lordjedi said:
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I've been through these consumer electronics debates with people who think they understand the industry and consumer spending patterns. They think they get it, but instead of actually understanding the industry, they're usually just projecting their own wishes and desires onto the general public.
I debated audio enthusiasts who thought DVD-A and SACD were the future of home audio. I understood that only enthusiasts who cared about the jump in quality and were willing to spend the money on an appropriate audio setup would buy into either format, relegating it to niche status. So, they were wrong.
I debated digital download proponents who said iTunes would take over music sales quickly. I understood that people still like owning physical media, lots of people are very attached to their CD libraries, and it would take years for music downloads to become the standard. As successful as iTunes is, it's still next to nothing compared to CD sales. So, they were wrong also.
I debated HD-DVD supporters who were convinced it was the format that would come out on top. I understood that Sony's main failure in the VHS/Betamax wars was their unwillingness to license the technology to other manufacturers. Toshiba, while willing to let others build HD-DVD decks, failed to line up the necessary manufacturing and brand support for HD-DVD to succeed. It was Toshiba and NEC (which has zero brand equity as a consumer electronics manufacturer in North America) versus practically every major consumer electronics giant in the world in support of Blu-ray. Many of those same companies have a lot of pull with the studios. No need to go into the results. So, once again, they were wrong.
Now I spend a lot of time debating people who say Blu-ray will fail because HD on demand and HD downloads are going to kill it. These people will be proven wrong also because they don't get the market and don't understand the glacial speeds at which it moves.
The first step to making accurate predictions is to understand that your wants and needs are yours and yours alone. For example, those "expensive" Blu-ray players that you refuse to pay for? They're selling just fine. That's because there are millions of people who aren't as sensitive to price and Profile as you are.
I've never purchased a song via iTunes, and until they offer uncompressed audio, I never will. Yet they still sell millions of songs because there are plenty of people who enjoy the convenience of the iTunes service. Not enough to kill the CD market, but enough for Apple and music companies to make a lot of money. And I get that, even though it's not my thing.
HD on demand breaks down into freebies, pay channels, rentals, and purchases. I'll address each.
I'm not sure how current freebies work, but I'm guessing that cable/satellite/etc. providers work out deals with studios to have a certain selection of their catalogs available at any given time. The list is regularly rotated, but the limited selection usually consists of older movies or more recent films that are well out of their prime rental and sales windows. Unless providers work out some big deals and spend some big money, which they won't do because they're incredibly cheap, the freebie selection will remain utter shite, making it worth nothing in terms of swaying consumers.
Next up are pay channels. Because I subscribe to Showtime, Encore, and Starz, I get a small selection of their current movies available via on demand. The choices are more current and better than the freebies, but hell, I'm paying for them, so they should be. Good for the occasional night where I have nothing else to watch, but nothing to write home about either. I also get HBO, but for some reason they offer no content via on demand with Comcast.
Then there are rentals. Comcast charges $5.99 to rent an HD movie via on demand. These are obviously newer films that have just hit the home video market; pretty much the same selection I'd see at Blockbuster. The rental price is similar, but the 24-hour window is ridiculous. If I rent a Blu-ray from Hollywood Video, I get to keep it for a week. If I rent an HD movie from Comcast and I start playing it, I have 24 hours to finish it before it goes away. This policy is horseshit and I'm quite sure that it, along with the price, is preventing a lot of people from making use of the service.
Finally, there are HD on demand purchases from services like Vudu. The samples I've seen online demonstrate what seems to be fairly high quality 1080p video and they claim to offer lossless audio for some movies. I'll ignore the fact that you have to buy the Vudu box because traditional providers like Comcast and Verizon will probably offer the same service at some point in the future.
The biggest problem I see with HD on demand sales is the price of the media itself. iTunes' success is due in part to the excellent pricing structure and flexibility. 99¢ for a song is just the right price to get consumers to buy, the media is portable, and they just announced that all songs available via iTunes will be DRM-free by March. On the contrary, it costs $19.99 to buy the SD version of Iron Man or Dark Knight on Vudu. That's SD! I can buy the DVD version for less or the Blu-ray version for slightly more. Movie studios are spoiled and don't like to be told how to set their prices, so they'll remain high until there's enough pressure from providers to lower them and that won't arrive any time soon.
My prediction: HD on demand, whether we're referring to rentals or sales, will stagnate until prices fall more in line with iTunes. $9.99 at the most to buy an HD movie and $1.99 to rent with a more flexible delivery window. Apple had to battle the studios quite a bit to maintain their pricing model, and they could only do that because iTunes was so popular. Cable/satellite/etc. providers will bend to the studios and let them charge whatever they want, which is why they will fail. And regardless of all this, Blu-ray will succeed as a viable, profitable, popular media format.