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Forward to friendMoving Pictures
By Steve Lord
The market is again ga-ga over Apple Computer, now because of the company's record earnings release last night after the bell. How times have changed! As a lifelong Mac user, I can remember when 1) Apple's earnings were anything but front-page news, and 2) Apple didn't have any earnings to report in the first place. It will be very interesting to see how Apple's stock reacts to the news; my bet is that the company's current good fortune is already priced (how could it not be?) and AAPL falls after any initial spike.
Meanwhile, earlier this week a relatively small company made a huge announcement. In fact, it is so big I think it will eventually revolutionize an entire industry - not something that happens every day. In this case, we're talking about the $24 billion home video industry. For the first time, this little firm has worked out a deal with the entire Hollywood gravy train - the studios, the producers, the distribution companies, etc. - to license feature movies for download.
Adoption will be slow - for now there are only 1000 movies available, and high-speed internet access has to continue reaching more and more households. Plus, new gadgets will be needed to move the movies from your hard drive to your TV (no matter what anyone says, I doubt many of us are keen to watch Jurassic Park on our desktop computers). But from here, now that the "genie is out of the bottle", the shift from video rental store to video rental SITE will be an inexorable one. Is there really any doubt that we will eventually download movies we want to rent, instead of heading over to the local Blockbuster?
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Look at the insane growth of video clips on the internet already - downloading a feature-length film is already possible for anyone with a high-speed internet connection and a little patience. What has been lacking, until now, was the distribution channel from Hollywood to your cable modem. Like most technology innovations, this one will not be adopted immediately, and it certainly didn’t impress Wall Street - even a few trading sessions afterward, this stock is barely unchanged. It's a testament to Wall Street myopia, if you ask me.
When I read the press release (I've followed this particular stock loosely for about a year now), I immediately went over to the CEO of a company that shares the restored 1784 house in which I have my office. This guy is vintage New York - loud, a little "in your face" and tough as nails. But he is also extremely smart, and has become wealthy successfully navigating the very tough movie production/distribution industry.
I mentioned the news release, and he nodded. "I saw it. It's really been only a matter of time. From here, the extent it grows is a function of how fast people marry their computer to their television sets, and how many studios will license their films this way. I know we're looking at it as a new, very efficient way to distribute our content. It will be like a tree growing - if you look every day you won't see much change. But if you come back in ten years, you won't believe how large it has become."
Like Amazon.com several years ago, for now this little firm is the only game in town. That will undoubtedly change, but first-mover advantage is a powerful force in online commerce. I am still analyzing the company, its finances and the impact of this new "product" on their business over the next few years, so it would be premature to make a recommendation. But is clearly GRESSOR material - high potential, high growth, speculative, etc. - so the earlier you get into it, the better off you will be. Stay tuned.
Sincerely,
Steven Lord, Editor, GRESSOR
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