Why Subscription May Not Be The Panacea In Entertainment

Subscription digital access is increasingly the hot business model for multi-platform entertainment distributors.

But, to Lovefilm, which pioneered UK DVD-by-post subscription, the same model could be increasingly second-best in its coming online era.

Case in point…

On Tuesday, Lovefilm announced Disney (NYSE: DIS) as its latest studio supplier. But the kinds of movies Lovefilm can offer from this deal, as with its other studio deals, is bifurcated…

SVOD (Subscription Video on Demand): Customers of the core Lovefilm subscription service get older movie titles (in Disney’s case, Dead Poet’s Society, Cocktail, Armageddon) because BSkyB (NYSE: BSY), through its pay-TV Sky Movies service, has a lock on the first movie runs via subscription.

TVOD (Transactional Video on Demand): It’s not that Lovefilm can’t offer newer titles. But it has to deliver them outside its core subscription service – as one-off, PPV titles, which cost extra, even to Lovefilm subscribers. For some time, this is how Lovefilm subscribers will see movies like Tron: Legacy, which also forms part of the 50-title Disney deal.

The holy grail would be offering movies on the web and IPTV services, as Lovefilm already does, but at the same time as Sky Movies. Yet this is an impossible scenario, at least until the UK’s Competition Commission completes an inquiry in to Sky’s first-run lock-up in August 2010.

Subscription may be a lucrative model in itself but this is an example of how subscription works against choice and against a tier-one line-up.

For Lovefilm’s PPV-only competitors, the landscape is simpler, and just as replete with opportunity. IP-enabled TVs will ship with online payment mechanisms so simple that viewers won’t be discouraged from buying PPV movies at £3.50 a time, as they already do on Virgin Media’s PPV FilmFlex service over cable.

The likes of Blinkbox, which markets “no subscription” as an asset, can make a more straightforward consumer proposition – more new premium titles and fewer tired old classics.