Channel Marker

Sep 12 2006   4:32PM GMT

Physical Media (and Blockbuster) Are Dead, and You Can Profit By It

Brein Matturro Profile: Brein Matturro

If you’re one to bet on the success of new technology and the potential ruin of the old (and your presence in the reseller business is evidence enough that you are), put a few bucks on the tubercular demise of Blockbuster and the rest of the walk-in video rental industry.

Both Apple and Amazon have announced that they’re going to sell or rent downloadable movies in the near future.

That’s great news for those of us who don’t have the patience to wait for Netflix to deliver a movie and would rather eat burned popcorn from a malfunctioning microwave while watching reruns of Full House than step into another Blockbuster.

It’s also good for those of us who think On Demand would be great if it ever had enough Supply. Two new movies a week doesn’t provide a ton of selection, you know? So downloadable is the way to go.

Sure, there are the tiny problems that go along with any new approach. “What are you going to watch it on?” asks one colleague, whose imagination is unfortunately limited to what is technically possible, or at least practical. Handheld video units like Apple’s own iPod don’t have enough storage or a big enough screen for a full-length movie. Laptops it is, at least for now.

“If it has to go to a computer first, forget it.” Convenience is overrated in the pursuit of, well, convenience. You can spend a few hundred extra dollars for a media switch that can connect your TV to your laptop, and voila: another very attractive home-networking segment that doesn’t work very well.

“Are you going to sit there for hours while it downloads?” Shortsighted, I told you. I have 6Mbit/sec cable to my house and am willing to wait a few minutes for a download. I need time to burn the popcorn, after all.

“What about if all your neighbors did the same thing; cable’s a shared circuit. You’d get swamped.” I won’t tell them about it.
IP TV. “You should see a urologist.”

You see why he doesn’t get invited to industry “vision” announcements?

The truth is that video and audio downloads – movies, music, audiobooks, video blogs and video e-mail, resource-intensive online gaming, high-def, watch-on-demand TV and all the other semi-attainable options of the digital age – will define our home and out-of-home lives in a couple of years. It’s the same world-revolves-around-me yen for personalized entertainment that made the iPod popular; and the CD player; and the Walkman; and the transistor radio; and books; and cuneiform.

The problem for consumers and the opportunity for resellers, however, is that it’s not easy to get all that stuff to work. Sure there are plenty of turnkey boxes that will channel media all over your house once you get their network access set up and the ACLs on every computer set up, and upgrade your bandwidth, and find the damn TV/video adapter plug you know is on the shelf even if the punk at Radio Shack says it doesn’t exist!

The channel’s an interesting place. It offers enormous business opportunities, but pulls them back just when you think everything’s going good.

Right now businesses that have been buying for the last three years are holding back “just before they pull the trigger,” on new deals, according to Yankee Group VP Zeus Kerravala. ROI calculations and promises about increased productivity are more than just marketing gibberish. Customers are starting to demand evidence that those promises are true, largely because they have to descent into accounting and provide those numbers to people who not only do the math, but believe the results.

“If you don’t have all the I’s dotted and the T’s crossed, they’re just saying forget it,” Kerravala says.

Home networks, on the other hand, pay for themselves the first time you Tivo a show without actually owning a Tivo, or e-mail with your spouse and your kid’s teacher while one watches Fried Green Tomatoes and the other watches the special-edition Matrix on your laptops.

Or, the first time you can stay home and watch that first-run movie you’ve been wanting to see without having to wade through endless On Demand menus.

ABI Research predicts the home network-storage market alone will go up from $305 million in 2006 to nearly $1.2 billion in 2011. And that’s not even counting all the VoIP, switching, security, powerline and all the other stuff you can pimp the average suburban house out with so McMansion-dwelling executives can try to out-geek each other at the kid soccer game.

It’s a rich market, and a fun one. How many toys to you get to play with selling SAN equipment to data-center managers?

And I guarantee that physical media are doomed when it comes to entertainment. It’s digital or nothing. Within two years a third of the domestic market for movies and music will be entirely electronic. Within five years it will be three quarters.

Take advantage of it. Have some fun. You’re smart. I’m sure you can figure out an easier way to get a movie to your house or a customer’s without having to stick it in an envelope and give it to the mailman. People are willing to pay for that.

Let them.

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