Download market in movies and TV is already huge, but much of it is illegal, says Richards

Verisign VP Digital Content Services Jeff Richards cautions studios, retailers and content owners that “slow rolling” a Web-based distribution strategy is “completely missing the boat.”
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In the last edition of IPTV Update, Verisign VP Digital Content Services Jeff Richards offered his opinion of how Internet TV is developing.

Well-positioned to know as Verisign quietly powers some of the largest players in Internet TV players, including BBC, Channel 4, Sky in UK and AOL Video In2TV, Richards this week turns his attention to broadcast, movie downloads and the need for traditional entertainment companies to deploy Internet TV distribution strategies that mesh with the realities of what’s transpiring on the Web.

IPTV Update: Do you have any sense of how big the market is today for downloads of video content, say movies?

Jeff Richards: I’ve taken a snapshot of a week from August of last year using figures from Big Champagne, which tracks movie downloads on the Internet, for just the U.S. and just the top 10 movies. There were 8,811,000 downloads in one week of the top 10 movies in the U.S. off the illegal file sharing networks.

If you translate that to a $20 purchase, it’s $180 million a week of content being downloaded per week illegally for just the top 10 videos in just the U.S. alone. I often get people saying to me, “Gee, when do you think the idea of consumers downloading studio-quality content is going to take off?” I say, “Hey, ladies and gentlemen, it’s taken off. It’s just that nobody’s paying for it.”

IPTV Update: That seems like a tremendous amount of illegal downloads.

Jeff Richards: Fifty percent of the traffic on the Internet is due to illegal file sharing networks. The fact that nobody is getting paid for it is another issue. But if you think peer-to-peer hasn’t taken off as a technology for downloading video content, you’ve got your head in the sand.

There’s more content being downloaded illegally in one week than is being paid for in an entire year right now.

Our point to content distributors or e-tailers or studios is if you are slow rolling out your project to get your digital distribution strategy in place, to put a site up on the Internet and start to monetize distribution of content digitally, you are completely missing the boat on the fact that your consumer is going elsewhere for that content. So whether you’re Blockbuster, or Hollywood Video or Wal-Mart or Paramount or Universal or whomever, if you think the miniscule amount of videos being paid for across various sites is an accurate representation of the market opportunity, you are sorely mistaken.

Your consumer, who you have to think of as a share of wallet, if the 35-year-old guy next door downloads “Pirates of the Caribbean” off a BitTorrent network and doesn’t pay for it, he’s not going to go into a store and rent the movie.

So when you think of that consumer’s share of wallet, that’s really the concept we’ve been trying to get people to think of. Wake up to the fact that that share of wallet is out there in the billions of dollars, and you as a studio, retailer or content distributor have got to start thinking about how to go back to capturing some of those dollars from the consumer who today is going elsewhere for it. And by the way, using peer-to-peer technology and using the PC to download the content — the numbers are just astonishing.

IPTV Update: That disruption in traditional distribution isn’t confined to movie studios. Look at the explosion in Internet TV and its impact on the traditional model in broadcast of local affiliates delivering network content to a geographic area. That seems to suffer as well. I was wondering what your perspective is on the network-affiliate distribution model?

Jeff Richards: It’s toast. There are a couple of things here. Obviously, that’s not the way the Internet works. It’s just as easy for me to go to a Japanese web site as it is to a traditional U.S. web site, which by the way is how the traditional broadcast world worked.

The downside is there’s no sort of barrier. I don’t have to get that ABC Television show from my local ABC affiliate. There will be 100 sites on the Internet I can get it from because ABC is going to syndicate that out. That’s sort of the perceived downside in terms of how the rules have changed.

Now the upside is I’m a broadcaster in San Diego, and I used to have a very defined market of San Diegans who watched the content I had access to. Now, I have essentially an international audience. So the extent to which I can draw people who are visiting San Diego, or those who like to watch shows about the beach, or whatever, I’m open to a much larger potential audience. I think that is a very new concept for these broadcasters and others.

We’re also talking about local newspapers, right? The local newspaper that used to have a captive audience — the downside is it doesn’t. The upside is it has potentially a much wider audience. So both of those groups are saying they don’t like the new rules because they no longer have this captive market that they own. But they potentially have a much wider audience if they can figure out how to go after that audience and monetize it.

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