September 03, 2003

Death of the CD Salesmen

A Massachusetts research outfit claims that DVDs and CDs will go the way of the eight-track as physical means for distributing video and audio content. The news was recently reported in the Hollywood Reporter.

Forrester Research, a Cambridge-based firm, performed the study.

Hollywood will win the war against illegal downloading but the battlefield will be littered with casualties, including the DVD and CD formats as physical means of distributing video and audio ...

The study predicts that in five years, CDs and DVDs will start to go the way of the vinyl LP as 33% of music sales and 19% of home video revenue shifts to streaming and downloading.

Part of that stems from the continued proliferation of illegal file trading, which has caused an estimated $700 million of lost CD sales since 1999. But it will be due more so to efforts by the studios, cable companies and telcos to finally deliver legitimate alternatives like video-on-demand, Forrester researcher Josh Bernoff said.

"The idea that anyone who has video-on-demand access to any movie they are interested in would get up and go to Blockbuster just doesn't make any sense," Bernoff said. "(The decline) begins with rentals, but eventually I think sales of these pieces of plastic are going to start going away because people will have access to whatever they want right there at their television set."

If Hollywood can win the war against illegal downloading, then I fully expect the Federal Government to win the war on drugs, Interpol to win the war against global crime syndicates, and the American Dental Association to win the war against people who don't floss their teeth.

Look. There are plenty of reasons why fewer people are buying CDs. All of the reasons are economic or business-related, and can be generally traced to the recording industry's idiocy.

First: CDs are expensive. Second: CDs are expensive and usually quite bad. Third: These expensive and usually quite bad CDs only have one or two decent songs on them. Fourth: No one wants to shell out $20 for a CD which only has one or two decent songs on it, especially if the rest of the album sounds as if it was recorded in the bass player's basement.

Besides. The industry's incredibly stupid move to hunt down and sue illegal downloaders has not won it a lot of friends. For one thing, suing relatively defense-less college kids isn't all that nice; and for another, the recording industry isn't exactly known for its virtue in terms of how it conducts its own operations. (cough)*Payola!*(cough)

Now movies are a different story, and there's no denying the studios are getting clobbered in terms of DVD piracy. I do think they can stem the worst of those problems through having tighter security before the movies actually go into general release. If that means locking down all the copies of the film in a guarded warehouse, and making sure the PAs can't steal bootleg rough cuts, then so be it. But I'm not convinced that the studios have anything to worry about in terms of DVDs, and I'm definitely not convinced that video-on-demand will take off any time soon.

Recently, I bought a copy of a mediocre science-fiction film (2010: The Year We Make Contact) for the princely sum of $9.99. This is pretty much equivalent to the cost of renting the thing twice at my local video store. Because the economics worked, I actually bought the stupid thing; and if every DVD was $9.99 I daresay the video stores would soon find themselves in dire straits.

If the movie studios and the record companies finally learn that they'll have to adjust their pricing policies to prevailing market conditions, they won't have any trouble at all. If they don't, then they'll be in for a world of hurt. Even still, don't shed any tears for them. They may not be smart, but they are cunning; and they'll figure out a way how to get back in the game. And if they don't, then others will do it instead.

Posted by Benjamin Kepple at September 3, 2003 12:07 AM | TrackBack

While Bernoff's reasoning in his quote is sound, I think a five year window for the decline of the DVD is unlikely. The technology to download the 5.5 G of data on a DVD in a nearly instant way will not be commonplace that soon.

And what's your problem with 2010? Mediocre? It may not have had the high-mindedness of the original but it wasn't a bad action science fiction film at all. I wish the film had included the Chinese subplot that was in the novel, though.

Posted by: Lance Jonn Romanoff at September 3, 2003 11:48 AM

The power and reach of continues to amaze. Yesterday Universal Music, the world's largest record company, announced major accross the board price reductions on it's CD's obviously rsponding to your blog of earlier this week. With such great influence comes great responsibility !

Posted by: Swammi in Solon at September 4, 2003 08:15 AM