Blu-ray Discs are Already Obsolete

Blu-ray is cool and all, but too bad it's going to be irrelevant.

Yes, I am stating unequivocally that Blu-ray disc technology is already obsolete. But not because there is a better pre-recorded viewing technology, but rather the Blu-ray disc obsolescence stems from a changed marketplace. Online Streaming coupled with changing media consumption patterns means that those Blu-ray Disc players and movies delivering the latest and greatest viewing experience are already becoming obsolete and will never achieve the success and ubiquity of VHS or DVD players.

This must be especially frustrating for Sony because of just how much effort they put into winning this format war, remembering the bitter taste of losing  the VHS vs. Betamax format war and the long-term ramifications of that loss. While the battle between Sony and Toshiba was fairly short and brutal, Toshiba’s decision to cede the field to Sony is beginning to look smarter and smarter.

Sony had the killer app, which in this case wasn’t actually an application but instead was a gaming console, the PS3, which included Blu-ray player capability. This meant that the small cadre of hard-core PS2 gamers who automatically upgraded to the PS3 were a built-in audience for the new format. This fairly significant population, for a fledgling technology at least, meant that those studios on the fence when deciding between the two formats couldn’t afford to risk ignoring the Blu-ray format altogether therefore eliminating HD-DVD only exclusive deals.  Toshiba had no similar killer app but it did have the easier to understand name. And although it marketed the heck out of the name, it just wasn’t able to overcome Sony’s PS3 advantage.

With this advantage Sony, to use an old cliche, won the format battle, but will ultimately lose the consumption war. The reasons for this are complex and intertwined. Netflix and Hulu are of course two of the biggest culprits, but so is the DVR. Another big reason for the shift from pre-recorded media viewing to streaming, is the the Xbox360, and it’s attendant Xbox Live service. Xbox Live not only allows streaming of NetFlix movies right to your TV, but it also streams ESPN and other HD TV shows and pay-per-view movies. If you doubt streaming’s popularity, this number may help put things into perspective – Microsoft now has over 25 million subscribers using the Xbox Live service that’s more than the combined readership of the top 25 US newspapers.  

As a former journalist, I hate to keep picking on newspapers, but if you are part of the rapidly shrinking minority of newspaper readers you can open up the Sunday circulars and see the effects this shift in viewing habits is already having. Just 4 or 5 years ago a season of a hit television show was available in boxed set on DVD for $35-40. Now multiple seasons of very popular shows can be had for $15 per box set on sale. That kind of rapid price erosion only happens in a changing marketplace.

The Atari 2600 Breakout game was the Halo of it's day.

Another reason for the shift in viewing patterns away from purchasing pre-recorded viewing media is that the original magic of being able to watch a movie whenever you wanted in the comfort of your own home has long since been forgotten – this is now done without thinking and is considered a perquisite of living in the 21st century. This is because there is always something new to watch, something that wasn’t true when the VHS player first rose to dominance in the 1970s.

Back in the 1970s there really were few choices for TV or gaming entertainment – your TV probably only had the big three broadcast channels (yes, back then ABC, CBS andNBC were the big three, FOX didn’t exist) with maybe possibly the addition of 30 or 40 cable channels if your household splurged on that new-fangled luxury called “Cable”. The video game industry was then dominated by Atari – whose hits included Pong, Missile Command and Breakout. The personal computer revolution was in its infancy and there were no ISPs providing Internet access. Instead people with computers (a relatively select and well-off few) dialed into BBSs with their 300 baud modems to peruse, download and upload software libraries and leave messages.

The one alternative to Cable was Satellite TV. But at the time this required a 6-foot dish on a post in your front yard and a degree in electronics theory and astronomy to make everything fully functional. Rural Americans quickly embraced the benefits of satellite technology because in some parts of the country they might have had only 1 TV channel from which to choose. In fact the adoption of this highly visible technology was so rapid that there was once a joke floating around Appalachia that West Virginia’s new state flower was the Satellite dish. This of course is not true, because I’ve been to West Virginia and have seen their actual state flower in full bloom – the sight of entire hills and valleys aglow with blooming Rhodendrons is quite unique and well worth a visit. But I digress.

Given the paucity of choices available, owning and therefore watching a great movie like the Godfather or Citizen Kane repeatedly made sense. But now owning movies makes less and less sense despite the hopes of the movie industry that everyone will go out and replace their VHS and DVD libraries with Blu-ray Discs. As the saying goes, if “wishes were horses beggars would ride”. This simply won’t happen.

Another factor working against video ownership is that the movie industry has embraced, or accepted depending on your view,  fragmentation as a strategy. The proliferation of movie screens and the shift in revenue streams means that studios don’t have the same reliance on domestic US ticket sales that they once did, now that revenue streams are a mix of domestic ticket sales, international ticket sales, pay-per-view revenue, and Video sales. This diversification of revenue intertwined with the fragmentation of movie audiences means that there are fewer and fewer “big” movies that everyone wants to see and own.

71 years after it's release Gone With The Wind is still the highest grossing movie in inflation-adjust dollars.

To put this into perspective 2009’s Avatar is the highest grossing domestic movie of all-time in absolute dollars but in inflation adjusted dollars it only ranks 14th at less than half the revenue of Gone with the Wind. In fact only 5 of the top 25 grossing movies in inflation adjusted dollars are from the last 20 years: Titanic (6th), Avatar (14th), Star Wars: Episode 1 – The Phantom Menace (20th), Forest Gump (23rd) and The Lion King (25th).

The Internet obviously has driven the biggest change in media consumption and leisure time activity – both in obvious ways by using it to consume content (see Netflix or Hulu) but also in less obvious ways in producing content (see Youtube) or in collaborating and communicating (see Facebook). Putting the Internet aside, video gaming has also begun to absorb a significant share of leisure time – both console based (Xbox, PS3, Wii) as well as online gaming communities.

These MMOGs, with WoW being the biggest,  are increasingly generating signficant revenue, while most top-selling video games out-gross most movies. For example the best-selling Xbox 360 video game – Halo 3 – has sold over 8 million copies. If we assume an average price of $40 – lifetime revenue for the game is approximately $320 Million which would rank Halo 3 2nd among 2008’s movies.

I could keep going and talk about web-enabled TVs, smartphones, social media, etc. but I think it’s fairly clear that while Blu-ray may become the standard technology for prerecorded viewing technology, it won’t ever achieve the ubiquity that previous generations of viewing technology enjoyed. The bigger question beyond just movies and video technology is what will achieve that ubiquity of mind-share and revenue-share that they formally occupied? Will anything? What does it mean if nothing ever achieves this again? What business opportunities will be created when everything resides in the long tail? Which businesses will be destroyed? If you know the answer please share your thoughts, opinions, comments and questions below. -t

UPDATE: According to the Wall Street Journal DVD sales were down 14% year-over-year in the 2nd quarter, and have shrank from almost $16 billion in 2007 to under $13 billion in 2009.  More detail here:

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  1. #1 by Dominick on 2010/11/23 - 12:21

    Blu-Ray is in fact, already dead, and it’s slayer is called ‘Ultraviolet’. Read more below….

    • #2 by Thom on 2010/11/23 - 13:14

      Dominick, thanks for stopping by and reading my blog. And for the links to the Uvvu system. Personally I’m skeptical that this coalition will hold together over time especially given the competing interests and egos. Witness the HD-DVD versus Blu-Ray battles – it wasn’t a technology issue that caused one side to win it was a revenue and self-interest issue that helped Sony win. I think this initiative sounds great but will be tossed into the dust bin of good ideas before too long. Kind of like flying cars….

  2. #3 by Karenin Huntington on 2011/07/25 - 05:22

    I think consumers are getting tired of being expected to buy their media over again each time a new format comes out.

    Oh, granted there was a reason to go from tape to CD and from VHS to DVD. (No more fear of the tape getting tangled or wearing out from normal use.)

    But this Blu Ray creates more problems than anything. (And just how much is it worth?)

    My wife and I have several dvd players in the house. (We don’t always watch the same films.) Now even if we had a big HDTV, why would we buy a new player and pay twice as much for films (with a slightly better picture) for films that could only be played in one room, and could not be played on our computers?

    Add to that that blu ray often comes with the tedious process of registration. And by the confession of people who have blu ray, it’s not even worth it for films made before 2002. Why? Because films before 2002 were not shot in high definition.

    Even if we had money to throw around, (and a big HDTV) we would probably just get an upgrader for $70.

    • #4 by Trevor Bachman on 2012/01/13 - 04:01

      I have a Blu-Ray player, and a DVD player in my PC, as well as a HD monitor at 1080P, and the picture of a DVD compared to a Blu-Ray is obvious. The overall quality comparison is this: “Compared to Blu-Ray a DVD’s picture is like watching the film through a filter of mud.”

      I also just purchased all of the Star Wars Trilogy re-releases, and the older movies were shot in the 1970’s and their picture quality is incredible. I don’t know where you’re hearing these outrageous claims and fallacies about Blu-Ray quality, but since you have no actual experience with them you’ve obviously been misled. Perhaps SOME films prior to 2002 are not suitable to Blu-Ray adaption, but not all.

      I also find this funny, because the streaming theory only applies to individuals who have a good internet connection, otherwise it’s not HD content. The quality of the internet connection determines whether or not play-back is presented in HD or SD format. According to this site the total population of broadband subscribers in the US is approximately 69,000,000. Which is roughly 20% of the US. Is that really enough for streaming services to win out over physical Blu-Ray players?

      Lets also look at the cold-hard facts. Average broadband speeds won’t get over 10Mb/s, or around 1.8MB/s. The size of a Blu-Ray disc DL is 50GB. In order to DOWNLOAD the entire size of a full Blu-Ray disc you’re talking of around an 8 hour wait (7.7 hours approximately, with those rough figures of course). If not everyone has a proper conenction streaming at HD play-back is not possible, and so downloading will likely be required. I don’t know about you, but I think spending a few extra bucks for a physical copy is worth 8 hours of my time waiting for a download.

      Digital copies may very well kill physical media, but I don’t predict such a drastic change anytime soon. Blu-Ray’s will still be produced, and movies will still be available in physical media for at least another decade.

      Let’s not forget, prices and consumption may be down due to the current state of the economy as well. It’s not far to simply throw out statistics about how Blu-Ray is losing their income without stating whether or not ISP’s or NetFlix (or other streaming providers) are as well.

      I see numerous facts and figures about the decline of Blu-Ray/DVD sales, but as for “sales” regarding streaming video services I did not see a single exact figure.

      And as a last note about the 25 million users of Xbox Live, no one buys and Xbox and subscribes to XBL to watch netflix, that’s just ridiculous. Why spend 250$ on a console like that simply to stream Netflix? You intended connection between Netflix’s increased popularity and XBL is flawed in that sense.

      I don’t mean to be rude, I’d just appreciate a non-biased article, in which you don’t solely state facts and figures about one form of media and not give any solid figures concerning the other (streaming services). And no, Halo 3’s 300 million revenue is not a good source of comparison, in fact that supports video game media over video media if anything, not streaming over video media, since games are sold on DVD discs (with a portion available on XBL or PSN for digital download).

      If the main point was to call out the fall of the video industry, then yes, this may have shown that something needs to be done for the industry, but not specifically for physical forms of data storage.

  3. #5 by Trevor Bachman on 2012/01/13 - 04:03

    I’m sorry, here is the website for the broadband subscribers figures.

  4. #6 by Thom on 2012/01/13 - 18:01

    Trevor, thank you for your comments. The point of the article wasn’t whether or not Blu-ray delivers the highest quality pre-recorded viewing experience, it clearly does. But rather despite the fact that Blu-ray is visually superior it won’t be as ubiquitous as DVDs or VHS.

    This is true for several reasons – first of all there are now significantly more entertainment options for viewers compared to 10 or 20 years ago. These options include gaming platforms (Xbox, PS3 and Wii), smartphones and tablets, expanded cable channels coupled with on-demand viewing and DVR capabilities, decreased movie attendance and finally streaming options like Netflix, Hulu, Youtube, etc. These options take both time and money which in the past was spent purchasing and attending movies.

    Movie attendance was the lowest it has been since 1995 and movie attendance is positively correlated with DVD/Blu-ray movie purchases. For many people, myself among them, the absolute highest picture quality isn’t the primary criteria when choosing a viewing platform. Convenience and choice are more important to me – which is why I stream most of my movie content. In fact this is why most higher-end Blu-ray players connect to Netflix, Hulu and Youtube.

    There will always be a place for audio/videophiles for whom Blu-ray, and its successors, will be chosen because they have to have the highest quality. But my bet is that this group will be smaller in the future not larger. It’ll be interesting to see what happens in the next few years and if my premise is correct. Thanks again for reading and taking time to comment.

  5. #7 by Paul on 2012/03/04 - 05:28

    I have Netflix streaming and Hulu and a “40 HDTV. What is working against ubiquity of streaming is the greed of the studios and internet providers. The studios continue to jack up fees and refuse to unbundle channels and providers are capping speeds as people try to avoid cable costs. Meanwhile HDTV screens have been getting bigger and cheaper and streaming looks like crap even on an iPad 2. Yeah, not quite ready for prime time even if Netflix is trying to smother DVDs and Blurays based on these projections. In 10 to 15 years maybe, but what won’t be faster in the future.
    Then they won’t be able stream Holographic video discs….

  6. #8 by Chris on 2012/07/11 - 23:46

    Love that here we are two years later and Blu-Rays are much bigger now than they were in 2010 when this article was written. Now, will they ever achieve the success of DVD? No. Much has changed since DVD. Downloading/streaming movies both illegally and legally thru Netflix exist now. But I do think Blu-Ray and even DVD will both be around for awhile. From avid film collectors like myself, I have a hard time believing that everything will go digital some day. There are just too many films and there is no way every one will get put to streaming. That’s why I still buy Blu Rays.

    • #9 by Thom on 2012/07/14 - 09:21

      Chris, you are absoutely right that Blu-Rays are bigger than they were two-years ago. But I still hold that my premise is true – digital streaming is where the future lies. Sure people will buy Blu-Rays, just like there are people still buying LPs. As true high speed bandwidth becomes cheaper and more prevalent streaming will only continue to grow. Netflix content viewing is now over 65% streaming and their DVD/Blu-Ray model usage declines every month. Plus new players like Xbox, Hulu, Comcast and FIOS plus the content producers like HBO, AMC, ShowTime will only increase this as they seek to monetize their content more fully.

      My statement may have been a bit of hyperbole but I think prerecorded media sales are similar to Wile E. Coyote going over a cliff and continuing to move forward, until suddenly he starts falling. I think the fall has started and in another 3 years combined media sales (CD, DVD and Blu-Ray) will be 10-15% less in dollar value, possibly even less, than they are today. It’ll be interesting to find out what happens.

  7. #10 by Patrick on 2012/07/23 - 19:08

    I don’t know. I get what you’re saying, that streaming will inevitably become the media of choice among the populous, however if one still wanted to get the best viewing experience, right now that medium is the blu-ray disc. Picture quality is excellent, but I’m surprised noone has brought up the fact that many BD have lossless audio tracks that far surpass any other format. To be able to stream the amount of data that is stored on BD would require a massive download speed that most (if any) people have access to. It’s just like anything else really, if you want to eat beef, you can buy some ground chuck, or fork over a little more cash and buy a steak. But again, I’m an a little persnickety about AV. So to each his own, and right now, many people are okay with streaming video services. Also, about the theatre comment, I don’t go to as many movies now because every time I do, I find myself thinking “this would look/sound so much better on my setup!”

  8. #11 by winmoz on 2013/08/03 - 03:21

    …happen to run into this article and just wanted to throw in that it’s always convenience that will win over physical copies, rentals, hell even redbox/netflix DVD over good old video stores who would treat you like human beings. But 4K is inevitably the incoming future and if they can rush to 4K streaming which I predict will be an ugly 4K just like 1080p is horrible in streaming, then the 4 times in resolution will probably make for a decent 1080p picture from about 10 ft away from your 80 inch screen. maybe.
    The mistake I think lies in the fact that streaming became popular at all. It is all a hype. It is a mistake. To never see a movie like the filmmakers intended is a serious blow to the integrity of the art form. We seem to never spend enough time on even making standard definition look good. TV never did look good. a high quality SD content can beat any 1080p streaming crap even nowadays! So perhaps blu-ray will be around for a while in that it’s the currently the only place for videophiles to be able to breathe deeply.

    • #12 by Thom on 2013/08/05 - 10:59

      Great point – convenience will win over fidelity. That being said just like LPs are still used by some audiophiles, Blu-ray will be used by people for whom fidelity is the primary concern. But given that a lot streamed content is Television shows – I think this is less of a concern than it used to be. This same debate took place between laserdisc and VHS – Laserdisc was better while VHS was more convenient. As more and more content is created natively in 16:9 format I think this will be less of an issue over time. Although streaming presents different compromises than the traditional Pan and Scan.

      Since I originally wrote this post – DVD/Blu-ray sales have declined even further and increasingly people want content in digital form so it’s viewable on any device. Even when people are buying movies, they are doing digitally now. Personally the last few movies I’ve bought were on my Xbox – so that it was viewable in my living room but also on my Win8 tablet and laptop while on airplane. My newest laptop doesn’t even have a media drive – so if I had bought a physical disc it wouldn’t do me any good.

  9. #13 by Richard Wicks on 2013/09/19 - 22:34

    “The Atari 2600 Breakout game was the Halo of it’s day. ”

    No it wasn’t.

    • #14 by Thom on 2013/09/20 - 22:41

      I’ll say it again. Breakout, along with Pong, drove the adoption of the Atari console. Halo cemented Xbox360’s place at the top of the videogame console heap – at least so far as sales go. Yes Breakout isn’t comparable in on any level to Halo when you consider graphics, gameplay, complexity, AI, etc – but my point wasn’t a direct comparison across several generations of game consoles but the fact that a single ‘killer app’ or game can make a platform successful – whether it is a PC, a smartphone or a game console.

      Breakout, even more than Pong, was the game that made Atari successful. And the lack of a killer app can doom a platform. I would posit that the Nitendo Wii U is very much lacking a killer game and its sales reflect that. We’ll see what happens with the next generation of consoles.

  10. #15 by Jill on 2014/03/06 - 10:49

    I like streaming movies and watching with itunes a lot better then buying a Discs. I haven’t bought discs in 2 years and has lots of movies to stream. I might plan on buying a Apple TV for Birthday or Christmas and ditch my players and discs for donation. Prices are cheaper online then in stores. Even tho Walmart has those $5 CDs and DVD bins/racks. I would buy them to just import into itunes. I would NEVER buy from Target, because they are EXTREMELY high prices. Episodes are cheap too to watch online then spending $50 on anime and cartoon box sets or movies.

    • #16 by Thom on 2014/03/06 - 12:41

      What’s interesting how much this has shifted in such a short period of time – when I wrote this back in 2010 it was a bit tongue-in-cheek. When I wrote this I was still buying DVDs in order to watch them on my laptop when I traveled. Now my laptop doesn’t even have a media drive and I only buy movies digitally – so I can stream them to my xbox or Win8 machines.

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