Is DVD the next Dodo?

Netflix made the national news this past Wednesday when it announced its entrance into the Canadian market. The p.r. launch included taking over a section of a Toronto street, and peppering it with actors pretending to be thrilled customers, as the CBC and a few sites reported. (Ahem.)

The basics of this “supplemental” home entertainment service, costing $7.99/month, and delivered via streaming to a PC, Apple gizmos, PlayStation 3, Xbox 360 or Nintendo Wii, gets you unlimited access to its mostly older film + TV series. (Netflix will not be offering mail rentals, leaving that market to local firms like Zip.ca.)

Torontoist reported the company’s offerings aren’t tied to any CanCon regulations, but Netflix is restricted to showing whatever program rights it can acquire, and some consumers that have signed up or browsed the company’s first wave of offerings aren’t wholly impressed, as evidenced by the comments at the company’s official blog.

In an interview last week with the Financial Post, Netflix chief executive Reed Hastings provided some straight replies to detailed questions of exactly what Netflix plans to do, now that its first venture outside of the U.S. is underway.

Hastings said the older content will get upgraded with newer material over time (Mad Men will among the first catches of ‘new’ material), but one void Canadians would love to see filled is the airing of indigenous programs and productions. That, however, doesn’t seem likely, according to Hastings: “From a competitive strategy, it’s unrealistic for us to out-Canada a local Canadian distributor. So we’re going to focus on what people end up watching. “

If the interest were to develop, and Netflix’ roster included programs like The Littlest Hobo, we’d all be seeing a retread of the mediocre programming that saturated the first wave of specialty pay channels like Showcase, and that wouldn’t be good.

If, on the other hand, Netflix were to go after neglected, overlooked, abandoned, marginalized titles where there’s pent-up demand or a cult following (or make themselves open to buying streaming rights), they’d actually be doing a service by saving stuff from oblivion.

The only caveat at this stage: as Torontoist pointed out last week, the real test isn’t whether people will warm up to an alternative, low-cost venue like Netflix for further media, but whether Bell and Rogers will throttle the hell out of the service as people stream all that unlimited content.

These monopolistic monsters were allowed to establish total vertical integration over the years courtesy of the CRTC, which means there’s no reason why Bell nor Rogers wouldn’t induce protective measures.

In the Financial Times Q&A, Hastings comments on the odd, coincidental move in which Rogers reduced bandwidth allowances soon after Netflix’ announcement of their Canadian launch. He brands it as “unfortunate timing,” but I think that’s a very diplomatic description for Rogers’ first move in a chess game to dominate the digital realm. The timing is perfect, and any effort to limit bandwidth when more content is becoming exclusive to online venues might make all that streaming more costly than a subscription is worth.

The CBC’s own interview with Hastings gets into more bandwidth-specific scenarios, and it’ll be amusing if Netflix becomes an unexpected supporter of an anti-throttling, anti-monopoly body a year from now.

Now, the news media is playing up Netflix’ announcement as ‘the final nail in home video’s coffin,’ which is sexy but shallow talk.

The aforementioned CBC news piece queried one owner who held up DVDs and said ‘they’re already dead matter,’ and that may be the case for top 100 title rental shops that don’t maintain a large inventory of hard-to-find or out-of-print titles, such as the sale/rental businesses profiled in this 2008 BlogTO piece, as well as Eyesore Cinema, and 7-24 Movies & More.

My prediction?

DVDs will tread into the waters of dying VHS, where mostly A-list titles by major studios are released on a physical medium. From their back catalogue, older films on DVD and Blu-ray will consist of top 100 classic films everyone knows, popular series tested out on TCM or tied to that brand name to boost a set’s recognition factor in Walmart and other mainstream outlets.

You will see the same films re-issued in single, anniversary, remastered, and themed sets, and some titles may only be available as long as the first pressings remain in stock, after which they’ll move over to digital delivery, or as bare bones on-demand discs with a premium price tag.

The obscure stuff will be available as downloads or on demand discs. The $18-20 pricing of those classics, either via Warner Archives, Universal via TCM/Warner Archives, or Columbia’s new setup (aka Screen Classics By Request) will be of interest only to those willing to shell out considerable cash for titles that really should be priced at $9.99 or less.

Foreigners unhappy that these titles are not available outside of the U.S. will pool their money into TCM and PVR recordings, unless the on demand scheme is downgraded in price, and broadened to a global delivery to ensure the widest international penetration possible.

Indie filmmakers and labels will still provide product on DVD and BR because they may have the advantage (for a while) by filling in shelf space previously saturated by studio product, but they’ll also exploit digital venues because more communities will have access to subscription and on demand services.

The indies will also benefit somewhat by offering more diverse titles compared to the same A-list titles in heavy rotation on major services like Rogers and Bell. Indies also specialize in collector-oriented titles, and collectors like physical product, not a thing that’s restricted to limited plays or storage devices with access codes.

BR will only start eclipsing DVD if DVD is phased out, and the price point drops another $5-10, timed as the last stragglers with tubes snap up HD sets on Boxing Day sales.

BR, however, will never attain the meteoric success of DVD, because the need-to-own factor has been blown away by too many reissues, repackaging, re-buying of gear, and a greater reliance on plugging in, streaming or downloading media that’s subsequently erased or dragged and dropped into a folder on a 2 TB hard drive.

We have too much stuff, even digitally, and there’s less time to watch things, which makes media more ephemeral than ever. We may want to own certain TV series, but the bulk of TV will only be watched once, because there’s so much other stuff out there. (Note the massive interest on this side of the pond for BBC fodder.)

Home video may well become a boutique product, much like vinyl, and be appreciated and collected by a devoted, sizeable niche market, but it’ll be available only via specialty merchants.

So, will video stores die?

I think it depends on a few key factors:

1) If the major studios radically reduced the amount of new product on DVD and BR (something that’s already underway with Fox), there will be nothing to rent/own beyond the same old/same old. Merchants and rental shops can’t survive without a steady wave of new titles; that’s what advanced the business, and the lack of diversity will kill it. The slow demise of Blockbuster, which was characterized by one subject in a recent article for Home Media Magazine as a company ‘wasting away,’ leaves small indie chains to carry studio product, but it’s doubtful the revenue will be as lucrative to the major studios as the big box chains.

2) The lack of diversity with on demand services from Rogers may push some to use rental shops now and then, but what’ll likely happen is this: rental stores will only exist in locales where the clientele remains nostalgic for the rental experience, be it in small communities, suburban quarters, or urban city centers. That may keep these ‘boutique’ outlets alive for a while, but most will disappear because the effort to maintain them simply won’t be profitable. Most boutiques are owned & operated by an aging demographic who at some point will either relinquish management or sell the business to a keen, younger generation willing to give it a go; or, close operations altogether, selling off a valuable inventory to collectors, and making a last profit boost before retiring, or moving into new ownership/management ventures.

One can see the remaining rental stores evolving into what used to be ‘nabes or neighbourhood cinemas, distinguished by a large archive of titles no one carries or can no longer acquire on home video. For a period they may survive through the rental of what’s essentially an archive of movies, but the lack of new titles will prove taxing in the long term.

The emergence of cheap public domain material may supplement new monthly releases, but there’s also Hollywood’s determination to extend the copyright of films as far into the future as possible. Whether it’s currently 75 or 50 years, that still leaves out a lot of commercially attractive material that will remain exclusive to the big studios.

For the average merchant, the struggle will be more than meeting rental and tax obligations: it’ll be enticing a dwindling, aging fan base with older films in their inventory, and testing the purchasing power of younger connoisseurs weaned on the immediacy of streaming and downloads.

Maybe the studios will offer new titles in DVD-BR combo packs, but the cost of making multi-format, multi-disc packs mandates their exclusive usage to A-list titles, and maybe a handful of nostalgia/AFI Top 100 classics.

The cost of renting a video may go lower, forced by competition from Netflix and on demand services, much in the way Cineplex knocked down the pricing in their aging locales like the Eaton Centre to a few bucks when their aging setup couldn’t compete with big screen/big sound setups.

At some point, whoever is left will have to question whether the effort of buying & prepping product, devoting shelf space to esoteric and chancy titles, hiring a knowledgeable staff, the limits minimum wages, and a slimming profit margin is worth the nostalgic experience of running a video store, and why it’s worthwhile for film fans to trek out when a substitute may exist online.

Nostalgia and the collector mentality can only go so far, and the survival odds of rental shops and a popular form of cheap entertainment are already diminishing.

The X factor is when such things would happen. It may be that in the next 2 years on-demand, streaming or download-to-own programs will be the chief source of programming, leaving DVD in the dust, if not a format exclusive to the film collector market.

The death of a format takes time, but there are striking patterns between DVD and VHS, as the old is being marginalized each year.

By 2012, maybe the family DVD players will be the next unwanted gear pushed to the curb – the next Dodo in home entertainment.

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Mark R. Hasan, Editor
KQEK.com

Tags: DVD

Category: EDITOR'S BLOG