125,000 and counting..Disney Downloads

15 thoughts on “125,000 and counting..Disney Downloads”

  1. Lets focus on the emerging trends and teh cash will follow, Apple is crating momentum here changing the way world use to njoy entertainment money at this point is incidental and stock value thingy, if the trend catches up Apple will figure out a way to make money and Apple has already made enuf monies from Disney, remeber Pixar deal 🙂

  2. Remember, Apple makes almost all it’s music profit from selling iPods, not selling songs. It’ll be the same with movies – video iPods and iTV boxes will bring in the profits.

  3. Three letters: P2P.

    Apple is probably happy just selling more video iPods for now but in order for the movie download business to really take off, with healthy competition and price points consumers will embrace(I think Apple has set the standard once again), margins will have to be plumped-up by reduced delivery costs. Its the only variable that can move. Especially as consumers get spoiled by their HD TVs (this is the demographic that buys movies online), they will demand higher quality and HD video bitrates for media they buy, sending file sizes well north of 1GB per flick. Economies of scale dictate that P2P will be called on by movie download services to enable those margins. Look to proven, commercially viable P2P platforms like Kontiki and Pando to play a big role. (Disclosure: I work at Pando)

  4. To directly answer your question Mr. Malik, my best guess is to assume that Disney is walking away with a majority of the pie since at the end of the day, they are the ones toiling away at creating and envisioning the content. It is a given that iTunes has a reputable brand name in its industry and is providing the users with the downloading options and paying for the server costs, but Disney has the dollars to match the downloading services that iTunes provides.

    Not only that, but also this was mentioned an article on CIO.com:
    “By the end of this year, Disney expects to reap $50 million in movie sales through the iTunes store ‘at no marketing expense to us at all,’ said Robert Iger, chief executive officer (CEO) of Disney” so that sets alarm bells ringing about how hungry for pie Disney is.

  5. ..uh, the pricing and distribution schemes will not be over until walmart weighs in and prompts a reaction from netflix and others…until then it’s all posturing as these firms try to see just how far studios will go in a share…imho.

  6. One question to consider is whether MSOs will ignore this as a threat to their future VOD revenues. Granted, I doubt Apple will sell anywhere close to the 45M TV shows they have sold in a year, but even that represents a significant chunk of revenue migrating from TV to broadband sources. Probably keeps a few finance folks awake at nite. 🙂

  7. Apple’s share is probably marginal; they only make pennies off each iTunes track sold, no reason to suspect it would be much different for movies.

    What’s surprising to me is that Apple hasn’t made any moves towards integrating bittorrent support into iTunes to cut down on the bandwidth costs… there was a rumor about that a while back, you’d think they’d have done that prior to selling movies.

  8. I believe the per movie delivery costs listed above are waaay overinflated. It should cost them no more than 5 cents. Actually, I have been running movie sites in the adult industry for 5 years now. My cost to deliver is 3 cents per full movie including storage and tech.

  9. I’d be curious to hear who Josh uses to push his “adult” content. The company I work for has been talking to CDN & P2P players about solutions for distributing content. For long form content (i.e. movies) we are able to get it close to $0.10/GB using CDNs but it takes a high volume to hit that price point. Assuming most movies are 1.5 – 2 hr long and 1hr of content ~=1GB you’re looking at $.10 – $.20 per movie…

  10. If movies sell on iTunes for between $9.99 and $14.99, let’s say they averaged $12.00, although you could run your estimate higher or lower. Iger’s statement implied that Disney’s split was in the $8.00 range ($1 mil / 125,000), although there’s certainly rounding in there. Unless I’m missing something, why wouldn’t this imply a $4.00 gross margin for Apple. We all understand Apple’s economics on the music side as they’ve made numerous statements that they basically break even (although I’ve seen estimates that they do better than that). To my knowledge, though, they’ve made no statements regarding splits or expected profitability on the video side, in respect of music videos, TV, or movies. I don’t know that we should assume that they would necessarily go out with the same business model on the video side as on the music side. Recall that when building music store, the business was unproven. Now it’s an 800lb. gorilla for digital distribution. That changes the leverage substantially. It is not unreasonable to expect that Apple would have tried to monetize this increased leverage as they’ve expanded the business. In fact, despite all of the rumors surounding gross movie pricing being the gating factor for signing up the various studios, I wouldn’t be suprised if Apple’s insistence to the studios on moving away from a breakeven model added to the complexity of the rollout.

  11. Disney reap $50m in revenue – at the expense of what? Walmart? Amazon? Sure, a lot of the first week downloads are going to be people buying and trying but are they going to continue? And if they do, are they going to do it instead of grabbing the physical DVD?

  12. John, we have 2 setups you can look into.

    One is a fully managed solution through http://www.webair.com The price they give us stays at less than the 10 cents per movie you speak of. Even for full 2 hour DVD rips.

    The other is a colo gig-e setup. We got 1gbs connection for $13,500 per month. The rest of the charges are for rackspace and power. We lease some pretty nice servers for $600 per month. So total we are looking at $15,500 We’ve had that for a few years now.

    Everyone knows adult pushes a lot of traffic. But we are not making Apple money. For us to be able to keep per movie costs at below what they pay means one of 2 things:

    A. They are padding the budget to trick studios into sharing more than they should

    or

    B. Mainstream is still paying waay too much money for hosting and bandwidth.

    Seeing as how Apple still pays Akamai for their overpriced CDN hosting I’m betting it’s a little bit of both.

    If you want better pricing on bandwidth I suggest you call my rep Mike at Webair.com .

  13. If I can get my files hosted at Amazon S3 at $0.2/Gb for transferred data, starting at just 10 bytes, I’m pretty sure Apple can get a better deal. How big are those movies? 2Gb? Then I’d say somewhere around $0.2, maybe less..
    Bandwith isn’t that expensive anymore, and those movies don’t take up that much space, so they are quite easy to serve…

This site uses Akismet to reduce spam. Learn how your comment data is processed.