Blu Ray is Dead

Yes, you read that right. HD DVD got it right, by bowing out now, because they realized that they are late to market. The concept of a larger optical format delivering higher quality content may have found success 5 years ago. However, in today’s environment, it is virtually a non starter. There are two basic and overpowering reasons why Blu Ray will fail:

1. Pornography. Being from the technology industry, it is amazing to analyze the role that pornography has played in the adoption of new technologies. Before the VHS tape, there was no easy way to consume pornography except a small pornography store on the seedy part of town. But the VHS tape changed all of that, and millions of pornography lovers flocked to the VHS format, purchasing VHS players over the Sony Betamax players.

Here’s the key point. Pornography is the tie breaker in the classic chicken and egg problem of content and players. Let me explain. The chicken and egg dilemma is a classic marketing puzzle. Consumers were hesitant to purchase betamax players because there were not enough betamax movies to play/rent. On the flip side, the movie studios were hesitant to produce and distribute more films in the new format since there were not a sufficient number of players to monetize. And then Boom. Pornography enters. For the pornography producers, it is a huge win since their prior distribution model was inefficient and limited the size of the market.

Hence, in the 1980’s, pornography drove the adoption of the VHS standard. Fast forward 15 years, and a new standard emerges DVD. Fresh off their VHS success, the pornography industry jumps on the new efficient standard. DVD was a quantum leap in video quality, but more importantly, dramatically reduced production and transportation costs. Before the movie industry blinked, there were a large number of DVD players ready to break the chicken and egg paradigm once again. DVD was a huge success.

Now shift to the present. The pornography industry was not moving to either the HD DVD nor Blue Ray. One simple reason the internet. The internet has already leap frogged either optical format. Despite the fact that Blue Ray is the sole HD DVD format remaining, it is hard to imagine a plethora of new pornography introduced in the new format. The reason is efficiency of distribution. It costs a lot less to distribute a movie over the internet than through an optical disk. The business risks are less, and the end user cost is also less. It’s just not going to happen.

2. Video on Demand. On top of this Blue Ray has another huge competitor – Video on Demand. It’s over game, set and match. Video on demand allows one to watch a full HD movie without any new hardware of software. It is amazing! To watch a HD movie within seconds in your own living room that almost rivals the quality one gets in the movie theater.

It is the esssence of efficiency. Straight from the movie studios to my house. They don’t have to stamp the movie millions of times and then place them in boxes, and then shipped out to individual stores. Think about all of the people that are eliminated from the distribution chain. Companies that stamp disks, companies that make boxes, shipping companies such as Fed EX, retail companies such as Walmart and Best Buy, and movie rental companies such as Blockbuster and Netflix. All of these companies will lose with the acceptance of HD Video on Demand.

And who is the winner? We are! Due to the inherent efficiencies, Video on demand will be less expensive. But that’s just the beginning. The efficiency should also allow movies to be made available sooner. And in the longer run, a much wider selection will be available. This is a key point. There is a cost for BlockBuster and BestBuy to continue to carry an old movie like CaddyShack in their stores. In addition, there is downside risk for the movie maker if these units stay on the shelves too long. All of these issues disappear with Video on Demand. Even in the medium term, Video on Demand will have the best selection as well.

I honestly see no way that Blue Ray can compete with these two large market dynamics. Rest in peace, Blue Ray.

3 thoughts on “Blu Ray is Dead

  1. You make some very valid points. I think the only thing that can save Blu-Ray is the tight DRM restrictions that we are currently seeing in digital content. It’s getting better, however there are still some providers that limit the number of watches, or limit to 24 hours.

    In addition, easy access to the media room. There is Apple TV, XBox is making waves, Tivo is even making an aggressive move to put downloaded content right to your TV easily. Home theaters are becoming more and more popular, if digital media is going to win you have to give easy access, to non restrictive, high quality (HD) content. There are a lot of problems with this we face. Mainly the ISP’s restricting downloading, and wanting to prioritize traffic. It’s not going to work if this behavior is allowed. No one wants to wait 5 hours for a download, then face DRM restrictions, when putting in a disk is less painful.

    We will get there, but it will be painful.

  2. I have Die Hard 3 on DVD. I really liked it. It was better than I thought it would be. I watched “Elizabeth” The Golden years in HD Saturday night. Good movie. However, It is not any better than the movies in SD DVD played in the correct screen format!! I have viewed a few movies of the Blue Ray DVD’s,

    They are substantially better in quality! I mean they rock!! The first thing you will notice is that everything is way sharper, and because of the sharpness the picture has great depth, almost like your are looking into the picture rather than just looking at the picture. HD on demand will succeed purely because of convenience, provided they get the pricing right. But for those that want quality, Blue ray will succeed also. I think your blog is inaccurate about the success of VHS. The success of VHS was not mainly because of pornography, In the beginning, I believe VHS was developed by Matsushita, division of Panasonic. (I could be wrong) Then Sony had there betamax technology already working in the commercial field for a few years. Movie Studios liked the idea of selling there movies after the box office run, So, they approached both Sony and Matsushita on marketing under both formats. However, (here in lies Sony’s mistake and Matsushita’s smart marketing, Sony refused to license their Betamax technology to other electronic Mfg’s. Matsushita however sold the hell out of there licensed VHS technology to anyone who wanted it, and at a very attractive price I’m sure. Because in a very short time the market was flooded with VHS Recorders and players many portables also, I know I had a camera, portable recorder/player and a separate VHS recorder in my family. It was so much better that 8mm movies. So with the proliferation and price crashing do to competitiveness, Sony lost big time.

    So to some up the VHS thing: It was the ability of Home Made Family Videos, plus being able to record your favorite movies and TV shows (Unheard of at the time), Commercial Market (Corporate Training, Duplicators and Marketing tapes), then, the movie studios stepped in big time. Everyone wanted a VHS tape recorder/player. Soon afterwards the movie rental market was born, Rental is why and when pornography on VHS was born! There was no internet back then, so distribution was difficult, once Mom & Pop video rental stores exploded in growth, and this happened fast, that’s when the Pornography market started to proliferate. So they were a small player in the big picture of things. How do I know that? I had my own company Microright back then and I marketed our software to video rental and retail stores. I worked all the VSDA (Video Software Dealers Association) shows in Vegas for 4 years. 90 percent or better of the people marketing to the existing rental and retail stores were from the Commercial and Movie Studios. With only a few booths from the pornography market. As the years went on you began to see more and more pornography at the show. So I really doubt that pornography had anything to do with driving the adoption of VHS, just the opposite.

    Here’s my take on Blue-Ray: Blue-Ray will only succeed if the pricing and technology of players will be both attractive (under $200.00) and available from a plethora of Electronic MFG’s. I just found this out, Sony does not own or did not design Blue-Ray, it was Panasonic. So Sony wanted that technology in there Playstation 3 player. They are the ones spending the money to push the blue-ray market. Not sure how the Blue-Ray market or how Sony’s cards are in the mix of things in regards to Panasonic selling the Blue-Ray technology to other mfg’s., that is critical to success in my opinion. Then you have the computer market which is a whole other market unto it’s self.

  3. Great points as usual, Rob. I think eventually the disc will go the way of the cassette tape, but I think that’s a ways off. I think the market for DVDs is going to be around for a long time.

    First, people like to have libraries of movies they can just put in whenever. That seems to be more convenient for the masses right now when it’s a physical DVD as opposed to a huge hard drive. Plus DVDs are more portable, easier to share, easier to play in your car on a long road trip.

    Second, there’s a huge segment of the market that doesn’t have access to on-demand video yet, cannot afford the level of service that brings HD on demand to their TVs instantly or they are uncomfortable with using it.

    Third, services like Netflix have shown how people like to have DVDs coming into their homes that they can view whenever in the 21 seconds it takes to put the disc in and get it going. When the delivery system becomes very reliable and ultra easy to use — think netflix where you click on a movie and it zaps down to your TV in stunning HD quality.

    There is still mongo cash to be made of the Blu-ray format even if it’s big-profit lifespan is only 5 to 10 years.

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