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Wednesday, 12 March 2008 13:25

Survey confirms broadband users aren't stupid

AVRRA, the Australian Video Rental Retailers Association, says online movie downloads are a ‘tough sell’, referencing a Diffusion Group survey of 1,975 US broadband users claiming that only 9.5% say they regularly download movies. However, there is evidence to suggest that the results are skewed.
It appears the Diffusion Group only asked about legal movie download services, surely making the survey and its subsequent US $2500 report potentially meaningless if you really want to know just how popular all types of movie downloads are.

”Lies, damned lies, statistics and surveys” so my amended version of the famous saying goes: if you ask the right questions, fail to ask the right questions, or ask questions that people won’t respond honestly to, you can have your survey generate whatever results you want, with the latest from the Diffusion Group on broadband and movie downloads seemingly a prime candidate.

AVRRA, the Australian Video Rental Retailers Association, is the industry body for Australia’s video and DVD rental industry and represents more than 60% of all video libraries in Australia, so when they issue a press release on movie downloads, it’s noteworthy because of who they are, but also because downloads are an obvious threat to the video rental business.

AVRRA’s press release quotes a US research firm, The Diffusion Group, whose new survey on US broadband users, according to AVRRA, “reveals that the market for downloading feature-length movies is nearly non-existent. Fewer than 9.5% of broadband users surveyed regularly downloaded movies.”

AVRRA say the survey is quoted in a 5th of March 2008 article in the US ‘Home Media Magazine’ website, and after looking through their recent stories, we found a very similar quote in an article from the 10th of March, 2008 talking about Lionsgate joining Apple’s iTunes movie download service.

Doing a bit of research, we found the press release from The Diffusion Group (TDG), and the précis of their actual US $2500 report which the quote comes from.

In the TDG press release, Michael Greeson, president of TDG and author of the new report  said that "Online movie services have to date failed to gain a critical mass of users. Even Steve Jobs recently noted that Apple, among others, has failed to figure out what combination of features will prove sufficiently compelling to consumers."

TDG’s press release says that: “Despite the presence of strong brand names such as Apple and the innovative services of start-ups such as Vudu, only 10% of adult broadband users have used an online download service either to rent or purchase movies (most of whom do so infrequently). The challenge, notes Greeson, is not only to increase familiarity with OMD (online movie download) services, but to make sure that when consumers do visit an OMD site that they find high-quality content and a set of compelling features free from the complexities and hassles of traditional web media sites.”

So, why have AVRRA jumped on this quote as evidence that consumers find movie downloads ‘a tough sell’ – and why does a lack of visibility into pirate p2p downloads of movies potentially make the report’s findings a potentially unreliable barometer by which to make any claims about consumer happiness with downloading? Please read onto page 2.

AVRRA Executive Director Ross Walden said that: “The reality is that Internet technology is just not offering quality of movie content, let alone delivering movies to the TV – that’s why consumers remain indifferent and services are not making economic sense”.

Of course, Walden fails to acknowledge that tech-savvy consumers have no difficulty in connecting their computers to their TVs, through wired or wireless means, especially to the now common ‘flat screen TVs’ which nowadays come with a VGA port as standard, or even simply burning illegally downloaded videos to DVD to watch ‘the old fashioned way’.

That said, iTWire in no way condones illegal piracy of any form of digital content, be it movies, music or anything else, and we readily acknowledge that non tech-savvy users could certainly find a number of difficulties, and would undoubtedly prefer a simple, legal way to get downloaded content if it was available, and inexpensive, using a device such as an Apple TV or Xbox 360 that offers far more entertainment features than your standard set-top box. 
Walden then says that “AVRRA’s own research into movie download services in Australia has identified several barriers to consumer take-up, including high costs, slow broadband speeds, poor movie quality and lack of access to the latest entertainment.”
In Australia, this is certainly true. A number of ISPs have badly priced services, overuse charges for going over download limits, uploads counted towards download limits, with limitations to legal download services such as that on Telstra’s BigPond which make it difficult to watch legally downloaded movies on a TV set, as well as limitations that mean rental stores get the latest movies long before legal download services or for broadcast on pay television, let alone free-to-air TV.

Broadband users aren't stupid - if legal movie downloads are difficult because of high prices, expensive download plans and no easy way to get that movie onto a TV set, they will wait until downloading movies becomes simple, although illegal downloaders are doing it anyway.

In addition, services such as Apple TV’s and the Xbox 360’s movie and TV show download services aren’t available in Australia, two platforms which would go an enormous way to making movie downloads to TVs a much simpler process, while also providing the needed competition to bring down the cost of online movie downloads.

AVRRA notes that the cost of downloading a movie in Australia “is as high as $13.95 per movie when you combine the cost of bandwidth to download the data with the movie download cost”, and note that on 512kbps to 1.5Mbps Internet connection speeds, a movie download would take one to four hours to download.

Of course many consumers are flocking to much faster ADSL2+ services, many of which at the higher end offer huge download limits each month, although that higher per month cost factors into the true cost of both legal and illegal movie downloads.

AVRRA also states that “the quality of downloaded data – which is compressed – is far inferior to a DVD in both audio and video resolution.”

AVRRA continues that: “Consumers also have to wait in line for at least six weeks and up to three months after new movies are available in video stores to access them via legitimate download services”, an observation that is certainly true, but presumably only because movie distributors have done this deal to protect the revenues of video rental stores.

It also must be noted that Apple TV and Xbox 360 offer ‘HD’ quality downloads that, although compressed, still look better than standard definition DVD quality.

So, what’s an Australian example from AVRRA  of the failed legal download market, what about those unasked and unanswered survey questions, and what’s another story in Home Media Magazine showing that consumers want more and faster bandwidth? Please read onto page 3.

AVRRA’s press release notes that: “Earlier this year Australia’s biggest move download player, ReelTime Media, collapsed – adding fuel to growing evidence that current movie download services are unviable.”

To back up this local example, AVRRA then notes US legal movie store download failures, saying that: “ReelTime’s failure followed in the wake of closures in the US, including Wal-Mart’s movie download service, Movie Gallery’s Moviebeam service, and a scaling down of Google Inc and AOL’s video download services.”
Those movie download store closures are accurate, but with Lionsgate joining Apple’s iTunes movie download store, those other legal download services are being overtaken by Apple’s superior legal service, for US users at least. Sony are also moving towards legal movie downloads through their PS3 games console.

AVRRA’s Walden concluded the press release saying that: “The struggle for movie download services to remain viable given the shortcomings of current delivery models and the lack of value for customers is unsurprising”.

What Walden says is true for the Australian market, but not necessarily true of the US market, and in both cases, it’s just a matter of time before the “shortcomings  of current delivery models and the lack of value for consumers” are shortcomings no longer, with movie download services set to offer a galaxy of choice far beyond what any rental store could provide, at cheaper prices, with delivery in mere minutes over high-speed broadband networks.

The Diffusion Group Survey also makes no mention in their report précis of asking survey respondents about illegal movie downloads, but even if they have, why would consumers engaged in illegal downloading practices voluntarily admit to breaking the law?

We also found another article at Home Media Magazine called “Study: Broadband Consumers Recognize Size Matters”.

Home Media Magazine’s (HMM) article notes that as broadband becomes ever more commonplace, rather than simply an ‘early adopter’ trend, “consumers have become cognizant of the limitations bandwidth imposed by some ISPs has on their multimedia”.

HMM notes that: “The greater the bandwidth, the faster users can access and download videos, movies and photos. Broadband access is considered key to the proliferation of Internet-enabled televisions, set-top boxes and digital distribution.”

So, how fast are US broadband download speeds on average, and why is illegal movie piracy bad, something many young people around the world don’t seem to care about anyway? Please read onto page 4.

HMM quotes an In-Stat survey of “700 broadband homes in the United States [which] found that 83% of respondents were either very satisfied or somewhat satisfied with their high-speed Internet access.”

Interestingly, the average monthly price for broadband in the US is US $38 per month, the average download speed is 3.8Mbps, and the average upload speed is just under 1Mbps at 980Kbps.

In-Stat’s analyst Mike Paxton is quoted as saying that: “As a general rule of thumb in the broadband world, higher bandwidth is better. Consumers readily recognize this fact, and many of them are actively looking for a broadband service that will increase the amount of bandwidth they can use.”

Given young people’s propensity to be fearless about downloading music and movies, despite many public actions from US and Australian copyright authorities, and despite the likelihood the parents of many of those young people probably don't know their kids are making pirate downloads, one can only wonder if illegal movie and music downloading at ever faster speeds is but one of the reasons why US consumers surveyed want ever faster broadband.

But we can’t fault AVRRA for releasing a survey that points to downloads being a hassle consumers would rather not bother with: they have a business that generally relies on walk through traffic to rent DVDs of movies and TV shows, both in DVD format, and increasingly in Blu-ray format as well.

The age of ubiquitous high-speed legal downloads of movies is still a few years away yet, but if rampant illegal downloading of movie downloads wasn’t a problem today, AVRRA’s statement would not be necessary.

Neither would all the ads in cinemas from copyright authorities pleading with consumers to stop downloading, an act which undeniably damages the incomes not only of AVRRA’s members, but actors, studios and all the many people who work behind the scenes producing the TV shows and movies we love to watch.

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Alex Zaharov-Reutt

Alex Zaharov-Reutt is iTWire's Technology Editor is one of Australia’s best-known technology journalists and consumer tech experts, Alex has appeared in his capacity as technology expert on all of Australia’s free-to-air and pay TV networks on all the major news and current affairs programs, on commercial and public radio, and technology, lifestyle and reality TV shows. Visit Alex at Twitter here.

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