War is Over, part 2 (Common and Premium Content)

Last post I began with the news that Warner Brothers will excusively support Sony's Blu-Ray format, thus decidedly tipping the balance in the next-generation format wars. For me, and those who aim to push towards online digital distribution of DVD's, this is excellent news.

At the end, I explained how every person should, ideally, be able to download a movie and then watch it on any media player, free of any interference. That freedom and empowerment is absolutely crucial in the new world of the internet and what's called "the long tail." Now let me show you an example.

Let's take the latest Pixar movie, Ratatouille. It's available in both DVD and digital formats, and it's fairly well-known. This gives us an excellent opporunity to compare the two and see how things stand.

First, with the DVD, here's what I can do. I can play it on the tv set. I can run it on my portable DVD player. I can run it on my computer and show off that 22" widescreen monitor. And, best of all, I can take the disc with me wherever I go. That's a great amount of mobility and freedom; I like that freedom, and best of all, the picture quality is fantastic.

Now, compare to the digital download on iTunes. Here are the formats I can play the movie on: an iPod, an iPhone, Apple TV, or a Mac. That's it. Can I watch it on my PC? No. Can I watch it on a Zune? No. How 'bout the television? No. Can I burn a backup copy to disc and play it on my portable DVD? Hell, no.

Now look at the picture itself. It's set at 640 x 480. In theory, it should be fine for standard resolution, but in practice, it's terrible. Looks fine on that video iPod, but everything looks fine on that little wonder. That's why I'm always tempted to buy one. But television or a monitor? It looks like shit. Compared to the commercial DVD, the picture is blurrier, fuzzier, and notable lower-resolution.

The Ratatouille download costs $12. I can buy the DVD for $15.

Is this a sick joke? You've got to be kidding me. Are you seriously fucking kidding me?!

On one level, it may appear that the Hollywood studios and Apple are helplessly out of touch, that they just don't get it. They're behaving the way corporations treated the internet a decade ago - something as too strange and odd to comprehend. Maybe that's true, to a certain extent. But I'm not buying it.

The problem with the suits isn't that they don't understand the digital revolution. The problem is that they understand it perfectly. They saw what happened to the major record labels over the past ten years. They know the score, and the suits are terrified.

You see it too, don't you? You should. It's as plain as the nose on your face. The thought keeps nagging in the back of my head...why isn't anybody doing anything about this? I can't be the first one to figure this out. It has to have been obvious for years. So why isn't anyone jumping? Why are the movie studios only content to dip their toes in the water?

We're facing the greatest media revolution since the invention of spoken language, and nobody's moving. I probably wouldn't even talk openly about these things if the Ghibli blog was a runaway hit; I'd be too convinced that some investor would grab my battle plans and get to work before I could. And, yet, here we are. Weird.

Alright, here's what I see. Back to Ratatouille. Take that digital download, and make it the equal to the commercial DVD. It's easily done; it can be done today, right now. We're only talking digits, zeros and ones. Make the download identical to that DVD, so the consumer couldn't tell the difference (this would actually be a demonstration in my proposals). This is now achievable with storage space and bandwidth.

Then comes the knockout blow. Take that $12 price tag and smash it. I have a number in my head. It's specific, I've moved it around somewhat, and I'm growing more and more confident about it. It's one of the two or three best cards in my hand - and I think it's a winning hand.

"The Long Tail" gets into all of this in far better detail, and, again, it's a must-read. It's the definitive business book on the digital revolution - The Gospel According to Google.


Now to wrap this all up. If you're keen, you can pretty easily guess what digital downloading of movies will do to the DVD format. DVD will be smashed to pieces. This is inevitable. It is unavoidable, and, more importantly, it's something we should welcome and embrace.

I don't believe the death of DVD will mean the death of movies; it will mean an expansion and growth into a hundred new dimensions. It's all about choices. Choices in formats, and the freedom to move between them effortlessly. Again, we're already there with music, where we can download, rip, burn, trade, share, and buy millions of songs. Movies will be the same way.

Variety is the name of the game. Consumers will pay different prices for different values. For movies, I think of it as two different camps: common level and premium level.

Yeah, I know, I need better names. But you get the point.

We see this already. VHS and DVD are a form of common level. It's cheap and readily available, accessable to the most people at the lowest price. You can rent a movie and watch at home for far less than going to the theatres. This is the common level, and instead of destorying Hollywood, it made them insanely wealthy.

What would be the premium level? Going to the movie theatre. I can watch films (you know, real camera film) on an enormous screen, sharing a darkened room with as many as a couple hundred strangers. It's a shared experience, and it's absolutely wonderful. I can't imagine the movies without that experience.

This month, the Minnesota Orchestra will be showing two silent classics: Charlie Chaplin's City Lights, and Sergei Eisenstein's Battleship Potemkin. The orchestra will be providing the musical accompanyment. Now that's premium content!

The name of the game is perceived value. I and my family will spend a lot more money,and you may have to deal with traffic and parking, but look at what you're getting in return. For the movie lover, this is the real deal. Does it even matter if I have the same movies at home on DVD? Of course not. The theatre experience has a greater perceived value; it sits at the premium level.

On a deeper level, going to the Minnesota Orchestra to see a masterpiece of cinema holds greater value than the latest blockbuster at the multiplex. The special-effects picture, aimed at teenage boys, are much closer to the common level. We'll often decide to wait for the DVD, because we're not getting much more from the multiplex, aside from noisy crowds.

Another excellent example of premium content is The Criterion Collection. Need I say more? Their value is so great in the eyes of movie lovers that only the name itself is enough to make a sale. A new movie on Criterion? I've never heard of it. It's perfect!

Criterion shows us how to effectively appeal to a niche market, and succeed masterfully. The arrival of downloading won't harm them in the least. No, while digital will cannabalize the standard DVD, Criterion will continue to thrive. The experience they offer is akin to attending film school; indeed, it probably surpasses most entry-level classes you took in college. And I'll pay a premium for it every time, with a big toothy grin on my face.

Take a look at Criterion's recent DVD for The Third Man, one of my absolute favorites. In addition to the film, which is masterfully restored; there are two commentary tracks (including director Steven Soderbergh); three documentaries on the movie and writer Graham Greene, ranging from 30-90 minutes; Orson Welles' Harry Lime radio broadcasts; a booklet containing essays on the film; and a whole wealth of extra bits and pieces. It's absolutely fantastic.

This is the premium service. We cannot provide that level of depth via downloads; to be honest, I wouldn't want it. Downloading works for me because it taps into that immediacy, that hunter-gatherer instinct. Find my deer, stalk it, come home and eat. I want my movie experience now. Afterword, I'll learn everything I can about the movie that will add to my enjoyment.

Same thing with music. First I check something out. If I like it, then I'll go foraging around, learning all I can.

Which bring us, finally (whew), to Warner Brothers and Blu-Ray. What excites me about this is not only the thrill of seeing the Warners' fabulous catalog in the hi-def format, but the end to this stupid format war altogether. Now we can work on making Blu-Ray the new must-have item of 2008. As anyone will tell you, once you see a hi-def movie on that 60" screen, there's no going back.

This effectively means the end of the DVD format. Which means that Hollywood has no useful need to drag its heels. Which means that Apple has no need to drag their heels, either. iPod's great appeal was the promise to store thousands of songs at once. We're going to do the same with movies. Imagine that. Ten thousand movies in your pocket, ready to pull out whenever you want, and ready to be played anywhere, from the iPhone to the HDTV.

Which means, folks, that the door is open for digital downloads to explode. Seriously explode. The big fear now is that downloading will destroy Blu-Ray before it ever gets a chance to succeed. Microsoft (according to Michael Bay, at least) is pushing for this scenario. But I think that's a false choice. The future of media, if it means anything, means more choices. The long tail enables viable markets and endless audiences that stretch on forever.

If Blu-Ray is to ultimately succeed, it will have to compete just like everything else on this planet. Screen resolution and hi-definition won't be enough. Bandwidth restricts us now, but soon that will also fall, and my digital download of Mind Game will look identical to the BR. So what? BR needs to follow the Criterion route, and follow the Premium path. The cheaply-assembled DVDs, the ones with no useful extras, will be discarded. Waste of fuckin' plastic.* I'll download those in a heartbeat. And I will still go to the theatres, and I'll still pay fifty bucks for Criterion.

*This is another idea that I hit upon when seeing the paper packing for An Inconvenient Truth. The green angle! "Save the Earth - Download Your Movie Instead!" Think of all the petroleum by-products that go into making that DVD. It's a disgrace, and completely unsustainable. Want to stop pollution and climate change? Download, kids, download.


benjamin said...

Variety IS the future. And for exactly that reason I'm not 100% convinced of the no-premium-for-downloads road. I once heard somebody use the analogy of a bathrobe in a supermarket. You'll find only one size "that fits everyone", but in reality, it fits no-one. This is the case with many DVD's right now. When I buy a Disney DVD, I want the film, making of, maybe galleries, etc. I DON'T want Celine Dion talking me through what story inspired the film or some silly children's game even children never play. One advantage of download could be that you pay extra for the extras, but you can pick which you want. There still are always things you wouldn't want in download form, though. For example, storyboard books.

But it IS a balance that's hard to find.

Frisenette said...

"Screen resolution and hi-definition won't be enough. Bandwidth restricts us now, but soon that will also fall"

I'm not sure about that at all. One thing is downloading and storing the 2 - 5Gb required for a standard definition movie. Quite another is the 25 - 50Gb for a fully fledged HD movie.
My guess is that we will have to wait at least 5 - 10 years before that becomes commercially viable.
That's enough time for BluRay to play out its role and be a success.

Daniel Thomas MacInnes said...

Of course, there will be data compression. There has to be. The good thing is that you can compress data to a certain point where it won't be noticable to the average person.

Also, you're thinking of the memory space of the DVD, which is different from the memory size of the movie file itself. That only fills a part of the disc space. We're talking about 1G of space or less, which is perfectly doable with our current bandwidth.

Digital distribution isn't a hope for the future; it's here right now. There will be challenges, like bandwidth and download speeds and memory constraints, but those can be overcome in time. This will not be an issue in five years' time. Remember how recently we were still using a 56K modem?

This is a growing industry. The winners will be the ones who begin now, not later.

In terms of commercial viability, think about that for a moment. If you have an import DVD company, what are your costs? And how many of those costs exist in a purely digital environment. The surprising truth is that you can go online for next to nothing, compared to the old DVD startup. This is what enables that "long tail" - all those minor niche markets. This is exactly where I'm aiming to strike.

Thanks a million for you input. Every little bit takes us one step closer to realizing our dream.

Frisenette said...

Better compression is not the answer. We will only get better by a few percents as things progress. There are mathematical limits to how much you can compress a signal before you start to notice it.
And then the whole idea of HD is lost.

The vast majority of space on a DVD is used by the movie data, menus and the like only take up a few megabytes at most.
Harddisc space is evergrowing, but even the largest HDDs won't fit more than a small collection of movies at HD resolutions.

There are also limits to how much traffic the existing infrastructure can take (copper cables and fibers). Most of it was laid out in the 80s/90s, in some cases much earlier. If everyone starts downloading 25-50Gb movies all the time, things will start to slow down A LOT.
A new information infrastructure is very expensive and not something you do in 5 years.

Of course the equipment and downloads costs next to nothing, but if the inertia to get things started is too high, that "nothing" can soon become a lot.

The only hope would be, if it turned out that consumers didn't really care about HD at all. That they were fine looking at slightly blurry images on theire large HDTVs.
Wii and YouTube says "yeah" ;-).

Personally I'm not that bothered with resolution as long as what's on is good.

Daniel Thomas MacInnes said...

Great insights. Right now, I'm not concerned about streaming or downloading High Definition content. It's the Standard Definintion that I'm after.

To me, all of these isues - and they are important - are secondary to the business model itself. If we can get the original content providers, whether it's a Japanese studio like Toei or Nippon Animation, or independent filmmakers, then we will have won. That's the key victory. After that, all else falls into place.

I've been hearing promises about the end of bandwidth troubles for over a decade now. We were supposed to enter the promised land by the year 2000. Broadband was supposed to solve everything. The problem is that no one ever anticipates the rising demand, and the greater amounts of data being moved about. Now we're talking about movies that reach 50 or 100 Gigabytes? Just wait until the multiple-layer BR discs hit.

If history shows anything, it's that advancing technology will have a fracturing effect. People will move into more and more directions. But the good thing is that this always brings us greater and greater numbers of people.

First there was television, and only four channels. Then there was cable, with 20 or 30. Then there were 100. Then satellite. Then the internet. Then VHS and DVD and HD. The media continues to fragment, but it's not a division of the old pie. The pie itself keeps growing, and that growth is fueled by the diversity of channels and content.

All of which means I'm not sure how BR will play out. Will it be as successful as DVD has been, or will it be less, as we have more and more options available? I think all of this talk is about formats - when the name of the game is content.

BR may be less successful in the long run, but when you combine all the formats together, you'll see the total market has exploded.

Again, for me, I'm after SD movies and television. The move towards HD content is almost certainly many years away. I just want something that looks as good as that old DVD.

Then there's the issue of source materials, and whether you have the resources to update or remaster and all that. The DVD's for Animal Treasure Island and Puss in Boots, for example, are single-layer discs from 2000. Compare that to the latest Criterion DVD9 transfer. Ugh - I'm getting ahead of myself again. We'll burn that bridge when we get to it.

Frisenette said...

Don't get me wrong, I think it's great that you're thinking these thoughts and obviously planning "something". But your claim that first movers are always winners is hardly correct. Look at the computer industry for prime examples of this. What happened to Apple, Atari and Commodore?
Beaten by the established player (IBM) in the long run, which in turn was maimed by its parasite, microsoft.

In Denmark, where I live, an upstart some years ago tried breaking the mold with an "Anime Only" online channel. He lost out to bureaucracy, the stubbornness of the Japanese rights holders, and lost a lot of money before he eventually had to admit defeat.

I not saying this to discourage you.
I'm saying, have a very, very good business plan before starting anything. Be sure to be not just a little better than the rest. Be *far* better. Or else you *will* fail.

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