Tag Archives: DVDs and Video-on-Demand

DVDs and Video-on-Demand: Red Queens or Increasing Returns (module 5)

Red Queens and Increasing Returns are terms used to describe economic competitiveness between technologies, businesses, stocks, etc.  The term Red Queens, a reference to the 1946 book Through the Looking Glass by Lewis Carrol, is used to explain the phenomena that occurs when similar products are in direct competition with each other and must constantly put out “the next best thing” just to stay in business (Thornburg, 2013a).  For example, Lowes and Home Depot are two major hardware stores across the country that are in constant battle with one another to gain the upper hand in the market.  The problem is that no matter how hard they try they remain equal competitors.

The term Increasing Returns, on the other hand, is used to explain the process of one product becoming overwhelmingly more popular than the other to the point that one drives the other out of business (Laureate Education, 2014).  An example of increasing returns includes the rise of CDs over cassette tapes and 8-tracks.  As CDs gained popularity, cassettes and 8-track tapes became obsolete, so much so that one of the reoccurring jokes on Facebook refers to a picture of a pencil and a cassette tape and tells readers to “Share” if they know what the relationship is between the two (see picture below).

The current competition between DVDs and video on demand services would seem to be an example of the increasing returns phenomenon.  Most families across the US, and across the world, have at one point or another owned one, if not several, DVDs.  Some may even have a collection of several hundred DVDs that are now either on a shelf or neatly tucked away in a CD case collecting dust as they sit taking up space, rarely getting used.

As internet services are becoming more reliable, and increasing more available in rural areas, more people are turning to video on demand or digital downloads for their entertainment.  According to the Digital Entertainment Group (2014), 2013 sales of electronic sell-thru, subscription streaming, and video-on-demand rentals rose 47%, 32%, and 4.8%, respectively, for a combined overall increase of 23.9% in digital sales from 2012 (see Figure 1).

Figure 1. Watching the Trends. Percent increase or decrease in home entertainment sales from 2012 to 2013 (The Wall Street Journal, 2014).

At the same time, 2012 to 2013, the sales of physical DVDs (including Blu-ray and HD) dropped 8%.  Digital sales continued to increase while DVD sales decreased from 2013 to 2014 with digital sales being up a total of 16% and physical sales being down 10.9% (Digital Entertainment Group, 2015).

If these trends were to continue, it would be easy to believe that over the coming years digital media would eventually become the only means of home entertainment as physical media, such as DVDs, become obsolete.  However, analysts with several different magazines and reviews, including Forbes, Computer World, The Wall Street Journal, and BGR Media, suspect that DVDs will hold their own against the digital market making the DVD/VOD rival more of a Red Queens scenario, at least for now.  According to Dade Hayes of Forbes magazine (2014), there are six reasons why DVDs will remain a competitor.

  1. Physical discs are much more reliable forms of entertainment than streaming via the internet, particularly while traveling, and especially while traveling with children.
  2. Many of the major players in the media market are providing access to digital content with the purchase of a physical disc.
  3. Particular markets, such as workout videos and religious sermons, are more likely to sell if in physical format than digital. “It’s easier to sell an official championship team DVD at supermarkets, gas stations and other retail outlets, for example, than an official championship download” (Hayes, 2014, Specialization favors it).
  4. Neither HD nor digital content can contend with picture quality of Blu-ray DVDs.
  5. Due to both the confusion on how to manage online cloud storage and the cost associated with it, movie and TV series collectors will continue to buy physical discs rather than digital downloads.
  6. At least for now, people seem to be happy with what works right now. “Battered by recession and indifferent to aesthetics or the futuristic potential of cloud storage, [a lot of Americans] are happy to rent cheap discs from Redbox” (For a lot of Americans, it ain’t broke).

Similar arguments have been made by Mearian (2014), Siegal (2014), and Fritz who also adds that “the biggest change is people who would have rented a movie but now, unwilling to wait, are buying it instead” (2014).

McLuhan’s Laws of Media, originally created by Marshall McLuhan, is a series of laws or categories used to analyze emerging technologies.  Considering DVDs and video-on-demand technologies as they relate to the laws of media (extension, obsoletes, retrieves, and reverses) and home entertainment in general we can look at the categories each could be placed.  DVDs could be placed in either the extension or obsoletes category.  Especially with Blu-ray, DVDs have extended the at-home movie experience by enhancing both the picture and sound quality of movies that has yet to be rivaled.  DVDs can also be categorized as a technology that has obsoleted other technologies, such as VHS.  Video-on-demand, on the other hand, is the current future of home entertainment, but, if “pushed to the limit of its potential” (Thornburg, 2013b, p. 2), will open the doors to the next best thing that will eventually push on-demand services out the door.

References

Digital Entertainment Group. (2014). Year-end 2013 Home Entertainment Report. Retrieved from http://degonline.org/wp-content/uploads/2014/02/DEG-Year-End-2013-Home-Entertainment-Report.pdf

Digital Entertainment Group. (2015). 2014 Home Entertainment Spending Final. Retrieved from http://degonline.org/wp-content/uploads/2015/01/2014_-DEG-Home-Entertainment-Spending-Final-External_1-5-2015.pdf

Fritz, B. (2014, January 7). Sales of digital movies surge: Delaying availability of DVDs, rentals nudged consumers. Retrieved from http://www.wsj.com/articles/SB10001424052702304887104579306440621142958

Hayes, D. (2013, July 8). Six reasons why DVDs still make money – and won’t die anytime soon. Retrieved from http://www.forbes.com/sites/dadehayes/2013/07/08/six-reasons-why-dvds-still-make-money-and-wont-die-anytime-soon/

Laureate Education (Producer). (2014a). David Thornburg: Increasing Returns [Video file]. Baltimore, MD: Author.

Mearian, L. (2014, May 2). Bye-bye, Blu-ray: Video-on-demand and streaming options are gaining on you. Retrieved from http://www.computerworld.com/article/2488931/data-center/bye-bye–blu-ray–video-on-demand-and-streaming-options-are-gaining-on-you.html

Siegal, J. (2014, January 8). Digital movie sales are on the rise as rentals fall off the charts. Retrieved from http://bgr.com/2014/01/08/digital-movie-sales-up-47-percent/

Thornburg, D. (2013a). Red queens, butterflies, and strange attractors: Imperfect lenses into emergent technologies. Lake Barrington, IL: Thornburg Center for Space Exploration.

Thornburg, D. (2013b). Emerging technologies and McLuhan’s laws of media. Lake Barrington, IL: Thornburg Center for Space Exploration.

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