With the downturn in the DVD world, how will people watch movies at home? Will they download movies to their computers, buy films on televisions using Internet-enabled set-top devices or stream them on iPads?
One local company wants to play this game as a home movie retailer of choice, with a specialty in lesser-known films that don’t get wide distribution. Film Fresh Inc. sells and rents digital downloads of more than 3,500 studio, independent and foreign movies.
When a person buys or rents a movie from Film Fresh, the movie downloads directly to their computer, where it can be viewed or burned onto a DVD to watch on a TV set. It can also be transferred to another device. And soon, the company will be renting or selling movies via Blu-ray players.
Rick Bolton, founder and chief executive of Film Fresh, believes the key to his company’s success is making Film Fresh and its movies available to consumers no matter how they want to watch films.
“We’re trying to figure out where consumers want to access films and we’re coming to them,” Bolton said. “That seems to be the next wave in the film distribution business.”
Last month, the six-year-old company raised $2 million in funding from an undisclosed private investor to expand its consumer reach. Film Fresh plans to have a download store on 6 million Internet-connected Blu-ray players and connected TVs in the next six months. Customers will be able to pay for movie downloads via their Blu-ray player, much like pay-per-view.
It costs between $8 and $20 to buy a film from Film Fresh and between $2 and $4 to rent one. The company also sells DVDs of some movies, but Bolton said that part of the company’s business is minimal.
He would not disclose revenue, but said it was up 260 percent in 2010. He attributed the company’s growth to a boom in the number of people downloading movies instead of buying DVDs.
The biggest problem for Film Fresh, though, is that it’s competing in a crowded market of big players. Netflix Inc. began streaming movies and TV shows for its subscribers in 2007, and Apple Inc. sells and rents digital downloads of films on its iTunes store. Last month, Amazon.com launched a subscription movie streaming service.
“Film Fresh really has their work cut out for them because they’re selling movies the same way a lot of others are,” said Dan Rayburn, a principal analyst who covers digital media for Frost & Sullivan in New York.
Film Fresh is among several startup companies hoping to jump into the market with the bigger players. Santa Clara-based Vudu Inc., which Wal-Mart acquired last year, began by making set-top boxes and now licenses its technology to other electronic devices. CinemaNow, a Marina del Rey movie download and rental company, was recently bought by Best Buy Inc. And Jaman.com is a San Mateo company that sells downloads of independent and world films, a niche Film Fresh aims to fill.
With so many offerings, it’s hard for consumers to know where to go, Rayburn said. The companies that will survive in the crowded market are those that can make their stores available to the most consumers.
Digital film companies also have to negotiate for the right to distribute films. Film Fresh charges customers per film instead of by subscription. Michael Arrieta, a partner in Film Fresh, said studios like that model.
“What we offer is the digital version of the DVD sale,” said Arrieta, who used to work as an executive vice president at Sony Pictures Entertainment. “As the DVD business goes flat and download-to-own grows, we offer a higher margin to the studios, which is attractive to them.”
Film founding
Bolton, who had worked for interactive advertising agency Razorfish and Walt Disney Internet Group, founded Film Fresh in 2005. He acknowledged that business was slow in the company’s first few years because most consumers were still renting and buying DVDs or Blu-ray discs instead of downloading movies. But, he said, it was important to get into the digital movie market before it became too crowded.
“We were extremely early and we knew we would be,” he said. “But at this point, we’re very well-positioned. It’s going to be very hard for new companies to enter the market at this point.”
Initially, Film Fresh sold only independent and foreign films. At the time, the studios had not yet approved DivX, the downloading format that Film Fresh uses under partnership. DivX got studio approval in 2009 and Film Fresh began selling studio films.
Nevertheless, Bolton sees the potential of remaining focused on indie and foreign films because there aren’t many places for people to watch them.
“We like Hollywood, but there are a lot of other kinds of films out there that people don’t get a chance to see,” he said. “One of the easiest ways to see them in the past was to get them on DVD, but with the film distribution universe changing so much, it’s getting harder and harder to find them.”
Bryan Gonzalez, director of social and digital media technology labs at the USC Entertainment Technology Center, said Film Fresh’s focus on alternative films that don’t get broader distribution should help them stand apart from competitors that emphasize studio movies.
“There’s a bit of a hole for independent films and where to get them,” Gonzalez said. “What should really get Film Fresh a lot of attention is to offer more obscure titles and push films that aren’t super popular.”
Film Fresh is redesigning its website and will soon let customers download movies to “the cloud” – a remote server – so they can access them from any computer or Internet-enabled device.
Bolton acknowledged that this year will be telling for the industry.
“There are going to be companies falling out rather than more companies being introduced,” he said. “It’s going to be very interesting for the next few years.”
Film Fresh Inc.
Year Founded: 2005
Headquarters: Hollywood
Core Business: Selling and renting digital downloads of movies.
Employees: 5 (up from 3 last year).
Goals: To make the company’s movies available on a wider range of devices.
The Numbers: Revenue grew by 260 percent in 2010.
