Amazon digital video sales are slow

In a topsy-turvy year for the digital download biz, a videogame service in just a few million homes is ending 2006 with more momentum than the world’s biggest e-tailer.

The relative success of video downloads on Microsoft’s Xbox Live and disappointment of Amazon.com’s Unbox point to two factors that differentiate Xbox from Amazon and its many other competitors — consumers who download a movie want a simple way to watch it on their TV, and those with high-def TVs want high-def content.

Thanks to the Xbox 360′s direct connection to a TV and the console’s focus on HD content, Microsoft can deliver both. Though exact sales figures aren’t available from any Web site or studio, insiders agree that it’s the most, and maybe only, positive story in digital movie downloads this year.

Many in Hollywood had high expectations that Amazon’s strength in DVD sales would spur the nascent Web download biz. But the Netco faces the same problems as competitors such as Movielink, CinemaNow, Guba and AOL that launched before it: It’s difficult for consumers to burn downloads onto DVD (save for a few titles on CinemaNow), and it’s tricky for all but the most tech-savvy to watch downloads on a TV.

(Apple launched movie downloads from Disney in September and will start selling a device to watch iTunes video content on a TV this winter.)

As a result, studio sources say, Amazon.com digital download sales have been as slow as at other Web sites — under 100 downloads per day for some titles.

“We think, and our customers think, that Unbox is another great way (in addition to our DVD store) to find, discover and buy video,” said Amazon VP of digital Bill Carr, when asked about the progress of his company’s service. “It is day one for digital video, and Amazon will continue to invest in the Unbox customer experience.”

The biggest surprise of the year, however, has been Microsoft offering movie rentals and TV downloads to the Xbox 360 via its Xbox Live Internet service.

Though there are fewer than 3.5 million 360s in the U.S. by last count, movies available from Warner and Paramount, as well as content from CBS and MTV on the TV side, are doing at least as well and, in some cases, better than on competing Web sites, which are available to anyone with a PC and high-speed Internet connection.

Xbox 360 owners are a tech-savvy and media-hungry bunch, of course, but the relatively strong start for video downloads on the console show that there is a market when watching a download is as easy as pushing a few buttons.

HD has proved particularly popular with Xbox 360 owners, many of whom already use the console to play vidgames in high-def.

For Warner, the only studio offering HD versions of its movies, consumers are consistently downloading more copies of a pic in high-def than in standard def when both are offered, even though it takes several extra hours to get the HD version.

“If you look at our sales charts, movies like ‘The Perfect Storm,’ ‘Unforgiven’ and ‘Swordfish’ are all doing disproportionately better than you would expect, and the only explanation is that they’re available in HD,” said Ross Honey, senior director for media in Microsoft’s content and partner strategy group.

Microsoft is charging $1 more for HD downloads, which translates into bigger margins for the tech giant and Warner.

Some studios had been worried that only young male-skewing content would get downloaded by gamers. That fear has been realized to some extent.

While “V for Vendetta” and “South Park” are the most popular downloads on Xbox Live, other titles on the top 10 chart include “The Lake House,” “Failure to Launch” and “CSI,” indicating that some people who typically don’t play “Halo” are watching video content on the 360.

That’s a good sign for Microsoft, which wants to make its vidgame console an entertainment center for the whole family, even if it was purchased for a young gamer.

Studios, of course, want as many e-tailers as possible to prosper in order to create a healthy and diverse digital download biz. But if they’re going to grow in 2007, moviestores like Amazon.com and CinemaNow will have to find a good way to get their content onto the TV.

For now, studios are mostly counting on Microsoft and Apple, two companies very used to competing, to drive growth.

Microsoft is in active talks with all the big studios save Sony, whose PlayStation competes with the Xbox, and is particularly eager to get its hands on more high-def content.

After selling 125,000 downloads of Disney movies during their first week of availability on iTunes in October, Apple has kept quiet about its progress, but studio sources say the Mac maker is pushing hard to get more content.

This winter, Apple is skedded to launch its iTV, a wireless device that promises to make watching digital downloads on a TV as simple as transferring songs to an iPod.

Apple, however, is selling only permanent downloads, not digital rentals like Microsoft, and at a lower price than other e-tailers.

All studios except Disney — which has Apple CEO Steve Jobs as its largest shareholder — have been wary of undercutting DVD retailers to meet iTunes’ terms.

But if the iTV works as promised, it may be the only alternative to Xbox Live for getting downloaded movies to consumers the way they want them.

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