In the final part of our discussion with Lionsgate's digital media president Curt Marvis, former CEO of CinemaNow, we discuss what went wrong (and right) at his former company, his company's approach to video games, and what technology he thinks could be "the new DVD for the film business."
Ben Fritz: How did you feel about CinemaNow’s sale a few months ago?
Curt Marvis: So to speak… (Laughter) [CinemaNow, in which Lionsgate had a 21% stake, was acquired by Sonic Solutions in November for $3 million. Over its lifetime it raised more than $40 million in venture capital.]
BF: Yea, so to speak. Obviously that’s not what you were thinking in 1999, I’m sure. Was there a pointing the past couple of years where the studios were taking a different tack and iTunes was succeeding and CinemaNow wasn’t where it needed to be? Was CinemaNow only useful for its technology in the end?
CM: The biggest mistake that we ever made in the operation of CinemaNow is we started way, way, way too early. No one could have predicted that. Keeping a company that wasn’t profitable in business for 10 years was kind of miraculous, really.
I think what really happened is that that entity still needed a lot of investment and to create a real business out of it is still going to take time. And we were in an environment where that was when the market crashed we were in the middle of raising a round and the existing investors said we just cant put more into this. We’ve tried and we’ve tried and we’ve tried and it’s always been “next year… next year… next year… next year…”
CinemaNow I think is following the strategy it has been following for a number of years which is to get away from being a destination site and focus its efforts on being a backend supplier of other peoples’ businesses on a branded or white label business. It’s gaining a lot of traction in that regard. There are some deals that haven’t been announced. The Blockbuster thing was announced [In January, Blockbuster signed up CinemaNow to power its Movielink digital download service. Movielink, which was bought by Blockbuster in late 2007, was CinemaNow’s primary competitor for many years] and we’ll see how that pans out.
CinemaNow’s going to get a shot to succeed as a business. Whether it does or not, I’m not sure.
BF: Is there some kind of personal vindication to see Blockbuster buy Movielink and then they need to use CinemaNow to run the thing?
CM: I can’t say I was disapp—It was ironic to have that happen.
I’m proud of what CinemaNow achieved as a groundbreaking company. I’m obviously horribly disappointed in what it achieved as an investment and an ultimate financial success.
BF: There was Movielink, which a bunch of studios invested in [it was backed by Sony Pictures, Universal, Paramount, Warner Bros. and MGM]. Going forward do you think studios like yours will have any ownership in digital distribution or do you think it’ll be Apple and Microsoft and you guys are purely producers?
CM: We have Lionsgate Shop, which is a store where you can buy any movie that Lionsgate has on a digital download basis or packaged media. The digital part of that is powered by CinemaNow.
I think you’ll find the studios probably all have their own boutique. But I don’t think – It’s the old story everybody’s aware of that nobody knows who makes a movie, whether it’s Warner Bros. or Fox or Paramount or Lionsgate or anybody else, except with rare exceptions.
Yeah, that will exist but I don’t think that will be the premium outlet. I think everybody will still go to an aggregation model where there will be, whether it’s Amazon or iTunes or CinemaNow through its channels, people who distribute all sorts of movies.
BF: On those digital outlets, are rentals much more popular than download-to-own? Is it similar to the dynamics on the DVD market?
CM: On a unit basis, there definitely are more rentals. It depends a little bit on what movies we have in the sell-through and rental windows. But in terms of pure units there’s definitely more rentals than there are sell-through, for obvious reasons.
With that said, there’s more money being generated by electronic sell-through because of the wholesale price point, you’d have to rent five, six movies to reach the same base revenue.
We believe in both. Some people will rent a movie, some want to buy one. There’s the digital future where things sit in cloud. There’s a lot of people who argue ownership won’t matter that much. I don’t necessarily agree with that. I think the virtual cloud’s no different than a hard drive. You want to know that track is there whenever you want it.
BF: I know CinemaNow tried this and it never really took off: Do you think downloading and burning DVDs is ever going to become significant? Or do you think at this point we’ve moved onto home networking and that’s not a business that’s going to make it?
CM: I think we’ll see a time where it’s common that when you buy the DVD you can also get a digital copy. I think we’ll see it go the other direction where you get the rights to burn it if you buy a digital copy.
And again I think there will be some percentage of the audience that finds that appealing. But I don’t think burning is as much of a driver for the industry as it would have been – If everyone had accepted burning five years ago and all the stuff that’s available now had come down for people to burn on a PC, I think that business could have jumpstarted. But nobody ever provided the content for it so it didn’t happen.
BF: If Lionsgate does anything in the video game space, are you involved in that?
CM: We have a group that meets once a month about video games. At the moment all we’ve done is licensed to other parties that are involved in the video game business. We continue to keep an eye on it.
Another area we’re taking in more specifically for my group is casual gaming and mobile games. There are some huge numbers that are being done by certain successful products in that area. And even not so huge but profitable businesses, particularly in the casual area.
So we’re looking at a lot of projects where we may partner with casual games creators to start to get into that business aggressively…
There’s a shorter schedule [than AAA disc titles] and it’s less demanding financially to take that risk. You invest in a real game these days and it’s like making a movie.
BF: What about your deal with YouTube [Lionsgate signed a deal with YouTube last summer to put clips from several hundred of its movies and TV shows on the site for users to share, embed and mash in return for a cut of advertising revenue.] Is it going well in terms of audience participation and in terms of revenue?
CM: We’re still in the embryonic stages, I guess I would say, of really making that happen. Our next fiscal year starts April 1. In fiscal ’10 I’m looking at having both YouTube and Hulu start to really contribute to the top line and bottom line.
I think ad supported Internet is an area where we haven’t generated a lot of revenue to date that’s going to be very important going forward. Both clip-based and long form product.
BF: Looking forward, are there devices or services just getting out there that you’re really excited about, either professionally or personally?
CM: I think the biggest area I’ve spent more time on than I probably expected when I walked through the door is mobile.
A little bit of it may be show fever because I just came back from the Mobile World Conference in Barcelona. But you look at that industry: 4 billion handsets, a global business; the computing power of the devices continues to grow; the screen power continues to grow.
Not surprisingly to me the one company on the planet that seems to really get it is Apple. So they’re jumping out in the lead. But at some point the iPhone represents your phone, your PC and your viewing device all in one little handheld thing. It’s only going to get more and more powerful. You’re going to set it next to your TV and put it on input 4 and it’ll just pull [video] off the hard drive of your phone.
I believe, if I had to take out my crystal ball, I would say that 10 years from now mobile devices will represent an enormous category of media consumption devices that will have a huge impact on the industry. It wouldn’t shock me – I don’t know if this will be true or not – if we look back 10 years from now and say, “Wow, the mobile industry is really the industry that resurrected – It was the new DVD for the film business. Because that’s how everybody got their content and it became a real cash cow of the industry."