Chin Up in the Downswing

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At-Home, On-Command Entertainment Is a Recession Go-To

June 03, 2009 08:00 PM
by Anne Szustek
TiVo and Netflix’s recent performance show how easy access plus affordability means success during the economic downturn.

TiVo and Netflix Faring Well

Digital recording service TiVo’s stock price soared 42 percent today, going up $2.95 to $9.93 as of 10:10 a.m. during Wall Street trading this morning. It’s the largest gain in share price since March 2005 and the highest the stock has traded since March 2005.

Online-to-door DVD and Blu-Ray disc rental service Netflix has largely participated in the Wall Street market rally ongoing since March, except for a four-week sell-off of its stock during April. Yet Investor’s Business Daily still sees it improving, pointing to slight gains made during the past month.

Could these stocks be an indication of a trend toward recession-friendly entertainment, one that offers personalized programming to consumers? True, TiVo’s stock bump today was largely on the back of winning an additional $103 million in a patent dispute with EchoStar Communications Corp., now part of satellite TV provider Dish Network Corp. However, The Wall Street Journal reported that a small but growing number of Americans are canceling their cable subscriptions, with access to Netflix set-top boxes and streaming online video mentioned as reasons, as well as tightening budgets.

“The reality is, we're starting to see the beginnings of cord cutting where people, particularly young people, are saying all I need is broadband,” Time Warner Cable President and Chief Executive Glenn Brit was quoted as saying by The Wall Street Journal.

On-Demand Is Key Niche

The on-demand entertainment niche, and Netflix in particular, is one example of what Saatchi and Saatchi Chairman Bob Seelert calls in a Forbes column “the simplest idea,” which “is often the most profound and far-reaching.”

Traditional cable providers and Hollywood film studios are taking notice; for example, Comcast is providing more on its free-access site Fancast, and some studios are launching immediate downloads of movies the same day as their DVD release. The Wall Street Journal writes that downloaded rentals offer studios a higher profit margin than do those of DVDs; however, “worries that simultaneous on-demand release could cannibalize more-valuable sales have caused studios to hold back electronic release of megahits likely to sell well in DVD.”

The Journal then goes on to suggest that studios offer downloadable rentals and sales of movies before they come out on DVD.

Whatever the distribution model is today, publishers of entertainment content and the advertisers on which they depend cannot ignore the potential treasure trove offered by on-demand media. "I believe the company that understands the balance between consumers, advertisers, content providers and ISPs will win, if they create the right balance and business model,” Mitch Berman, the CEO of on-demand video service ZillionTV, told Forbes columnist Sramana Mitra.

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