Is Blu-ray a shoe-in to win the format war?
A research firm recently predicted that Blu-ray would still emerge as the winning format even after Paramount/Dreamworks have moved to HD-DVD. Still 58% of the studio market share is devoted to Blu-Ray exclusively, with another 19% offering both formats.
Although this still paints a pretty picture for Blu-ray, it’s a VERY supply-oriented argument and neglects the demand side of the equation. Most consumers do not follow market share breakdowns of the studios, and they’re largely unaware of the capacity/technological differences favoring the Blu-Ray format. What they are aware of (if they’re in the market for a player), is that HD-DVD players are $239 while Blu-Rays start at $350. If this $100+ pricing gap doesn’t narrow, the Blu-Ray format will depend almost entirely on PS3 sales which, while significant, cannot win the format war alone.
Another significant point in the analyst report concerns the long life physical DVDs still have in the road ahead:
DVD will still be king in 2011 — and “the revenues are not going to come from digital [delivery] for four to five years”
Music to Netflix and Blockbuster’s ears.
Guru predicts end of TV as we know it
Vint Cerf, a Google VP who also helped develop the Internet in the 70’s, recently predicted:
Increasingly [TV] is going to be almost like the iPod, where you download content to look at later.
That’s fine for 2011, Vint. But in the meantime, my bets go on the established living room players (Comcast, Time Warner, DirecTV, etc.) whose agreements with established content producers threaten the introduction of an open content system. Internet-based TV is a disruptive innovation and until someone can introduce a device that en masse replaces the cable boxes and DVRs (as iPods replaced CD players), there is very little traction for Internet-based TV. And as far as the established players go, VoD still has large bandwidth and content issues to overcome before its many prophesies are fulfilled.
Technorati Tags: vod, cable, dvr
The album is dead
All you need to do is look at iTunes data to see evidence that the album has died. Forget about Top 40 artists (that’s too easy). Just look at classic albums generally thought of as “sum-is-greater-than-the-parts” classics, concept albums, etc. These are the albums you’d think would have a slightly more even distribution of sales across all tracks (i.e. evidence that a lot of people are buying the whole album).
[note, in the process of upgrading blog software, these images of track popularity on iTunes were lost]
Pink Floyd - Dark Side of the Moon
Rolling Stones - Exile on Main Street
Nirvana - Nevermind
David Bowie - Ziggy Stardust
This is terrible news for the studio labels because their old business model relied on the economics of bundling, and that model is eroding with the album. They have taken a largely passive/reactive role in the merchandising of digital music, and as a consequence, they have seen a large chunk of their business go away.
Apple, who is doing the merchandising, could care less about this phenomenon. They are in the business of selling hardware (iTunes is only a means to that end). The studios pass very little margin along to Apple, and you can be sure that Apple would be MUCH better at selling albums if they had a larger cut of the profit.
Digital music distribution is obviously created a disruptive innovation. Labels need to re-think the traditional idea of an album if they want to add value. This could include exclusive content such as bonus video, rare tracks, live music, ringtones, etc. At a minimum, for highly anticipated releases, the studios could negotiate with iTunes to sell only the full album in the first 1-2 weeks of release and then release individual tracks thereafter, thus capturing more value from the inelastic portion of the demand curve.
Bottom line: the digital distribution of music has created a huge power shift from the labels to the consumers. The labels need to re-capture the economic benefits of bundling. But ultimately, they may need to admit to themselves that they can’t solve the problem alone — they may need Apple’s incentives more aligned with their own.
Technorati Tags: itunes, music, labels, bundling, economics
VoD: Get the Short Tail Right First
The New York Times writes about the lack of content available for VoD in spite of infrastructure advances made by cable providers. As I commented in “VoD’s Uncertain Future”, the studios are dragging their heels in making their content available:
Comcast now has secured rights to offer only about 300 movie titles on-demand on any given day, excluding premium channels like HBO; about 50 of those are high-definition. It has a long way to go to match the comprehensive coverage of Netflix’s 80,000 titles or Blockbuster Online’s 75,000.
Here’s the thing. Even if there were 80,000 titles available, Comcast does not have the capability to facilitate the discovery of them through a set top box (set top box user interfaces are light years behind where the web is at). I think it will be years before Long Tail economics are a reality in the living room. Phase I of getting VoD right is getting New Releases right. Unlike traditional DVD rentals at Blockbuster/Netflix, the VoD model does not face supply constraints in the first week or two of release. New Releases have always been the loss leader in the video rental business, and that portion of the demand curve has never been fully utilized. Make New Releases available in HD, promote them as coming attractions, promote them heavily in the first 1-2 weeks, and charge a premium. Once they’ve gotten that right, they can start filling in the back catalog.
Technorati Tags: vod, blockbuster, comcast, netflix
Paramount & Dreamworks drop Blu-Ray
Just today, Paramount and Dreamworks joined Universal in their announcement to drop support for the Blu-Ray format. Brad Gray, CEO of Paramount (subsidiary of Viacom), says:
“I believe HD DVD is not only the affordable high-quality choice for consumers, but also the smart choice for Paramount.”
Whatever. The report is that Paramount/Dreamworks got paid off big time. And while they say competition is ultimately good for the consumer, this further slows the adoption of HD physical media. Consumers don’t like to be involved in format wars and will wait until there is a clear winner.
Blu-Ray seemed a sure bet before today, but now it’s anyone’s guess.
Technorati Tags: blu-ray, hd-dvd, dvd
Would Google acquire Adobe?
Adobe and Google both have a common competitor in Microsoft. As GigaOM suggests, it would make sense for Google to own Flash, the ubiquitous standard for Web-driven video, putting it in a squarely dominant position for online video distribution. But Adobe’s entire AIR suite (including Flex) would really position Google to be at the forefront for delivering rich internet applications — a swift uppercut to Microsoft. Sorry, but Google Docs is not quite enough. Yes, it would be a huge buy for Google (over $30B), but stranger things have happened and with a $150B+ valuation, Google’s currency remains strong.
Update: Adobe just announced HD-quality H.264 video for Flash. Looks like the dominance of Flash will continue for years to come.
Technorati Tags: google, adobe, microsoft
New show: Facebook Diaries
Interesting new concept. A show “unlike any we’ve seen so far” consisting of user-generated content (like YouTube), but hand stitched together by a producer to show only the best clips, with transitions and everything.
Good thing no one in this show’s target audience remembers when the show when the show originally aired in 1989. (only difference being that this new incarnation may not necessarily be funny)
Technorati Tags: facebook
Social networks as walled gardens: what’s the issue?
Lots of talk these days about the issue of “walled garden” social networks. The issue cited is that users have multiple overlapping social networks, and that this issue could be solved through a more open architecture.
I’m all for openness, and like the idea of some sort of uber-control mechanism for all my social networking activities. I thought about it a lot when I was a Product Manager for Yahoo Address Book years back, and technologies like Plaxo were starting to appear on the horizon. At that time, email was the primary hub for social networking, and everything was very “Web 1.0″ (always to be uttered in a snooty, condescending voice).
However, even as an avid user of Web 2.0 technology and social networks, I don’t use more than 2 social networks with any frequency, and I don’t think the average person is trying to juggle and unite a lot of disparate social networks. I have about 250 or so people in my online network. There is probably 15-20% overlap across my LinkedIn and Facebook contacts. The cost of having 2 social networks in my life is quite low, and I like the fact that these two networks are “walled gardens”. Not only do I not mind keeping LinkedIn and Facebook separate (my two favorites), I want them to be separate. I’m in a completely different mindset when I visit LinkedIn (career networking) than when I visit Facebook (fun / interest-oriented). The UI, configurability, and privacy options of each are well suited for their purposes.
The benefit of having walled gardens is that they compete against each other. Yes, as users, we look for a single standard and don’t like the switching costs of going from one network to the other (same thing with switching cell phone providers). But we benefit from the innovation that occurs when multiple closed, competing networks battle it out.
Technorati Tags: facebook, web 2.0, linkedin
Google News experimenting with “newsmaker” comment system
Interesting commentary on how a Google News feature would change the landscape of news. The idea is to facilitate a commenting system on news articles, but only for those directly involved with the news article.
Google being Google, it will have the brand power to attract principals who are actually part of the news to participate. Who wouldn’t want to be part of the reach that Google has? Furthermore, this offers individuals who are part of the story to actually *tell* their side of the story, in their own words, providing context, opinion, and their own personalized version of the events. In many ways, this is almost like bringing a blogging-like aspect to the news, without actually having the trouble to set up a blog, or, having a place to host it to have your opinion noticed.
It seems like an interesting experiment but a very far-fetched one. As Forecast-Blog notes, there are no shortage of naysayers to this idea:
John Murrell says this will result in a huge PR hiring boom and to expect “spin, spin, spin” as every negative fact/opinion is countered. Danny Sullivan says Google doesn’t know what it’s getting itself into. Frank Shaw, who basically controls all Microsoft PR, says this is “stupid” and predicts it will never get out of beta. That’s a pretty clear statement from the king of spin. And I agree 100%.
Still, I give credit to Google for challenging the status quo. I’ve always considered them to be a Venture Capital fund that gets capital from Search. Like few other public companies, the markets enable them to be in a position to let 10 or 15 ideas fail for every 1 that’ s successful. It’s a big portfoilo of assets being put to work on high risk investments, you’ve got to expect some outright failures.
Consumers dissatisfied with video download services
eMarketer cites some interesting research on consumer satisfaction with video download services (note: they do not single out specific services but cite iTunes as an example). Simply put, with satisfaction at 21%, users just don’t see the value proposition:
“People don’t see a reason to use video downloading services,” John Barrett, director of research at Parks, said in a statement. “Sure, it saves a trip to the video store, but it takes longer, looks worse, and you end up watching it on a 17-inch screen. No wonder consumers are dissatisfied with the experience.”
Not addressed specifically in this survey is the dearth of HD content vs. the demand (heading towards 50M installed HD-capable sets by end of 2007). This will become an increasingly important point. The cables, telcos, and satellite producers are in a race with the falling prices of HD-DVD and Bluray hardware. My current Verizon FIOS TV service has a VoD offering with zero HD content (even with a Fiber Optic connection!) and only vague promises to add HD content. And none of the advertisements I receive for Dish Network, DirecTV, or Time Warner cable present a decent HD value proposition. There’s clearly a lag here in supply and demand.
I think 2008 will bring interesting developments for physical media. Which format wins isn’t important (Bluray vs. HD-DVD vs. dual-format). What matters is how quickly high definition DVD players come down to an accessible price, and how well the cable/telco providers can build their HD VoD libraries in the meantime. Until then, I agree with eMarketer’s analysis:
Just as online music still represents a small fraction of total music sales, so too are movie downloads tiny compared to DVDs. And until the buying and viewing experience measures up, downloads will likely remain a niche market.
I may be in the minority, but I still think physical media has a long life ahead.
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