Analyst: No More Studios on iTunes Before Holidays
TMO Reports - Analyst: No More Studios on iTunes Before Holidays
by , 3:25 PM EDT, October 10th, 2006
Piper Jaffray analyst Gene Munster on Tuesday said that recent meetings with four of the six major film studios revealed that they likely won't be adding their movies to iTunes before the holidays because of fear over retaliation by big retailers, as well as issues with content protection and pricing. He wrote: "Our checks lead us to believe other studios will have content on iTunes in the next six months, but not likely before the holidays."
So far, Disney, which encompasses Miramax, Touchstone, and other labels, is the only major studio offering movies through iTunes. The company was likewise the first to make TV content available on iTunes, when the video-enabled iPod debuted a year ago.
Regarding the fear of retaliation, which was the biggest complaint he heard, Mr. Munster explained: "Given services such as iTunes often undercut pricing at [Wal-Mart, Target, Best Buy, etc.], these retailers are concerned about the impact it will have on their DVD sales. It is possible that retailers will shift focus to other products if DVDs become less profitable due to lower priced online competition. Some of the studios refer to this as 'retailiation' [sic] and they are concerned that this could significantly disrupt current business models in the DVD market."
Content protection ran a close second; studios are concerned about films made available through iTunes becoming victims of piracy. Mr. Munster wrote: "For most studios, they are happy to see Disney serve as a 'guinea pig,' and we expect that if Disney's content continues to appear to be relatively safe from casual pirates, other studios will become more comfortable with offering content on iTunes."
In addition, the current pricing structure for movies was "a significant hurdle," according to the analyst. He elaborated: "Specifically, these studios want to have the ability to price certain movies at a premium to less popular content and are opposed to Apple's rigid pricing strategy." Apple currently sells older films for US$9.99 each, while new movies are $12.99 during the pre-order period, as well as the first week of sales, before jumping to $14.99.
Mr. Munster concluded: "A couple of the studios indicated that they expect to have content on iTunes within six months, but it may require some tweaks to Apple's pricing guidelines to get them there. We would not expect additional studios to sign on with iTunes before the holidays, however, as most studios recognize that this change could disrupt their holiday business at retailers."
He retained his "Outperform" rating on Apple's stock, with a $99 12-month price target. At 3:25 PM EST on Tuesday, the company's shares were selling for $73.52, down 1.49% for the day.
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Observer Comments
Tue Oct 10, 2006 3:33 pm Subject: and the big retailers should fear...
that us consumers will create backlash at them by not purchasing DVDs and videotapes AT ALL this holiday season.
And it's not just out of spite either. Has anybody seen (or at least read/heard about) the garbage out in the movies this year? Geez. It's no wonder sales are plummeting. They're peddling garbage. Why would I want to buy any of it, whether on DVD or electronically.
Not worth my hard earned $$$.
At what point does the big box stores threatening the studios if they go to iTunes become something illegal? I mean IANAL but when they start using their market power to make the studios either not use iTS or, theoretically, sell iTS films at the same price or higher than DVD versions of the same movie, it sounds to me kinda like the sort of bullying Microsoft got in trouble for.
This is NOT undercutting them in pricing. You get NO dvd to carry with you in the Ford Excursion Subdivision SUV monstrosity for the kids ... You get no extras, commentaries, booklets, or packaging... and you do NOT get dvd quality. OF COURSE THE PRICE SHOULD BE LOWER!!!!!!!!!
Sorry, but these short-sighted idiots really tick me off. Fools.
Tue Oct 10, 2006 3:55 pm Subject:
QuoteTommo_UK wrote:
Mmm.. Gene Munster has been a bit of colour of late... remember his "No new iBook until after July" pronouncement? Umm.. MacBooks came out in May.
Take this with a big grain of salt. Make that a salt cellar.
Like this?
http://ars.userfriendly.org/cartoons/?id=20061008
As I commented over at TiPO, buying a DVD buys "more" content than just the movie. Therefore, one should not expect that DVD discs should *ever* be priced the same as iTMS movies.
If the retailers want to lobby the movie industry into providing "movie-only" DVDs that they can sell for the same price as the iTMS, that's their prerogative, but saying that a DVD and a iTMS download should be the same price is like saying that a comic book should cost the same as a television set.
I just hope the studios can wrap their brain around the basic idea that downloads and DVDs are DIFFERENT
Tue Oct 10, 2006 6:17 pm Subject: Not a big deal right now
I don't think this is a real big deal right now. I don't think that the present video iPod or on a computer is the best way for people to watch movies at present. Once the iTV is released as well as the reported large screen video iPod, then it would make more sense for these other studios to make more content available for iTunes.
Neal
Hard for me to envision Wal-Mart or Best Buy scaling back their DVD floor/shelf space. I currently don't buy many DVDs, but I likely would buy a lot of ITS videos. I'm super lazy and would rather just find a file and click it then get up and across room and find a disc and then pop it in the player (or computer).
The stores see it as the exact same product yet without the packaging, shipping, and even physical form to manufacture - just buying & downloading a freaking file SHOULD BE A LOT MORE cheaper than an actual DVD or DVD set! So I see why the stores are scared, yet I seriously doubt if the option of buying movies at ITS would impact their physical sales. Studios still simply need to make BETTER movies.
Just watch the sales figures for the new Pirates of Caribbean movie coming soon to both retail stores as DVDs and ITS. I bet it'll sale a ton with both tracks and retail won't suffer, especially since holiday shopping is coming.
I really think it's too early to declare either victory or failure here. Apple is not on a Christmas season schedule with this one, they're waiting for the 802.11n protocol to get an initial release before committing to larger files on a wider basis. When the 802.11n is released in early 2007, they'll release the commercial version of the iTV (called whatever it'll be), then you'll see a much bigger retail effort.
This gives Apple over 6 months to show the studios some kind of results at the ITS through Disney's offerings, and plenty of time to settle the pricing issues, which will end up less of an issue after Apple signs a separate agreement with Walmart.
Give this time. Apple obviously isn't flying blind here, and they seem to be sticking to a game plan. Their game plan worked with iTunes and music, there's no reason to think this'll fail - it's certainly too early to make any claims one way or another.
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