Why Hollywood has no iTunes for movies

Why has Hollywood been so slow to put its movies and TV shows online? I get asked that question all the time, but never found a simply way to offer the answer. In fact, there isn't a simple answer. But Slate's crackerjack technology columnist Farhad Manjoo offers the most persuasive explanation I've seen yet in this post about why there's no iTunes for movies.

As Manjoo notes, almost anyone living in an apartment or home equipped with a fast Internet connection has the ability to download an hourlong TV show in 10 minutes, a movie in about 15. But there's no current service that allows an enthusiastic consumer to make use of all that bandwidth. As Manjoo confesses: "I would gladly pay a hefty monthly fee for this wonderful service -- if someone would take my money. In reality, I pay nothing because no company sells such a plan. Instead, I've been getting my programming from the friendly BitTorrent peer-to-peer network. Pirates aren't popular these days, but let's give them this -- they know how to put together a killer on-demand entertainment system."

So why hasn't someone constructed a legal streaming service that would essentially offer all the ease and depth of movie product offered by Netflix, which has more than 100,000 film titles in its library, all ready to go out via FedEx in their cute little red envelopes. Yes, Netflix has an online streaming plan, but Manjoo says most of the titles are "of the airline movie variety." iTunes has a movie service, but its crippled by contractual restrictions. So what's the problem here?

As Manjoo discovered, online access to Hollywood films is governed by a "byzantine set of contractual relationships" among studios, distributors, cable channels and a variety of other parties. The studios won't release movies online day and date with their theatrical release, fearing the availability will cannibalize their performance in the theaters, not to mention enraging theater owners. After movies arrive on DVD, they are also becoming available on pay-per-view, then a few months later they go to premium, HBO-style pay-cable channels, which get a 15- to 18-month exclusive window in which to show the film. As Manjoo explains: "That's why you can't get older titles through Apple's rental plan -- once the movie goes to HBO, Apple loses the right to rent it."

Movies then "make a tour" of ad-supported cable and broadcast networks before returning to outlets like Starz for a second run. Only years after its initial release, when a film enters its "library" phase, are companies like Netflix allowed to license it for streaming. There's a growing generation of consumers eager to see studios shorten or do away with all these windows, but the studios are in no rush -- they say these deals are worth billions, so why sacrifice built-in profits for an uncertain future? Netflix founder Reed Hastings recently told the Hollywood Reporter that it could be 10 years before consumers get a streaming service that offers any movie at any time. 

But if you've seen what's happened to the music business and now the newspaper business -- both clearly waited too long to adapt and exploit the Internet -- you have to wonder if by the time Hollywood makes movies easily available online, the dogs will have barked and the caravan will have moved on. In other words, it might be too late.

Comments

[Dan]

Far be it from me not to point out the obvious: Netflix doesn't use FedEx. :-)

As for online streaming, I'm honestly not sure the demand is really there for movies. TV shows, undeniably and the sooner the studios realize they don't profit by not leaving episodes up on Hulu or another preferred service, the better. But I'll lay down money that TV torrents beat out all but the most heavily advertised of films.

As for Netflix's selection, there's plenty of good stuff. Maybe he should develop an appreciation for the classics, instead of whining.

[Iron mike hamilton]

I would think it has something to do with, first off- the amount of storage required.

Perhaps it's also more likely the position of leverage Hollywood has currently that affords it the opportunity not to do so. It would be great for indy producers though.

DVDs are costly as well- whereas netflix and on demand options are reasonable.

[Bill Cunningham]

Storage is not the problem. We could double the amount of content on the web easily.

It is the byzantine contracts that kill the potential for new business until it's too late.