2010.39 | Netflix Canada – Moving to Digital Media?

Selling video entertainment in today’s digital world is a complex business.  The entertainment business in Canada has have moved from a physical product available in stores to an incredible array of options.  While we don’t have all of the options available to our neighbhours to the south, Canadian options were extended with Netflix opening its doors to Canada last week.  Their model is likely to shake up the local entertainment sales and rental industry.   Consider the options currently available for video entertainment.

DVD Rental Blockbuster Canada, Videotron and Rogers Plus are the larger players in Canada.  These stores are far more robust than their equivalents in the US and the are plenty of bricks and mortar sites from which to rent. 

DVD kiosks – There are different options in Canada for DVD rentals from kiosks, though most networks don’t have more than a handful of locations at present. 

DVD Subscription Zip.ca is the main player for DVD subscription rentals in Canada, with subscribers in the tens of thousands.

Digital Download and Rental – Digital downloads have been available on Pay Per View boxes in homes across Canada for some time from Digital Cable/ Satellite providers.  iTunes is the primary player in Canada for digital downloads of Movies and TV shows to own and rent, though some studios include digital copies for download with the physical copy.  With Netflix on the scene in Canada, iTunes is no longer the lone digital player in Canada.  More technologically sophisticated users can use solutions like Boxee to watch online video on their PCs and TVs.

There are a number of factors driving the usage adoption of the different platforms:

  • Bandwidth – Music was easily moved from CD to download with files in the 2Mb size range.  Movies and even TV shows of any sort of quality require files from 200Mb to 2Gb in size.  Internet usage is expansive in Canada with more than three quarters of Canadians online.  With large files, varying download speeds, and no unlimited bandwidth options at present, it may take some time for the digital downloads of video to reach the ubiquity of DVDs, but it appears that the number of people watching video online is growing
  • Portability – DVDs were the original portable option for entertainment.  Netflix has done a great job of moving this sort of portability to a digital format, allowing users to view content on their PC, iPhone, iPad or on their TV via a game console like the Wii.  The service keeps track of the last known viewing point allowing users to resume their place as they travel, commute, or are in any other place.  Allowing consumption of entertainment where and when they wish is key to the success digital media.
  • Licensing  – Every country has a patchwork of licensing rules and every studio and local rightsholder can make their own decisions.  This means that the media available over digital networks can vary by jurisdiction.  The media available will have an impact on the users of a digital service.  Limiting selection will drive the demographics of digital users in various ways.
  • User Experience – Digital media doesn’t currently have the extras available on DVDs like making of the film documentaries, and there are segments of the population who are interested in those extras. Digital options also may not provide the High Definition Surround Sound experience that technophiles may wish to experience. 
  • Cost – While piracy is rife on the internet and there are many fears about that issue, there is always a trade-off on digital media between time and effort.  If digital providers make it simpler to obtain their services, and they are of better quality or different in some way than what can be obtained for free, chargable digital solutions will find a place in people’s homes and wallets.  Nick Bilton’s recent book highlights and explains this point well. 
  • Technology – The ubiquity of technology is making it simpler for consumers to consume media through digital means.   Viewing digital media used to require extra equipment, knowledge of various technologies and either expensive software or open source software.  Services like Netflix make it possible to consume digital video with the simple knowledge of how to browse the internet.

So is digital media going to move the DVD the way of the 8 track?  For those of us with high speed internet, it certainly appears to be going in that direction.  I am an early adopter, always willing to try the newest thing, and I invest in new technology, high bandwidth internet and consume my media in such a way that digital is practical.  For those who are less interested in making technology such a central part of their lives, it will take some time – perhaps years – before digital is the default option.   I believe it will be a situation similar to eBooks.  While they are certainly overtaking books, books aren’t going away.  While DVDs are going away, they are not all going to disappear tomorrow.  It is most likely that all of these options will continue to co-exist for some time and they will probably be joined by other hybrids as well.

[Full disclosure – my employer NCR Corporation, owns and operates Blockbuster Express DVD Rental Kiosks]

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