Blu-ray: death by streaming

The Blu-ray gamble has failed: streaming has won the war for consumer's hearts and minds. Blu-ray will limp along, but the action is in streaming.

The news this week: DVD/Blu-ray sales down 20% from the year ago quarter. Yes, Blu-ray sales were up 10%, but the larger dynamic is that people prefer to stream video rather than buy - or rent - optical media.

In the meantime, Netflix has seen its business soar, and become the largest single consumer of Internet bandwidth in the US. According to Sandvine:

In North America, Netflix is now 29.7% of peak downstream traffic and has become the largest source of Internet traffic overall. Currently, Real-Time Entertainment applications consume 49.2% of peak aggregate traffic, up from 29.5% in 2009 – a 60% increase. Sandvine forecasts that the Real-Time Entertainment category will represent 55-60% of peak aggregate traffic by the end of 2011.

Translation: consumers want what they want and they want it NOW! Note that streaming is growing fast even as Blu-ray player penetration is still creeping up.

But streaming quality sucks! Compared to Blu-ray streaming video looks terrible. But if you like what you are watching, who cares?

As Philip Kortum, psych prof at Rice and co-author of the study "The Effect of Content Desirability on Subjective Video Quality Ratings" put it:

If you're at home watching and enjoying a movie, we found that you're probably not going to notice or even concern yourself with how many pixels the video is or if the data is being compressed. This strong relationship holds across a wide range of encoding levels and movie content when that content is viewed under longer and more naturalistic viewing conditions.

Blu-ray's window of opportunity has slammed shut.

The Storage Bits take As I warned almost 3 years ago:

The question the studios need to ask is: “do we want to be selling disks in 5 years?” No? Then keep it up. Turn distribution over to your very good friends at Comcast, Apple and Time Warner.

Oh, and Netflix.

I love movies and have collected over 1,200 DVD and Blu-ray disks to watch on a 10 foot screen with 5.1 DTS - when I can get it - audio. But even I am often seduced by the convenience and selection of Netflix online.

I still prefer physical media if it doesn't cost too much, because then I can watch movies on my notebook, iPad or iPhone. So I don't expect or want disks to disappear.

But Hollywood and Sony brought this on themselves. They overestimated the importance of video quality and the price people were willing to pay. And underestimated how popular streaming video would become.

My larger concern is whether Blu-ray will succeed as a writeable data storage medium for home and business use. Prices are coming down - I'm planning to buy a burner when prices drop below $100 and media below $1 - so I'm hopeful.

Comments welcome, of course. "Remember Betamax? SACD? Minidisk? Laser Disk? DVD-Audio? There are more losers than winners in consumer storage formats."