public market make it much more difficult for them to maneuver. Expect some changes at GroupOn and Zynga, with many people questioning their business models and long term viability.

Media

For a couple of years, there’s been a slow ramp up to the integration of the Internet with television. The rise (and to some extent fall) of Netflix, along with the entrance of new players like Hulu and Amazon, have made video distribution on the big screen one of the areas where the Internet and television have already intersected.

However, other areas of interaction have, so far, not been quite as successful. Apple is still treating AppleTV as a hobby, Google has mostly failed so far with GoogleTV, and other players like Roku and Boxee have, to date, been only adopted on the fringe.

In 2012 all that changes as the TV screen takes center stage in a way that a new generation of smart phones arose after the 2007 iPhone announcement. First of all, we will see some increased standardization around how to deliver content to TV screens, with agreements from TV set manufacturers like Samsung, Panasonic, Sony, and Vizio agreeing to some level of standardization. Apple will also announce a large screen product it will position in the TV market: The set will have AppleTV’s technology built-in, be accessible over WiFi, and connect directly to the iTunes store as well as integrate with the iPhone and iPad and other Airplay compatible devices. The set will run iOS and will be managed by a remote that runs on iPod touch, iPhones and iPads.

Meanwhile, cable companies will start opening up their platforms with some software development kits allowing to access content on the set top boxes they use. Once the Motorola acquisition is completed, Google will start transitioning the Motorola set-top boxes, which are a large part of the cableTV market, to GoogleTV, increasing the footprint of the service in the marketplace. Along the way, we will also see GoogleTV become more streamlined and less ambitious, focusing on delivering Android apps to the big screen instead of trying to rebuild the whole TV industry.

The concept of cord-cutting will continue to gain support but will not yet jump into the mainstream consciousness. With shows now being available exclusively on the likes of Netflix, we might see some interesting positioning whereas some TV carrier will offer Netflix as a premium service.

Politics

Social media will dominate the political cycle in 2012, with Twitter, Facebook, YouTube, Tumblr, and Meetup becoming part of the political operative tool belt. However, traditional electoral models will continue to be disrupted by the rise of distributed networked organizations like Occupy Wall Street, Wikileaks, or Anonymous. Except those players and new ones built on a similar model to have a substantial impact in terms of registering new voters and getting those voters to the polls in elections in Europe, the Middle East, and the United States.

In the US, the 2012 electoral cycle will see Republicans select Mitt Romney, a candidate most of their electorate is not very excited about, to run against Barack Obama. With the unexpected support of Occupy Wall Street and its splinter organization, Obama will win re-election as issues around economic disparities and job creation continue to be big topics of discussion.

In Europe, expect to see incumbents toppled in many countries: with major elections coming up in France, Spain, Russia, and Finland, it is possible that we will see a major change in political alignments across most of Europe, along with an increase chance of protest in those different countries. In Russia, in particular, we may see the internet play a crucial role in organizing protest if there are questions regarding voting irregularities.

The continuing protests in the middle east region may also lead to substantial changes in governance in several countries including Bahrain, Syria, and Saudi Arabia. During the presidential elections in Iran, we will see increasing clampdowns on internet sites as the government tries to shut any means of communication available to large groups of protesters.

… and of course, the easiest prediction to make is that the media industry will continue to push for more restrictions on the Internet, leading to more activists pushing back.

Technology

2012 is going to be an explosive year for technology.

First of all, we will see HTML5 roaring back, as many companies realize that it is cheaper to build in HTML5 and that the gap between platform specific code and HTML5 is shrinking. The introduction of WebGL, and proper implementation of geolocation and caching within mobile devices will give developers the ability to develop applications in HTML5 that can rival some of the offerings of native code. This is a move that will be resisted by platform makers like Apple and Google as it will loosen their stranglehold on their respective platforms; however, the split side of this is that effort is that some large companies will look to free themselves from said control by creating HTML5 instances of their own products.

On the mobile end, the Microsoft/Nokia will get some real traction with Windows Phone becoming a strong third player in the mobile market. Apple and Android will continue dominating the market with Microsoft still being a distant third. RIM’s position in the market will substantially worsen and will either be sold or go into bankruptcy.

Enterprise cloud strategies will continue to grow, leading to a growing divide between companies that can get efficiencies through the use of cloud computing and companies that are kept by different regulatory frameworks from being able to realize the financial gains offered by such model.

3D will be a hot buzzword, with the introduction of consumer-oriented 3D scanners and 3D printers that will push the idea of scanning and printing your own plastic parts. This will lead to some controversy around the concept of 3D objects piracy popping up in the media, with little actual evidence to back those fears. On the 3D projection end, we will see the rise of designer 3D glasses and the first glasses-free 3D television hitting the market, as we as a few consumer-grade 3D cameras. At the same time, we will see more and more technology to upscale 2D to 3D, in an attempt to develop a larger consumer market for 3D technology.

On the PC end, netbooks will disappear as a category and the hot new trend will be to offer thinbooks that mirror much of what Apple is offering with the Macbook Air product line.  Solid State Drive will aso increasingly become standard on new computers and we will see Apple actually announce they are getting rid of traditional hard-drive in all their product offerings. This will lead to their being able to announce that all their hardware can now run for at least 7 hours on a single charge.

Any which way, we will be revisiting those predictions at the end of the year and see how well (or badly) I did. I wish you, dear reader, a very happy new year and look forward to a continued dialogue in 2012.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title The 2012 Crystal ball. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Evaluating options

By breaking apart the service into two offerings, Netflix is now forcing its users to think of the services not as a bundle but as two very specific different types of offerings.

On one side, we have the DVD service which can be compared, to some extent to the Redbox and Blockbuster direct services. From that standpoint, one has to consider whether he/she wants to rent DVDs of popular movies from those services or dig into Netflix’s more extensive options. The challenge, for Netflix, is that the DVD offering is not quite as cost efficient as the streaming one. For each DVD, Netflix has to not only have the movie on hand but also pay for shipping and return of the plastic DVD. I’ve heard that those costs are in the range of $.50 per segment or roughly $1 per DVD shipped. By comparison, streaming costs have been estimated to be in the range of $.10 to $.25 per stream, which is substantially lower.

On the streaming side, however, the Netflix offering is now something that can be compared to Hulu+ or Amazon Prime, two services that offer unlimited streaming. The Hulu+ offering is priced at $7.99, a price that Netflix is apparently looking to match with its streaming service. Amazon Prime is $79 per year (or $6.58 per month if you break the price down) and include streaming and free shipping for goods bought from Amazon. In both of the streaming options, the products are different: For example, if one’s interest lies more in TV offering, then maybe the Hulu+ service works better. However, what becomes apparent from looking at the different unlimited streaming services is that the offerings are still relatively slim, compared to what one might get from regular or cable television.

The 2-DVD option

There is, however, a path that Netflix has left open for those who are interested in doing a little hacking. Imagine a plan that would cost $12.98 and provide you unlimited streaming with a small backstop for DVDs. Only one concession needs to be made: the willingness to only receive 2 DVDs per month instead of the theoretical 8 one could get under the unlimited DVD plan.

Netflix offers a 2 DVD per month plan for $4.99. The trick to getting it is that Netflix does not allow to sign-up for it online. You must sign-up for a streaming plan (which it now defaults to) and then call their support number. Once you have called the support number, ask them to allow you to switch to the $4.99 plan. The person on the phone will first try to sell you either the unlimited DVD deal or the bundled option. Turn those down and insist on getting the $4.99 option. Once you’ve accomplished this, you will have a DVD plan that allows you to get access to the extensive DVD collection Netflix has. This can serve as a convenient backstop to the online streaming option.

One needs to then either create a separate account on Netflix to get access to online streaming or get a Hulu+ account. In either case, it would be $7.99 .

A question remains as to how long Netflix will maintain that loophole but for now, it may be a better option than paying 60% more than you previously did and it brings to mind questions as to whether Netflix is really a solid alternative to cable or other TV-related options.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Netflix Options. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Some background

While many have been surprised by the move, this is not the first time that Netflix has gone into the content production business. A few years back, the company launched Red Envelope Entertainment, a company that worked as the production arm of Netflix, buying portions of indie movies. While their budget at the beginning of the century was small, by the time Red Envelope Entertainment was closed (in 2008), the company was spending $100 million on helping produce and distribute movies (IMDB showed them to have distributed 41 movies and produced 12). The reason for its closing was a worry about conflicts that would make it harder for Netflix to acquire content and a general worry that annoying the studios might not make good business sense.

But while the company had shuttered its production company, its interest in getting more content for its customers did not wane. And as it has grown larger, the studios have found themselves annoyed by Netflix’s rise. What changed radically in the relationship is that Netflix now has 20 million customers it can rely on, and the studios are not willing to give Netflix their best content at any price.

So since the TV and movie industry won’t give Netflix access to high quality content for its streaming offering, the company has figured that it would compete one step earlier in the process, by buying a stake in the production of content.

We’ve seen this before

The scenario of Netflix vs. Hollywood is nothing really new. In fact, it seems to be at the core of every successful company creations on the internet:

1. a new internet company finds a more efficient way to do something.
2. Incumbents call it a side market while the company is still small and generally ignore the changes.
3. The new internet company syphons increasing parts of the overall pie.
4. Incumbents take notice of the new internet company and cry foul.
5. Incumbents start dying off as a result of the realignment.
6. The new internet company makes revenue that represent roughly 10–20% of what the industry used to make as a whole.

You can apply the template above to the music industry (iTunes), the newspaper industry (craigslist), the advertising industry (Google), etc… Netflix is probably going to do the same to the video industry (and by video, I mean a lot of the pre-recorded video content available, whether it is movies or TV).

8 words that will change TV forever

In the more recent cases, it appears that the inefficiencies were due to lack of data. And Netflix, like many of the new contenders before it is using its troves of data as a competitive advantage. Lost in the flurry of commentary about the announcement were 8 small words which may hold the key to Netflix’s approach to content acquisition (emphasis is mine):

We’ve committed to at least 26 episodes of the serialized drama, which is based on a BBC mini-series from the 1990s that’s been a favorite of Netflix members.

Every time members watch a movie, Netflix gets some data as to whether they watched it fully and often times, Netflix members rate the movies, declaring their interests and preferences along the way. On an individual basis, the data is used to tailor recommendations of other movies a subscriber may be interested in. In the aggregate, however, it give Netflix a clear advantage in that it knows exactly what its membership is interested in. By comparison, TV channels like HBO and Showtime may be able to do focus group and look at ratings data to get an approximation of the taste of their respective membership but they do not know their subscribers on as intimate a level.

In his recent report on the state of web 2.0 and the app economy, John Battelle had doubt about the success of “data as the new Intel Inside” but here’s another example of a provider harnessing the collective intelligence of its user base to get data as to what may or may not interest them in the future.

Imagine the kind of bidding war that goes on around juicy pieces of content. Up until recently, the players would guess as to what may or may now work. However, they were working with imperfect data. Now Netflix can almost tell which of its subscribers will be most interested in a show before the show is even produced because that subscriber has provided information on what interest them in a variety of ways: from what shows/movies he/she has watched online (and here there is data as to when/where he/she stopped, restarted or how long they actually watched) to how quickly they turned around a rental, to actual grading if the subscriber decides to do so. All that data may help Netflix understand which shows/movies are going to be successful with its membership in the future.

With that knowledge, Netflix can then bid on material that works for its membership. To its competitors, this might be unnerving as Netflix’s ability to program for its audience will be much more on-target than anyone else’s due to some strong data.

Death of primetime

Probably more unnerving to the TV industry in Netflix’s entry in their business is the fundamental realignment of how people will consume content. Since the invention of television, TV has mostly been based on an event-driven model. Up until a decade ago, people were still talking about appointment TV, where viewers would make time in their schedule to watch a show at a time defined by the TV programmers. The time was designed to draw the largest audience possible so that the show could be seen as a “hit” and be the “talk of the watercooler” the next day.

Some may argue that DVRs have destroyed that model but I would venture that they have only eroded it. After all, most people still want to see this week’s (or recent weeks’) episode of a popular TV series. This is why TV companies have been OK with providing older seasons of a TV series to Netflix but have jealously kept the more recent one under wrap or offered them online in a way that would return maximum revenue to them in the short term.

But Netflix bidding on content is exploding that concept. By throwing several episodes of a new “exclusive series” online at the same time, they are indulging their membership, while at the same time destroying the idea of a particular time/day when one needs to sit in front of the TV set to see a show. I am sure that they will create windows of release (the first X episodes are coming on this date) in order to maximize marketing bang but once they are published, the episodes will be available for a longer duration.

By getting people acquainted with this model, Netflix is going to make ALL its currently purchased content that much more valuable because it’s eroding the idea of “most recent” and transferring it to “available or not”. This means serial series they now own become more evergreen.

The Netflix Channel

Last year, I argued that Netflix was headed to be channel 1. With this recent move, I’d warrant that Netflix is going further: forget being a channel, let’s be the whole TV experience.

… and that is what every TV programmer out there should be. For a long time, my friend Jeff Jarvis has been talking about exploding TV. Well, Netflix has been found sitting by the dynamite with a set of matches.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Netflix and TV 2.0. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

As a reminder, this is what the 2010 aggregate data looked like:

But one question that was left unanswered was whether there was a bias in the data selection as it presented data that was specific to a single year. So in order to assess the strength of the different services, I decided to look at the data for the 5 previous years, hoping to discern a pattern. However, because it’s a lot of data to crunch, I decided to limit my research to top 10 over that time (in data point, this means a universe of 60 titles or 240 data points.).

2009

So let’s start with the  2009 data:

And here, something interesting happening. Not only did Netflix not fare that much better but all of the other rental services fared much much worth.

I was now very intrigued. Was 2009 an unusual year or was there a pattern here? Were older title getting less available as time went on?

In order to answer those question, I decided to pull a lot more data, going all the way back to 2005 so I could have 5 year’s worth of data to look at.

2008

2008 seems to be marked by a departure from the concept of renting movies online, with only 1 title (the Dark Knight) being available across all the services. Netflix does not even have access to that one, ending the year with no box office topper in its offering. Apple has a clear advantage over its competitors in the selling of titles.

2007

The amount of titles available for rent on non-Netflix services increases a little for the 2007 catalog (Netflix continues to be a non starter) and the number of titles for sales seems to be pretty consistent across all services.

2006

iTunes and Vudu have back-catalogs that allow for 90 percent coverage when it comes to purchasing the titles. Amazon brings up the rear with a respectable 7 titles. What’s interesting here is that there seems to be a clear divide between sales and rental availability.

2005

2005 appears to be another equalizing year for non-netflix VOD services. However, it doesn’t mean that they are great, in that only 6 out of 10 titles are actually available.

Conclusion

With all that data in place, we can get a clearer picture of what’s available:

As far as Netflix is concerned, the trend doesn’t get better as you head back in time. In fact, the data suggests that their streaming catalog gets worse as time goes on. While it is true that the company has only recently started getting into the streaming business, they will need to do a lot of work in order to catch up to their competitors. The fact that their business model is radically different (Netflix takes a membership/all-you-can-eat approach while its competitors allow for a-la-carte purchases, more in line with traditional TV-based video on demand services) may also make life more difficult for them.

On the bright side, it appears that 2009 was a strange year as far as the other services are concerned and there are more titles available for rent as you go back in time, with the possible exception of the Apple iTunes store, which tends to favor selling over renting. All the players will need to do more work, however, if they want to broaden their appeal as none of them could deliver half of the available box office winners over a 6 year period.

Another interesting trend is the relative consistency in terms of availability: Amazon, Apple, and Vudu all appear to have access to the same times and, for the most part, they also all seemed to be denied access to the same titles. I’m not sure whether this points to fairness in the market or some kind of manipulation in the movie industry but it’s an interesting phenomenon worth noting.

All and all, if video on demand is to serve as a core component of the cord-cutting phenomenon (the idea that people are abandoning cable TV for online streams only), there is still much work that needs to be done.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Where the hits are streaming — historical view. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Last week, I looked at which legal streams were available for movie box office winners . This week, I investigate how internet VOD services are faring when it comes to offering top rated TV shows.

Approach

The first part of my investigation was to find data that presented the top TV series on television in the United States in 2010. Surprisingly, that data was not that easy to get but Deadline.com had a list of the top shows that could be used.

Because news shows, variety shows, sport shows, and reality TV shows seem to lose their freshness once aired, I decided to remove them from the list as I assumed the demand for such show on VOD would probably be limited over time. All this cleaning up allowed me to format a list of the top TV series which I could then use for research.

Because TV seasons change in the middle of the year, I’ve looked to include seasons that ended in 2010 and seasons that started in 2010. If only one set is available, this is noted in the table. If both seasons are available, I put in Yes.

I picked Netflix and Hulu as the first two services to look at because they have positioned themselves as alternative ways to watch the shows. I also included data from Amazon VOD, and iTunes as both of them are trying to sell either season pass or per show purchasing to their users. I did not include the individual station’s websites sites (eg. ABC.com, NBC.com, CBS.com, Fox.com, etc…) because most of them are only accessible via computers and a high number of them have started blocking devices which were trying to offer access to their content from a TV screen. For the same reason, I focused on Hulu Plus content instead of the web-based one only.
It is important to note that TV episodes on Amazon and iTunes are available in different formats, either on a season-pass basis, per episode rental, or per episode purchase.

I’ve capped the list at 50 titles because, from a trend standpoint, the data seem to be roughly the same at top 50 and top 75.

The list

So without further ado, here’s the list of top 2010 TV shows available for streaming on the internet:

Let’s total this up to see how the different services did:

One of the first interesting trends to notice is that Hulu Plus seems to offer more recent episodes when it does but Netflix seems to offer older ones that are not available on Hulu. Oftentimes, the two offer different selection on the same show, allowing users with subscriptions to both services to get wider coverage. Yet, Hulu only offers a bit over one third of all the big rating getters last year and Netflix offers only one out of five of those series on a partial basis.

Current seasons seem to be a strength area for Hulu Plus and a substantial weakness for Netflix. This may be of some significance as far as the cord-cutter trend is concerned. A question one could pose here is whether cord-cutters want fresh content or not. If the latter is the case, then Netflix may provide enough. On the other hand, if cord-cutter expect to be able to get relatively recent shows on their TV, they will either have to check the Hulu Plus listing or purchase the episodes on an individual basis.

Another interesting note is that while many episodes are available for rent on iTunes and for sale on Amazon, the price difference tends to be pretty substantial with Amazon selling rights to own for $.99 per episode while Apple charges the same amount for the right to rent (they tend to charge $2.99 per episode for the right to own).

Breaking it down

If you want some of the series (let’s say one season but not the other), here’s what the data looks like:

… but if you want full coverage (ie. both the 2009 season that ended in 2010 and the 2010 season that bleeds into 2011), the data looks as follows:

Conclusion

Looking at the total numbers, the subscription model offered by Netflix and Hulu Plus seem to offer a relatively slim selection. However, the costs associated with purchasing season pass for every show one follows could get prohibitive (in the research, it appeared that shows averaged between $30 and $60 for a season pass).

All told, the Video On Demand services appear to have room for improvement. While Apple has an early lead in terms of overall coverage, its iTunes store is also the more expensive one, giving Amazon an opportunity to expand its footprint by selling titles at a lower price. In terms of availability, however, Apple seems to hold a very solid lead over its competitors.

The subscription model offered by Hulu Plus and Netflix, however, still have a long way to go if they are aiming to truly be disruptors.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title The 2010 state of Internet VOD: TV. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

There’s been a lot of discussion lately about how Netflix is in the process of moving from a DVD distribution company to primarily a streaming service. The question, though, is how close this future truly is.

In order to assess their progress, I decided to look at how many of the 2010 top box office earners were on the service. Figuring that we also needed a yardstick to compare Netflix offerings against, I took the top three online streaming services and got the data for each of them (generally speaking, rentals are around $3.99 to $4.99 and purchases seem to be around $14.99).

First, I pulled up the Box Office data and then put each title in the search engine for each of the services. I also looked up DVD availability from both Amazon and Netflix to ensure we had a yardstick we could measure against in terms of online vs. offline availability of titles. The assumption here was that some box office hit might not be available in either form due to the fact that they were recently released. I also made a decision to reject titles that are available on a pre-order basis as it is not yet possible to watch them. For future reference, all this data was pulled together the third week of January 2011.

2010: Box Office Winners availability

Once I did all this work I had a table for the  2010 box office numbers winners and it looked like this:

Aggregate Rental data

When you tally it up, the rental chart looks as follows:

The first thing one notices here is that Netflix seems to have a long way to go before having any claim to strength in that particular arena. With only 9 percent of the top 100 2010 movies, Netflix seems to come on the short end of the stick when it comes to making streams of box office winners online. In a future post, I will examine whether this is because their strength is more in older titles than in recent ones but, as far as the data currently show, the subscription model offered by Netflix would probably have a hard time fighting with a premium cable TV movie channel.

The story gets more interesting when one starts looking at the Video on Demand data for services like Amazon on demand, iTunes, and Vudu. My selection of those particular services was largely due to the fact that they are available in systems that can connect to your television. For example Amazon is available on the Roku box, iTunes is available on AppleTV, and Vudu is available on the Boxee box.

What I consider to be the most striking finding in this is the relative consistency of offerings across the board. None of the VoD players seem to have any particular advantage over the other. All of them batted in the 45–50 percent range, as far as the 2010 hits are concerned. By comparison, just under 75 percent of the movies were available on DVD at the time I did this research, giving DVDs a 1/3rd advantage over VoD at this time. One can only hope that the trend will go to that gap closing over the next few years.

Sales Data

Another interesting point is the closing of the gap between DVD and Vod when it comes to availability of titles on an ownership basis:

Here, the data seems to show increased availability of titles on an ownership basis as opposed to a rental one. The VoD services performed 10 percent better on availability, coming much closer to the number of titles offered over DVD.

Conclusion

While Netflix has been heralded as the leader in online streaming, the reality on the ground is much more complex. The Netflix model is predicated on an all you can eat model but if what you want to eat is a movie that was in the top 100 at the box office last year, viewers are left with only crumbs. The rental model offered by other internet based streaming companies is more in line with the traditional video on demand offerings available on cable television and the data seems to highlight that Hollywood is more comfortable with that model than it is with the Netflix one. This could present a strategic challenge for Netflix as it tries to negotiate more streaming contracts.

While DVD is still the king of the roost, the gap between DVD and online streams is slowly closing. The list I’ve created here can serve as a baseline against data next year to assess whether more titles will be made available. There also appears to be a preference in the film industry towards making titles available for sale instead of rent. I believe that this may be a short-sighted view as rental models can generate more income over the long run. It will be fascinating to see how all this develops.

Update: A more recent version of this post is now available.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Where the hits are streaming. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

This week’s announcements of pricing around the Google TV offerings, combined with some of the first deliveries of AppleTV boxes, have kicked off a new salvo in the war for the third screen.

TV and web pre-history

Before I go into more details as to why I think this is important, I need to give newer readers some background in the history of the many failed attempts to merge the web and television.

In the early 1990s, in an era that is considered mostly pre-internet (that is, before the internet became mainstream), then vice-presidential candidate Al Gore talked about the “information superhighway,” a concept that highlighted a universe where most interactive data would move to your television. The TV screen has always been the main screen in American household and, unless you were a computer geek, that was largely the case in the early 1990s.

As the 1990s moved on and the commercial internet moved to the center of public consciousness, there were several attempts to marry the internet and the web (12 years ago, I was even involved in a failed effort at creating a standard web model for bringing TV to the web). The basic idea, at the time, was to bring TV content to the web and enhance it with some extra juicy bits from the web. This meant, for example, being able to push web content that would provide more info on a broadcast (for example, related news stories). The concept wasn’t new in that it had been embedded in a lot of British television since the 1970s as teletext, passing extra content as part of a broadcast.

Set top boxes wars

At the time, a group of engineers and product managers who had worked for Apple left the company and started a new offering called WebTV. WebTV was a new type of set-top box allowing its users to surf the web on their television. The company also introduced a set of specialized tags that web developers could use to create pages that were formatted to fit this new TV paradigm.

Others looked to the same concepts and, in the late 1990s, the set-top boxes became a new competitive arena for distributing content in a digital form (In order to disclose my biases, I must point out that I worked on a consulting basis for Nokia’s set-top boxes group, an effort that ended up having an impact on some of the thinking behind podcasting)

WebTV networks was acquired by Microsoft and much of its technology ended up in the Media Center edition of Windows, which powered the next wave of TV/web marriage.

Starting with Windows XP, Microsoft offered a Media Center edition of their Windows platform. The idea was basically Windows, on your TV. Unfortunately, the assumption that the PC experience could translate to a large screen proved to be mostly wrong (this, by the way, is a mistake that Microsoft also made on mobile devices, assuming, until recently, that the windows metaphor could transport itself to other experiences).

As the dotcom boom led to a dotcom crash, much of the intentions to merge the web and TV disappeared. The concept of converged content moved from the web to gaming stations as a delivery mechanism  (in fact, around 2006–2007, I was considering the Sony Playstation as an attempt to get BluRay to defeat HD-DVD instead of an actual delivery device). In the midst of a 3-way war between Sony, Microsoft, and Nintendo for gaming supremacy, Appled announce its first foray into the TV space with iTV (later to be renamed AppleTV). While they didn’t look at games as a space at the time, their model of attaching a device to the TV was no different then than the model they have today: the set-top box as a way to buy content from Apple. In that sense, the fact that the company hasn’t changed direction points to their belief that this is the right model (though I personally think that, in the long run, they will end up opening the marketplace further, in a fashion similar to what they did with the iPhone).

Internet Everywhere: 5, 15, 50

Over the last few years, as more video content has become available, the internet has moved back to being discussed as a delivery mechanism for many types of devices.

I call that the 5, 15, 50 paradigm, since internet content is now being offered on devices that have 5 inches screens (mobile devices), 15 inches screens (computers), and 50 inches screens (televisions).

Netflix has had pretty good success with their strategy of getting their player integrated in a lot of devices, thus allowing their content to be streamed pretty much everywhere if a connection is available.

Apple vs. Google

But now that the war is moving to that new ground, two players in the computer and mobile space have decided to fight for that corner of our digital lives: Apple is re-tuning its AppleTV box to be more competitive on a price level and Google is gearing up for a larger attack on the living room. In this case, however, I think that Apple has an early lead with some critical flaws.

The reason I believe Apple has an advantage here is that their offering, from a product standpoint seems to balance the right feature vs. price compromise. The Netflix and YouTube offerings are no-brainers but the reliance on iTunes as the delivery mechanism for your pictures and movies is annoying: I think that’s a critical flaw in that most people do not want to have to turn their computer and iTunes on in order to have access to that content. Apple should offer a way to attach a network drive (maybe a modified version of their time capsule) on which a user could drop pictures and movies, leaving them there for use from the Apple TV (or mac, iPhone, and iPod) at any time.

Google, on the other hand, is introducing a product that is just a more modern version of WebTV. And I’d warrant that, at this time, the keyboard interface approach is the wrong metaphor for the big screen. The keyboard on the first devices (Logitech Revue and Sony Internet TV) to follow the Google strategy are just too big (as the owner of a Logitech DiNovo Mini, the keyboard that’s modified for logitech’s enhanced offering, I can tell you that most normal people get confused by such an offering). This, in itself, would not be a killer as Boxee has demonstrated, with the remote for their boxee box, that a remote can have two sides, allowing for the complexity to be simplified.

Keyboard aside, however, GoogleTV will have a problem the price point ($299 for the Revue), which is too high for most consumer. Considering that Apple is pricing the AppleTV at $99, consumers may question what they get for the extra $200. Geeks like myself may end up buying something like the GoogleTV box but I suspect that the vast majority of the public will not.

Meanwhile, the incumbents in that space (cable companies, as well as Microsoft, Sony, and Nintendo) are not sitting on their hands and smaller players (Roku, Boxee) are looking to get a share of the market too.

The next set of battles will be waged for your living room and they are gearing up to be interesting as, for the first time in a very long time, TV may become more about the consumer than it is about the advertisers.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title The revolution will be televised. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Netflix on channel 1

In a transaction estimated to cost Netflix about US$1 billion over 5 years, the DVD and streaming company partnered up with Epix, a cable and internet streaming channel backed by Paramount, Lionsgate, and MGM studios. Considering the fact that Netflix already has an established streaming relationship with Starz, a company that already has streaming rights to Disney movies, this means that Netflix now has a substantial portion of the recent blockbuster movies tied up for its streaming service (Fast Company reports that the combined box office market share of Epix backers was around 21%).

The deal carefully avoids create any controversies around DVDs to establish supremacy in the online streaming space. Netflix is betting, strategically, that the DVD business that brought it to where it is today is a buggy whip type business in a world that is slowly to moving to the cars-like business of online streaming. Now that the netflix player is embedded in a series of devices that allow for streaming across a large footprint (computers, TV and, soon, mobile devices), the company is building up its content catalog.

What Netflix is doing is basically creating a new “on-demand” channel that can sit next to the other channels on a TV screen. The company is sidestepping “appointment viewing,” which requires people to set a particular time and date to see a particular piece of entertainment, to provide instead the equivalent of an always-ready, always-on-demand format of entertainment viewing (kind of like “there’s a movie for that”). It’s a future AT&T predicted in 1993 (as an interesting aside, that very ad campaign was also one of the first banner ad campaigns on the internet) and the company to bring it to you is Netflix.

Basic Internet Tenets

Regular readers of tnl.net will recognize the trend of everything moving to an IP stack. I’ve long held the view (at least since 2004, according to this entry) that cable channels ought to be delivered a la carte over the internet and Netflix may be the first company to successfully deliver an internet-only on-demand channel.

This model, however is predicated on a few key tenets that have made the internet such a great arena for innovation:

• The internet is a level playing field: Large companies do not have an advantage over smaller ones as everyone gets the same level of access to internet resources, no matter whether they are two guys in a garage or a multinational corporation.
• The internet allows any platforms to connect: There is no discrimination on what type of device can connect to the internet, as long as the device respects rules around addressing (getting a unique identifier on the net) and respects every other devices on the net. As a result, computers are seen no differently than mobile phones, TV set-top boxes, game stations, watches, coke machines, or whatever anyone willing to agree with the basic rule set attaches to the net
• There is only one internet: The minute you agree with the basic tenets of the internet, you take it upon yourself to continue supporting them if you want to be part of the internet commons. You are free to leave the internet and go to another network if you want to but you cannot call that the internet if it’s a different network.

A different view

But not everyone seems to agree. Earlier this week, Google, a company that has greatly benefited from the current tenets of the internet, decided that now that it was a large company, it could throw the internet under the bus by breaking some of those very tenets.

In a joint announcement with Verizon, the company proposed a compromise on net neutrality discussions that starts out with the right concepts and eventually gets off-track to a point where the basic tenets of the internet would no longer be valid.

Before I go into the details of what’s wrong with the proposal, let’s first look at what’s right (although I have to take what they say with a grain of salt since I’ve trusted the company in the past only to see it turn its back on earlier announcements):

A broadband Internet access service provider would be prohibited from preventing users of its broadband service from:

1. sending and receiving lawful content of their choice;
2. running lawful applications and using lawful services of their choice; and
3. connecting their choice of legal devices that do not harm the network or service, facilitate theft of service, or harm other users of the service.

I would have some questions on the definition of “harm” here but, for the most part, these seem to be points that could be agreed upon.

The lines would also carry a non-discrimination principle that are, for the most part OK, except for the following sentence (emphasis is mine):

Prioritization of Internet traffic would be presumed inconsistent with the non-discrimination standard, but the presumption could be rebutted.

I would argue that striking those last 6 words would make the rest of that section OK.

The next section is about transparency and the proposition of providers telling people when they do discriminate or make other modifications seems sound.

However, it starts going downhill from there. Provisions like network management (a tricky area that ends up being the place of most disagreement), additional online services, wireless broadband and case-by-case enforcement give up on the notion of the internet as a simple (or stupid) network.

It is true that network management is necessary to the proper functioning of the internet commons but, as Barbara Van Schewick (via Fred Wilson) points out, there is a simple rule on dealing with net neutrality:

A non-discrimination rule that bans all application-specific discrimination, but allows all application-agnostic discrimination. Discrimination is application-specific if the discrimination is based on the specific application or content (e.g. Skype is treated differently  from Vonage), or based on classes of applications or content (e.g. Internet telephony is treated  differently from e-mail).

The main challenge in Google and Verizon’s proposal is the idea of a differentiated internet. If the first two components of their proposal (consumer protection and non-discrimination) were considered valid, the rest of the policy framework would be invalid. One cannot say in the same sentence that a broadband provider is prevented from allowing users and applications almost unfettered access to the net and then turn around to say that this may not be the case for new applications or parts of the net.

Like it or not, the wireless internet is part of the internet. While there are parts where it can be controlled, internet is still a word that works as singular and has no plural. Anything else (a differentiated network) is not the internet and don’t let people tell you otherwise.

Motivations

So what motivated such proposal? Well, first of all, it appears that there are a number of strategic areas where Google could do well in appeasing the telecom and cable industry:

• The Android OS is a natural fit here as Google is working on ensuring that it will do better than Apple in the mobile space.
• GoogleTV is another arena where the company would benefit from sitting on a “differentiated network” where it could serve content as a premium package. In its fight with Apple (Apple’s business model is still largely predicated on selling hardware, like AppleTV), Google could offer an advertising-sponsored model carried on differentiated pipes.
• Of course, another arena would be wherever there are tools that are potentially threatening Google. For example, pictures from Picasa could be served at a faster rate than pictures from Facebook on that network. Or movies from YouTube could get priority access over movies from Netflix.

So, having established that Google has much in terms of alignment with the telco industry, it is now time to question whether its motives are truly in line with its previous policy of not being evil or whether they are better aligned with pure profitability motives. The decision could allow the internet to grow or the world to return to the pre-internet world of balkanized networks.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title The internet at a crossroad. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Traditionally, the model or rent vs. own has been one that most consumers and companies have mostly considered when it came to real estate (and traditionally, people have looked at renting real estate as more normal than owning, with the possible exception of the last couple of decades, during which real estate ownership appeared more attractive). But today, that concept seems to be increasingly extending to other arenas.

Netflix

For example, Netflix has build a very solid model around renting movies over the Internet. True enough, many people will mention that rental of media dates back to the early days of the video store and were a substantial component in the rise of companies like Blockbuster (born Blockbuster Video). True also that said companies have been falling on hard times lately. But the substantial difference between what Netflix offers and the traditional rental model is focused on convenience: one could argue that Netflix’s original business model was largely centered around the distribution of physical media (the DVDs themselves) but I would argue that the true success of Netflix will be due largely to its digital distribution model, allowing for instant distribution of movies and TV shows with the click of a few buttons. The instant (and the emphasis here needs to be put on instant) access to a large media collection can easily call into question the concept of owning similar content in a physical form: What is the advantage of having a physical copy of a movie sitting on your shelf, collecting dust most of the time, when the same movie is available at the touch of a remote control button from the Internet?

However, the challenge in such concept is that once someone stops paying Netflix, the access to said collection disappears. An owned movie is paid for upfront and can be watched time and time again by a consumer but a rented one can only be watched as long as one keeps paying the owner renting party.

Apple

With Apple’s recent move to sell music tracks without any digital rights management features on it, one could safely assume that Apple is not in the rental business. Apple’s move was largely a response to Amazon’s own marketing around selling DRM-Free music but it is interesting to note that, while the restrictions on music went away, the same was not true of similar restrictions around music videos, movies, and TV shows. The lock-in that appears here is similar to that which exist with Netflix in that if you decide to end your relationship with Apple, the media you bought will stop working. Under such restricted mode, can one really assume that he/she owns the media he/she purchased?

Similarly, Apple is renting out, in partnership with telecommunication vendors like AT&T, an ingenious device called the iPhone. The reason I would call it a rental model is that use of the device is limited by the partners to people who have paid the initial fee and continue to pay a fee to the telecommunication provider on a regular basis. It is a model that exists for most phone providers, as devices tend to be tied to a specific vendor. Once again, people will highlight that it is possible to get rid of that lock-in with software but I will counter that doing so is a violation of the contract terms of the device, voiding warranty and your agreement with Apple. To claim otherwise would be similar to saying that everyone has access to as much money as they want, as long as they are willing to rob banks. (In the interest of disclosure, I should highlight here that I own an iPhone which is not connected to the “authorized provider”.)

Going a little further, Apple gets to lock-in who can and cannot play on an iPhone, only allowing developers who submit themselves to Apple’s whim and offering what is sometimes only temporary access to the userbase as release of every update to a product still has to go through Apple’s review. In other words, Apple gives developers temporary access to the iPhone user base, an access it can choose to revoke at any time.

The Amazon Kindle

All this conversation bring us to Amazon and a couple of its products, starting with the Kindle, which serves as the incentive for writing this lenghthy post. The Kindle, much like the iPhone is a pretty impressive device, bringing several technologies (always on device, e-ink) out of the labs and into more mainstream consumption. And like the iPhone, it has both fans and detractors. And once again, the Kindle offers an interesting kind of lock-in, allowing you to read titles purchased on the kindle (or through the iPhone kindle software) but allowing you access for only as long as you keep a relationship with Amazon. Where the model moves to rental is around magazines and newspapers: you may purchase subscriptions but, should your Kindle be completely full as a result of your subscription, you may loose access to the back issues you “own”.

But Amazon’s move to a rental model is not just around the kindle device. On the consumer end, Amazon now play in the same spaces as Apple and Netflix, renting out or selling digital versions of movies, TV shows, and music.

Renting at the Enterprise Level

In other example of the evolving trend moving from the consumer to the enterprise space, Amazon is now renting itself, or rather portions of its own operating capacity, to anyone willing to pay a fee. Its infrastructure (storage, computing, and databases ) are all available to organizations who are willing to put their application on top of Amazon’s own servers. Amazon offers similar solutions for payment services, and goes as far as providing space in their warehouses along with complete pick, pack and ship capabilities.

The infrastructure component is part of a trend in which enterprise vendors are now providing data center capabilities on a per data transaction costing model. For many Chief Technical or Chief Information Officer, it changes the basic questions around data center from a “Build vs. Buy” to “Build vs. Buy vs. Rent”.

In the process, it also changes the dynamics of how a business can be built as a substantial portion of a company’s activities can now be outsourced to outside players (I’ll go into more details around the enterprise related issues in my next post)

Is it all bad?

If you read this far, you might assume that, by this point, I’m going to claim that this is all about the over-reach of DRM and that it is all a horrible thing.

I’m not.

What I am trying to highlight here is that the experience around internet driven goods is changing. As connectivity speeds increase, the ability to access any movie/TV show/video/ music clip/ books / magazines / etc is going to have a substantial impact on our relationship to said goods (in a fashion similar to the type of relationship kids now have to music, assuming that music on the Internet ought to be free of restrictions, while at the same time assuming that mobile phone ringtones are something one ought to pay for).

The change in our relationship to media forces us to reassess the value of the physical good. In the case of our household, we have made a leap of faith, assuming that the content of certain DVDs will always be available online from one rental provider or another. The reason for that approach is that the experience of watching such thing on our TV using an internet connected video player is not diminished by the lack of a physical medium. Living in a more constrained space (in Manhattan, space is always at a premium), the physicality of a DVD box is actually an impediment to the experience of the medium. As a result, the internet connectivity, and the rental model, appears to make much more sense than the physical ownership of DVD boxes.

In the same way, the value of a CD collection is in what’s on the CD rather than the plastic container it’s in. Much of the value of the physical container of music has decreased: in the past, LPs were designed and the wraping of the LP was almost has important to the experience as the music itself. However, as CDs reduced the size of the cases, and music production companies spend less time on designing custom boxes, physical CDs became more of a commodity, with the music on them being the only thing that truly distinguished one CD from another.

But what about books, magazines, and newspapers?

To a large extent, I would venture that the relationship we have with magazines or newspapers is different from that of a book. When I first saw the Kindle, I was not attracted to it because I could read books on it but rather because I might be able to subscribe to newspapers or magazines. The clear line falls in the arena of experience: with a few exceptions, magazines and newspapers are read and then discarded. The ephemeral nature of that experience archetype seems to make such relationship a prime candidate for digitization: Once again, the convenience of something like a Kindle seems to trump the experience of having to fold a newspaper in a crowded subway or the guilt associated with recycling large amount of newsprint or magazines on a regular basis: because the intrisic value of newspapers or magazines is as conveyors of temporal information that now appears to be archivable and retrieveable online, the need for ownership of that data appears to be lowered.

Books, on the other hand, are a different issue. Reference books may lend themselves to a good digitizable model (O’Reilly, for example, has had success with its Safari offering, as have encyclopedias like Brittanica and the OED) but fiction books may be in a different class. The book as object may be falling into the same class as those ancient LPs, being designed as a full object rather than just its content and rental of such good (though people will mention that books have been something you can borrow from a library for a long time) may take longer to break through as the advantage of reading such a book on a Kindle is not necessarily higher than that of a physical good. I may be romantic in my thinking, attaching to books not only the content and the packaging but its experience in a greater space, as each book I own has, in itself, a number of memories attached, in the form of sand from a beach where it was read, or wrinkles from being carried on a trip or fold marking and writings from a particular era. In those rare cases, the books serve as containers for more than the stories they held when first presented on a bookshelf or through the online presentation they had: they are containers of a full experience and that, at this point, is not yet something that any digital device (whether it is a kindle or other) has yet been able to reproduce.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Is Ownership Passé?. You can follow him on twitter here or receive his weekly newsletter by subscribing here.