updated 02:20 pm EDT, Wed July 26, 2006
Amazon preps movie store
News that Amazon has put a lot of money and R&D into an ad-free movie download service has some investors worried after Amazon posted a drop in second quarter earnings by 58 percent, but the company may have an edge over its competitors. With the market currently dominated by Apple's iTunes Music Store, concern has surfaced over the $300 million that many believe Amazon has already spent on the service. However, existing business in DVD retail may help Amazon's case with Hollywood executives, who already have money in their pockets thanks to Amazon. This closer relationship, industry watchers believe, may force Apple to adopt a rent-to-use model instead of the existing iTunes buy-to-own model. Some believe that this might be better for Apple as most don't watch movies over and over the same way many listen to music.
Rumors of Amazon entering the digital download business peaked earlier this month when it was reported that both Steve Jobs and the opposing Amazon executives had been negotiating with Hollywood execs to get content ready for feature-length download services.
A recent report in Advertising Age noted that Amazon may cancel plans for a music service and focus its efforts solely on TV and movie content. The same report said that such an ad-free service could debut as soon as mid-August.
Amazon may very well have no option but to enter the digital market, as it looks to expand. Business Magazine 2.0 reports that physical distribution currently accounts for the majority of Amazon revenue -- two-thirds from books, DVDs, and CDs. As consumers want their content faster, digital download has emerged as the only path to fill this demand.
Many of Amazon's strengths will come from its high Web traffic to promote the service and large customer database of previous purchases to recommend movies to customers. Business Magazine 2.0 believes that the key to Amazon success will be the ability to get the content to the living room.
Recently CinemaNow launched a download-to-own movie service with the ability for purchasers to burn their downloads to DVDs. This service does not feature the most current movie releases but is the first of its kind to allow DVD burning of legally downloaded movies.