Watch out Netflix - Here Comes the VUDU Box

One of the most successfully secretive start-ups in recent memory finally came out over the weekend...and now the promise of true TV-based VOD (anything you want to watch, whenever you want to watch it) seems a step closer to reality. According to Brad Stone in the NYT, the VUDU TV box will allow owners to watch any of 5,000-plus movies instantly, instead of playing roulette on cable Pay-Per-View, waiting for Netflix discs to arrive, interminably downloading full-length films to their PCs, or, god forbid, driving to the video store.

The VUDU box apparently stores the beginning of all movies locally, which allows for the "instant" viewing, then downloads the rest from a peer-to-peer network of other VUDU boxes. Owners pay about $300 for the box and then $6-$10 for each movie. Several studios have already signed up to distribute movies through the box.

Thoughts:

The future--a world in which TV and movie viewers are no longer "programmed" and, instead, can always watch what they want to watch--is, slowly but surely, arriving. VUDU is the next step.

Unlike YouTube, Joost, and PC-based movie-downloading services, VUDU is attacking a TV problem through the TV, as opposed to through the PC. Downloading and watching movies on a PC will never be a big hit with consumer, and today's PC-to-TV solutions are klugy. VUDU starts with device on which most movies will and should be watched: the TV.

The early incarnation of the VUDU functionality, which will require yet another TV box and remote, seems clunky and inconvenient. Sooner or later, however, the functionality will likely be built into other boxes (the way TiVo is/was).

The early reported business model--$300 for the box and $6-$10 per movie--is not likely to be as successful as a subscription model (all-you-can-eat or a Netflix-like tiering). Consumers hate to be nicked for every action, and the per-movie charge will discourage use, no matter how convenient it is. (If Netflix users got discs for free but had to pay every time they used them, the service would be far less popular).

This said, the movie studios that have rushed to sign on with VUDU would likely be more wary of a subscription model, and have likely forced the company to go with pay-per-view. The fact that the studios have signed up so fast is, on the one hand, positive: They are finally embracing some change. On the other hand, the fact that they have signed up so quickly indicates that, from their perspective, the change may not be that radical. Unlike analog media, digital media is a high fixed-cost, low/zero variable-cost business. Monthly subscriptions would/will ultimately make far more sense for both producers and consumers.