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How The Cloud And Big Data Are Changing Entertainment

NetApp

filmratings.com

From Amazon to Wal-Mart, companies are carving up the fast-growing market for direct digital delivery of movies to the living room.

It's a classic case of the disruptive entrants and a strategic inflexion point: New technology threatens the status quo, as streaming video propelled through the cloud by big data takes on the DVD and Blu-ray. Discs are a venerable golden goose egg for studios, which last year generated some $18 billion in sales and rentals.

The strategic technological shifts that are driving this business change are our old friends: cloud computing and big data.

Change is a Constant

With DVD sales declining and streaming services growing, it's already clear who's going to be the loser of this high-tech Gunfight at the O.K. Corral. But the sub-plots are tantalizing: Hollywood studios are hell-bent on retaining profits from movies after they leave the theater, while technology companies and online retailers jockey for supremacy in movie streaming.

To say that movie streaming has been a hit would be an understatement. According to Dan Cryan, senior director of digital media for market research firm IHS, "We've hit the point this year where by some measures, people are watching more movies online than physical discs."

Like the music CD before it, the DVD is under siege—and for a similar reason. Just as iTunes lets you download individual songs rather than entire CDs, streaming services, cable and satellite companies now allow customers to rent movies as well as buy them.

With rentals accounting for the vast majority of streaming business, Hollywood so far doesn't face a direct threat to DVDs. Yet there is an indirect threat: Every movie rented can mean one fewer DVD bought.

And the growth of streaming has irreparably damaged the traditional channels for DVD distribution, driving video rental stores out of business, and reducing shelf space for DVD sales. (Ironically, Dish Network scooped up the failing Blockbuster video store franchise and now streams its movies to Dish subscribers.)

What really caused the studios to prick up their ears was the emergence of cloud-based streaming services from Amazon and Wal-Mart's Vudu, which rent and sell movies soon after they appear on DVD. Moreover, both of those services are readily available via online menus of newer TVs and Blu-ray players, making it easy to find, pay for and view a movie without getting off the couch.

The growth of movie streaming could really kick into high gear if Apple gets into the integrated TV game. Right now, you can buy or rent a movie from the iTunes cloud, but not directly to your TV. Today's smart TV user-experience is generally pretty poor, which is why Apple is rumored to be developing an Apple HDTV.

But What Do I Want to Watch?

Whether a consumer is browsing the shelves of a traditional video rental store or choosing a movie from the cloud, discoverability is a huge user challenge.

That’s why many of the streaming services are investing in big-data analytics, to help give consumers suggestions of what movies they might want to watch. Amazon has long been the poster child for this type of feature, with its People who bought X also bought Y schtick.

Hollywood is determined not to follow the music industry down the path of inertia. The labels' failure to counter the move to digital downloads led to lost opportunities and a race to catch up to market realities. The big movie studios already have created new revenue models based on licensing agreements, and they're taking advantage of the competition among streaming services to get the most lucrative deals possible.

At the same time, several big studios are trying to beat the streamers at their own game. EPIX, the cable channel backed by Paramount, Lionsgate and MGM, offers streaming movies over Internet-connected TVs. And in an attempt to steer consumers away from movie rentals and back to DVDs, most big studios have banded together to support UltraViolet, which offers a cloud-based copy of certain discs, and lets anyone move their discs to the cloud for a couple of bucks each.

In the long run, however, you can always count on DVDs for beverage coasters.

So how can you capitalize on these disruptive changes? More from NetApp:


Dave Einstein is a veteran print and digital journalist, having worked for The Associated Press, Los Angeles Times and Forbes.com. He currently writes the weekly Computing Q&A column for the San Francisco Chronicle.