Wednesday, March 12, 2008

Tech Thursdays #1: HD Format Wars Round 2 by Argus

Everyone's probably heard of Blu-ray's victory in the HD format wars last month. The funny thing about this victory is that people are now predicting Blu-ray's own demise in the next "format war". Even Steve Jobs himself has said that downloads, not physical formats like Blu-ray, are the future of HD content distribution. To quote El Jobso himself, "“Clearly, Blu-ray won, but in the new world order of instant online movie rentals, in HD, no one will care about what format is where.”

Some may take Steve's words as gospel but I don't quite buy it. Media downloads and streaming may be gaining a little momentum in first world countries but I don't see it catching on globally in the next 5 years or so.

At the end of the day, the success of any format will depend on compelling content, distribution channels and payment facilities. I don’t know much about payment facilities to confidently write about it so let’s leave it out for now. Since content is constant across formats, what will really drive the success of Blu-ray versus downloading and streaming is distribution. The lack of decent broadband infrastructure and media player endpoints (PCs, Internet-enabled media appliances etc.) in most parts of the world are the primary factors that will ensure the continued success for physical formats.

My definition of distribution channels for this market is an ecosystem of content delivery, playback devices and consumer storage. Blu-ray has these nailed down in varying degrees. Every studio already has distributors for physical media in virtually every nook and cranny of the world. Making Blu-ray available to the market is no different from distributing DVDs. It is a relatively simple matter of logistics involving physical goods. Sales of PS3's and standalone Blu-ray players are increasing steadily and are expected to reach 10M units this year. Some may say that this pales in comparison to 100M DVD players expected to be sold in 2008 but DVD has had a 10 year head start. Blu-ray player sales can only go up over time. Finally, storage is also a non-issue since a distributor or consumer just has to provide shelf space for his/her collection.

On the other hand, distribution through downloading and streaming requires major investments for both the studio and the consumer. Studios will have to build content delivery infrastructure (servers, storage, bandwidth, etc.) in multiple locations around the world. Consumers won't have it any easier either. We will need access to decent broadband infrastructure. When I say decent, I mean bandwidth that will allow you to download an HD movie in a reasonable amount of time. To put this into perspective, a Blu-ray movie ranges from 20 to more than 40GB. Assuming you have a 2Mbps connection, it will take you more than 47 hours to download Hellboy (not that you would want to download this movie) in all its HD glory. Consumers will also have to worry about the incremental cost of adding drive space as they rack up their movie collection.

These are but some of the issues in the next "format war". We haven't even considered things such as ownership/fair use concerns. Don’t get me wrong though. I do believe that the world will eventually embrace online distribution. It just won’t happen anytime soon. Till then, I suggest you break your piggy banks and invest in the best Blu-ray player in the market today – the Sony PS3.

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1 comment:

Rickious said...

Nice post, Argus. Let's see what Mark Cuban has to say about it!