Manufacturing on Demand

By Jennifer Netherby

After a year of hype, the DVD manufactured-on-demand business is on the verge of a broad pilot launch at retail, which promises to make more movies available on DVD in more places than ever before.

When kiosks begin rolling out in April, kiosk manufacturers say, consumers will be able to buy everything from catalog hits to smaller new releases that will be pressed in-store while they wait. Kiosks are expected to first appear in drug stores and other specialty retailers that have so far had a limited presence in DVD. 

Trials have already begun with some retailers. Online grocer Peapod is testing manufacturing-on-demand with TitleMatch in the Chicago area. Best Buy is testing MOD Systems’ POD kiosks in some of its stores. Polar Frog has kiosks in several airports, some hardware stores and drug stores. Walgreens has said it plans be a leader in MOD kiosks when they launch but hasn’t disclosed more details.

Meanwhile, CreateSpace, which sells movies on demand through parent company Amazon.com, and Hewlett-Packard, which makes DVDs on demand to be sold through retailer partners, continue to broaden their content.

The right content

Now that DVD copy-protection technology CSS has been approved for use in MOD, the major studios are in talks with companies to offer catalog films and smaller new releases in the coming months. Sony Pictures Home Entertainment became the first major studio to sign an MOD deal in January, when it announced it would offer movies through H-P’s MOD service. The two haven’t yet disclosed which films will be made available through the service, but H-P Digital Content Services VP of business development Doug Warner says it will include former Oscar contenders, classic children’s movies, early star vehicles with reasonable box-office distribution and other films that have been sold through major retailers in the past.

Warner Home Video hasn’t yet signed a deal, but senior VP of digital distribution Jim Wuthrich says the studio expects to have front-line catalog titles available once kiosk rollouts begin in the next couple months. The studio is choosing the mix of product it will make available at the start and is working with manufacturers to evaluate their infrastructure and prepare product.

“They’re all wanting to see what is that final product going to look like,” says TitleMatch Entertainment Group VP of business development Mary Litchult. “Quality is extremely important to them as it is to us.”

Testing usage, title mix

Sonic Solutions has licensed its Qflix technology to securely deliver films on demand through kiosks and is working with content providers and MOD companies to get that digital content ready.

“Right now, we’ve got a lot of companies that we’re working with that are basically in rollout mode, where they’ve got plans for trials; in some cases, people are talking about 10 to 20 store trials. We have a couple companies doing 100 store trials,” says Jim Taylor, senior VP and general manager of Sonic’s advanced technology group.

The movies and TV shows in kiosks will vary by company and retailer.

TitleMatch expects to have 1,000 to 2,000 films in its kiosks at launch, including catalog and smaller new releases. Users will be able to search by actor, film or genre. TitleMatch will monitor sales and can update offerings overnight. It also can regionalize offerings or make different films available at different retailers, depending on the audience.

Polar Frog already has 11,000 specialty titles in its catalogs, including films from smaller suppliers such as Magnolia Entertainment and First Look Studios. Polar Frog is positioning itself as a digital rackjobber, managing product and sales for the retailer, says CEO Todd Rosenbaum.

MOD Systems’ PODs now carry music and movie previews, but the company plans to add TV shows and movies this year.

Initially, kiosk companies say they are focused on retailers that aren’t carrying large quantities of DVD. Execs say one place they’ll likely be found is near the pharmacy counter, where customers often have to wait for prescription refills. In most cases, customers will place their order and then pick it up 10 minutes later behind a sales counter.

“As these kiosks are fairly new to the marketplace, we have found that most retailers prefer to have an associate involved in the manufacturing process [burning to CDs or DVDs] in an effort to deliver the most convenient, positive customer experience,” says Anthony Bay, MOD Systems executive chair and co-founder.

Building a catalog

At the same time that retailers add in-store DVD burning, Amazon.com and H-P are adding content to their libraries for their centralized MOD offerings.

Amazon’s CreateSpace has been a pioneer in the segment since launching in 2002 as CustomFlix. Since its acquisition by Amazon in 2005, the company has signed deals with ABC News, CBS News, A&E Home Video and other suppliers and filmmakers such as Jon Favreau. On-demand manufacturing has allowed the retailer to offer more niche programming that wouldn’t justify a full DVD release. The company also is able to turn out releases quickly, as it did recently with CNN’s Planet in Peril.

“We don’t need to wait for replication runs,” says Darren Giles, CreateSpace chief technology officer and co-founder. “We can collapse the time between receiving video for a given title and starting to give it to customers. Timeliness is important, especially for topical or current events material.”

H-P is developing a business-to-business portal through which retailers could order content from H-P’s catalog of MOD product from suppliers such as Sony, First Look and others. H-P has offered movies on demand through TransWorld since last year and has a deal with an unnamed 38-store chain in the Midwest.

So far, sales have been “very limited,” Trans World director of merchandising operations and new media Ish Cuebas says.

H-P also is reaching out to wholesalers in its efforts to use MOD to make more titles already out on DVD available in the supply chain and “selling more of what they already have by doing it better,” Warner says.

For studios and other suppliers, MOD offers the chance to sell deeper catalog titles than ever before.

WHV has 6,600 movies in its library but only 1,500 have been released on DVD.

“There are 5,000 titles not on DVD today that we can exploit in this model,” Wuthrich says. “We’re really interested in it.”

Wuthrich believes in-store kiosks will end up featuring higher profile films, while more obscure long-tail films will be offered through services such as Amazon CreateSpace and H-P or in-store through bookstores and retailers that already carry a breadth of DVDs.

He says that by the end of the year, MOD kiosks could offer TV shows available the day after they air or episodes of TV shows that consumers could mix and match for one DVD.



             Titles that have made a mark in MOD

In the Crease: This independent hockey film has generated $500,000 in gross sales since its release last year through Amazon’s CreateSpace.

CNN’s Planet in Peril: This strong-selling two-disc CNN special environmental report hosted by Anderson Cooper was sold through Amazon immediately after it aired.

Charlie Rose With Ang Lee & Heath Ledger (Dec. 7, 2005): This archive title picked up in sales on Amazon following Ledger’s death.

Prenatal Vinyasa Yoga—Jennifer Wolfe (fitness and yoga): Strong seller in health/fitness, which tends to be a good category for MOD.

How Do I: Series of home improvement videos have seen steady sales in Polar Frog kiosks in hardware stores.





                          Where to get MOD

In-store kiosks:

MOD PODs in Best Buy and Starbucks offer music content right now from four labels: WMG, UMG, EMI and Sony BMG.

Polar Frog kiosk in Burbank, Calif., Detroit Metro and Raleigh-Durham, N.C., airports serve up specialized content and smaller films from Magnolia Entertainment, First Look Studios and other indies.

Online:

Amazon.com’s CreateSpace has content from major networks ABC, CNN, CBS and independent labels. Shows include Charlie Rose, Dinner for Five and CNN’s Planet in Peril.

Online grocer Peapod offers on-demand movies in the Chicago area from TitleMatch, whose library includes Bollywood films and other specialized content.

TransWorld offers Hewlett-Packard content through the retailer’s Web site. H-P’s catalog includes music documentaries on Pink Floyd and other artists from MVD, children’s shows such as Madeline from Cookie Jar Entertainment and classic TV from Synergy Entertainment (The Lone Ranger).