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Print On Demand DVDs: deal moves HP one step closer

dvd hpAlmost definitely in ten years, and very possibly 5 years from now,  if I want to watch a movie, chances are I’ll be able to download a rental, or buy the rights to own it, through some combination of online and offline services.  Maybe I can hit a button on a remote and that’ll be it; a copy of my purchase stored on a home-hard drive, an electronic debit for payment and nothing else to deal with.  Chances are within the next decade, I won’t need to get a DVD in person.  But for today, and the next handful of years?  They’re not going anywhere and my viewing pleasures are still likely to be tethered to optical discs (DVDs).

But as for how I get my DVDs? or how many titles are available?  Those are questions that may be answered differently, questions answered with evolutionary changes rather than a changing of the guard.  Hewlett Packard is one of the companies hoping to be responsible for that.

For several years, Hewlett Packard has had a small but successful business venture selling technology and services to digitally restore old films.  They’ve also been focused on building digital content libraries – both by building out IT infrastructure and by signing licensing deals (for which they have a partnership with Ascent Media).  The eventual end goal of HP’s efforts, about which they haven’t been shy, is to pioneer print-on-demand DVD services.

The idea is this:  imagine, a customer approaches a kiosk at Wal-Mart or Best Buy and searches for a movie title; something obscure, maybe even never before commercially available on DVD.  She presses a few buttons and her DVD is burned and delivered.  At the same time, someone else goes through the same process online at Amazon.  Forgoing a download option and instead choosing a disc, their movie is printed and mailed within hours.  

In both cases, online or off, neither store nor warehouse inventory space was wasted keeping the title in stock.  That frees up shelf space for high margin items (like electronics) and represents significant cost savings for retailers.  But inventory efficiency is only part of the equation.  There’s a second value proposition: catalog depth.   In present retail, stores can only carry what they have room for so they prioritize by customer demand.  New titles get preference over old; popular over obscure.   Put to actual numbers, estimates say that more than a million movies and television episodes have been broadcast (and new programs air daily).   Add to that sports footage and documentary content, and the pool of content gets even bigger.   But how many programs can you buy or download?  Just a fraction.  Estimates are that less than ten percent of feature content is available in DVD form.  There’s not enough demand or shelf space.

Eventually, the Internet and its “long tail” will reduce the problem.  But in the nearer term, while the market landscape still includes DVDs, print-on-demand offers a theoretical solution.  By erasing the need for direct inventory, print-on-demand DVD services gives retailers the tools to showcase and sell a far deeper pool of titles.  Shelf space would no longer be the obstacle restricting title depth; instead availability would be a factor of licensing and the digitization of the content (digital archiving film can be time consuming and labor intensive).

Wherever the marketplace goes five years from now, presently The DVD market is huge.   American’s alone spend between $30 and $40 billion a year on DVD rentals and purchases.  That’s ultimately what HP is after.  HP’s vice president and general manager of digital entertainment services, Willem de Zoete, told Business 2.0 magazine last May that if  “f we only have 5 or 10 percent of that, we won’t be totally satisfied."

So HP’s ambitions are big, huge even. To achieve them, they want (and arguably need) to build one of the largest catalogs of commercial video available.  All the information technology infrastructure in the world is useless without the titles.

Today, HP took a step toward that lofty goal with an announcement that HP Video Merchant Services has signed agreements with 30 content providers to license more than 4,000 film and television titles.  The variety of programming is wide.  HP said in their press release that their targets included never before released TV programs, independent and foreign films and lastly a host of specialty content including education, lifestyle, and sports programs.  Some of the studios included among the group include independent feature film distributors like First Look Studios, Anthem Pictures; reality and documentary distributors like Monarch Films, and sports centric production houses like Opper Sports.

I’ve looked at Print-on-demand DVD services before.  They provide a real value proposition for an enormous market opportunity but at the same time, the obstacles and risks on the road to success looked enormous (and they still do).  Not only is there indirect competition from download services like iTunes, Vudu, Amazon etc, there is also direct competition (Amazon’s on-demand subsidiary CreateSpace (formerly called CustomFlix labs) is working with ABC, and Cinergy, Sun, and IBM are all exploring too).   Then there is the slow-to-embrace-change Hollywood tradition; the question of whether or not big studios will embrace the idea.  All of the present signatories are independents.   It’s worth noting none of the major studios are on board yet, even though HP is working with several on other archiving projects.   (Will they sign on?  and if they do, will it be enough to gain market share absent an impossible level of distribution exclusivity?)

Since the July Metue article first exploring on demand DVDs, another thing has changed: copyright issues.  In late September, the DVD Copyright Control Association, a trade group that oversees the technology used to encrypt DVD’s agreed for the first time to license the technology to consumer device makers.  That little change has a dramatic impact.  It means, a DVD burned on your home computer could soon play freely on any free standing DVD player too.  Before that wasn’t the case.  Home burned DVDs of downloaded video content were not truly portable. Soon they will be.

That copyright/licensing change gives an edge to download services and decreases some of the opportunity for print-on-demand DVDs.  It will no longer be essential to have a 3rd party make a DVD for me.  That notwithstanding, this article began noting that a dramatic change in how we watch movies at home is still many years off.  Even, with licensing technology, and downloadable movie offerings, potentially decreasing the size of the DVD market over the next few years, it will be still remain a multi billion dollar marketplace for a long time.

HP’s effort is poised to capitalize on that in the nearer term (even as download services potentially encroach).  Further, there’s no reason digital titles used for print-on-demand DVDs today couldn’t be repurposed and resold as downloadable content as the market eventually changes (assuming HP’s lawyers are forward thinking enough to build that into their licensing agreements).    When it comes down to it, a digital file, remains a digital file.  If HP has the rights, the file can be delivered to a customer by any of several methods from streaming and downloads to on-demand burning via kiosk or online ordering.

Will Hewlett Packard achieve their market share goals? More than 10% of the present market?  Of that, I’m skeptical. Print-on-demand DVD’s may never take off even though there’s logic in the concept.   Signing up 30 Independents is a good milestone but it’s a small one. I’ll be more impressed when (or if) they sign deals with the major studios. Bring in Sony, Warner Brothers, Disney or Paramount. Sign up a marquee independent like Lionsgate or The Weinstein Company. Those kinds of deals will make me think twice.

Wherever the market goes,  however customers get their video footage, one of the keys to distribution success will be having the content in a digital format at a high enough resolution to allow options. Building the content library is the essential step.  HP’s making progress toward that end but there’s no coup yet.


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