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

Damn.  I guess I purchased my Sharp Aquos HDTV too soon.  Vudu announced a while ago that any new Sharp HDTV over 42” would receive a free Vudu box.  I wondered how they were going to get that box into everyone’s homes.  

You’re probably wondering what I’m talking about.  OK, here is the short-form kahani (story).  Every time I see an instance of a company (YuMe’s original plan was similar; to license and distribute content to people’s homes and monetise using our ad management system and networks.  We have a home-grown set-top-box and a set of licensed long-form theatrical movies on our balance sheet to prove it) that is attempting to distribute another device into people’s homes, I hope that they will support in-line, run-time advertising insertion.  Maybe I’m being nostalgic for the YuMe business, but ad monetisation in conjunction with PPV/VoD, if not instead of, still seems to be the only economic model that works. 

The startup business world is littered with the dead, dying or surviving shells of companies that have tried licensing, distributing (with and without set-top devices).   Moviebeam, Akimbo, Cinemanow, Movielink, Apple’s iTV, Netflix and I can go on.  To be fair, some of these companies didn’t distribute a set top device, and some are moderately successful, but I’m probably not going too far out on a limb by saying the business model on a PPV or VoD basis is not easy, and may be a black hole.

I hope that over the past few years that the content owners from whom Vudu and others are licensing content will allow them to monetise the content using advertising in addition to the usual PPV or VoD models.  If nothing else, it’ll help the user experience, and add to the revenue base of the company.

I think I’ll call Marc Jung and ask for a free box and more importantly if he has the right to insert ads into the content he’s streaming into his customer base.  It’ll help his economics, of that I’m sure.   It’ll also be a great outlet for relevant ads.  I know I’d love to see the trailer for the next 007 movie when I’m watching the Bourne Ultimatum on Vudu rather than the trailer of some soppy movie that my wife enjoys.  If I have the choice of purchasing the movie, renting the movie, or downloading/streaming the movie with a few ads, how can that not be better…. Right?  Isn’t choice always better?  OK, it’s not, but in this case I think it’s an improvement and a step in the right direction

Jayant Kadambi