Amazon Reportedly Planning to Make Movie Rental Play

Amazon.com is remaining tight-lipped about published reports stating that the company plans to launch a digital video download service in August. However, as the public waits for Amazon to reveal details, analysts muse that Apple remains the company with the most potential to succeed in the space.

Reports indicate that Amazon executives are focusing on video because of Apple’s ubiquity in the digital music space. Again, however, analysts believe that because Apple was able to make such a huge splash in one digital category, it should be able to enjoy similar success in another — especially when consumers don’t necessarily associate Amazon’s name with a digital lifestyle.

“Apple has a head start on everybody,” Mike McGuire, research vice president at Gartner, told TechNewsWorld, noting that Apple currently has roughly 150 downloadable television programs available on its site. Consumers are downloading an average of roughly one million video downloads per week, according to his research. Although that pales in comparison to the roughly 2.5 million to 3 million daily music downloads, McGuire expects the video trend to catch on and spread to other areas.

Incumbent’s Advantage

Sony had a multiple-decade head start on the analog mobile music space with the Walkman in 1979, according to research by Michael Lew and Jonathan Hoopes, research analysts at ThinkEquity Partners. That did not stop Apple from propelling ahead in that market, however. “If you ask who’s going to win in this space, I’ve got to give a lot of credit to the incumbent,” Hoopes told TechNewsWorld.

If Apple’s popularity with the digital generation is not advantage enough, the company has something else that Amazon doesn’t: hardware.

PCs and WiFi-enabled laptops provide loads of video for consumers to watch, but a shift is taking place in which movie enthusiasts are moving their eyes from their big-screen television sets to 2-inch screens.

“What’s important in this transformation is how do users aggregate the content and put it on the devices of their choice,” Hoopes said. That’s where Apple has a huge competitive leg up.

Important Link

McGuire agrees. “The device, i.e., the iPod, provides that important link in the chain — the idea that ‘I can take it with me.’ That’s the part they [Amazon] don’t have in their hands,” he said. “Amazon would have to work with hardware OEMs. Apple has the advantage of being able to [connect] all parts of the chain.”

Cost will be a concern for both companies. The iTunes music store gained popularity because it sold music at 99 US cents per song, Michael Gartenberg, vice president and research director at JupiterResearch, told TechNewsWorld. Downloadable videos need to be similarly competitive with the costs of DVDs.

“The online device that matters beyond the PC is the iPod. Nothing else really has that amount of gravity,” Gartenberg said. “The challenge will be getting enough premiere content, the pricing model and the ability to come up with a platform that’s attractive.”