Vudu, Vuze, Veoh, VideoEgg, Lulu, Hulu…Don’t worry, I’m not crazy: those are the names of a few Internet startups that all have to do with video content delivered through Internet.
The first one of them, Vudu, aims to defeat all its competitors with an enticing offer for customers, made up of more than 5,000 movies from major Hollywood studios, including Lionsgate, Universal, Paramount, Sony Pictures Entertainment, 20th Century Fox, New Line Cinema, Walt Disney Studios and Warner Bros.
"We're bringing a broad array of mainstream content straight into the living room," said Patrick Cosson, Vudu's vice president of marketing and sales.
However, there are technical obstacles to overcome and there’s also the heavy competition.
Although the Silicon Valley, CA-based startup has a pretty impressive library available- including blockbuster titles like 300, Dreamgirls or Pan’s Labyrinth- it’s still difficult to make it available to the masses, since one of the main conditions for instant viewing is to have an Internet connection with a download speed of at least 2Mbps (usually advertised by ISPs as 3.0 Mbps). According to Pew Internet & American Life Project, 47% of all adult Americans have a broadband connection at home as of early 2007- a five percentage point increase from early 2006- but home broadband adoption in rural areas, now 31%, continues to lag high speed adoption in urban centers and suburbs.
Vudu’s business model is not based on subscription, so customers don’t have to pay any activation fee. Rentals range from 99¢ to $3.99, purchased movies from $4.99 to $19.99. Vudu will deliver movies through its proprietary set-top box, which connects to the TV and Internet and can hold up at least a part of that impressive library of 5,000 movies.
Vudu’s management team comes from leading Silicon Valley companies, including TiVo, WebTV and Openwave. The company has received venture funding from Greylock Partners and Benchmark Capital.
Vudu will need a unique edge in a market segment increasingly crowded with big name competitors. Microsoft, Amazon and Apple all launched new ways to deliver downloads to the TV. In November last year, Microsoft began selling TV and movie downloads to Xbox 360 users through the Xbox Live Marketplace. Amazon partnered with TiVo in February to allow TiVo users with broadband to download movies to their digital video recorder. And in March, Apple introduced the Apple TV, a set-top box that allows people to stream movies, TV shows and music from iTunes to the TV. Actually, if the Vudu system sounds like a TiVo for movies, it's pretty close…
Of course, let’s not forget that there’s also Netflix Inc., which has 5,000 titles available on its online download service, along with 80,000 titles through its mail-order rental business. Blockbuster Inc. lists 75,000 titles available through its mail rental service. Blockbuster this year paid $6.6 million for Movielink, a download service with 3,300 movies and TV shows.
Moreover, P2P Web-apps like Joost and Babelgum are also a strong deterrent for Vudu’s take-off, since they are free and don’t have the same broadband requirements (although it’s true that the image quality is considerably inferior). Vudu’s proprietary encoding, decoding, and up-converting technologies enable HDTVs to display the content stored on the set-top box in high definition (the movies are transported in the MPEG-4 format through the peer-to-peer technology and they later upscaled to higher-quality format inside the set-top box).
Analysts are not very optimistic about Vudu’s future.
"Vudu is being introduced in an area that's had some tough history," said Kurt Scherf, analyst at Parks Associates. "It's been clear that the movie-on-demand model via the Internet has so far underperformed Hollywood studios expectations."