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The DVD may have died this week.

Walmart is now selling Blu-Ray high-definition optical disk players for $68 in the U. S. Sure, plain old DVD players are cheaper still, but why would you buy one? Blu-Ray players can be used with your old DVD collection just fine and will line-double and up-shift your old disks a bit so they’ll look nice (but not as nice as 1080p Blu-Ray) on your new LCD or plasma TV. So unless the Blu-Ray can’t connect to your old TV for some reason, I can’t imagine why anyone would buy the old standard.

These things happen: Moore’s Law, remember? But in this case it feels to me like the transition is happening a little earlier than I expected it would. For that I blame the economy.

DVD sales have dropped 30 percent in the current recession, which was a big surprise to the major movie studios. They expected sales to go up because movies played at home (where the popcorn is cheaper and the butter is real) are supposed to be a bargain during a recession. In a sense it seemed a perfect time to introduce Blu-Ray and get people to upgrade their movie collections just as they had upgraded their VHS tape collections for DVDs a decade ago.

That VHS-to-DVD transition was the Golden Age of home video, when old flicks earned their weight in rhinestones all over again simply because people liked the prettier pictures and random access to slo-mo nude scenes offered by DVD. So everybody happily bought all their favorite movies all over again, home video revenue became bigger for the movie industry than box office revenue. And like all participants in an unsustainable economic bubble, the movie producers and backers told themselves it would go on forever.

It couldn’t last forever because eventually all the people who wanted to buy DVD’s of old movies had bought them and the industry could only bring out new movies at a certain rate — a rate that was nothing compared to that total library conversion. What was needed, they realized, was another VHS-to-DVD experience, though in this case to a high definition standard like Blu-Ray, or its competitor, HD-DVD.

Except it didn’t work out quite that way. Both Blue-Ray and HD-DVD were late. Like Betamax and VHS, they fought it out in the market, creating buyer confusion (and movie studio confusion too). By the time Sony and Blu-Ray had defeated Toshiba and HD-DVD the DVD business was in decline (movie-related game sales were, too) and there were signs of an impending recession, which brings us to today.

The movie studio fantasy was that we’d pay $20-$40 per Blu-Ray disk, but then Daddy was laid-off and that Blu-Ray copy of 8 Mile suddenly wasn’t THAT much better than the DVD version for half the price. Some people decided to wait while others gave up completely, leading to that $68 Blu-Ray player down at WalMart. Remember WalMart is the largest seller of DVD’s (and presumably Blu-Ray disks) in America and possibly the world. WalMart is such a Big Kahuna in the home video business that they can dictate prices pretty much to the rest of the market. I predict, therefore, that after Christmas Blu-Ray prices will crash to only marginally more than DVDs and maybe even the same.

This is — like short-selling your dream house – just an acceptance of reality by the major players. They missed their chance to make big money but are fairly confident we’ll all finally switch to Blu-Ray if the price difference isn’t very much.

Think about that. It means we’re going to buy all new disks yet again, Hollywood will return to normal, and again we’ll probably be happy about it.

Lucky us.

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There was a minor flap in tech news last week when the CEO of Activision, a huge video game company, called on Sony to drop the price of its PlayStation 3 game console, suggesting that if Sony didn’t follow this advice Activision would consider withdrawing support for the game platform altogether.  I hardly expect Activision to withdraw its PS3 support, nor do I expect Sony to dramatically reduce the price of systems that have already effectively dropped 20 percent or more in Sony’s top market, the U.S., because of the weak dollar. To the astonishment of hard-core gamers, in fact, I’d suggest that this little drama has nothing to do with game sales or games at all, but is instead directed at the Blu-Ray optical disk drive inside every PS3.  The dude from Activision, sensing blood in the water, is trying to look like a shark, for there is growing sentiment in the industry that Blu-Ray, as it was originally intended, is a failure.

How can that be?  Wasn’t it just a year ago that Blu-Ray, with its greater data capacity, triumphed over the opposing HD-DVD standard?  Well promises were made to achieve that victory and now it appears promises may have been broken.

Understand that the success or failure of Blu-Ray has little to do with games and everything to do with movies.  Two historical events informed the battle between Blu-Ray and HD-DVD.  First was the epic and costly 1980‘s competition between the BetaMax and VHS tape cassette standards.  Second was the triumphant succession of DVD over VHS, when we all replaced our tape libraries with disks, gladly paying anew for what we already owned, buying every Hollywood exec a new Mercedes in the process.

Re-fighting the battle between BetaMax and VHS was something the industry wanted to avoid when it came to an emerging HD video standard,  There had been for a moment such a potential conflict for DVD but the opposing forces were brought to a compromise by the movie studios, themselves, and a single technical standard emerged, pumping billions into the movie business as a result.  That’s the same goal that all sides had in the HD video fight — to get it over with quickly and get us all replacing our video libraries with HD.

According to Hollywood insiders who speak with me, the HD video battle was again decided by the studios when Disney and 20th Century Fox went with Blu-Ray in 2008.  The leader in that decision was reportedly Disney, which had 35 animated classic films it envisioned bringing to market in a data rich format with lots of extra material — so much material and games that HD-DVD, with its lower capacity, couldn’t hold it all on a single disk.  So it was Blu-Ray’s greater capacity that swayed Disney, along with Sony’s promise that the rampant success of PS3 game machines would quickly put Blu-Ray drives in most American living rooms.

The Disney fantasy was that Blu-Ray would triumph, PS3s would be everywhere, and American families would, all over again, buy enhanced copies of the 35 animated classics, sending up to $7 billion to Disney.

Well so far it hasn’t happened.

Yes, there are millions of PS3s in use, but millions more xBox360s and Nintendo Wii’s.  PlayStation 3 is the third-best-selling next-gen game console — third out of three, which is the wrong place to be for any competing tech standard that hopes to dominate.  Game consoles that have already been on the market for a year or more don’t suddenly win from behind like Seabiscuit.  Sony sells more PS2s still than PS3s.  PS3 was a year late to market, had supply problems, fewer game titles, and those titles usually cost a bit more than on other platforms.  But what really killed it for the movie studios was something completely different and unanticipated — the need for an HDTV to go with each PS3 Blu-Ray player.

Both the VCR and DVD revolutions required that just a single revolutionary (in the case of DVD, evolutionary) product be successful.  Your TV remained the same.  You can play a DVD on a DuMont black & white TV set from 1956, but Blu-Ray — unless you are not taking advantage of any of its, well, advantages — requires a whole new TV.  The chances of people buying simultaneously an HDTV AND a PS3 were lower and so was the dual penetration with the result that Blu-Ray disk sales, while not terrible, are also not material, yet, to the movie industry.  And the question now is whether they ever will be material?

Blu-Ray will survive, but will it be just for cinephiles?  That depends on how the 1080p download market evolves (which is why Apple has yet to sell a computer with a Blu-Ray disk installed, seeing it as eventual channel conflict with iTunes) or whether a new HD-DVD standard will emerge to compete again with Blu-Ray.

And don’t forget the impact of up-converting progressive-scan DVD players, which even Sony sells: I just bought one for $44.77 at Wal-Mart and driving the 720p display in my RV makes a standard-definition DVD of Charlie and the Chocolate Factory look amazingly good.  Not good enough for a cinephile, but that’s five percent of the video market, tops.

Yes, Blu-Ray is better, but for many people the incentives aren’t there, which leaves us still looking for a higher-density data standard that ideally costs less than Blu-Ray. That particular need, especially in the PC industry, never went away.

This alternate standard is coming, I’m sure, and don’t be surprised if it turns out to be pretty much the same HD-DVD that lost-out a year ago, though this time probably not under the Toshiba brand.  It would make a superior archival platform and might even be used for HD video, too.  Retooling a factory to stamp HD-DVDs costs millions less than upgrading to Blu-Ray and the eventual disks are significantly cheaper.

But that The Making of Bambi featurette may have to go.