MOD Systems Sees Video Delivery Via SD Cards

mod_systemsMOD Systems is betting that you’ll still shop for digital movies at physical retail locations in the future. But instead of browsing the aisles and rows of DVDs, you’ll walk up to an automated kiosk, download video onto an SD card, and plug that card into a device connected to your TV (or into the TV itself). MOD announced today that it is demoing this SD solution with Toshiba at CES.

I rolled my eyes when I first read about MOD. Between DVDs from Redbox, downloading movies from iTunes and streaming through Netflix — does the world need yet another way to get video content? Plus, SD cards are tiny and bound to be something frequently lost. So I talked with MOD Systems co-founder and vice chairman Anthony Bay by phone yesterday to find out more.

“Direct delivery into the home will continue to grow,” said Bay, “But will direct delivery into the home be the only way people get content? People still buy stuff on impulse.”

There are three main reasons MOD believes in its SD card storage solution: Storage, security and openness. Bay believes that optical storage via DVD and Blu-ray has hit its peak, but the silicon-based storage on an SD card can keep growing. Bay pointed out that you can buy a 16GB SD card that will hold 3 HD movies using the same compression as iTunes for $35.

Because security is a big issue with content owners like Hollywood studios, MOD thinks SD cards are ideal. The format has the storage key built in, providing native security. But because SD cards are open, they are not locked into a proprietary format and can be plugged into any device with an SD card reader, allowing for greater transport of content.

Last October, MOD received $35 million in funding from Toshiba and NCR, one of the largest self-service kiosk vendors in the world (NCR is providing DVD vending kiosks for Blockbuster). MOD will leverage NCR’s extensive retail network to deploy its service widely. Bay said MOD-powered kiosks would feature the third-party branding, and that it takes 2-3 minutes to transfer a full-length standard definition movie to the card.

MOD also announced today that it has signed agreements with Warner Bros. and Paramount Digital Entertainment to distribute video content — including new releases. Unfortunately, the agreement only covers standard definition content, not HD. The lack of HD content is a pretty glaring omission for a company looking to get into the movie distribution business. Bay recognizes this limitation, but says the lack of HD was a function of the long download times for content and the capacity of the cards. “2009 is standard def,” said Bay, “2010 is high def.”

MOD Systems’ value proposition make more sense after speaking with them — but I still think they have a lot of obstacles to overcome. There will be a place for shopping at a physical store for purely digital video, but that video could just as easily be beamed directly to your home and be waiting for you when you got back. Plus, people understand DVDs as a way to watch movies. There’s a learning curve to get them to understand that the SD card is capable of the same thing. And let’s not forget that, in our cluttered world, DVDs have a nice size to them — they aren’t easily lost. MOD will have to figure out a way to get a high-capacity SD card onto someone’s keychain or something similar so they can carry it with them everywhere and make that impulse purchase.