Today on Slashdot: Blockbuster gives up against Netflix. I posted a comment on this article but I wanted to expand upon the thoughts here.
Blockbuster was never competing against Netflix. They were competing against Hollywood's new overlord (to be revealed shortly). Blockbuster has tried desperately to keep themselves from sailing down the abyss in the face of technology. They changed their late fees, tried mail-in rentals like Netflix, and have tried rental subscriptions at their brick-and-mortar locations. None of these has helped in a rental market that's headed into negative territory. Right now, the only product Blockbuster has that people can't really rent somewhere else are video games, and hopefully that will change someday.
On the other side of this coin, Netflix will eventually turn out to be a blip in history. They may be around for a long time, and they'll continue to serve the needs of people who are looking for obscure DVDs, or just watch a lot of movies and want to do so on a budget. They may be even able to be profitable long into the future with that model. I would not be surprised if we eventually see movie studios desperately claw to make their own version of Netflix to fend of the monster.
That monster is Comcast.
And you thought Google was the juggarnaut of the future? Comcast will soon have put Blockbuster under and have TV networks, studios, distributors... everyone in entertainment under their thumb. And why is that? Many reasons.
For one, they've perfected DIVX. Remember the DVD format that self destructs after 24 hours and had people screaming? No one wanted to buy something that self destructs. However, Comcast has come out with a product that essentially does exactly that and WILL have customers. It's their On Demand service.
My first exposure to On Demand was pretty piss-poor. That was about a year ago, I watched "Elf" with Will Farrell. I thought the compression was horrible, the controls had an annoying delay in them, and of course the cable box UI was terrible. A lot has changed since then. Their cable box is much, much better than before. Much faster, and the UI isn't terrible. The controls are a tad more responsive, though will always have some delay compared to a local playback device since On Demand is actually streaming from the central office. But, most improved is the compression. I was watching I, Robot on On Demand earlier and it looked as good as a DVD or from HBO.
My theory is that the first company that truly gets On Demand out there and popularized will destroy everybody. Technically speaking, Comcast is already there in some markets (I'm trying it out in Illinois), now they just need to expand the content. With enough content, On Demand can make Tivo irrelevant. It can make internet broadcasting irrelevant -- who wants to download WMVs when you can watch on your TV with your typical cable box? Oh, and movie rentals? Pay Per View had already made going to Blockbuster a chore, but with On Demand you can forget it. As their library of content expands, you won't need to ever go anywhere to get your hands on that old movie -- and that's good bye to Netflix (though I believe a fringe element of movie viewers will keep them going for a while).
And finally, Hollywood. We've already figured out that no one gives a crap to see movies in the theater anymore. We've got HD sets that are better looking than most screens these days. We've got surround sound we can adjust to our own preference rather than being blown away. Now all we need is a decent way to get movies to the HD sets.
Enter Comcast. Blu-Ray or HD-DVD are at least six months out from being in people's hands and are years away from being widespread. However, today, Comcast can take any movie, get an HDCAM or D5 HD transfer of it, upload it to their server, and have it in your hands tomorrow via On Demand. They completely control the prerecorded HD market today--and will until a new format can rise to challenge them. If this continues, Comcast could easily control virtually all distribution of HD content. That would mean they'd essentially be the world's largest theater owner. That would mean they'd have more power to dictate what movies are made, play on their channels, and how they get marketed than possibly any theater owner ever.
For those not familiar with the movie business, the distributors actually market their movies to theater owners at a conference called Showest. It's as important for the studios that theater owners will show the movie as it is for people to show up at the theater. Sometimes, not as much as it probably should, theater owners vote with their feet and won't show a movie the studios want them to.
Now imagine Comcast controls a massive distribution channel for HD--larger than all theater chains in the US. Theaters sold 1.578b tickets in 2002 (most ever was that year). In 2004, Comcast had 500m On Demand views (incl. lots of free ones, I'm sure). This year, they expect to exceed 1b On Demands. In short, a service that's merely 2 years old has already reached 66% of all movie tickets sold in the US in its best year. One word: pwned.
That's bad news for theater owners, because movie studios would love to have a distribution channel like Comcast -- high definition films that aren't easily crackable by hackers like DVDJon, expire in 24 hours, and can reach 60m people (20m homes) at the touch of a button. No more having to wring their hands over digital distribution to theaters. I wouldn't be surprised if, in the next 5 years, we see a high-end, full-length feature movie get released on HD via On Demand at the same time as theaters. And of course Comcast drives what movie that would be... since their distribution is more powerful than the theaters.
Oh, and one more thing... SBC should look out too. I haven't been on a cable modem yet that doesn't get at least twice the performance of my DSL. The theory is that the switching on DSL is better, but I honestly haven't seen it. Cable providers have everything invested in data, really, when you think about it. It just makes sense that they have to keep performance up.