As consumer electronics vendors in Australia roll out Internet based TV’s and IP enabled set top boxes consumers are turning to online content over the traditional video store say the experts. The move is set to hurt Blockbuster and VideoEzy store operators in Australia.
Also putting pressure on Blockbuster and the VideoEzy group are new DVD vending machines such as RedRoom DVD operations which are located in strip shopping centres and supermarkets in Australia.
On Tuesday Foxtel is expected to announce new IP based movie and sporting content that can be downloaded to a Foxtel PVR.
At the recent Telstra briefing Telstra CEO David Thodey confirmed that more Australian consumers than ever before were upgrading to faster and more expensive broadband plans because of an increase in downloads of video’s and movies.
He also said that Telstra was currently building out a new content delivery system that will be used to deliver video and music content direct into homes over an IP network as well as to mobile phones and PC’s.
John Chambers the CEO of Cisco said recently that by 2013 over 80% of internet traffic will be video or movie downloads.
In recent weeks Sony, LG and Samsung have launched new TV’s that will allow content to be identified online and then played direct to a PC or IP enabled TV.
At the weekend Blockbuster in the USA confirmed that they will close up to 960 stores by the end of 2010. Currently Blockbuster Australia pays a licence fee to Blockbuster in the USA to use their name.
There is no shareholding between the two Companies.
In Australia Blockbuster recently cut a deal with the operators of the TiVo set to box to deliver movie content however insiders claim that the service is only “marginally successful” due to limited new movies and high bandwidth costs over a Telstra BigPond or Optus network.
According to CEPro in the USA, 18 percent of Blockbuster’s US stores aren’t making money and 47 percent are only mildly profitable, according to a filing with the Securities and Exchange Commission.
The once dominant movie rental chain, which had already closed 276 stores as of mid-August 2009, has seen intense competition lately.
Analysts at Citigroup say that as broadband gets faster and more brands launch IP enabled devices there will be an explosion in online content that can be purchased either separately or via a monthly subscription service.
In the US for example the Netflix service which delivers movies, documentaries and TV programs is proving extremely popular with their service being embedded into IP enabled TVs; Blu-ray allows users to download content easily.
Last week in the USA I trialled the Netflix service and the first thing I noticed that the service was being offered over a broadband network that was running at between 18 and 22MBs which is the same speeds available in Australia.
However Australia has very limited content providers such as Foxtel, which has a monopoly on pay TV services which in comparison are expensive when compared with services in the USA.
As a result of consumer electronics manufacturers such as Samsung Panasonic and LG including the Netflix media player service with their devices Netflix now has 10.6 million subscribers and earned $55 million through the first half of 2009.
Blockbuster lost $15 million.