Trust: The Real Loser In the HD-DVD/BluRay Battle

For those of us who make a habit of predicting the future, the recent demise of HD-DVD was an inevitability. Press reports indicated that a mere 600,000 standalone units had been sold to consumers. My notes from last year’s SXSW festival indicate that half a million total HD-DVD/Blu-Ray players were in the market — obviously, sales didn’t skyrocket. After all the fanfare and hype, the consumer shrugged.

Of course, the consumer — or that portion of consumers who invested in HD-DVD technology — lost. This does not bode well for the motion picture industry, and you’ve got to wonder who will be fired for failing to gauge the mood of the DVD-purchasing public. Just as many people predicted the disaster of the Iraq war, many of us saw how this made-up DVD format war would end.

When the home video market was in its infancy, the idea of renting or buying movies for home viewing was novel. Formats jostled for supremacy: Laserdisc, Betamax, and VHS. Eventually, VHS reigned supreme, and those who’d bet their libraries on other formats had to suck it up and repurchase the media or forego elements of their library.

DVD arrived with promises of near-viewing magic; better, it heralded a cheaper-to-produce, cheaper-to-distribute media. DVD marked a dramatic shift in consumer behavior. The video rental market waned while the sell-through market (where consumers were the final purchasers) waxed. Believing in the superiority of the format (not to mention the more compact packaging), consumers turned their libraries over again. VHS had a serious flaw: the product degraded over time. DVDs didn’t (seem to) have that problem.

With VHS, there seemed to be a slower pace of product releases. With DVD, more product hit the market at a greater pace. This breathed new life into titles that weren’t selling in the various televisions markets. Old series that didn’t work in syndication could be made available on DVD. Movies that suffered from the necessary cutting for commercials and time were reborn as full-length features.

Disney, which had previously made a fortune on rereleasing library classics (they were famous for “retiring” releases, making certain product unavailable for the foreseeable future), found that this more permanent format cut into library sales. Disney also discovered that they could create a robust direct-to-video market to ease some of the pain that came from losing repeated sales of ”Robin Hood” (my family went through a good three copies of the VHS version during the youngest sister’s obsessive RH period). Disney’s lesson soon resonated throughout the industry: library product was starting to lose value as the market grew saturated.

BluRay and HD-DVD were the next generation of DVDs for consumers. More capacity, better pictures, all those lovely extras…how could the customer say no? You could blame the Internet and the promise of downloadable media for the lack of interest in the new formats, but I’d suggest it’s something much more logical: consumers had no appetite for investing in a format that might disappear in cloud of smoke tomorrow.

Making this even more teeth-gnashing for the motion picture studios was the fact that consumers had no need to reinvest in home entertainment product. DVDs do last longer than VHS tapes. The players are relatively cheap, and, I’m going to be opinionated here, the extras that pack the disks are interesting, but not necessarily that interesting. They don’t really add all that much to the overall purchasing decision.

Sure, there are some exceptions. There are always some exceptions.

HD-DVD was an extremely expensive experiment that showed what happens when there’s no consumer demand, no consumer need, and no consumer trust. That the studios and manufacturers couldn’t work out their differences demonstrates how far removed both parties are from reality. If you doubt me, just focus your attention on the ways online video is being treated. If there are ways to make the experience less consumer-friendly, I’m interested to learn how.

BluRay will continue to trudge along. As consumers upgrade to new home entertainment systems, a Blu-Ray player will be considered as part of the package (Jim laid out his thoughts on this shift so I don’t have to). Blu-Ray will also continue to find happiness as part of the PlayStation package and the go-to choice for personal computers. Microsoft has pulled the plug on its own HD-DVD business and is now looking at possible next steps (you can imagine the frustration at being forced to buy into technology created by the parent of its chief gaming rival). Embracing of downloadable video will happen, though the potential exists for the studios to make a royal hash of that experience.

One thing remains certain: consumer trust of video technology won’t be easily regained.

One Response to “Trust: The Real Loser In the HD-DVD/BluRay Battle”

  1. Jim says:

    One more historical note on all of this. The obvious well-known physical limitations of analog tape was one of two reasons that VHS never took off in the home sales department — the other was price.

    Besides a few very-well known exceptions, the vast vast vast majority of VHS tapes in the 1980s & 1990s had MSRPs of $70, $80, $90. This was mostly because the primary market for these tapes was the video stores themselves, and the studios wanted to soak those stores (whom they believed were stealing their business as opposed to enhancing it) for as much as they could.

    Of course, video stores could get some discount by buying in bulk, but we did a lot of math trying to figure out how many copies of a particular title to purchase — the goal was to maximize the rental availability of a particular title during the two-or-three month window it was a considered a “new release” — at what was still a crazy high price.

    And even when the studios realized that they could make a buttload of money selling major titles to the audience, the video stores still got screwed.

    The reason I have a Costco card today is that when “E.T.” first came out, we discovered it would be cheaper to buy it from Costco than from our distributor. So our boss sprang for about a half-dozen of us to get Costco cards, and we walked in the day it came out, bought 10 at time (Costco wouldn’t allow any more), waited a few minutes and bought 10 more.