Studios keep faith in digital biz

Movie downloads lean but execs eye growth

The download movie biz still isn’t ready for its closeup.

Studios desperately want the download biz to take off, and Netcos are eager for movie sales and rentals to migrate online, but it hasn’t really happened yet. Studios admit the digital biz is very small but believe it could grow to a significant level by next year.

At this point, it’s clearly a small part of the overall biz for major players like Apple and Amazon as well. On Wednesday afternoon, the segment was mentioned only in passing on the companies’ earnings calls — despite the fact that both have ramped up their efforts considerably in recent months.

Apple signed all the majors to a new movie rental service in January, and while chief financial officer Peter Oppenheimer told Wall Street analysts that it “has been very well received by customers,” homevid execs admit it is still getting up to speed.

“It’s nothing earth shattering yet,” Warner Home Video prexy Ron Sanders recently told Daily Variety.

And Lionsgate prexy Steve Beeks, while encouraged by the early going, concedes that iTunes coin reps a very small portion of the overall home entertainment biz. During the first quarter, disc sales generated $3.5 billion, and total consumer spending hit $5.6 billion.

Amazon topper Jeff Bezos was even more enigmatic about his digital initiatives on his earnings call, saying only that the Netco was “extremely happy” with them. Amazon’s Unbox service lags behind Apple’s iTunes service considerably.

According to market research firm NPD, iTunes accounts for 73% of MP3 sales.

And iTunes continued to grow last quarter. In fact, execs told analysts that that growth dented the company’s margins.

In its March quarter, Apple’s “other related music products and services” category, which includes iTunes, grew 35% over the year-earlier period to $881 million. That category also includes iPod services and accessories.

Overall, Apple posted a $1.05 billion profit, up from $770 million, and A 43% revenue increase to $7.51 billion. That’s the best March quarter earnings and profit in the company’s history.

Apple sold 10.6 million iPods in the quarter and 1.7 million iPhones amid shortages of the latter.

Amazon also beat expectations with its net earnings, which jumped 30% to $143 million. Sales increased 37% to $4.13 billion. Packaged media continued to dominate Amazon’s sales, accounting for $2.5 billion during the period. The company ran into shortages of its own digital device, the Kindle book reader, at the beginning of the year.

Studios expect the number of digital movie sales to increase over the year. Several studios are experimenting with iTunes sales of new releases, which they have been resisting for fear it would give Apple topper Steve Jobs too much power. However, they have been more open to sales via Unbox, in part due to its smaller size (Daily Variety, April 16).

Homevid toppers say it’s just a matter of time before iTunes, and its rivals, gain traction in the movie download biz.

“One thing we know is it’s going to grow,” Beeks said.

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