Consumers Interested in Downloading Movies via iTunes but Sensitive to Price & Service Model
The Diffusion Group Releases Landmark Report Series Assessing Consumer Receptivity
to Various Apple iTunes Movie Download Strategies
August 3, 2006 (Dallas, Texas) - According to new research from The Diffusion Group, close to one-fourth of broadband households would be interested in an iTunes online movie service if titles were priced at $10 each. On the Viability of an iTunes Movie Service - Part I reveals that 23% of broadband households were to varying degrees interested in such a service but that interest declined rapidly as price per title increased. For example, total interest declined to 14% at $15 per title with marginal decreases thereafter as title prices rose to $25.
Speculation regarding Apple's entry into the online movie space has heated up as next week's Worldwide Developers Conference is set to launch. Industry insiders believe that CEO Steve Jobs will use his August 7 keynote to announce a new video iPod and an iTunes movie download service. Regardless of whether such a service is a rental-only or purchase-to-own model, Apple's entry into this space will be viewed by many as a turning point for online movie distribution.
"Given Apple's success in music and video downloads, extending this model to include full-length movies seems natural," said Michael Greeson, founder of The Diffusion Group and co-author of the report. "It was never a question of 'if' Apple would enter this space, but more a question of 'when' and 'in what form' - and Apple is about to answer both questions."
Apple's entry into the online music market is widely believed to have single-handedly fueled the development of today's digital music industry. Given its track record, many believe it can do the same for online movie distribution. However, as Greeson notes, downloading music files or short video programs for consumption on a PC or portable device is a very different activity than viewing full-length movies. "The value proposition is very different if only because full-length movies are normally viewed in a theater or in the comfort of your living room on a home entertainment system. While movie purchasing models have proven to be flexible (capable of supporting brick-and-mortar, on-demand, and even mail order models), movie viewing preferences are well-engrained and will be difficult to alter."
To evaluate how an Apple iTunes movie download service would be received by consumers, TDG commissioned a June 2006 study of more than 2,000 US households regarding their interest in and price sensitivity toward two types of Apple iTunes-branded online movie services - the first involving movie downloads to the PC and the second involving movie downloads to a iTunes-branded set-top box connected directly to the primary home TV. Researchers examined consumer receptivity to both of these scenarios across a variety of prices points, identified the core group of consumers most likely to adopt each of different these services, and profiled these segments across a number of characteristics.
The results of this extensive analysis are featured in a two-part report series entitled On the Viability of an iTunes Movie Service - Consumer & Strategic Perspectives. Part I contains a detailed examination of consumer receptivity towards an iTunes movie download service for the PC and portable devices. The report also features an overview and analysis of Movielink and CinemaNow, the two leading online movie distribution services, and a discussion regarding why these models have to date failed to capture a critical mass of users.
Part II of this series will feature a discussion and analysis of Apple's iLife strategy and the role that new hardware platforms and iTunes will play in Apple's entry into the home living room. This report will be available for purchase on August 11.
The report is available at TDG’s website or by contacting the firm at 469.287.8050.
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