Google ups ante in online video gold rush
JAN. 6 7:01 P.M. ET Google Inc. is upping the ante in the online video gold rush, allowing content owners to set their own prices in a bid to create a more flexible alternative to Apple Computer Inc.'s pioneering iTunes store.
Context & Ripple Effects
Apple's iTunes had reached 1 million video-file downloads in 20 days by November 2005, establishing a visible early market for paid downloads. Google's planned video-download service and companion software positioned it as a direct alternative rather than a mere search distributor.
Google's decision to let rights holders set prices makes the competitive distinction concrete: licensors, not the store operator alone, can tailor the price of their video catalogues.
First-order effects
- Content owners gain direct control over the prices charged for video sold through Google, allowing different catalogues to be priced independently.
- Apple's iTunes faces a rival store model built around greater pricing discretion for the studios and other rights holders supplying video.
Second-order effects
- Rights holders can use price flexibility to test whether Google's store delivers better economics than iTunes, increasing their leverage in negotiations with both distributors.
- Google must persuade catalog owners that its download service and software offer enough reach and control to justify listing alongside or instead of Apple's store.
Third-order effects
- Online video distribution is beginning to compete on the terms offered to rights holders, not only on consumer download volume; platforms that control customer access will be pressed to share more commercial control with suppliers.
The trend: Paid online video is developing into a contest between tightly managed storefronts and distribution services that give content owners more control over pricing.