In looking at the video download space, three sets of questions loom large.
First, how much does portability matter? Is it OK to only download to the PC/laptop? Will consumers buy the necessary gear to display PC-downloaded movies on their TVs? What’s the importance of an on-the-road solution, something that portable players can deal with? Note that DVDs are pretty portable and can be played on any PC/laptop, on portable players and on anyone else’s DVD player. Is the DVD the standard by which video downloads will be measured?
Second, how much will security matter? The music industry has ultimately decided to go with fairly flimsy DRM technology that can be broken/circumvented by any Internet-savvy user willing to do it. Will the video industry go the same way or will they demand much stronger controls?
Last but not least, there is the pricing model question. Looking at CinemaNow and MovieLink as examples, new movies (before they are available on DVD) are priced in the $15 range. That seems fine. Many others, already available on DVD, are in the $5-10 range. It takes 2-4 movie downloads/month for Netflix to become more cost-effective. What’s the industry’s path to subscription-based downloads, if any? Royalty payments in the industry are all tied to per-copy pricing mechanisms. A change to a subscription model that isn’t inherently based on a per-copy royalty stream (as is Netflix because of the physical DVD) will cause some havoc.