Chump Change... For Now

I know some of this is old, but I kept it around because it stuck with me.  I also think that this post will make me seem like a technophobe, but I'm nothing of the sort.  I truly believe that in the next 20 years, we'll be downloading all our content - movies, video games, tv, music, and experiencing it however we want: on any device or on any screen in the house.

Having said all that, I think Bob Iger is full of crap in this news/press release.

Look, I give him credit.  He sealed the deal with Jobs and Pixar when Eisner couldn't get it done.  He had the first network to put their shows on iTunes, and everyone else followed suit.  And now, he's got the first movie studio to put their films on iTunes as well.

However, he tells us in the release that Disney sold 125,000 movies through iTunes in their opening week, generating $1 million.

I guess we're all supposed to just sit back and think that's good (and it might be), but there's no way for us to know.  Was that within their expectation?  Is that new business, or business that would have been a DVD or movie ticket anyway?  How much money does Disney get here vs. Apple?  This is certainly good news for Apple, as it's new business for them (assuming the operating costs of running a movie download service aren't for some reason incredibly higher than running their music download service), but it's not remotely clear what this means for Disney.  There's no context, nothing to compare it to, just the word of an executive...

Actually, we do have something to compare it to: the box office.  Let's call out the week's worst (and most heavily derided) new performer: All the King's Men.  It made $3.6 million this weekend - more than 3 times that amazing iTunes download number.  I mean, Buena Vista's own Invincible is in its 5th week at the box office, and it still made $2.5 million.  Pirates of the Caribbean 2 farted a million bucks during it's opening weekend.  It made $135.6 million in 72 hours - an average of $1,883,813 per hour.  That million bucks (or less) from iTunes, and their projected $50 million (or less) for the year will have absolutely no impact on Buena Vista's bottom line for years to come.

I mention all this today, because David Card wrote today that TV and film programmers should treat new platforms as "relatively small revenue streams whose primary value is promotion."

Again, I don't think it will always be this way, but let's be careful when and where we toot our own horns, shall we?

Comments

[Nate]

I don't think comparing a movie download to the box office is relevant at all because they happen in different distribution windows. Disney already sent all of the movies (now available for download) through the box office. They already made all that money. The correct comparison is how many DVDs is Disney NOT selling (today) because of iTunes. I definately don't think it is 125,000. This is a new medium and the public is warming up (slowly) to this new way of getting entertainment.

I agree with you that there is no context in this comparison. What is $1 million to Disney? Is that good? How much did they lose on DVD sales? To find this out we would need to run a survey asking "How many people who bought X movie from iTunes were going to buy the DVD and didn't?" I'm sure Disney will know when they see a dip (or not) in DVD sales on the movies they have posted to iTunes.

We need more data before we can get some context on what 1 million dollars means. However, I think 250,000 downloads is amazing. It shows that the market is ready for this distribution model and hopefully other studios will follow Disney because as a consumer I like the convienence and the (semi) ownership of my purchase.

[Craig Beilinson]

Hi Nate - Great comments.

Perhaps I went a bit overboard by comparing it to the box office. Note how it comes at the end of my post... it was my real intent to talk about the complete lack of context around the number, and the decision to write about the box office just sort of happened real-time.

I did call out (to agree with you) that there was no way to understand what this number meant to Disney.

I wrote, "Was that within their expectation? Is that new business, or business that would have been a DVD or movie ticket anyway? How much money does Disney get here vs. Apple?"

I'm also interested in this: If I buy a Disney DVD from Walmart or Best Buy, how much does Disney get, and how much does the retailer get? By the same token, is it a better or worse deal with Apple and iTunes? Then you can look at the DVD sales numbers and see if there's a dip or not. How do all of those numbers compare to the breakdown of buying a movie ticket (whose cost is split between the theaters and studios about 50/50 these days)?

I do think it's a mistake to ignore the box office here completely though. Remember this is now a new way for people to spend their entertainment dollar. While you are absolutely correct that Disney has already released all of the films that are in iTunes, it's certainly possible that a consumer will choose to buy, download, and watch a movie on iTunes tonight INSTEAD of going to see a Disney film at the movie theater. Maybe they never go see that movie... So, is that a net gain or loss for Disney? We don't know, and that's my point.

It's definitely a net win for Apple though.