The DVD Blues

Home video sales haven't gone as expected in 2009. Is it the economy or is the cause more fundamental?

Only a few years ago, studio executives were dancing in the streets because of the torrid rate at which revenue was pouring in from DVD sales. What was once viewed as a "secondary market" was fast becoming a primary source of revenue. In response to this trend, the traditional "window" between theatrical opening and home video debut was, in some cases, cut nearly in half. Mark Cuban's empire began toying with the concept of home availability day and date with Landmark opening. How quickly things change… It all started to fall apart once the majority of the desirable back catalogue titles were exhausted and it didn't help that new movies weren't selling as well. One simple rule Hollywood has not yet learned: people might be willing to spend $10 to see a crappy movie in a multiplex but they're not going to buy a copy even if it doesn't cost that much more. Movie-going is regarded as a form of disposable entertainment. Buying a DVD is an investment, and people are not going to purchase a video unless it's something they treasure to one degree or another. The studios' shift toward filling the need for disposable entertainment has served them well at the box office but not at the DVD counter.

At one time, Blu-Ray was being touted as the great savior. As DVD sales flagged, Blu-Ray was supposed to ride in like a White Knight and pick up the slack. Many analysts were especially bullish once the high def format war ended in early 2008. However, things didn't turn out as expected. Sales of Blu-Ray players (especially PS3s) have been robust, but disc purchases have languished. Unsurprisingly, most purchasers of PS3s have bought the units for gaming; being able to play Blu-Ray discs is just a nice bonus. And the Blu-Ray rental market has been stronger than expected. It seems a great many consumers are buying sparingly but renting indiscriminately. This makes sense, but it's not in line with Hollywood's inflated expectations for the market. Certain executives really thought millions of people were going to purchase Blu-Ray copies of Paul Blart: Mall Cop.

The price delta between a standard DVD and a Blu-Ray copy of the same film is still an issue, especially in an economy where a $7 difference can represent an extra 70 miles of gasoline. People are still purchasing DVDs, even when they own a Blu-Ray player, and one of the reasons is cost. With small and moderate home theaters, the quality differential isn't huge. In an expensive home setup, the Blu-Ray shines, but people with that level of extravagance don't worry about spending a few extra bucks on a disc. My feeling remains that for Blu-Ray discs to radically increase their market share, the price point has to drift closer to that of their older, less pristine siblings.

Since July 1, what have I purchased? Here's the complete list:
Adventureland (movie, Blu-Ray)
Doctor Who: The Image of the Fendahl (TV, DVD)
Doctor Who: The Deadly Assassin (TV, DVD)
Doctor Who: The Next Doctor (TV, DVD)
Star Trek: First Contact (movie, Blu-Ray)
Star Trek: The Original Series Second Season (TV, Blu-Ray)
Doctor Who: The War Games (TV, DVD)
Doctor Who: The Black Guardian Trilogy (TV, DVD)
The Prisoner: Complete Series (TV, DVD)
Battlestar Galactica: The Plan (made-for-TV movie, DVD)
Up (movie, Blu-Ray)
Star Trek (2009) (movie, Blu-Ray)

That's it: A lot of Doctor Who and not very much else. In about five months, only four movies, one of which is a repurchase of something I owned on DVD. Repurchases, by the way, have performed poorly on Blu-Ray. Sales of catalogue titles previously released on DVD have generally not sold well. The situation is so dire that some of the studios are reportedly reconsidering how many older titles they want to release. We'll still see Star Wars and The Lord of the Rings, but what about smaller movies? Don't hold your breath.

There is another player in the home video arena and it has gradually been making its presence felt. I am, of course, referring to movie downloads. Although not yet mature, this format can no longer be ignored as an irrelevancy. Virtually everyone agrees that downloading represents the future of video content; what experts cannot agree on is when "the future" will arrive. Two years? Five years? Ten years? The answer will go a long way toward determining whether Blu-Ray becomes more than a niche or passing fad.

There are two ways that downloading can be used: to buy movies or to stream them. Thus far, the method has proven to be more popular for the latter use than the former. In general, those who want to own a movie still prefer to have something they can touch (a disc) rather than an amorphous file on a hard-drive. However, as it changed with music, it will change with movies. With streaming, it's another matter altogether. Netflix has been at the forefront of streaming, making numerous titles available for impulse, on-demand viewing. Netflix-ready devices that allow seamless playing on a television (with excellent quality) include Roku video players, X-Boxes, PS3s, and Samsung/Sony/LG Blu-Ray players. There's no extra change for the streaming feature; it comes as part of the Netflix monthly membership and greatly increases the number of titles that can be watched. I spent some time playing with streaming via a PS3 to a 52" Samsung HDTV before writing this and was suitably impressed. The picture was on par with that of an upconverted DVD, which is to say, far better than I expected. And there were no hiccups in delivery. I had full fast-forward/rewind/pause capability for every movie I watched.

Although bandwidth is not a major concern with standard definition streaming, it is an impediment when it comes to true 1080p high definition. This limitation is more economic than technological. The technology exists to widen the bandwidth pipeline enough to provide the throughput necessary for effective high definition streaming, but it has not been implemented because the business case does not yet exist. Reworking current networks so they are high-def capable requires infrastructure changes and those are expensive. Currently, internet providers (often telephone or cable companies) prefer making occasional, incremental increases. At that rate, the bandwidth and speed will eventually be available to allow high-def streaming, but that time is years away. Until them, the market for discs (both standard DVDs and Blu-Rays) will continue to dominate.

The other current problem with streaming is the limited number of titles. Netflix does what it can do get as many movies and TV shows available for this feature as possible, but the studios aren't always willing. If you want to stream a movie from Netflix, there's perhaps a 1 in 4 chance it will be available. If you want something new and hot, the chance decreases to virtually zero. That's why Netflix's streaming capability is still viewed as a "feature" available to those with a membership, not the focus of the membership. This will eventually change, but we're not there yet.

The advantages of streaming are clear. It takes no planning to watch a movie. You can choose anything at any time. It's like having a vast video library in your basement. With my Oscar winner video views, I would be able to watch them at any time rather than having to schedule them so the Netflix DVD delivery arrives during the window when I plan to write the review. Convenience is a major component in streaming's favor and, along with the obvious economic advantages (how about 50 movies for a fee of less than $20?), it's impossible to deny where things are headed. The situation for DVDs and Blu-Ray discs is terminal, but we don't know how long they have got.

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