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Summary:

The new, new thing to do these days is to launch a new streaming video service to compete with Netflix and Amazon. Intel, Walmart, AT&T, Sony, Verizon… the list of me-too offerings is getting longer. The problem is that they aren’t really better than the incumbents.

The Consumer Electronics Show (CES) is a great opportunity to sit back and watch the technology industry and its mass delusion. Every year it is something new that is trendy — the same thing that eventually ends in tears and lost opportunities. This year’s “what the hell are they smoking” award should go to any and every company that is trying to chase Netflix and Amazon Prime in the streaming video business. Here are some of the recent annocements.

Given the torrent of announcements (and I am pretty sure I missed a few), what I am not missing is this feeling of deja vu, all over again. (Hat tip, Yogi Berra.) A few years ago when digital download music was all the rage, thanks to Apple and its iPod/iTunes, we saw a similar scenario play out. Industry players including Cingular, 7-Eleven, Best Buy, Wal-Mart, Verizon and AT&T lost their collective minds and in the end were spanked by the marketplace in their derrières with a wet bamboo cane.

In 2007-2008, it became fashionable for companies to offer video downloads. Wal-Mart was going to crush Apple and in the end, it hightailed it out of the market. AOL and Google, too, had to bow out of video download movies. The reason those efforts failed and the reason why none of the new efforts are primed for a pole position is because they don’t solve the problem of people.

They are part of some bureucratic decision and a corporate checklist that allows management to say: hey, we are trying something new and innovative — even though, in reality, it is a terrible execution on ideas that are not original. The members of the new streaming video herd are going to be hard to distinguish from each other. AT&T, for example, is starting with about 3,000 titles from a handful of studios. When I compare them to Netflix or Amazon Prime Video, I don’t see any advantage to switch to them.

Netflix is a great casual viewing package for me. Sure, it might not have the latest movies, but neither does TBS or TNT channels. Amazon Prime is actually a great deal — it is free because I pay for Amazon Prime delivery service. Between those two and occasional downloads via the Apple store, I am pretty well taken care off from an online video watching perspective.

If I am Intel, I should really focus on trying to actually get mobile chips out that can compete with Qualcomm and Mediatek, rather than screw around with video services. How this video service helps the company’s core business is hard to understand.

AT&T and Verizon — well, they shouldn’t try to do consumer services because frankly they exist to punish their customers. Sony? Given how Samsung is eating its breakfast, lunch and dinner, shouldn’t they focus on making great televisions instead of making online video services? I often wonder why the companies that are under most duress often try and do things that distract from the problems that are eating away at their core.

  1. I like to think Sony, AT&T & Verizon are having a Quantum Leap moment, where they somehow leap into a new body and a new experience. And then boom, it’s off to another body & another adventure.

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    1. Lol @ Rick

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  2. Yep. Not to mention Netflix is NOT a profitable company … why would someone want to get into that space… the Studios track profits and raise their licenses to eat any distribution profits.

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    1. Cameron

      In response to your Netflix profitability comment, according to their Q3 statement

      “We remained profitable this quarter with $8 million of net income, and $0.13 EPS. Compared to Q2, net income was essentially flat, as increased domestic streaming contribution profit (up $8 million) more than offset a $3 million decline of DVD contribution profit, a $3 million increase in international losses, and a $2 million increase in global operating expenses.”

      They had a profitable Q1, losses in Q2 and are expected to be profitable in Q4 2012.

      Thanks for your comment.

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  3. Everybody is selling/streaming media, everybody is doing smart TVs, everybody is doing online storage (and calling it cloud) , everybody is designing websites for tablets, ruining the desktop experience (gigaom included). It’s sad and amusing and never stops.

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  4. Doesn’t image fidelity count at all any more? All of these streaming video services look like dog shit compared to top quality HD cable-tv (eg FiOS), which in turn pales against good quality Bluray or 4k (which in turn pales against real 35 or 70mm film that wasn’t post-processed digitally). Are we abandoning the lean-back entertainmment environment? Why are we bothering to develop OLED and 4k resolution TV sets, if our only content choices will be crappy 5mbps video streams??

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  5. AT&T will get new releases before netflix because of their U-Verse business

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  6. Very well written. One of the big reasons why huge companies try to do these things is simple. When their core business is booming and successful, they have a lot of people supporting it as the revenue growth from that product line can accommodate these things. Example: Intel had a boat load of people working on making movies available exclusively on Intel’s laptops. The laptop business line probably was supporting that. Now that the laptop business is dying, that product line pulls out. Intel suddenly has a 1000 odd people and so a new product emerges!

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    1. Thanks @why

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  7. Doesn’t WalMart have a solid position with Vudu? They’re a distributor for Ultraviolet digital copies for at least some titles (I think my copy of The Dark Knight Rises was a Vudu digital copy), so they’ll get registrations just from that. Flixster is also in the Ultraviolet distribution business (they’re owned by Warner Bros, so that makes the whole Dark Knight thing odd, but I just double-checked that Vudu was the insert in my Blu-Ray case).

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    1. Vudu kinda sucks, personally I would rip my movies to mkv and use mediacore to stream them. Setup the mediacore server to access outside of my personal network and bam, cloud movies.

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      1. Vudu.. They were never a useful service for me.

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  8. I don’t think you really understand what business Sony is in. The TV-selling part of Sony hasn’t made money in more than a decade. The content side, on the other hand, does.

    I’m not suggesting a half-baked Netflix clone solves their problems, but things like Music Unlimited, video sales, etc. are part of a strategy a la Xbox Live that might be the only thing that rescues the consumer side of Sony from oblivion.

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    1. Mark

      I think I understand Sony and for now most of their problems are stemming from the fact that as a brand that made consumer electronics, they don’t make those devices well and are getting pummeled. They need focus before trying to do services – they have sucked forever whenever they have tried to do software or services.

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  9. It’s like vod bandwagon. Netflix is a great service. All these other companies should just quit while they are not ahead. I am a netflix subscriber, the only problem I have with it is Reed Hastings. I don’t think I have to explain why I don’t like him.

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    1. @brian

      Why don’t you like reed Hastings? U don’t really have to work with him or talk to him? Just wondering

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  10. Although I share some of your scepticism it would be a shame if firms just sat back and let Netflix & Amazon clean up. Intel is clearly stretching too far but AT&T and Verizon are both already firmly in the video aggregation business with their fixed offers and surely it makes sense for them to follow the TV everywhere trend

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    1. 186k

      I would rather see Microsoft try this via its XBox service than Verizon or AT&T. When was the last time you associated those phone company monopolies with customer happiness. They should just sell us the network access, gouge us like they do, thanks to their friends at FCC and the political firmament.

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      1. Agreed, would be nice to see Xbox compete here, but I think they are smart as they know they can’t make money, so they aren’t going to try.

        Last year, they came out and said that their plans for a Xbox streaming subscription service would not work, from a business standpoint, as content licensing costs were too high and the rate that consumers would pay each month for such a service was too low.

        Microsoft said they could not make money with such a service, and that’s from a company who has more devices in the home in the U.S, connected to the TV, than anyone else.

        Hulu can’t get rid of ads in the Hulu Plus service as they CEO said they would have to charge consumers $20 a month, which they know they won’t pay, yet they can’t make money on $8 a month fees, without ads.

        Verizon, Redbox, Intel and others are clearly underestimating the costs involved with content licensing, on a mass scale, if you want to give consumers a real choice.

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        1. Very well said Dan. Thanks for your comment.

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