Media Stocks: Video On Demand
By Ann Sosnowski
In this article
The most popular content on the Internet are videos.
Video-on-Demand could be a $4.1 billion industry in the next few years.
Both retailers and established video rental stores are starting their own movie downloading services.
Media Stocks: Video On Demand
You know from my past article on video rentals a few weeks ago that I'm a little finicky when it comes to movies. I have a love-hate relationship with Netflix Inc. (NFLX:NASDAQ), a service I personally didn't have a good experience with, but a company that professionally I have a lot of respect for. After all, NFLX did pave the way for the new generation of movie rental companies and business plans.
This weekend, I was the laziest I've ever been. I, a self-professed horror movie nut, ordered one Alfred Hitchcock movie thriller and was hooked. I ended up downloading (for free!) four Hitchcock movies from Comcast On-Demand and watched them back-to-back.
I even watched a few scenes from his movies on my computer when I was finished with Dial M for Murder.
Videos are fast becoming the most popular content on the Internet, as we can very well see from Google Inc.'s (GOOG:NASDAQ) high-paying acquisition of YouTube.
Downloading videos online, instead of visiting a movie rental store or subscribing to Netflix, is giving movie fans just what they want when they want it. You could very easily compare this transition in the movie rental business to what happened, and is still happening, with music: every year less and less CDs are sold, but iTunes and MP3s are being downloaded from the Internet more frequently.
Media Stocks: Video On Demand Will Be A $4.1 Billion Industry
It's estimated that online video downloads will be a $5.8 billion market by 2011 and a $6.3 billion market by 2012. $4.1 billion of that will come from movie and television downloads from the Internet.
Read on… Get Market Report everyday! Sign up Free!
As with merger and acquisition activity that changes the face of companies and makes them new again, movie retailers across the board are being forced, again, to change with the industry. First it was the success of DVDs that made retailers throw old cassette tapes into the clearance bin for $1.99 a piece… now retail stores are being forced to stay with the times and introduce online video downloads, at their own costs, to give consumers what they want.
We already saw this kind of change with BlockBuster Inc. (BBI:NYSE). First it had to compete with Netflix, and launched Total Access, a subscription plan that allows users to order videos through the mail, and then return them to stores and exchange them for other movies. It melds an online business with a storefront business.
Blockbuster recently launched talks with Movielink earlier this year to add more options to its movie arsenal. Movielink is a well-known movie download service. It hasn't succeeded in buying the company however. Blockbuster has stated that its plans to start a movie download service are on point for the end of the year, whether it's through acquisition activity or copying another business model for the technology.
But it's not just the video rental stores that are being forced to change: companies like Best Buy Co. Inc. (BBY:NYSE) are seeing their video sales decline just like they did their CD sales, and are looking to start a movie download service. Even Wal-Mart Stores Inc. (WMT:NYSE) is looking to join the $4.1 billion business. It sold 3,000 movie downloads in February alone.
Stay informed. Get Market Report everyday! Sign up Free!
Video-on-demand is still a slow process. Currently, Netflix allows streaming video downloads online because it's easier and faster. But Wal-Mart has already conceded that the video files are so large that it could take almost two hours to download the movie you've paid for.
Media Stocks: A Video Rental Company Ready to Roll
Not to mention that the set-top boxes that transmit the movies from the computer to the television are not prime purchases made at Best Buy or Circuit City. And like much new technology, they're still expensive. Anyone who comes into those stores usually buys televisions or computers. Stores like Best Buy and Circuit City used to get heavy foot traffic on new release days for CDs and movies… an event that's diminishing now that online downloading for music and movies is becoming more prominent.
Whether consumers will trust Wal-Mart or Best Buy for movie downloads over much more suitable industry players like Netflix and Blockbuster is to be determined.
But there is already one movie rental company that's above the curve.
In fact, I'm releasing a recommendation on this company in my next Diligent Investor issue, due out in about two weeks.
If you want to be the first to know about this company that could make you 100% by the end of 2007, learn more about Diligent Investor today.
***
Ann Sosnowski is a small and mid-cap stock analyst for Taipan Financial News. She is the editor of Diligent Investor, a monthly newsletter that balances conservative and moderately risky investments that pertain to current market trends. She is also the editor of Diligent Investor Micro-Cap Hot Sheet, a monthly newsletter that finds the hottest penny and micro-cap stocks on the market.
Did you like this article? Get Market Report everyday! Sign up Free!
Related Articles
Airline Companies: 2007 Brings Hope
Microcap Stocks: Already Beating the Major Market Averages
Commodity Prices: Metals Prices Are Up on Hybrid Technology
Related Resources
Media Stocks: Retailers Explore Movie Download Options
Movies-On-Demand: Learn more about Movielink and if it's right for you.
Video-On-Demand: Time Warner expands its video on demand.