There’s no business like show business

Movies are big business. The exact numbers depend upon whose reports you look at, and how you slice up the market – but movie and video industry revenue in the U.S. is probably in excess of $100 billion annually. That’s what we would call “real money.”

Movies are big business. The exact numbers depend upon whose reports you look at, and how you slice up the market – but movie and video industry revenue in the U.S. is probably in excess of $100 billion annually. That’s what we would call “real money.”

It’s no surprise that broadband providers want a piece of this market as they try to expand their services from the realm of Internet “pipes” into something that moves beyond the computer and throughout the home. Multicable system operators (MSO), of course, have the advantage here today with their existing Pay-per-View (PPV), and broadcast analog and digital cable TV services. MSOs have also aggressively deployed set top-based Video on Demand (VoD) services, with many already in major markets.

DSL providers, it will come as no surprise to learn, are a bit further behind on this count. Bandwidth is the biggest limiting factor – MSOs have more bandwidth to the home, and the bandwidth they use for video doesn’t, for the most part, impinge on the bandwidth used to provide Internet services (VoD is an exception here). DSL providers, on the other hand, need to carve out some of their Internet bandwidth to send any sort of video to customers.

These bandwidth limitations can be tackled in two ways: by decreasing the size of video files using compression or by reducing resolution; or by caching content locally so that real-time streaming is not required. These approaches both work best for non-broadcast video content like movies – it’s easier to compress and cache this content than it is to transcode live video streams on the fly.

Probably the most prominent provider of compressed and cached video is Movielink, a year-old joint venture between five of the biggest studios in the business – MGM, Sony Pictures, Paramount, Warner Brothers and Universal. Movielink is focused on one thing:  bringing movies to broadband customers. And while the focus today is on movies to the desktop, a bunch of technological changes and refinements are combining to make Movielink a legitimate competitor, rather than complement to, more traditional TV-based movie delivery services like PPV or DVD rentals.

Today, Movielink encodes movie content at about 750K bit/sec using Microsoft Media Player and Real Player technologies. This provides a good picture (it can be considered roughly equivalent to cable or satellite broadcast), but inferior to DVD and HDTV. Increasing this picture quality is not a big technical leap but given the current real throughput of most broadband networks in the U.S., it isn’t an attractive prospect. But with advances in compression and a bit of a bump in broadband bandwidth, DVD-quality movies could be a reality. With enough bandwidth – and crucially with some QoS support in the consumer broadband access network – Movielink could easily compete directly with other VoD offerings. Even HDTV movies are not out of the question. HD DVDs are just now getting off the ground, and many HDTV owners are starving for content.

The second piece of the puzzle is moving the movie off the computer and onto the big screen in the living room or home theater. Today’s users can connect their PC directly to the TV, if they’ve got the right video card and cables. In fact, over 10% of Movielink viewers do this already but it is a bit of a technical challenge for the mainstream market. For a subgroup of users, a direct connection between a PC and a TV (using Microsoft’s Windows XP Media Center Edition 2004) could make this quite an easy task. In fact, Movielink is one of the marquee online partners, built right into the Media Center interface in the new 2004 version of the operating system. (And, conveniently, access to satellite or cable PPV is almost impractical through MCE 2004, giving Movielink – and fellow Microsoft partner CinemaNow – an unhindered path to MCE users).

Wireless “Media Adapters” have also hit the market in a big way and can offer a solution here. Though most of the initial crop are more focused on audio than video, 802.11a or g should offer enough real throughput to handle compressed movie file formats. With such a set-up, a consumer could order a video on his or her regular PC and be watching it on the TV in a matter of minutes. Look for moves by Microsoft here early next year.

As always, the question remains: what’s in it for the service provider? Well, there’s a risk that doing nothing will leave the service provider out in the dark – we’ve written too many columns that discuss the potential disintermediation of broadband providers when customers can interact independently with Internet-based services, and Movielink and CinemaNow fit this description. But service providers can also get into the game – Movielink, for example, has deals in place with Time Warner Cable (Road Runner), SBC and BellSouth.

With a guarantee of bandwidth and QoS, a service provider can offer a jointly marketed movie package that goes above and beyond what is currently available over the Internet. For today’s movie format, that might mean a 750K bit/sec guaranteed stream, which lets the customer watch the movie truly on demand. In the future, as network architectures advance, it could mean a turbo-button experience – boosted bandwidth for downloading or streaming larger DVD-quality or even HDTV movies. With the content ownership and relationships, and the all-important digital rights management handled by a third party, a broadband provider can use this approach as a quick and easy way to get into “triple play” even before they’re ready to handle broadcast content.