Chapter 2 – But I Like Me!

I'm not sure when I first noticed it. Perhaps it was my own tired (art school educated mind you) eyes having to see those information stuffed yet design starved Hotmovies ads all over creation. Or maybe it was how they were telling producers and studios that consumers don't care who you are or about pesky things like brands or studios, that consumers just want to see porn in heaping portions. Perhaps it was how quickly the VOD providers started chomping at each others heels to provide the lowest cost per minute to the consumer thus driving down the value per minute or maybe it was how they started to bicker with each other while trying to secure exclusive content that made their site that much more unique and exclusive than the next. Or maybe it was just how quickly everything lost its own inherent value in the market place and had become exactly what Hotmovies had hoped, quite simply, content to be devoured hand over fist.

Don't get me wrong, I do not mean to imply that Hotmovies purposely caused this temporary lack of reasoning within the industry. It's not as if without collusion this could have happened. VOD has, in fact, proven itself a valuable revenue stream for producers, studios and retailers alike. No one can argue that. However, we have to ask ourselves at the end of the day, is gross revenue the end all be all or is there something more that is lost in the delivery of this new method of consumption?

VOD is the true predecessor of convergence. Someday, VOD will be our Australopithicus. VOD must evolve as any stepping stone in technology because I say to you now, VOD is a broken system. But Brian, how can you say that? Easy, let me explain...

In the good ol' days, studios produced content. They invested what they saw fit in their production and then decided on those results the wholesale price for those goods to be sold to retailers. The retailers then decided, based upon those prices to mark the goods up accordingly to make a profit. This system worked because as with any physical goods, the market demand dictates the perceived value of the goods being sold. If the goods aren't worth the $29.99 that it's being sold for, then the retailer won't pay the $13 wholesale and the studio will quickly realize they are over charging. They will correct their error and equilibrium is quickly established. In this VOD world, studios no longer dictate the terms of sale for their content. Instead, the providers have chosen (and from what I can tell, completely randomly) the cost per minute that content shall be sold. The consumer then chooses what they wish to spend based on blocks of minute packages. Sure, most consumers don't seem to be big on the whole math thing and they end up purchasing a pay-per-minute block that ends up costing them way more than the advertised 8 cents per minute. However, for the porn consumer who has passed elementary mathematics, they need simply purchase a big block of time and all of the sudden that consumer is only paying a few cents for each minute they view of your content. Tom and his wife Betsy in their double wide parked out on I-10, east of El Paso could shoot themselves exploring each others sun-dried asses, upload it to any number of VOD providers and in an instant, see their homemade, crack-whore shaking camera work sold for the same per cent cost as Wicked's new release. Want to bet that Wicked paid slightly more for their production than Tom and Betsy?  Look, Brad Armstrong may be Canadian but the Canadian dollar ain't weak anymore.

In addition, studios have decided that releasing content day and date with DVD release makes sense. Why shouldn't they when they've been told that VOD customers are not the same as DVD customers. They aren't "collectors"; they don't care about the packaging. I'd like to suggest to you that that theory has been presented by companies that do not mix the two. Ask Adult DVD Empire, TLA Raw, or any of the other retailers who provide complete sales options for customers out there and you may hear a different story. I can tell you that in my own daily sales reports, customers continuously purchase minute packages, DVDs and downloads in the same order. Thus, customers are paying wildly varying amounts for your content. That may be fine for Tom and Betsy who have only Oreo's and Yoo-hoo to worry about, but it probably doesn't make a whole lot of sense to a company with 20 employees and a future to think about, a company with an identity. Do you remember in 2001: A Space Odyssey when HAL became aware of his own mortality? Mmmhmm....

Next week: Chapter 3 - It Hurts Dave...

Listening - Vampire Weekend - S/T LP

Reading - The Rules of Attraction by Bret Easton Ellis

Watching - The Wire Season 5