Inside HP's Long Tail strategy for DVDs

(Note: I chatted with the HP team behind this initiative this morning at the ATG Insight Live 2007 conference in Charleston, SC, where I was speaking. What they told me seems to agree with the account below. The main thing I'd add is that one of the key parts of making this work is finding really cheap and scaleable ways to add cover art, descriptions and other metadata to archive content. For the cover art, for instance, they've developed a way to upscale frames from the video itself so they look okay on the DVD box. Clever):

From John Fortt at B2.0's excellent Utility Belt blog:

Tech titan Hewlett-Packard (HPQ) has an ambitious plan to get a piece of the $35 billion U.S. consumers spend each year on TV and movies. The company wants to help studios automate the process of digitally archiving video and then help retailers sell more of that digital video onto iPods, phones, PCs, TVs, and any other platform that comes along.

...

At the center of that strategy is a secret facility outside Sacramento where HP has placed its first big bet on the future of video distribution. (I call it secret because I was the first reporter HP let in, and some of the company’s own employees haven’t been allowed to see it yet. HP has requested that I not spill the beans on exactly what city the facility is in.) At the facility, set to go live this summer, where HP can crank out DVDs on demand. Order Karate Kid 2 on a website, and rather than send the order to a warehouse where the movie’s being stored on a shelf, the system will place an order in HP’s on-demand facility where a professional-quality DVD will be burned especially for you.

The most obvious benefit under this system would go to retailers, who would no longer need massive warehouses to store movies. But longer-term, the system could allow retailers to sell the “long tail” of video content that’s too obscure to give shelf space in your local Wal-Mart. (I’d love to mix and match old episodes of Quantum Leap, for instance.)

Wal-Mart (WMT), the world’s top seller of DVDs, happens to be the first customer for HP’s on-demand service. Customers ordering through the DVD site HP built for Wal-Mart will be able to access the on-demand facility in Sacramento. (The Wal-Mart site itself needs work, and both companies assured me they’re continuing to upgrade it.)

“We're quite optimistic about it – the amount of untapped content that could be made available is pretty substantial,” said Kevin Swint, Wal-Mart’s divisional merchandise manager for digital media. “Long tail businesses are not easy to develop, but there's plenty of opportunity there.”

Read more here.

Comments

[Peter Kohan]

Question: What do the film studios have to gain here? Normally on physical goods they control the manufacturing of DVDs and reap the profit accordingly. While consumers wold benefit from increased selection - online, not in bricks and mortar stores - where do the studios make their normal profit stream here? What bargain have copyright owners struck here to make this a viable option for their businesses?

[Yuval Tobias]

Looks to be in line with the new printers they are coming out with - faster, more efficient, but targeted for more centralized locations rather than homes:

http://www.informationweek.com/news/showArticle.jhtml?articleID=199000343

[Stefan Engeseth]

Interesting concept. When it comes to changes behavior it is more complex than computers. I hope that the entertainment business has learned it this time around.

[qkslvrwolf]

@Peter:

I think that that is the primary problem with the recording industry today. Rather than try and make profits by sellings as many copies as possible, they are interested in profit AND CONTROL. Profit-wise, the potential for increased profits increases with the potential for increased sales. The problem is, now you have to contend with every joe on the street with an artistic bent and a good story to tell, and they don't want that. It would mean while there are more total profits to be made, the wealth would like be distributed over more people, and that seems a Bad Thing to the film studios.

[Elad Kehat]

There's already a way to crank out DVDs on demand - it's called bittorrent. I download whatever "untapped" content I want, say Karate Kid 2, and burn it to a DVD :)
And how exactly does printing DVDs on demand help selling digital video onto iPods and phones? Or is HP planning an iPaq with a DVD drive too?

[Joel Kleinberg]

The true benefit to the Studios is the ability to sell years and years of catalog titles. There are countless titles that have not been produced in DVD form because of the impracticality of manufacturing and then storing them is a warehouse.

If you are a Noir Film fan, or a B-Movie grindhouse fan, you now may have access to tons of films previously unreleased in DVD format. The studio can monitize the titles they own with low overhead.

[Jon Fortt]

Thanks for the compliment, Chris. For those wondering what HP's DVD strategy has to do with iPods and whatnot, check out the story I did for this month's B2. It should be clearer and deeper than my blog.

[wow powerleveling]

But HP plans to expand the initiative beyond Wal-Mart. Using a model akin to its Snapfish digital photography service, which handles online services for Wal-Mart, Walgreen, Costco and other huge retailers, HP wants to be the force behind the scenes that’s powering online DVD stores for all sorts of big companies. Vyomesh Joshi, the HP executive vice presidentmaple story powerleveling who leads the imaging and printing division, told me that Snapfish handles 50 percent of all online photo printing in the U.S. through the combination of its branded service and the white-label services it runs for Wal-Mart and others.

[kabin]

thanks...
Kabin
Konteyner