Trash the Disc, Learn from Porn! Can HD Movie Downloads Deliver the Convenience and Flexibility Consumers Demand?

SPECIAL SEGMENT: LOOK TO THE FUTURE

It has been my goal to present blog posts that provide practical, decision-aiding information on technology for the home. I have been concerned about being too futuristic with glimpses into the crystal ball. For the topic of the delivery of HD movie content, however, I believe it is important to understand the future direction in order to make a decision today. For this reason, I will be making forward-looking predictions beyond my typical articles. In other words, my blindfold is on and I’m aiming my dart at the board. Want to put an apple on your head?

Just a few days ago, in response to growing demand for high-definition DVDs, Blockbuster announced that it will be rolling out Blu-ray discs to 1,700 corporate-owned stores within the next month. This may appear to be a blow to the HD DVD format, but one should be careful about reading too much into this move. In a Blockbuster corporate press release, Matthew Smith, SVP Merchandising, acknowledged that, "it is still too early to say which high-definition format will become the industry standard." The decision to place Blu-rays in stores is of limited consequence, as both formats will continue to be offered online with their Total Access plans. In test markets, Blu-ray out-rented HD DVD 2-to-1 and Blockbuster is using this initial customer response to limit the cost of rolling out HD discs to stores. If ultimately both formats hang around for awhile, the online and in-store video rental giant will surely offer both in their stores.

While the near future will be greatly impacted by the Blu-ray and HD DVD format war, you have to wonder if the future lies with a disc format at all. Although the pornography industry played a major role in determining the outcome of the VHS vs. Betamax battle, most believe this industry will not influence the determination of the HD format winner. During the epic VHS/Betamax struggle, cassette tapes were the primary method of delivering porn. Today, the industry has embraced a greater variety of methods to deliver its goods, including the popular video downloads via the web. I like to call this porn-ography-over-IP – or PooP for short. With the weight of a multi-billion dollar industry, I think it is safe to say that these folks have thought “long and hard” about the best ways to deliver their product to its consumers. They no longer depend on tapes or discs for distribution. If this industry can give “arise” to video downloads, should it be adopted for mainstream video? Let us first look at the current state of (non-disc) HD movie distribution.

Video-on-Demand
Cable and satellite content providers that offer pay-per-view or video-on-demand actually have the needs and desires of consumers close at hand. Most are available in a HD format and only fall short in overall selection. The subset of movies made available through this method is missing the mark. There are relatively few older, classic movies made available and the newest movies were new releases for purchase or rent several months ago. If the selection improves, this method can provide a real alternative for movie fans, especially when combined with a High Defintion TiVo or HD DVR. I’m not sure if movie studios would stretch the distribution rights to allow this to happen.

Current Video Downloads
Although there are almost 300 titles available (or soon to be available) in a high definition disc format, the availability of HD movies for download is sparse. Blockbuster and Best Buy have only been rumored to be developing movie download stores. Sites that are currently delivering downloadable movies for rent or purchase include iTunes, Amazon (via Amazon unbox), WalMart, Movielink, CinemaNow (which includes a download and burn to DVD option), and Vongo (which downloads available Starz movies). The problem is that the best quality any of these sites offer is DVD-type resolutions. From these sites, there is no HD content despite the future pointing toward this high resolution form.

A company called MovieBeam, however, has introduced an innovative method of delivering movies to your home, including some in HD. They sell a MovieBeam Player for $199.99 ($149.99 fobr a limited time) that automatically keeps 40 of the latest movies available for you to rent. Appeasing early adopting geeks and nerds, the player receives the movies through a transporter similar to the one used on Star Trek (beam my movie, Scottie!). Actually, the movies are received wirelessly into the home using an indoor antenna and MovieBeam’s patented digital signal. The signal is available in 33 metropolitan areas across the U.S., including smaller markets such as Austin, Tacoma, and Nashville. Movies are available for rent from $1.99 to $3.99 with a one dollar premium for HD movies. There is no monthly subscription fee. The selection appears to be similar to a movies-on-demand source. Since movies are downloaded to the device prior to selection for renting, your rental choice may immediately be followed by the viewing of the movie. There is no waiting for the download. Once started, you have 24 hours to view the movie. Standard pause, fast-forward, and rewind functionality exists. MovieBeam claims to have access to movies from virtually every major Hollywood studio, but our search for HD movies only turned up seven possibilities.

Xbox LIVE, self-dubbed “the only online social network in the living room,” is a community of more than five million members that has access to downloadable high-definition games, television, and, of course, movies. This compares to Netflix and Blockbuster Total Access that combine for just under 10 million subscribers. Xbox LIVE is the largest online distributor of high-definition content by volume. On its website, the Xbox people boast that the vast majority of subscribers choose the high-definition version of media when given a choice between a standard- or high-definition download on the network. The claim is that Xbox 360™ is the first and only gaming console to provide HD and standard-definition TV shows and movies straight to a hard drive. Xbox LIVE® Marketplace is where you can download your favorite movies and television shows. Each title is available for rent for $4 to $6, but currently not for purchase. On their website, they have 26 HD titles shown as available.

The Future of HD Movie Downloads
For HD movie downloads to become prominent, however, eight issues need to be addressed. Once these topics are fully developed, the flood gates will likely open for movie downloads, enabling this content distribution method to pass DVD sales. Here are the eight topics:

1. Quality Must Be High Def. As discussed, almost all downloadable movie content today is DVD quality or lower. Only MovieBeam and the Xbox Live Marketplace have experienced any success in HD movie downloads. There is little doubt in my mind, however, that as these eight issues become resolved, the big boys from iTunes to Amazon to Walmart will begin offering HD content. The time is not right today, but once you read further into these points, I think you will agree that digital distribution is coming. Considering the progress of technology, I would expect to see some big boys joining the HD movie download scene by year-end, with others following in 2008.



2. More Advanced Compression. The “old” DVD format uses an MPEG-2 compression technique (also called a “codec”) that enables 3.8 hours of standard definition video to fit on a 8.5GB standard DVD. An hour of a high definition movie, however, would take almost 10 GB in this MPEG-2 video codec. A newer compression model, called H.264 or MPEG-4 AVC (Advanced Video Codec), allows an hour of HD video to be stored in less than 6 GB with negligible loss of quality. Another codec, called VC-1, is similar in compressed size and is used by Microsoft’s Windows Media Player. These compression techniques are helping HD DVD and Blu-ray store more HD content on their discs, too. Finally, another video codec, called DivX, has slight video quality loss but cuts the space required for HD video in half. I am ignoring an important quality-influencer called bit rate, but am trying to simplify things by assuming that all codecs are using the same high quality bit rate. The bottom line is that more advanced compression techniques can greatly reduce file size with very small losses in video quality. Of the issues mentioned here, this may be one of the most mature as the codecs mentioned are available for use today.



3. Cost Justification Must Exist. For the music industry, buying a 12-song CD for $16 was replaced with individual song downloads for $1 or an entire album for about $10. This flexibility gave great credibility and cost justification for downloading music. I don’t think the movie download methodology can be sustained unless the cost of downloading a song for purchase has a significant price advantage over buying the HD DVD or Blu-ray. Rentals, on the other hand, may justify pricing similar or slightly higher than in store or mail rentals due to the convenience downloading delivers. The price must be within striking distance, though. What Xbox LIVE and MovieBeam offer today is within striking distance, but better offers could sweeten the pot within a year.



4. The Entertainment PC Needs a Boost. Although folks like Microsoft have been trying to get the PC in the main entertainment room for years, sales and full use of Windows Media Center PCs have been lackluster. Convergence has long been on the lips of Bill Gates, describing a technological utopia where all consumer electronic devices work together and create an interconnected network to serve the user. The average consumer has not embraced this vision and a shift in mentality needs to occur. As Media Center PCs, TV tuner cards, DVR applications, and networked media players mature, the vision of a home entertainment network will crystallize. With devices like the Xbox 360 acting as media players, consumers will see that the PC does not need to sit under the TV. Networks will bridge the gaps. HDTV will continue to penetrate the home and more folks will see the benefit of displaying PC output on the living room television. Progress will continue this year but 2008 will be the year that the HDTV and PC connectivity will become second nature.



5. Improved Movie Studio Support. The movie studios will need to address how their movies become available and are distributed. Walmart has been successful in getting the major movie studios to allow their content to be downloadable. It takes a powerful name such as this to get the movie studios to move in the proper direction. If Amazon, iTunes, Blockbuster, and Best Buy enter the HD download market in 2008, then there will be enough power there to get movie studios to allow their content to be distributed digitally. A name like MovieBeam just doesn’t seem to have the pull to get a huge variety of movies available.



6. Better Digital Rights for Consumers. Movie studios will be in control of how the digital rights are managed. Check out my post on digital rights management for an illustration on how DRM has worked with music content. If you download a movie, a law-abiding user needs to feel that they can freely use the video within their personal realm. The folks behind the copy-protection system within HD DVD and Blu-ray are working on a "managed copy" scheme that would allow users to make legal copies of movies to media centers, portable media players, or PCs. The hope is to have this ready by the end of 2007. If HD DVD and Blu-ray can come up with a solution, surely a pure download strategy can have a workable solution by 2008.
   
   To expand on user flexibility, subscription services (as opposed to pay-per-view) must also be made available, too. This appears to be reserved by a trio of pay-TV neworks: HBO, Showtime, and Starz. So far, Starz has been the only one to experiment with the digital distribution through its Vongo service, which has yet to offer HD content. The movies are typically one or two months behind the earliest release of movies on DVD, but the content would be available with few time constraints or volume limitations. Similar to subscribing to HBO from cable provider, you would be able to watch as much as you want, as often as you want. The difference is that an online subscription would allow you to access to a greater on-demand variety than a cable pay channel.



7. Cheaper Storage Costs. Although hard drive storage space has dropped under $0.30 per GB, the continued decline in storage costs is needed. Currently, a typical HD movie may require as much as 10 GB of storage or $3 worth. For those looking to permanently store a movie, this cost in addition to the movie download costs. As these prices continue to plummet, I believe it will be reasonable to store a move for under a buck by the end of 2008. Another way to address storage costs is to let the service do the storage. If Amazon Unbox moves to HD, then you could maintain rights to watch the movie without keeping it on your own hard drive, except when you want to view it. Obviously, additional downloads would be required. This leads us to our next issue about download capacity.



8. Increased Bandwidth. The 10 GB HD movie described earlier would take about 30 minutes to download at 5.0 Mbps, a pretty aggressive download speed. For those with a measly 1.5 Mbps download package, that jumps to about 2 hours. Verizon is continuing to grow its fiber-optic service that is dubbed “FiOS.” This program touts download speeds that start at 5.0 Mbps and run up to 50 Mbps. Their internet service is currently available in more than 1,700 communities in 16 states. This same fiber-optic technology is also available as FiOS TV to bring HD programming and video-on-demand content to homes as well. The cable companies are not sitting still. The National Cable & Telecommunications Association is moving the industry toward a new standard, called DOCSIS 3.0, that has the potential to obtain download speeds up to 160 Mbps. While Verizon’s solution is available today and expanding, the DOCSIS 3.0 standard may be years away from full implementation. The average consumer may not be engaged in this leap forward in bandwidth until 2009 or 2010. Until then, patience in download times may be the key.

The point of all of this is that we are not decades away from seeing movie downloads become mainstream. John Q. Consumer will likely not jump ship from his DVD purchases overnight, but within a few years the benefit of a huge movie selection at his fingertips will be realized. As this happens, the battle of HD DVD vs. Blu-ray will become less of an issue. Trash the disc, learn from porn!