Wednesday, October 26, 2005

800 lb Gorillas, continued

A few days ago Ezra Klein linked to this Slate column by Edward Jay Epstein:
"...The HD recording was so clearly visually superior to the DVD that one guest asked: "Why would anyone ever rent a DVD if they could record it in HD?"...

That's why they have created an artificial barrier called the video window, which prevents cable operators and TV stations from showing movies at the same time as their release on DVD. In the case of pay-per-view, the window is 45 days; with subscription cable such as HBO, it is at least four months.... If that barrier were removed, a large part, if not all, of the DVD rental business would disappear....

What has prevented the studios from closing the video window is simple: Wal-Mart. The company, which is the single biggest seller of DVDs, has made it clear that it does not want to compete with home delivery. Wal-Mart executives told Viacom's home entertainment division in no uncertain terms that if any studio does away with the 45-day video window for a single title, they would risk losing access to Wal-Mart's shelf space for all of its titles. Wal-Mart provided studios with more than one-third of their U.S. DVD revenue in 2004. In the face of Wal-Mart's retail power, the studios have not dared (yet) to do away with the protective video window.
I'm confused, though. Video on demand threatens DVD rentals, not sales. So what does Wal-Mart have to lose from closing the DVD window?

I guess one possible answer is that Wal-Mart fears that DVDs really are a one-time experience, and that if people can get a cheap (say, $3-4) watching, people won't buy DVDs at all.

Still, this shows how these companies manage to strangle innovation in it's crib. And people wonder why we don't have electric cars...

1 comment:

Battlepanda said...

It's pretty poor planning to end up buying a 15 dollar DVD one's not planning to watch again just to watch it a few months early.

Oh well, if they don't watch out downloading is going to eat all their lunches while they squabble anyhow.