The future of Blu-Ray

With Toshiba droping the HD-DVD format, pretty much everybody agrees on the following:

• Now that consumers don't run the risk of choosing the Betamax of the 21st century, Blu-Ray sales should pick up now.
• It might be an empty victory as digital movie download might spoil the party.
  

And indeed, DVD sales are slowly declining. There is however some hope for the DVD industry. I don't mean the medium's future is wonderful, I mean that the industry can do something about it.

For a start, movie download offers aren't perfect yet, whereas you can already receive Blu-Rays from Netflix.

But the key advantage that a physical media like Blu-Ray can have is "PHYSICAL". It's something users can hold. Granted, if will not matter for movie rentals. But for movies you want to buy it might. Now, some will argue that consumers don't care anymore about physically holding what they bought, and offer as a proof the fact that they have forsaken the CD for the immaterial but more convenient MP3.

There is however one big difference between music and movies: when one plays music, the CD is an inconvenience. You need to change discs often unless you want to hear the same songs over and over again. And you need to bring them with you if you want to listen to music on the road. A DVD doesn't have that problem. Apart from DVD players inside cars (a tiny percentage of the market) people watch movies in the comfort of their homes. And they generally watch one movie per night so switching DVDs is not the pain it is for music.

But there is one aspect the DVD industry has mostly forgotten: the package. Aside from the content there's not much exciting about DVD boxes. They come in dull plastic boxes and the only available goodies are exclusive footage and other bonuses, something digital download can replicate. But no physical goodies such as posters. Even the disc itself looks like a regular CD - the magic is long gone. To that regard the 12" Laserdisc (DVD's ancestor) was much sexier. You really had the impression to hold something valuable. Such a DVD wouldn't be practical for a computer or a PlayStation 3, but that's something Sony execs should keep in mind.

Because at the end of the day, whether people will choose to buy movies online or a Blu-Ray will highly depend on the latter's competitive edge. When the content is exactly the same, what other feelings can a Blu-Ray provide that digital download won't?

The DVD industry wants people to buy more DVDs and Blu-Rays? They should think about selling something consumers are excited about holding and opening. Something worth putting on their shelves.

News item: Microsoft makes a $44.6 billion offer for Yahoo!

News item: Microsoft makes a $44.6 billion offer for Yahoo!

Analysis: it's not the first time that Microsoft is the underdog in a market, but a $44.6 billion (a 62% premium) is unheard of from Redmond who is known to be notoriously cheap. It has indeed often managed to pay very little for a lot of acquisitions. Hotmail is a notable exception, although I suspect it had to do with the dotcom craze of the time. But that was then, and entrepreneurs who used to build companies in the hope of selling them to Microsoft now hope to be the next YouTube and be snatched by Google.

After investing $240 million in Facebook for a paltry 1.6% of the company, being ready to pay a 62% premium for Yahoo! indicates how Microsoft has run out of ideas to compete with Google. With Bill Gates leaving the company to focus on his foundation, this is the end of an era for Microsoft.

Now, that doesn't mean that Microsoft will never catch up with Google. Redmond's strategy has always been to keep pounding until the competition makes a fatal mistake. But things aren't so easy this time. And Bill's departure doesn't affect anything.

Contrary to what a lot of people say, Bill is no visionary. His main vision was to foresee the rise of the PC, but that's about it. His book "The road again" completely missed the Internet. His next book, "Internet at the speed of thought", contains banalities and is more an attempt to place himself at an authoritative figure of the Internet. And all his "predictions" have have more been self-fulfilled prophecy attempts than anything else. Last but not least, he didn't see the rise of Google.

Bill Gates is however a very savvy businessman and a great strategist who has known how to capture the PC market by partnering with and then betraying IBM. Later, he has known how to leverage this desktop dominance to conquer other markets.

But on the Internet Microsoft doesn't have its usual edge. There is not an IBM equivalent who "owns" the Internet and with whom Redmond could strike a partnership in order to steal the whole market later. And its dominance on markets such as the desktop and the Web browser does not help one bit.

To be fair, Microsoft has managed to overthrow a market leader in a market where neither conditions applied either: the video game industry. Redmond capitalized on Sony's mistakes with the PS3 to launch the XBox 360... only to see Nintendo steal the victory with the Wii.

So to get back to the online advertising market, Yahoo's acquisition by Microsoft (if it goes through) would help Redmond try to catch up with Google. But it will take more than that to derail Google. Just like Microsoft beat AOL because of AOL's mistakes (its merger with Warner Bros), Redmond might need Google to make a mistake.