A blog by George Engel

Posts tagged “increasing returns

VOD vs DVD: Battle Royal Cage Match or Bridge on a Saturday Night?

When I sat down to watch Paycheck, as well as other films, I watched it on my Google TV receiver. I downloaded it through Amazon.com, and enjoyed the high quality video that I was able to access. This is an amazing feat compared to the quality of streaming video just a few years ago. My question is, “How does it stand up against the DVD, or more specifically, the Blu-ray DVD?”

I would say that the first round goes to the DVD in this battle because of lack of quality. Apple TV, at this time, only streams 720p. However, new innovations with Google TV and other devices like the PS3 allow streaming in 1080i. Because of this, Video on demand (VOD) services like Netflix or Amazon, are now capable of matching the video and sound quality of a Blu-ray disc and player. (See http://www.wired.com/gadgetlab/2010/10/netflix-ps3-streaming-app-adds-hd-surround-sound-ditches-disc/ ) This seems to mean that the battle is even between the two services. So if the image quality is the same, which one would have the greater advantage? This comes down to time of delivery. To watch a DVD, if you do not already own it, you must get in your vehicle of choice, for me that would be a Dodge Ram 1500, and travel to your local DVD retailer or Redbox distributor and either purchase or rent the DVD. This takes time, expends fuel, and generally makes my popcorn go cold. For me, this means at least a 1.5 hour round trip as I live in the middle of nowhere. Now, this is where the VOD service has a distinct advantage, quick downloads. Notice that I did not say, “instantaneous download.” A VOD device typically takes a few minutes to download a complete movie, which is much more convenient that a 1.5 hour drive. In the end, I believe that the VOD service will eventually win this competition, under current technological restraints.

Now, is this battle between the VOD and DVD a “Red Queen” or will the battle follow the laws of increasing returns? The classic example of increasing returns involves the victory of the VHS system over the Betamax. A more recent example may be the Blu-ray versus HD DVD battle, where the HD-DVD quickly surrendered to Sony’s mighty Blu-ray sword. In the VOD vs DVD battle, I do not believe one will win out over the other. For the near future, both will be running in place while competing against one another for the greater market share, which at this time, the DVD is winning by the fact that it has been around so much longer. This would indicate, instead that they may be experiencing the “Red Queen” phenomenon. A Red Queen occurs when two products so fiercely compete against each other that they out pace all other competitors for the market share. Dr. David Thornburg, of the Thornburg Center for Space Exploration, cites the PC and Apple computer battle is an example of this.

This is an ongoing battle between two different video delivery formats. However, if they follow the McLuhan Tetrad model that I mentioned in an earlier post, they may be eventually replaced by a different technology. However, as the power of the Internet grows in scope, for this Battle Royale, the VOD service may ultimately win in the end. As technology becomes more and more integrated into our lives, we are becoming more accustomed to the “on demand” service like the VOD offers. We can now watch movies on our tvs, our pcs, and even our smart phones. With these devices, our choices and demands for entertainment are growing. There can be only one conclusion, this is no Saturday afternoon at the bridge table; this is a battle royal cage match!

Advertisements