« NY Times Critical of Blockbuster CEO Compensation | Main | Any Frequent Travelers Using Netflix? »



I think HD-DVD or blu-ray is one reason VOD will have trouble finding a foothold. You can pack 25 - 50 GB in a single disc (& much, much more in multi-layer discs) and it would take hours to download something like this over broadband. The storage capacity of discs is growing faster than bandwidth. If you want to watch something on an impulse, you can't wait for hours to download something. It's much faster to go over to the neighborhood DVD rental place. That said, the rental rates would have to be much higher & subscription rental businesses will have to adjust their rates accordingly.


Here's my current thinking on how things pan out. First I will make up this garbage, then I will research it and slap my forehead:

The beginning - end of 2005
Blu-Ray and HD-DVD simul-launch (lower production costs - sufficient storage size) end of 2005\early 2006. Movies are 30$ with low title base. Netflix charges an extra 50% or so for the HD-DVD subscription and does quite well (on a fairly limited selection) margin-wise, though it will always remain a fairly small component of total revenue.

The early middle - 2007
Total adoption rate approaches 10%. HD DVD appears to become winner and blu-ray is pushed out (though loved by PS3 owners). Prices begin slide down. DVD sellthrough hits 9.99$ average retail. HD-DVD comes rapidly towards previous DVD prices (20$). Netflix gets squeezed by increasing sellthrough rates on their core business, but is helped by the beginning of a rapid reduction in stores who refocus on wringing profits out of their dying market. Stores won't disappear for another 10 years though you'll need some help finding one.

Peak - 2009
HD-DVD hits peak of 35% penetration and plateaus. Users exit the HD-DVD market for Pure VOD/hard drive/wireless solutions at about the same rate as new adopters come into HD-DVD. All early VOD players are still net profit negative. Competition is fierce and still fairly unspecialized horizontally - that is, companies are attempting to dominate the whole VOD watching process). There is an explosion of major old school player competition in VOD-related products (bringing together PDA, phone, digital music, handheld game makers as well as most any other CE name).

Decline - 2011
HD-DVD begins march to irrelevance. More flexible digital solutions begin breaking ridiculously low price barriers and magazines start saying "This christmas, the nod is VOD" (Robots also begin to pick up significant ownership rates and Microsoft is no longer the largest software company). Studios attempt to move away from an ownership model given that the fidelity of the content is now about as high as can be distinguished thus leading to a "this is the last time we will ever get revenue from this movie" crisis. Movie subscriptions are the ruling force. For reasonable prices, people have access to pretty much any content on demand. New release pricing from studios remains fairly expensive but trails off rather quickly (and with impressive mathematical and demand curve precision) to very cheap viewings (.99$ or less). Innovation in demand creation via cinematch\IMDB type technology leads the profitability market where the natural networking effects force a small set of leaders. Hardware also produces opportunities for Asian companies, or American companies that own Asian operations. Delivery and server administration for movies is rapidly commoditized on a pay-per-bit level by various Akamai-types who specialize in secure transportation of massive amounts of data rapidly.

2013 - New forms of movie-like content begin creation, starting primarily as Pixar-type animations. Action movies allow you to move the camera to anywhere in a scene, and comedies allow you to interchange various actors or put yourself into a movie. Movies are created that incorporate realtime events. TV's in the background of movies have a current feed of CNN. The weather outside is the same as where you are watching, etc.

2020 - Viewing movies without the use of any type of screen\display or visible connection to anything catches on.

2025 - SkyNet (a Rupert Murdoch endeavour) is turned on. We're batteries. End of story.


I haven't been following the march to death of VHS. Have the prices of videos on VHS dropped dramatically? Seeing that content is the most expensive part of a video (DVD production cost is <$1), I'd be skeptical of a dramatic price reduction.


oh great, another format.


VHS prices do not appear to have plummeted, which is an excellent point you have made.

On Amazon, prices for VHS movies appear to be the same or within a couple bucks of their DVD counterparts. Spiderman 2 is an interesting exception in that VHS is actually MORE expensive. I would suspect that Amazon's margins are greater on VHS product.

This does tend to invalidate a theory that HD-DVD's introduction will substantially reduce DVD prices.

Then again, VHS is the first mainstream home video format and DVD is the first mainstream replacement. How mature the studios are in pricing these cycles is unclear. And with only 1 cycle behind us, the blind adherance to the same strategy might be unwise.

In setting prices, I would think that a high percentage of movie sales are impulse new release purchases. One would want to monetize these within a short window of release, rather then rely on recurring purchases. Therefore a similar price should reign across all formats to avoid a negative substition effect.

Movies that appear to stand the test of time, perhaps as judged by demand at a certain time after release, would be more apt for repurchase or "media upgrading". These are the ones that are apt to get heavy promotions and re-releases well into the future on multiple formats. The logic of pricing to encourage repeated buys may come into play a little more there.

I see Netflix with an opportunity to target the sellthrough market for more obscure titles. They are somewhat uniquely situated here in that they are creating the demand for these films on a scale that might give them negotiating power with studios.

If you look at an older film like Tampopo, which goes for 14$ on Amazon you might think that a low-price point is not logical again for this category of film. But, I think in the pre-Netflix world, the only potential purchasers of the film are the long-time fans of it. These people will pay higher prices. With the combinative value of cinematch and super-cheap renting, Netflix gives many people the opportunity to see this movie and subsequently create demand for buying it. I would suspect this fact to lower the perfect price point below 14$ (something magical about 9.99$ I think).

Anyway, I'm gonna chew on this stuff and look for some info. I'm still sort of making it up.

i want a live visual performance of this camera in action

coldaz ice

show me live camera footage.

coldaz ice

show me live camera footage.


Almost everyone who has worked with computers for any length of time at all has run into at least one situation in which a problem left a PC unbootable. What if you could return the machine to a bootable state just by inserting a USB flash drive though? Believe it or not, it is actually possible to install a bootable copy of Windows XP onto a flash drive and then boot a PC off of the flash drive. From there, you can use applications that you have installed on the flash drive (antivirus, antispyware, disk repair, etc.) to fix the PC's problem. In this article, I will show you how.

The comments to this entry are closed.


Third-Party Netflix Sites