HD-DVD, Blu-Ray, and The Problem With Wal-Mart

So, yeah, wow, it’s 2007 and we’re having format wars. Hmm, that’s not entirely true. We, the people, are not a war at all. In face, we, the people, don’t care. The people who care, who desperately care, are the businesses who have staked the ground on either the HD-DVD or Blu-Ray side of the fence. To them, the battles and strategy matter very much. It’s almost like they’re holding a modern war in another century.

I’m doing the masochist thing at this year’s SXSWi (as augmented by the film festival) and attending all of the “The Future of…” panels. Sure, it’s hard to take “The Future of Online Video” seriously, when nascent barely begins to describe the phenomenon, but when the panel is about The Future of DVDs, well, now you have my attention. The future of DVD, as we all know, is keeping way too many media executives awake at night to count.

Not that you’d know it from this panel.

Best case scenario has DVD sales on the flat to declining side. Reasons range from price to consumer overload — people were (and, in some cases, are) purchasing DVDs they’ll never watch. Despite the constant influx of nostalgia product, such as Mork & Mindy, the fact of the matter is that the constant stream of new product makes it impossible to revisit the old. The purchases of movies is limited, much as the attendance to theaters is limited. You have your blockbusters, you have your art house films, you have your “man, I meant to catch that” titles. There is a sense of media overload on the part of the consumer, and DVDs simply aren’t the events they once were.

Because back catalog is the spine of the motion picture business, the only way to extract new dollars from the consumer is to convince them to “flip” their collection, i.e., purchase all new copies of what they already own. The problem is that consumers already feel used by the flipping doctrine and aren’t as willing to play along as they once were. Put another way, Kirk will happily purchase each and every version of Stranger Than Paradise, to a point. Even he realizes that owning formats not supported by current technology makes no sense.

The SXSWi panel had, ostensibly, two members who represented the upcoming format wars — Kevin Collins, Director HD-DVD Evangelism, Microsoft, Scott Shooman, Executive Director of Acquisitions and Production, Sony Pictures Entertainment. It’s not fair to pitch this as a battle because Shooman isn’t on the hardware or even format side. Collins, however, clearly serves the HD-DVD format.

The major studios are picking sides in this battle, as I’ve noted before. A quick poll of the room — arguably early adopters — indicated a large investment in high-definition televisions. Another poll showed nearly no investment in high-definition (Blu-Ray or HD-DVD) players; Collins buttressed this by noting that unit sales are in the 500,000 range. The public isn’t rushing out to acquire this hardware. I say it’s because the public doesn’t see a compelling need to upgrade existing DVD players.

The promise of HD-DVD and Blu-Ray is great. The reality is less compelling. Across the board, the panelists, including Jonathan Marlow, Vice-President of Content Development and Acquisitions, GreenCine, Joseph Amodei, President, Hart Sharp Video, and Brent Hoff, Editor, Wholphin, agreed that many decisions about what is acquired and what is released to DVD is dependent on Wal-Mart. With nearly 50% of the DVD market, the retailer holds great influence on the motion picture industry.

What this means for movie lovers (and TV lovers) is that studios must lean toward product that will move large numbers of units quickly. Even as studios experiment with concepts such as scan-based trading to sweeten the inventory pot, retailers like Wal-Mart don’t want stale product on their shelves. This is bad for small, quirky films.

It also means that the HD-DVD and Blu-Ray releases are going to skew toward these so-called money-making titles. While the need for variety to tempt consumers is greater than ever before, the need to stick with the proven is also great. Given the choice, most studios will likely err on the side of Wal-Mart.

Another note about the high-definition formats: they are less forgiving of production flaws such as out-of-focus shots. Cinephiles will find this format to be particularly teeth-gnashing as the loss of magic will tear some out of the proper movie-watching trance.

The only way consumer desire for deep catalog will be met — and, yes, finally getting to my point — is through digital downloads. The desire on the part of the consumers is already there. Though there are arguments about whether there is sufficient bandwidth available to handle demand (Collins noted that only 1% of U.S. households have sufficient capacity), downloading motion picture product is already part of the consumer experience.

In fact, I’d argue that one of the reasons so few consumers are jumping on to the HD-DVD or Blu-Ray bandwagon is that they, the ones who actually have to make the purchasing commitment, are waiting to see. Those who are aware of the 2009 deadline to switch to high-definition broadcast signals are pricing new televisions. Those who aren’t will be in for some problems. In the meantime, technology moves faster than ever before. The Apple television might be just the ticket or may simply be a harbinger of televisions to come.

In the meantime, the studios are trying to hold a war that nobody wants. Consumers simply aren’t going to make technology decisions based on what one particular studio does over the other. It’s ridiculous that the studios are engaging in this battle at a time when shelf space is limited and consumer desire is almost non-existent. Why would I — or anyone with disposable income — want to make an investment in something that might be replaced in less than ten years?

Especially since what I have works just fine already.

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  1. […] HD-DVD, Blu-Ray, and The Problem With Wal-Mart – Consumers aren’t lining up for HD-DVD or Blu-Ray. We already have shelves and shelves full of DVDs. We don’t need anymore. So the question is, why aren’t the studios and technology companies focusing elsewhere, like inexpensive burnable digital downloads? […]