U2 VUDU?
Christopher Carter
I wasn't surprised to read of VUDU's stategy change to focus on the development of its video aggregation and distribution platform for established devices and to cease from manufacturing the VUDU STB. I've used VUDU and like the service, but its a tough slog to convince consumers to pay for a second box to receive TV shows, movies and other entertainment features when consumers are shopping for Blue Ray DVD players, and soon 3D Blue Ray DVD players. Others, like AKIMBO, reached the same conclusion and the yet to launch ZillionTV might want to reconsider. I'm not sure why Boxee is pursuing this strategy. I'd love to see the market research that leads them to the decision to launch their own device. Strategically it makes sense to integrate VUDU's platform into CE devices and game machines that have a higher consumer demand and household penetration. I've made this argument before in prior blog posts. Its not an easy road as the integration into DVRs, DVD players or game machines must wait for device development cycles and lengthy testing processes. So one can expect anywhere from 9 months to close to 2 years between the time the first conversations occur and the device is on the market.
Additionally, this move puts VUDU squarely in competition with the likes of HULU, BOXEE and Netflix, among others, as an alternative source for aggregated content delivered over internet. The race is on to partner with CE manufacturers and to capture market share. I can't imagine the CE Manufacturers would sign exclusive deals with one aggregator, so look for lots of testing and shuffling of services as data from consumer choice and consumption becomes available.
I am still trying to figure out the benefit for the CE Companies. Have they negotiated a revenue split on advertising? A percentage of the rental fees for the content viewed? I can tell you one thing from my experience this weekend while shopping for a TV for my in-laws. Not one salesman mentioned any of the aforementioned services in their sales pitch. They are still pitching LCD vs Plasma attributes, 1080 vs 720, and glare on the screen. I had to bring up the hertz rates (240 is the latest rage, especially for sports buffs) and the move to 3D TV. And the sales guys are still pitching price. What does that tell you about the early success of these online services? If you are looking for VUDU or Netflix while shopping for your next CE device, know what brands and models include your favorite service as chances are the salesman will not.
If you've read my earlier blog posts you know I believe consolidation and platform convergence are the keys to success in this arena. Sometimes it just takes a while, and a lot of VC money, for people to see the light.