Digital Evolution

by Wendy Hall

November 18, 2002

Movielink, the joint-studio VoD Internet venture that has been in development for over a year, finally unveiled last week. Meanwhile, Microsoft's Xbox Live online gaming service launched on Friday to compete with rival Sony. The long-term success of these anticipated services could ultimately prove whether or not a broader selection of desirable digital content will convert more broadband users, and jumpstart the long-awaited high speed dream.

Converting to Convergence

After last week's Movielink launch, there was the somewhat predictable onslaught of media skepticism about the service, echoing what analysts had been already been stating since the venture was first announced. Users, even those with a broadband connection which Movielink is specifically targeted towards, would not find download times enticing (averaging between a half hour and sometimes over an hour as some articles claimed). Also the fact that the average consumer isn't technologically sophisticated enough to watch the films on their TVs, and that most people were accustomed and comfortable with renting movies via traditional methods, are seen as serious obstacles to the company's success.

Yet these roadblocks came not only as unsurprising, but were anticipated by the company. Movielink's initial launch, which offered a total of 170 titles covering the usual sphere of new releases, classics and a few cult favorites that can indeed all be rented at the corner video store, was very much intended as a trial launch to test Movielink's technical challenges and gauge user response. And with a service that hinges on balancing out the needs of a customer base with the complexity of a content infrastructure, a soft launch to test the waters is a predictable move. Yet even though Movielink does intend to expand upon the service and begin investing in an online marketing campaign in a few months, the company doesn't have any misconceptions about its broader ambitions of converting home entertainment consumers to this new format, an illusion which brought down many content sites during the dot com boom. Thus the introduction of the service transcends the soft launch itself, as the company sets out on its larger challenge of introducing users to this revised method of acquiring entertainment to the home. "I don't think we have any illusions that we are going to change people's viewing habits from television to the PC, because this is just a new additional way that is entering the market, and we'll see how people use it," says Movielink's CEO Jim Ramo.

Although Ramo would not disclose any figures relating to traffic or customer base upon the first week, he says the amount of visitors exceeded what the company had expected. Yet he argued that there's no question that this is a new way of viewing this, is a personalized experience, not a television communal experience, and that there was an education job from a consumer's point of view, and an experimental job to be done on the other, to see how they will use the service. This not only involves acquainting and ultimately making consumers accustomed to acquiring entertainment content from computers, but a familiarity with a more sophisticated home networking system.

"I think if you see this business with a long-term horizon, we think that as you get three to five years of the business, that you'll start to see how networking begins to become a key feature in the US," Ramo says. "IP then becomes one of the inputs to a home network. And so that's one way of--over time--getting onto a TV. There are various set-top boxes today that are just starting to have Internet in them, such as game boxes, perhaps Playstations, or XBoxes, and TV-out. And while those aren't practical today because they don't have players, and they don't have operating systems, and they really are geared for storage of games, a set-top box of some sort with IP input seems like it too is coming in this few years."

The High Speed Dream

Because of the size of the files being downloaded, the health of these online VoD ventures, as well as online gaming services offered through Microsoft and Sony which have also just taken off, will depend on how many homes convert to high speed. Given the track record of disappointing broadband deployment to homes, this may seem like precarious positioning. However, these industries feel that better content selection will allure more consumers to switch to broadband. In many respects the current number broadband connected homes is seen as a strong enough springboard to launch from.

"The main applications that have sold and driven broadband are high-speed and always on," says Ramo. "We hope that a new application will be this high-value content, and that people will perhaps add broadband rather than dial-up simply to get this new application. And as that happens, if that helps to sort-of crack the chicken and egg problem, then we get a bigger broadband footprint."