In case you missed it, Apple made a couple of announcements at this week’s MacWorld, including one about movie rentals coming to iTunes and AppleTV. Immediately, the bloggers and news outlets – as well as Wall Street – started talking about the impact to Blockbuster, Netflix, Movielink and others.  In addition, as I’ve mentioned in previous missives, Apple follows a long line of defunct, semi-defunct and new on-line movie distribution companies, most of them not using an ad-supported model, but preferring a subscription or pay model.

Apple has never been a proponent of an ad supported model, opting instead for pay models on music, TV shows and movie purchases through iTunes and iTV. But unlike the simplicity in pricing that Apple once offered through music downloads on iTunes, this new rental feature adds another layer of complexity for consumers – one price for standard-def and another for high-def, alongside limits of how long the movie is available for viewing.

It seems that since they’ve complicated things already, Apple could have considered the option of advertising-supported content and really provide choice to the customers.  “Download HD content for free with ads, or download it for a price.”   It’ll probably be an accretive source of revenue and it’d be a great experiment.  With Apple’s cachet and brand equity, advertisers would jump at the opportunity and we’d really get an apples-to-apples test.  And the ads would be about as intrusive as trailers are during movie rentals, which is not very, especially if they are contextually targeted using a good ad management system.   We at YuMe are seeing a rapid growth of online video distributors as well as audiences that are willing to watch an ad for the chance to view content for free, or at least at a discounted rate. Just look at how traditional television networks are expanding their ad-supported lineup of free offerings on the Web and stay tuned for announcements from us in this area.

To be fair, the success of rental or ad supported distribution mechanisms such as Apple’s iTV is dependent to some extent on the studio’s willingness to license content when they know it’s being ad supported.  But we know it is being done on an ever increasing basis by large and small distribution networks alike and it seems that the declaration of success of this new offering from Apple may be made with limited data.  Sure, this time around, Apple has the support of all of the major studios. But is the lineup enough to get consumers to turn their backs on Netflix and Blockbuster and cough up $3.99 for a 24-hour rental?  Maybe they will call us up and we can set them up to earn most of that $3.99 back on ads, and see what happens.

 Jayant Kadambi

It is interesting being in an industry where you can wander the office talking about Jackass and not get the HR hounds frothing.  Since we at YuMe were bidding on part of the Jackass advertising campaign, it was free game, at least for a while.  And then, on the 19th of December, which strangely enough is a Wednesday, the sequel to Jackass 2 (or perhaps a massive PR campaign for Jackass 3) debuted.  And it debuted online.  Sure, the distribution rules are highly complex, it plays only until the 31st of December 2007 exclusively on http://blockbuster.jackassworld.com/, and then it plays on Joost, can be downloaded from iTunes, available on Amazon, and then in February, the satellite and VoD providers will air the movie.  I guess technically Jackass 2.5 is not a movie, since it’s only an hour, but the interesting thing is that they are streaming pre-roll and post-roll ads during the playback.  Now, I haven’t watched the whole thing to see if there are ads during it, but it does seem that this release of content is truly ad supported to start. 

Content owners continue to overcomplicate the distribution life of content so they can extract what they think is the maximum value from a piece of content.  Actually, my pet theory is that the distribution rules for content are clearly designed to be highly complex and require tons of lawyers as a BD and legal employment preservation act.  But, that being said, this is good stuff, and maybe a worthwhile trend is starting.  On December 10th, Warner simultaneously introduced the popular Robert Ludlum movie franchise’s latest movie blockbuster, The Bourne Ultimatum, simultaneously on Vudu and DVD.    Vudu is a service/set-top that allows people to watch high-quality, presumably theatrical movie stuff in their homes.

The fact that content owners are beginning to add broadband and online distribution strategies to their precious content monetisation is good.  Hopefully, they will learn to overcome their fear of new distribution models and that the more people that have access to good content, and the earlier they have access to it, the more people will watch.  And the more they watch, the more money they’ll earn.  They just need smart advertising to help monetisation.  Charging a Queen’s (OK, perhaps a Prince’s ransom) on a subscription or pay-per-use basis isn’t going to bring accretive revenue.   They’ll need to advertise.  And let’s stop with the human cry over advertising on theatrical content.    What is it that you watch for 8 minutes before a DVD that you purchased?  Those 3 trailers are adverts.  Wouldn’t it be great to be able to get relevant ads when you watch that 3-year-old Jason Bourne movie, rather than an ad for the next one?

Jayant Kadambi