BitTorrent users spend money, too
Vuze -- the company that's trying to sell licensed, high-def videos to users of the BitTorrent file-sharing software -- has spent much of the past two years trying to persuade Hollywood that its users are customers, not thieves. So far, however, the major studios have entrusted little to Vuze beyond movie trailers and other promotional videos. Now Vuze is trying to prod Hollywood with some eye-opening data about its clientele's buying habits and purchasing power: in addition to being copyright infringers, they spend a lot of money on movies and movie-watching gear. Said Vuze CEO Gilles BianRosa, "Those users are actually Hollywood's best customers."
Yes, that's a self-serving comment. But BianRosa's assertion is supported by a survey by media consulting firm Frank N. Magid Associates of about 1,300 Internet users between the ages of 18 and 44, nearly 700 of whom use Vuze. The survey, which Vuze released late Tuesday, included the following insights about the members of the company's audience:
- They buy 34% more movie tickets, purchase 34% more DVDs and rent 24% more movies than the average Internet user.
- They tend to have more and better equipment for consuming media, including home theaters and expensive computers with large screens.
- They spend less time watching TV, more online, and far more watching downloaded or streaming video.
- They're not only early adopters, they're more likely to share their opinions online, and with more people.
BianRosa said he talks frequently with studio executives, and a common attitude is that BitTorrent users are "never going to pay for anything" and "are basically at the heart of Hollywood's problem right now." Rather than dismissing them, though, the survey shows that Hollywood should be trying to understand when and why they decide to buy content. The data tells Hollywood that Vuze's audience is ready for video delivered digitally and willing to spend heavily on programming and the means to consume it. What it doesn't reveal, at least not explicitly, is why those users buy DVDs but not the downloadable movies sold or rented by authorized outlets such as CinemaNow, iTunes or Amazon.com.
Naturally, BianRosa has a few guesses. First, he said, the price demanded for downloadable movies is about the same as what it costs to buy or rent a physical DVD, yet the downloads don't deliver as much value. That's true in part because the DRM used on the downloadable media creates "massive friction" for consumers, making those files less portable and harder to use than discs. And the studios' demand that online distributors pay anticipated royalties in advance cuts down on the availability of legitimate content by making it hard for many smaller outlets to get into the business, he said.
The studios' pricing strategy is dictated to some degree by their concern about cannibalizing DVD sales, which have been a critical source of revenue. But BianRosa asked, "How can there be cannibalization if there isn't distribution?" It's not a question of trading analog dollars for digital dimes, as NBC Universal CEO Jeff Zucker famously put it, because the profit margins should be better online than they are in the physical world, BianRosa said. Rather, the issue is whether Hollywood can afford not to be experimenting online with BitTorrent and other distribution platforms that millions of people are using. The studios, he said, are "hoping for a model online that will magically emerge on its own, with all the problems resolved ... and then embrace it. That's just not the way it's going to happen."
Of course, it's not fair to say the major studios are shunning the Internet just because they haven't been willing to license content to Vuze on BianRosa's terms. They're doing some significant experiments online, particularly with television programs and advertiser-supported platforms such as Hulu (which NBC Universal and News Corp. founded). They've gradually offered more movies for rent or purchase on the Net, and reduced the time lag between the DVD release and online availability. But they've not gone nearly as far as the music industry to enable fully stocked video-on-demand services online or provide the same quality and flexibility in downloadable media as they do in packaged products. And neither the record labels nor the studios has made a credible attempt yet to compete head-to-head with bootlegged goods on the distribution platforms where piracy thrives. Perhaps the Vuze survey will give Hollywood more incentive to court those users, rather than simply wishing they'd go away.