Under the hood of Google Movies - implications for GOOG and other stocks
Within hours of Google's announcement, its new movie search service received rave reviews from a lot of people. But investors and those wishing to understand the implications for Google and the other Internet companies need to dig deeper:
Who's providing the underlying content for Google Movies?
Google Movies provides streamlined access to the following information: (1) movie showtimes by zip code; (2) the ability to purchase movie tickets by clicking on a showtime; (3) access to movie reviews; (4) a link to a site that provides movie information (plot, actors, director etc).
1. Movie showtimes listings: There are two providers of movie showtime data: Tribune Media Services ("TMS" - owned by the Tribune Group) and Hollywood Media's CinemaSource division. Industry sources have told me that CinemaSource's movie listings are more accurate and comprehensive, and it's therefore likely that Google licensed movie showtime data from CinemaSource rather than TMS. That would make sense, since according to Hollywood Media's 10K:
CinemaSource currently provides movie showtime listings to more than 200 newspapers, wireless companies, Internet sites, and other media outlets, including newspapers such as The New York Times and The Washington Post, wireless companies including Sprint PCS, AT&T Wireless, Cingular Wireless, Verizon and Vindigo, Internet companies including AOL's Moviefone and Digital City, MSN, Yahoo! and Lycos, and other media outlets.Google is certainly paying Hollywood Media for the listings. How much? Not clear.
Net beneficiary: Hollywood Media.
Net losers: portals that currently offer less user-friendly access to showtimes, such as Yahoo! and MSN.
2. Purchase of movie tickets: About half of the showtimes on Google Movies are highlighted in blue; clicking on the link will take you to a page that allows you to purchase the movie ticket. The provider is MovieTickets.com, a private company majority owned by the participating movie theater chains and minority owned (26%) by Hollywood Media.
The online movie ticketing market is interesting. Although you can purchase movie tickets online via sites like Yahoo! Movies, they in fact forward you to Fandango or MovieTickets.com. Fandango and MovieTickets.com both have exclusive online ticketing relationships with the U.S. movie theater chains, with the market split roughly 55% to 45% in MovieTickets.com's favor. Before the Google deal, Movietickets.com had exclusive distribution deals with AOL and Microsoft (MSN and Windows Media Player), and Fandango with Yahoo!.
The market split between Fandango and MovieTickets.com leads to a poor situation for end-users: no single web site allows you to buy tickets from any movie theater in the U.S. Google was therefore forced to choose between the two. That's why only about half the showtimes that appear on Google include links to purchase a ticket.
Why did Google chose MovieTickets.com over Fandango? Probably because MovieTickets.com is the stronger of the two. That's reflected in traffic numbers. According to ComScore - MediaMetrix, MovieTickets.com's January traffic exceeded Fandango's by 4,590,000 to 3,459,000. And that's only for the U.S. MovieTickets.com dominates online ticketing in Canada and (unlike Fandango) also operates in the U.K. That will probably be important to Google as it rolls out its movie search internationally.
Net (publicly-traded) beneficiary: Hollywood Media.
Net losers: Privately-held Fandango loses the contract in the short run, but in the long run Google's provision of access to online movie purchase will benefit both Movietickets.com and Fandango.
3. Movie reviews: Google provides access to multiple sources of movie reviews, and seems not to prioritise any one specific source.
Net beneficiaries: Small providers of movie reviews that now get equal exposure from Google as larger providers. But no clear publicly traded winner.
Net losers: Established providers of movie reviews including well-known newspapers like The New York Times and LA Times, and movie-specific
web sites like Hollywood.com (owned by Hollywood Media) and IMDb.com (owned by Amazon) lose market share. (Geek note: this is the competitive impact of The Long Tail: tiny web sites take market share from established media companies.) But Google's impact on the overall consumption of online movie reviews is positive, so increased market size may offset market share losses of the major players.
4. Other movie info: Next to each movie name is a link to IMDb.com, the Internet Movie Database, providing information about each movie - actors, plot, trailer etc. IMDb is owned by Amazon.com, and gets over 20 million unique users per month. Links from Google Movies will further increase its traffic. It's highly unlikely that Google had to pay to link IMDb, so Amazon is a big winner here.
Two quick comments about IMDb:
- Until recently, Amazon used IMDb primarily as a source for selling DVDs. But over the last few weeks, IMDb introduced online movie ticket purchase - from Fandango.
- If Amazon decides to move into the online movie rental market, as Netflix has asserted it will, IMDb is an attractive platform for doing so. Customer acquisition costs are high in the online movie rental market, so increased traffic to IMDb.com is an important competitive advantage should Amazon decide to enter the online movie rental business.
Net beneficiaries: Amazon.com (IMDb.com).
Net losers: Netflix (ticker: NFLX) if Amazon enters the online movie rental business.
Finally, Google Movies illustrates two trends that will increasingly impact 'Net stocks:
- Search engines are becoming "answer engines". Google
Movies received rave reviews because it dishes up exactly the
information people want, without requiring further clicks. In other
words: In response to a search, Google Movies provides information instead of links to information. - Search engines are colliding with portals. As the search
engines become answer engines, they head into direct collision with the
portals. Google Movies, although it is technically a search service,
directly competes with Yahoo movies and MSN Movies.
What will they mean in practice?
- More competition. Competition between Yahoo!, Microsoft
and Google will heat up. That's probably bad news for Yahoo!, since its
stickiest services such as maps, email and entertainment info now face
tougher competition than at any time during the last few years. - Rising operating expenses. Search companies will attempt to
differentiate themselves by providing better answers (read: better
access to proprietary information) than their competitors. As they
spend money on generating or licensing proprietary data, their margins
may fall. To illustrate: it costs Amazon money to send round
GPS-equipped trucks to take photos for A9 local search, or for Google
to scan millions of books. - Rising value of unique content. Companies in possession of unique and desirable content or transactional assets will become far more valuable.
Footnote: News moves fast through the Blogosphere: It all started with an announcement on Google's own blog. Here's a list of (and links to) some of the sites that subsequently picked up on the news of Google Movies, and/or reviewed it: Slashdot, Inside Google, Google Blogscoped, Search Engine Lowdown, Search Engine Watch, Movie Theater Research Central, Information Week Blog, rare bird, Cites & Bytes, Info from Infopeople, Chris Holland, Mike's Technology Report, NetNews Archives, Octopus Hat, Ben Hammersley, Subzero Blue, Whatever Amuses Me, and many, many more...
Full disclosure: at the time of writing I'm long HOLL.
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