Why I was wrong about HD DVD and Blu-Ray’s Decline…

The other day I conceded to a friend of mine that he was right when he said that both HD DVD and Blu-Ray were going to be like the eight track: largely irrelevant in the long term.  At the time I was under the impression that HD movies were going to be available for rent.  Also this week, a number of publications began speculating that Apple TV would win the “format war” over Blu-Ray and HD DVD.  While I initially thought that… I now am going back to my original position.

Where I think Apple TV can do some damage is to Netflix and Blockbuster.  While slightly on the pricey side, especially for HD movie rentals ($4.99) the Apple TV does offer a viable and competitive program.  Plus, it does a whole lot more than your average DVD player, including brings your entire digital music collection into your living room as well as your photos.  That feature set is pretty compelling.  Plus the convenience of renting from your home will be nice.

The problem is that while people like to rent movies, they also like to purchase them.  Just look at the number of DVDs being sold – last year 23.4 billion dollars were spent on DVDs here in the United States (although that was down slightly from the year before).  While the slight decrease can he attributed to any number of factors (emergence of HD DVD and Blu-Ray, more digital access to movies) it’s still a heck of a lot of money and shows that there’s still a huge market for video.  The problem is that you cannot purchase HD editions of movies online (the only exception to this is HD movies On-Demand that you can purchase through your cable or satellite provider).  The problem there is that there is no good way to archive things you purchase from your cable or satellite provider.  The best you can do is to connect them to a DVD recorder and record them in good old fashioned SD with stereo audio.  Hardly the high definition with surround sound that people are looking for.     The other option is to let it chew up space on your DVR…

Finally, it appears clear that movie studios are not stupid, and are going to keep riding the horse that has been selling, and that’s physical media.  One can only imagine that if Apple had it’s way, we’d be able to purchase HD movies from the Apple Store.  But Apple has had enough trouble getting movie studio to sell the DVD quality versions (which only a few studios do anyway) let alone trying to get the HD versions.  As long as the movie studios remain dedicated to physical media (as they presently are), I predict that for the next five to ten years at least, physical media will remain the main way people watch their movies.  Or, until the movie studios decide to change their business models for distribution.