Sony Blu-ray Player for $40

Blu-ray has taken a long time to catch up with DVD, and as I continue to point out, the disc business appears to be in decline. Is if possible tht Blu-ray could catch up this late in the race?

It could if the premium between it and standard DVD players (which is “good enough” for the majority of consumers) dropped to something approaching “zero.” And apparently now it has.

Sony BDP-BX18 Blu-ray player available on eBay

A seller on eBay is offering refurbished Sony Blu-ray players for $40. I have not tested this model, so I can’t tell you if it’s any good or not, but it appears that the seller has sold many hundreds of them. And it’s no “transportation special” stripped-down model, either. It has Sony Bravia Internet video support and a wired Ethernet connection, a front panel USB port, and an HDMI connector. According to the product description, it was “originally purchased from a major retail store and returned.”

New Blu-ray players still cost more than DVD players, but with deals like this showing up, I’d expect the price differential to soon become meaningless.

Alfred Poor on Video about HDTV

Yesterday, I had the pleasure of discussing HDTV and related topics with David Gewirtz of ZDNet, which he captured on video. We covered a wide range of topics, including OLED HDTVs, 3DTV, screen sizes, Smart TVs, and “direct LED” TVs. The video runs almost a full hour and was made during a Skype video call. (David has invested a lot of time and effort to develop a pretty sophisticated “Skype Studio” for recording interviews like this, and he gets some impressive results.)

So here’s the video if you want to hear more about my latest thoughts about buying HDTVs. If you or someone you know are thinking about getting a new set, you’ll probably find some helpful information here.

If you have any questions, you can email me at alfred@hdtvprofessor.com or send a Twitter message to @AlfredPoor.

DVD and Blu-Ray: Exit Slowly, Stage Left

There was a time when DVDs enjoyed the fastest new technology adoption of all time. The transition from the clumsy, snowy VHS tapes to the sleek little polycarbonate discs was driven by the fact that the digital image looked terrific even on standard definition picture tube televisions. And they look even better on flat panel HDTVs; many people still think that they’re watching high-definition content when they watch a DVD on an HDTV.

But the cycles of rise and fall continue, and it looks as though the days of getting movies on plastic DVD and Blu-ray discs are numbered. My friend and colleague Peter Putman wrote a recent column that cites some sobering statistics. Physical disc rentals dropped 25% in the first half of 2012 compared with the first half of 2011. Kiosk rentals were up by 30%, but brick and mortar rentals fell 40% and subscription rentals fell 48%. (Now do you see why Netflix has been trying to get out of the business?) By comparison, streaming video subscriptions rose 545%. (I repeat; do you see why Netflix wants to get out of renting discs?)

Now, I know that there are few options that give you a way to stream high-quality HD content at this point, so all you afficianados do not need to write and tell me about how Blu-ray is way better than streamed video. We’re talking here about the mass market, and many consumers are perfectly happy with DVD quality on their televisions, so most streamed content falls into the “good enough” category. And I also believe that there will be more and more true HD content available to stream over the Internet as the subscriber base increases. (We’re also going to see new compression standards that should help keep the bandwidth requirements down for the higher resolutions.)

The take-away here is that DVD and Blu-ray discs are on the down side of the curve, and I don’t see anything on the horizon that might change that trend.

More Streaming Time on U.S. TVs

A new white paper from Parks Associates reports on the shifting trends in home entertainment. One of the most telling statistics in this document is that the average broadband user in U.S. households now watches 1.6 hours a weeek of Internet video on their television. Not on their notebook or smartphone or tablet or desktop computer: on their television!

When you consider that four out of five homes now have broadband service, that includes a whole lot of people who don’t a Netflix from a KitKat. So the fact that on average we’re watching this much Internet content on our televisions strikes me as being pretty significant. It’s a trend that I expect to continue to grow, and grow rapidly.

Parks also makes a number of recommendations, the most important of which is this one:

Services must offer a subscription or advertising-supported model.

The U.S. connected consumer does not want to get nickeled and dimed when watching television and movie content at home. We didn’t like paying for phone services by the minute or the text character, and the phone companies responded with flat rate options. There’s no reason to expect that we’d react any differently to getting our entertainment content. That’s why the “all you can eat” plans from Netflix and Hulu Plus are so much more successful than the a la carte rental (or purchase) plans offered by so many other services such as Cinemanow or Vudu. So if you’re going to get money from the consumers, get it as a subscription.

Or get it from advertisers; just don’t expect the traditional model of insert commercial interruptions to work much longer. Creative ways to effectively connect a viewing experience to a relevant brand message are needed if commercial advertising for video is to survice.

From Blu-ray players to video game consoles, from low-cost network media players to Smart TVs, more and more devices in the living room are making it easier to bring content from the Internet to the largest screen in the home. Get ready to watch those hours-viewed-per-week stats climb!

Cable Services Dangle Bonuses

If this keeps up, you’ll be getting a new toaster when you upgrade your cable subscription.

Cablevision announced on Friday that members of its Optimum Rewards loyalty program now get a new perk: discounted car rentals from Hertz. The deal also offers free rental upgrades and free membership in Hertz Gold Plus Rewards.

Wow, when I sit down in front of my television, I often find myself thinking about renting a car. Not. I’m not saying that there isn’t value in this new partnership between the two partnerships, but I think it is a strong indication of just how lost the cable services are in general these days. Cablevision is in a particularly difficult situation in its New York City metropolitan market, because it faces competition on a number of fronts, and not just satellite services. According to The Bridge, Cablevision’s subscriber list has been slowly but steadily dropping since the fourth quarter of 2010. Most large cable services show similar results.

The cable services have to figure out how to deliver more perceived value to their subscribers while charging more for the same service due to increased retransmission fees, infrastructure maintenance, and other rising costs. They have to fight off the pressure for a la carte pricing of their enormous inventory of linear programming channels, while finding a way to get video on demand (VOD) offerings to compete with online streaming and DVD rental services. They certainly have a difficult task on their hands, but I’m not clear that putting the subscriber in the driver’s seat is the solution.

Best Buy Breaks More Bad News

The fourth quarter of every year for consumer electronic retailers is like the rainy season for farmers; it’s a make-or-break time of year when you have to compensate for the slower sales from the other three quarters. So it was like the  Dust Bowl when Best Buy posted a $1.7 billion loss. This is not quite as bad as it might seem, because their fiscal year ends on March 3, so this only includes December’s sales from last year. Also, the bulk of the loss was due to one-time charges for items including its mobile phone business and the closure of its big box stores in the United Kingdom.

All the same, $1.7 billion is a big number, and the company has announced plans to deal with the loss. It will close 50 of its United States big box stores this year and cut about 400 additional jobs. In spite of these $800 million cuts, the company expects to increase its presence by opening more stores with much smaller footprints.

Clearly, the landscape for consumer electronics retailing is changing in this country. There appear to be more forces at work than just the down economy, as the Internet gives consumers more places to shop and to compare prices. Best Buy is trying to survive these shifts, but looking at the recent history of retailers such as Circuit City, CompUSA, and 6th Ave Electronics suggests that this could be a challenging task.

Bye-bye, Polycarbonate Discs!

The writing is on the wall. Or perhaps it is just encoded in microscopic pits on a polycarbonate disc. But wherever you choose to read the signs, it is clear that physical distribution of entertainment media is on the way out. It has happened in the music industry, and we appear to be reaching a tipping point for movies as well.

New research by IHS Screen Digest Research predicts that in 2012, U.S. consumers will pay to watch more movies online than they will watch movies recorded on DVD and Blu-ray discs. Note that this research covers the money paid for legal downloads of this content. The forecast is that we will watch 3.4 billion streaming “views” this year, compared with 2.4 billion viewings of movies on discs. And their forecasts call for the online views to continue to grow rapidly while the disc views continue to decline.

IHS also makes an interesting point. Even though streaming views will dominate in 2012, the physical discs will continue to generate more revenue. The streaming movies are expected to earn just $1.7 billion. (Forgive me; did I really write “just $1.7 billion”? That is still more than the annual GDP of Belize! My apologies.) In contrast, the physical discs will likely generate $11.1 billion this year.

This may seem like a wildly lopsided comparison; who wouldn’t want 6.5 times more revenue? Keep in mind, however, that the marginal cost — the cost to produce the next copy of a product — is nearly zero for the streaming version. The physical version has a disc, packaging, handling, and shipping that go against that extra money. So as the market matures and the online movie services can further streamline their operations and reduce costs, it is possible that they will make more money even though consumers pay about $.50 per streaming video on average, compared with an average $4.72 for the physical discs.

From where I sit, I think the Netflix decision to move away from physical discs and toward streaming services was the right choice at the right time. These numbers appear to support that decision.

Redbox Rising

The physical DVD is dead; long live streaming!

That’s the conventional wisdom, but I’ve got a dollar that says rumors of the DVD’s death are premature. Why a dollar? Because that’s what it costs to rent a DVD from one of those big red vending machines that you see everywhere from Walmart to McDonalds (not to mention the two just beyond the cash registers at our local grocery store).

Yes, I’m talking about Redbox, which is the other jaw of the vice that — along with Netflix on the other side — squeezed Blockbuster out of existence. Not only is the company succeeding with $1 DVD rentals, it also now offers Blu-ray discs overnight for just $1.50. Is the strategy working? Consider two breaking news items, and you be the judge.

The most recent announcement is that Redbox will be acquiring the assets from NCR’s entertainment division, which includes the kiosks and DVD inventory of NCR’s ill-fated movie rental venture with Blockbuster. Redbox is doubling down on the DVD rental business to the tune of $100 million, according to some sources.

This announcement comes hard on the heels of its press release with Verizon. The two companies are launching a joint venture that will combine disc rentals with new video on-demand streaming and download services. In other words, what Netflix has chosen to rent asunder, Redbox and Verizon plan to offer together. And if there were some players who could have the leverage to compete with Netflix, it would be these two partners.

According to the press release, the products to be released later this year will be designed to offer “subscription services and more in an easy-to-use, flexible and affordable service that will allow all consumers across the U.S. to enjoy the new and popular entertainment they want, whenever they choose, using the media and devices they prefer.” Hmmm, a multi-modal all-you-can eat service at a flat rate? Do you think that consumers might be interested in something like that? I do. And when you consider that nearly seven out of every 10 people in the U.S. already live within a five minute drive of a Redbox kiosk, they’ve got enough bots on the ground to make this assault work.

NetFlix Posts Good News

In a letter to shareholders about 4th Quarter 2011 results, Netflix CEO Reed Hastings reported good news and bad news. As I read the letter, it looks to me that while the company may have made some very public missteps along the way, there is no question in my mind that the corporate change of direction was a good choice and that it is already paying dividends.

The big news for many people is that the online streaming subscribers now outnumber the DVD-in-the-mail subscribers almost two t0 one. Netflix ended the year with nearly 22 million streaming subscribers and a little more than 11 million DVD subscribers. The DVD users still produce the bulk of the profits, however, $194 million for the quarter compared with just $52 million for the streaming. Still, the company had hoped that streaming would account for as much as 8% of the company profits by the end of last year; it turns out that they exceeded that goal with almost 11% of profits coming from streaming.

Netflix has turned the corner and is not looking back. They see that the days are numbered for DVD rentals; “As expected, DVD members declined this quarter to 11.2 million due to the continued impact of the price changes, as hybrid members continued to predominantly choose a streaming-only plan over a higher priced hybrid plan.” The consumers are voting with their dollars, and moving from disc to broadband delivery. One interesting point is that they see the existing television subscription services as their main competition going forward. “Just as broadcast networks have substantially transformed themselves into cable channels over the last twenty years, both broadcast and cable networks will effectively also become Internet networks like Netflix. As a pure-play we have many advantages, however, just as cable did over broadcast.” Netflix clearly has a strong head start over the others in streaming video, and their commitment to expanding their catalog of content is evidence of their will to compete. They lost the Starz content, but they have already contracted with studios to license many of the same titles directly. And they’re even launching their own original production of content, including a resurrection of the popular series “Arrested Development.”

The company’s future success is anything but guaranteed, but it clearly remains a force to be reckoned with in the market. The transition from in-the-mail to Internet has not been without its bumps, for certain, but Netflix looks strong and will play a role in shaping the future of television.

Google TV Lives!

After last year’s disappearing act at CES 2011, Google TV came back strong at CES 2012. Google announced partnerships with major players including Sony, LG, VIZIO, and newcomer to the Smart TV market, Lenovo. (Logitech was conspicuously absent from the list.) Consumer demand for “over-the-top” streaming video over the Internet is growing by leaps and bounds, and Google is certainly in a position to manage and deliver the oceans of information required to track and access all the online video content that is available. Having the largest search engine and YouTube certainly helps their position.

Sony's new network media player is powered by Google TV.

It also helps to have some top tier brands in your corner. One of the most interesting announcements came from Sony. The company announced two new products with Google TV. The NSZ-GP9 Blu-ray player provides unprecedented connectivity. More surprising for me, however, was the NSZ-GS7 which is a network media player powered by Google TV. Now you can get a Sony that makes your existing dumb TV a Smart TV. (Or if you already have a Smart TV, it can make it smarter.) I take it as a strong sign that Sony feels that there is a market for a retrofit device such as this.

Now here’s the good, the bad, and the ugly: it’s still all about the remote. The press and analysts piled on when the original Google TV products came out, harping on the clunky QWERTY keyboards that were built into the remote. This generation is better, in that the remote has a touchpad to make mouse-like cursor control easier. The bad is that when you flip the remote over, there is the backlit QWERTY keyboard staring back at you. And the ugly is that no matter how you slice it, any remote that is large enough to hold a full keyboard is going to awkwardly large. I am reconciled to the fact that accessing streaming video on the Internet inevitably requires some text entry at some point, but I’m not convinced that having the keyboard with you at all times is necessarily the right answer.

I don’t know what the right answer is; it probably involves some combination of speech recognition, gesture or motion control, a keyboard, and a lot of intelligence the device to make good judgments about what I’m trying to find. But I’m encouraged that Google TV has lived to see another revision, and I expect that consumer interest in the platform will grow when these Sony products ship this summer.