Thursday, October 16, 2008

Digital Distribution

By Ricardo Blanco

Welcome to E-commerce and Video distribution, a series of blogs that will serve to inform and foster discussion of the various methods, platforms and issues regarding the impact that e-commerce has had on physical and digital distribution of online download and streaming video media. In this installment we will discuss the download and streaming mediums of digital video distribution (at a non technical level) and how the internet and e-commerce have been embraced to optimize their distribution.

In the initial installment of this blog series physical mediums of video distribution were discussed, also introduced were the newer means of digital media distribution. However reluctant older generations may be to abandon their traditional television sets, DVDs and higher quality Blu-ray discs, younger generations have already largely left them behind; opting for the instantaneous access to content that the internet provides (3). The Hollywood community, television and cable networks, independent film producers, distributors and innovative service providing companies have become aware of this trend and have already(in varying degrees) begun to form business models that incorporate, strategize, invest in, and map out the transition to this new frontier of video distribution. Though this new medium clearly has already demonstrated amazing promise, it is also plagued with the same obstacles that the emerging physical mediums have faced. That is: format disputes, content availability, concerns of security of content rights and how to manage those rights, improving quality, monetization of content distribution and advertisement, and as previously mentioned technology adoption and convergence issues(1, 4).

Digital distribution is the dissemination of content over the internet in the form of products or services, such as software, video games, books, music, television programs, and films(1). Content such as this is easily digitized and cost effectively transferable over the internet and other networks. Digital distribution has increased in popularity and accessibility since the turn of the century, due largely in part to the burgeoning consumer availability of broadband connections (1). Of course underscoring this growing popularity is the improvement in PC technologies. Particularly innovations that have lead to the PC becoming an entertainment platform such as increased processing power, connectivity to a variety of displays and increased compression and decompression of high quality video and audio (4).

Video on Demand, Digital Downloads and Streaming Video

Video on demand (VOD) is the term used to describe means for online and cable/satellite video distribution that allows users to access content at their convenience. As early as 1994, cable companies and the first generation of online digital distribution were set into motion. Content can be purchased on a pay-per-view, micropayment basis and has increasingly become free in many instances. In addition to the convenience of anytime access, the user is provided with familiar functionality such as pause, fast forward and rewind options. Lending to its attractiveness, as this functionality is typically not available with live TV. This emerging industry is quickly becoming saturated with providers yet as with the physical mediums, no clear standardization exists among the competition. While the instantaneous access to plug in players is available, and various set top converter boxes have been manufactured, those who are still turned off by the fact that they must view this content on their PC are holding out for a standardized format(5).

VOD systems either allow users to download content directly to their PC or compatible set top box for later play back, or allow users to stream video live. Downloads have their benefits and disadvantages. For one, typically a higher quality product is obtained and in some instances can be transferred to physical mediums. The downside is the often long periods of time required for downloading the content, and the amount of space that each download requires. Streaming video is a growing method for acquiring multimedia formats quickly, particularly for users who do not have fast enough connections, the patience to download video content in a timely fashion, or the required memory space. Streaming is a technique for transferring data so that it is processed by the receiving application as a steady stream of data. Streaming utilizes a buffer that collects and saves excess data and steadily streams it to a plug in player application that can convert the data to sound and pictures before the entire file is downloaded (2).

For the artist, independent film producer and distributor, the direct nature of the internet has allowed some to bypass the entrenched traditional publishing industry. Providing the opportunity for smaller and largely unfunded artist to implement and in some cases develop new business models to distribute their content. The artist, independent producer or distributor can get their work or product into the public sphere with relatively little cost and despite a lack of industry connections that have traditionally dominated the market. Clearly the obvious advantage of utilizing the established publishing industry is that they have established avenues and capital to fund the creation, as well as the means to advertise and distribute work to retail outlets on behalf of the artist. However, these traditional chains do have some draw backs, for example limited acceptance of artists and genres, decreased profitability, and loss of control over the direction and creativity of content produced. Digital distribution, the Internet, and e-commerce, have opened up the same distribution channels that major publishers and distributors utilize, while also providing new marketing and promotional services. Furthermore, reduced manufacturing costs of media content has the potential of leading to lower prices for the consumer, increased revenues for the artist and subsequently increased freedom of artistic expression.

From consumer and business perspectives, digital distribution has many advantages. One such advantage is the global availability of content (however existing content rights issues limit this international availability). For the consumer, access is granted as long as he or she has an active and sufficient internet connection. Time is no longer an issue, as content is directly transferred at the purchaser’s convenience. For the traditional brink and mortar shopper, time taken and resources needed to obtain products, as well as limited local availability are no longer issues. For the ever growing populace of internet shoppers, time spent in anticipation for the product to arrive (though this may be relative) and the related shipping costs for those products are eliminated. For businesses, costs related to producing, shipping, housing and protecting physical copies of the work are greatly reduced. Another strength of digital distribution is that large back catalog's can be maintained and easily managed as they do not require the immense warehouse, physical shelf space and resources that they would require in traditional brick and mortar retail stores, more innovative click and mortar retailers or solely internet based operations (1). Furthermore, given the nature of the Internet, content is introduced and aimed at a substantially larger market with 24 hour a day, 7 day a week, Year long access. These strengths provide a definite advantage over competition that solely relies on costly constraint of dealing with physical forms of media and who do not embrace the new digital distribution mediums. However as we will later learn, there is substantial reluctance in the industry to promote digital distribution that will in anyway minimize the revenue generated from advertisement and direct sales of video content via physical playback and television distribution.

Digital Distribution and Marketing

The increased popularity and availability of streaming and downloadable content, such as television shows and viral videos, has created a medium or better yet an incentive for advertisers to reach customers who routinely view such content. Undoubtedly for the readers of this blog, the notion that failure to quickly establish standardized formats and platforms from which to distribute and market videos, has created long and costly “format wars” that stifle their penetration into the marketplace and ultimate success, is a well ingrained concept. As a report released by LiveRail indicates, the multitude of formats, video players, reporting methods, and even lack of consensus on terminology in the industry of video advertising has created an environment of confusion that has also stifled the effectiveness and thus the confidence of online advertisers; having a detrimental impact on the ease that they can distribute their content among the various content service providers and vice versa. Ultimately reducing the motivation of content providers to allow free access of to their material, or for that matter for a fee. Another issue, which I will discuss, is the reluctance of many advertisers and networks to fully embrace the potential of online video advertising, particularly with streaming video content, due to the indication of a widespread consumer preference for viewing content on their television sets. In addition is the time honored day/time slots with specific relevancy and demographics that advertisers have traditionally reached and relied upon during normal television cable broadcast times.

A great example of TV preference over online, is that of the 2008 Olympics provided by LiveRail’s report. Interestingly, while they did procure 1.2 billion web page views, this was comparable to sites like Yahoo Sports. Though NBC took it upon themselves to generate buzz about their web coverage of the Olympics, they also feared they would harm their attractiveness toward advertisers and the revenues they could generate via traditional broadcast mediums and so limited the availability of their web content. Undoubtedly hindering the advertising monetization that they could have generated had they not do so. This was quite likely an unwarranted precaution. As LiveRail mentions, surveys of viewer’s usage and preferences would indicate otherwise. Other sources suggest that preference for viewing content on their larger television sets will remain despite the availability of video on demand via web and other sources. One projection estimates that monthly television watching time will remain unchanged and only be augmented by an addition of 38% or nearly two additional hours of viewing time online and via other video on demand sources by 2012.

Although stated earlier as an unwarranted precaution, it is clear that most of network and cable TV broadcasters are reliant on advertising dollars and sales of specific time slots to be viewed on traditional mediums to produce their revenues. Hence they do not want to endanger their longstanding and proven business models. They have come to rely on certain demographics watching on certain days and at certain times and charge for these slots accordingly. There are also time relevant advertisements that attach themselves to certain shows, which attempt to attract customers during normal business hours, sales times, or even the ads to get you into the open till 2am burger joints. It has been a big fear that these ads will not have there relevance if a video can then be viewed at any time the viewer wishes to watch them. It appears that advertisers however have not considered the potential to more efficiently target perspective customers using the data collection tools that things such as individual preferences and search histories provide. They also fear that given the option, viewers will opt to skip advertisements if given the choice. This is simply not the case if the figures presented by LiveRail are accurate. They report that average completion rate of 15 and 30 second in stream pre rolls are 79 and 84%. To clarify stream rolls are advertisements that appear during streaming video content, usually pre (before) mid (during) or post (following). Given these completion rates and the potential there is to produce advertising revenues and as formats become more standardized, advertisements will increase and almost every streaming video will have some sort of advertisement attached to it. The industry will soon reach critical mass as online video advertisement becomes a more effective and efficient medium for reaching a vast number of people that may have been missed on TV or possibly which can be reached on TV and online and whatever other medium they use to advertise. Interestingly Youtube has announced that it will begin to air post roll adds on some of its videos and I am sure others will follow. The finding as reported by LiveRail, that only 20.9% of streaming videos is being monetized by some sort of advertisement will likely increase very soon. This may be specific to their content but they have found that pre rolls and overlays do turn off the viewer and reduce their potential of being viewed, however viewers are more likely to view post rolls.


Most believe that electronic distribution will and to some extent has become a viable and mainstream option for media distribution and acquisition. However the amazing penetration that the DVD market (and likely the Blu-ray market) has had and continues to have in US households cannot be ignored. It is also very evident that digital distribution and its monetization is not immune to the so called format wars and their influence on consumer behavior as well as the rate at which victorious formats and resultant products penetrate the market. It is clear that regardless of format or medium, the power that the internet and e-commerce provide in capitalizing on the video distribution industry is immense. As with other enterprises the success of online digital video distribution is dependent on standardization, leadership and business models that absorb lessons in innovation, in letting the marketplace determine what works and doesn’t work as well as what it wants. The ability to incorporate, anticipate and fearlessly confront technological change in an ever changing industry is essential to the survival of a video distribution company.

Thank you for reading this second installment of the E-commerce and Video Distribution blog series. I hope that it has been and enjoyable experience and that it has informed and fostered some points for discussion. Please feel free to comment and provide additional or updated information, as your participation is crucial for the enlightenment of the author and the readership. Stay tuned to the next installment that will discuss, digital rights management and piracy issues.


(1) Digital distribution. From Wikipedia, the free encyclopedia.
(2) Streaming. Last modified: Thursday, March 28, 2002
(3) Digital Downloads Are Not About To Kill Blu-Ray. Duncan Riley. TechCrunch. February 17, 2008.
(4) Digital Media Distribution Opportunities for the Film Industry. Windows Media Whitepaper. 2002.
(5) Video on Demand. From Wikipedia, the free encyclopedia.

Friday, September 26, 2008

E-comercio y Video Distribución:
DVD y Blu-ray

Spanish version
please browse blog archive or scroll down to view English version, similarly titled E-commerce and Video Distribution: DVD and Blu-ray

Autor: Ricardo Blanco

Bienvenidos a E-comercio y video distribución, una serie de blogs que servirán para informar y fomentar la discusión de los varios métodos, plataformas y temas con respecto al impacto del comercio electronico en el video distribución física, descarga en línea y la distribución de streaming video medios sobre demanda. En esta instalación inicial discutiremos los medios físicos para distribución de video (no en un nivel técnico) y la forma en que la Internet y el comercio electrónico se han adoptado para optimizar la distribución de los medios de vídeo.

El e-comercio o comercio electrónico, ha demostrado que es un recurso eficace y creciente para la distribución del contenido video. Según un reporte de la búsqueda de la Internet y de los hábitos en línea de las compras, lanzado por iCrossing en 2007, demuestra que 39% de adultos norte americanos en línea hacen las compras en línea, una fuerte indicación que las compras en línea se han convertido en una actividad inculcada del consumidor norte americano. Más importantemente para el asunto de este blog, de esta actividad de compras crecientes, DVDs, libros, y música continúen siendo los artículos más extensamente comprados en línea, sin importar los demographicos de la edad, del sexo o de la ganancia (1).


El DVD es un formato de almacenamiento óptico, utilizado principalmente para el vídeo y para guradar datos. Interesante nunca se ha establecido claramente si el acrónimo DVD significa Disco Versátil de Digital, Disco de Video Digital, o ni uno ni otro. Sin embargo foros posteriores han indicado que el Disco Versátil Digital es el nombre verdadero. El uso popular de la palabra refiere típicamente al DVD como una película en un disco brillante similar a un CD. El lanzamiento del DVD ha sido pregonado como el producto más éxitoso en la historia Norte Americana. Especificamente, Barry McCarthy, CFO de Netflix, describe el DVD como el producto más acertado en la historia de los Estados Unidos Americanos, determinado por la cantidad de crecimiento medido por el número de unidades poseídas en hogares individuales. Posiblemente usted en este momento estas considerando las apiladas DVD cajas en su hogar (muchos de quales comprastes en línea) en determinando los meritos de esta declaración. Ademas en solamente 5 años el DVD alcancanzo el 50% entrada a los hogares de los E.E.U.U.(2).

¿Por qué logró el DVD tanto éxito? El DVD proporcionó una plataforma abierta y estándar para el aparato de lectura y la producción, significando que cada compañía podría utilizar el mismo estándar en la fabricación y la publicidad. Esta estandardización adelantada es considerada por muchos, la razón suprema del éxito rápido de la plataforma de DVD. Recuerdase que las costosas VHS contra BETAMAX y más recientemente las de HD-DVD contra Blu-ray guerras de formato eran y continuarán siendo perjudiciales a la progresión rápida y a la disponibilidad extensa de más nuevas tecnologías. En 1993 dos competidores se presentaron en la escena con nuevas sistemas de disco ópticos que ambos utilizaban el video compresión mejorada del MPEG 2. Anticipando un inminente y problemático guerra formatica entre los dos reveladores ópticos, expertos de los formatos del disco, de la industria del ordenador representando muchas compañías de fabricación de computadoras, formaron un raro consorcio conocido como el Technical Working Group o TWG. El TWG amenazaron a boicotear a los ambos reveladores del formato, ejerciéndoles presión para desarrollar un solo almacenaje y formato diseña. Así nació la plataforma estandardizada del DVD (3).

Como otros formatos de distribución nuevamente lanzados (Blu-ray, directa descarga digital y streaming video), la dominación del DVD formato no era completa; faltaba el video contenido substancial para distribuir. La “comunidad de Hollywood,” los dueños de las derechas al contenido de las películas, eran renuente a liberar y al lanzamiento de contenido a otro formato hasta que podrían ser garantizados que precauciones estaban establecidos para luchar contra piratería y las pérdidas ilegales de rédito. Para enfrentar estas vacilaciones un consorcio de representantes individuales de la película, consumidores electrónicos, grabación y las industrias del ordenador formaron el grupo de Copy Protection Technology Working Group o CPTWG. En octubre de 1996 CPTWG llegó a un acuerdo y estableció una sistema de revolveracíon que redujo preocupaciones y en 1997 reproductores y títulos estaban disponible para la venta en el mercado E.E.U.U. Algunos de los estudios de Hollywood seguían siendo vacilantes a adoptar el formato de DVD, y si limitaron el éxito inmediato del DVD, pero pronto besaron el azote y también beneficiaron del revolucionario método de video distribución. Pronto veremos que las figuras iniciales de las ventas del formato de DVD sobrepasaron el éxito de las tecnologías mejoradas de los formatos siguientes HD-DVD y Blu-ray, sin importar los últimos estudios renuentes (4).

En el año 1997, las ventas del minorista de reproductores de DVD y los títulos video de DVD habían comenzado. 1998 demostro ser más acertado con la disponibilidad de aproximadamente 2.500 títulos y la venta de 23 millones reproductores. Además de ventas de DVD el alquiler del DVD comenzado por Blockbuster prospero. Alquileres semanales del DVD sobrepasaron los de VHS en 2003. En muchos casos, el rédito generados por ventas de el DVD había excedido las ventas de la taquilla. Consiguientemente, la venta del DVD se convertío en una parte extremadamente lucrativa de la industria, una que lucharían para proteger y para ampliar. Ayudado por reproductores progresivos comprables y muchos título con precios más baratos, el DVD sigue siendo la forma más dominante de video distribución por todo el mundo (3.4).

El e-comercio ha revolucionado la distribución y el anuncio del DVD en una variedad de maneras. Según lo mencionado anterior, el DVD representa parte grande de la mayoría de ventas en línea. Los minoristas en línea tales como y otros ofrecen selecciones amplias de nuevos y usados títulos de una variedad de vendedores con precios competitivos. Sin importar precios adicionales del envío, la conveniencia, la selección y los precios competitivos han hecho los DVD ventas en la Internet una empresa extremadamente acertada. La Internet ha demostrado que es un medio rentable y generalizada. Utilizada para el anuncio de la información sobre video lanzamiento y de disponibilidad, que influyen ventas en línea y tradicionales minoristas. Muchos tradicionales comerciantes pequeños y grandes del ladrillo y mortero también se habían beneficiado del e-comercio. Ofreciendo la mayor parte de sus almacenan selecciones y inventario adicional en línea con varios métodos de envío y hasta la opción de recoger compras en tiendas locales. La Internet también ha proporcionado los distribuidores de cine principal y independiente, la oportunidad de distribuir su contenido directamente al consumidor. Además los bajos gastos generales y amplia accesibilidad que la Internet y el comercio electrónico ofrece sobre todo han hecho un modelo de distribución viable para los pequeños productores y distribuidores independientes.

la industria de alquiler video ha sido revolucionado por el e-comercio. Netflix una compañía de alquiler en línea que envia DVD selecciones por correo, es un ejemplo excepcional de esta nueva industria. Netflix jacta un catálogo que contiene 95.000 títulos y un catálogo más limitado de títulos disponibles para ver en línea. Con este inventario grande (uno que los alquiler minoristas tradicionales no podrían soportar), el 70% de su negocio está en las películas viejas del catálogo, donde almacenes tradicionales alquilen como 90% nuevas versiones de películas y ofrecen una selección limitada de las películas viejas. Su capacidad de proporcionar una manera eficiente de buscar títulos en su catálogo enorme en línea (también una capacidad que la mayoría del ladrillo y mortero tiendas no podrían acomodar eficientemente) y sus métodos innovadores para vincular a las personas con videos que podrían querer, son claves de su éxito y profundos ejemplos de los efectos que la Internet tiene en DVD y otros formato de vídeo distribución. McCarthy claramente considera que la distribución electrónica de vídeo es el futuro de Netflix y la industria, proporcionando una manera más eficiente para entregar los medios de comunicación y una manera de ampliar en los países donde la infraestructura postal es insuficiente. La compañía ha anticipado este cambio en los medios de comunicación y distribución, y ha invertido desde el principio de su desarrollo (2). Pero no van a abandonar el DVD en cualquier momento en el futuro inmediato y también han comenzado a distribuir el siguiente y mejorado video formato físico, el Blu-ray.


El sucesor del DVD, por lo menos en el reino físico de la distribución video, es el disco del Blu-ray. En 1998 se desarrollo la televisione de alta definición en el mercado del consumidor. Sin embargo no había método ampliamente disponible para reproducir o para grabar el contenido de alta definición. Esto cambio con la utilización de los láser diodos azules, en comparación con los láser diodos rojos usados con el DVD. rayo lásers del color azul tienen una longitud de onda mucho más corta que permita el almacenamiento de más datos y archivos de vídeo más grandes en los discos ópticos que comparten las mismas dimensiones del DVD. Dos formatos principales para esta nueva tecnología surgieron, y después de un costoso y inhibiendo guerra de formato los Blu-ray discos emergieron victorioso sobre su competición, el HD-DVD. Lamentablemente, a diferencia del la mediación en el formato del DVD, los intentos para evitar la guerra formato de alta definición demostro ser inútil como ningunos de las campos estaban dispuestos a sacrificar los ingresos producidos por las regalías (5,6).

Aunque el HD DVD era el primer campo que alcanzp el mercado, no pudo ganar un equilibrio en el mercado. Varios factores contribuyeron al triunfo del Blu-ray. Un tal factor era el lanzamiento de la consola videojuego de PlayStation 3 por Sony, que utilizó el disco del Blu-ray. Otro factor citado es la adopción de la sistema de contra-copia de BD+ que atraído muchos sostenedores de las derechas del video contenido al formato. En Enero de 2007 el formato Blu-ray había vendido más unidades que el formato HD DVD. Una reacción en cadena de acontecimientos, incluyendo las retiradas de proveedores de contenidos y distribuidores a nivel nacional en E.E.U.U, incitando Toshiba a cesar la producción de los productos de HD DVD en febrero de 2008, finalmente terminando la guerra de formato alta definición. Con la guerra de formato terminada todos los principales estudios cinematográficos adoptaron la tecnología Blu-ray (5.6).

Esta guerra de formato claramente obstaculizó ventas y la aceptación de los formatos de alta definición. Es evidente que los consumidores no eran dispuestos invertir en un sistema que tenía un futuro cuestionable. Las investigacións de Nielson Media Research y de Adams Media Research divulgan que 16.3 millones de estándares DVDs fueron vendidos en los primeros dos años del lanzamiento con respecto a 8.3 millones de Blu-ray y de HD DVD combinados en 2006 y 2007. Los analistas también indican que el vídeo de alta definición sólo se puede ver en los televisores de alta definición o HDTV, y que el número de los HDTV en hogares era 26.5 million comparado con 100 millón televisions de definición nórmale, claramente influyó las ventas de vídeo de alta definición. Además, mucha gente no ve tanto diferencia entre la calidad estándar y de alta definición, por lo menos cuando está comparada a la diferencia entre VHS y DVD estándar. En el lado positivo de las cosas, analistas sugieren que con un solo formato Blu-ray ventas probablemente aumentarán (7).

El nuevo y mejorado formato del Blu-ray probablemente tendrá el mismo éxito que el DVD tuvo en el reino del e-comercio; particularmente si los precios de los televisoins de alta definición y de los reproductores del Blu-ray así como película títulos continúan disminuyendo. Las compañías de video alquiler han plenamente aceptado el más nuevo formato y si solamente utilizan su existente modelo de negocio, ladrillo y mortero así como en línea, podran contar con el mismo resultado. Sin duda, la tecnología del Blu-ray luego tarde a la industria, y está cada vez más a riesgo de ser pasado por la creciente disponibilidad de aumento de videos sobre demanda como descargas digitales y streaming videos. Duncan Riley de Tech Crunch explica porqué no sucederá ésto en caulquier momento pronto. Él dice que los viejos hábitos mueren difícilmente, y aunque las generacións jóvenes ahora están acostumbrados a las transferencias directas digitales, substanciales númeroes de generaciones están acostumbrados a los formatos físicos. A pesar de que si mira un fin a la preferencia de formatos físicos, se considera que es por lo menos 5 a 10 años en el futuro (8). Otro factor supportando la preferencia física de los videos DVD y Blu-ray, es que muchos desean mirar el contenido en sus televisiones. La computadora proporciona una experiencia personal, mientras que una pantalla más grande de la televisión tiene más claridad y potencial para una interacción social. Uno debe también considerar las inversiones substanciales que las personas han hecho en los sistemas caseros del teatro de definiciones altas y estándares. Si existen alternativos que permiten ver descargas digitales y contenido streaming en los televisores. A pesar de las muchas alternativas que hay, muchos de ellos no comparten un formato estándar y una vez más tenemos la falta de confianza de los consumidores en un producto que sólo funciona con determinados contenidos y que tiene un incierto futuro. Por estas razones, es probable que Blu-ray seguirá, sin embargo tambein probablemente podría ser el último gran formato de medios físicos (8).


La mayoría cree que la distribución electrónica se convertirá en una opción viable y de corriente para los medios distribución y adquisición. Sin embargo la penetración asombrosa que el mercado de DVD (y egualmente el mercado del Blu-ray) ha tenido y continuara tener en hogares de los E.E.U.U. no puede ser ignorado. Es también muy evidente que las guerras del formato han influenciado el comportamiento del consumidor así como el ritmo en cual los formatos victoriosos y los productos resultantes penetran el mercado. Está claro que sin importar formato o medio, el potencial que la Internet y el e-comercio proporcionan en la capitalización de la industria de video distribución es inmenso. El éxito de la distribución video física y digital en línea es dependiente en el liderazgo, dirección, en los modelos de negocio que absorben lecciones en la innovación, y en dejar el mercado determinar qué trabaja y no trabaja tan bien como qué desea. La capacidad de incorporar, anticipar y sin temor enfrenta el cambio tecnológico en una industria que siempre se esta cambiando, es esencial para la supervivencia de un video distribución compañía.

Gracias por leer la instalación inicial de E-comercio y Vídeo Distribución blog serie. Espero que haya sido una experiencia agradable y que ha informado y fomentado algunos puntos de discusión y debate. Por favor, siéntase libre de hacer comentarios y prestar información adicional y actualizada. Su participación es crucial para el esclarecimiento de el autor, los lectores y mas importante, de usted. Estén atentos a la próxima instalación de la serie donde se discutirá el comercio electrónico y video distribución de contenido sobre demanda; directas descargas digitales y streaming video.


(1). How America Searches: Online Retail Survey conducted by Opinion Research Corporation. report written by iCrossing September 2007. www.i crossing. Com
(2). Barry McCarthy, Chief Financial Officer of Netflix. Sunday, January 13, 2008. iinnovate, A Podcast by Students as Harvard’s Business and Design School.
(3). DVD From Wikipedia, the free encyclopedia.
(4). Digital America. 2008. Consumer Electronics Association.
(5). Blu-ray Disc From Wikipedia, the free encyclopedia.
(6). Format war From Wikipedia, the free encyclopedia.
(7). High-Definition Sales Far Behind Standard DVD's First Two Years. February 20th, 2008. Movieweb.

(8). Digital Downloads Are Not About To Kill Blu-Ray by Duncan Riley. Tech Crunch on February 17, 2008.

Thursday, September 18, 2008

E-commerce and Video Distribution:
DVD and Blu-ray

By Ricardo Blanco

Welcome to E-commerce and Video distribution, a series of blogs that will serve to inform and foster discussion of the various methods, platforms and issues regarding the impact that e-commerce has had on physical, online download and streaming video media distribution. In this initial installment we will discuss the various mediums for physical video distribution (at a non technical level) and how the internet and e-commerce have been embraced to optimize video media distribution.

E-commerce has proven to be an effective and ever growing means for distribution of video content. According to a report of internet search and online shopping habits, released by iCrossing in 2007, 39% of online American adults make online purchases, a strong indication that online shopping has become an ingrained activity of the American Consumer. More importantly for the topic of this blog, of this increased shopping activity, DVDs, books, and music continue to be the most widely purchased items online regardless of age, sex and income demographics (1).


The DVD is an optical disc storage media format, mainly used for video and data storage. Interestingly it has never been clearly established if DVD stands for Digital Versatile Disc or Digital Video Disc or neither. However later forums have indicated that Digital Versatile Disc is the true name. The popular use of the word typically refers to DVD video a movie on a shiny disk similar to a CD. The DVD has been touted by many sources to be the most successful product ever launched in American History. Barry McCarthy, CFO of Netflix, describes the DVD as the most successful product in the history of the US in amount of growth measured by the number of units owned in individual US homes. Perhaps as you stare at the stack of DVDs you may own (many of which you may have purchased online), you see the truth to this statement. Impressively the DVD only took 5 years to reach 50% entrance into US homes (2).

Why did the DVD attain such success? The DVD provided an open and standard platform for playback and production, meaning that every company could use the same standard in DVD manufacture and advertising. This early standardization is claimed by many to be the paramount reason for the rapid success of the DVD platform. If you recall, the costly VHS vs. BETAMAX and more recently the HD-DVD vs. Blu-ray DVD format wars were and will continue to be detrimental to the rapid progression and widespread availability of newer technologies. In 1993 two competitors emerged on the scene with new optical disk systems that both used the improved MPEG 2 compression. Sensing an on coming and problematic format war between the two optical disc formats developers that would become the DVD, computer industry experts representing many computer manufacturing companies, formed a rare consortium known as the Technical Working Group or TWG. The TWG threatened to boycott both of the competing format developers, pressuring them to develop a single storage and format design. Thus the standardized DVD platform was born (3).

As with distribution formats to come (Blu-ray and Digital download and streaming distribution), the DVD formats dominance was not complete; it lacked substantial content for distribution. The “Hollywood community,” who owned the rights to the movie content, was reluctant to release content to yet another format until they could be guaranteed that precautions were in place to battle against illegal piracy and loss of revenue. To address these hesitations a larger consortium of individual representatives from the motion picture, consumer electronics, recording and computer industries formed the Copy Protection Technology Working Group or CPTWG. In October of 1996 CPTWG agreed upon a scrambling system that eased concerns and by 1997 players and titles hit the US marketplace. Though some of Hollywood’s studios remained hesitant to adopt the DVD format, which limited the DVDs immediate success, they soon caught on and also benefited for the revolutionary boom in home video distribution. As we will see, regardless of these last studio hold outs the initial sales figures of the DVD format surpassed the success of the improved technologies of the next formats HD-DVD and Blu-ray DVD (4).

By 1997, mass retailer sales of DVD player and DVD video titles had begun. 1998 proved to be even more successful with the availability of approximately 2,500 titles and the sale of 23 million players. In addition to DVD sales the rental of DVDs begun by Blockbuster had by 2003, surpassed weekly VHS rentals. In many cases, revenue produced by DVD sales exceeded box office sales and thusly has become an extremely lucrative part of the industry, one which it fights to protect and extend Today. Aided by more affordable progressive scan players and cheaper title prices, DVDs remain the most dominant form of home video distribution worldwide (3,4).

E-commerce has revolutionized the distribution and advertisement of DVDs in a variety of ways. As mentioned earlier, DVDs account for a large part of the majority of online sales. Online retailers such as and others offer wide selections of new and used titles from a variety of sellers at competitive prices. Regardless of additional shipping prices, convenience, selection and competitive prices have made internet DVD sales an extremely successful enterprise. The internet has proven to be a cost effective and far reaching means for advertisement of video release and availability information that influence both online sales and traditional retailer sales. Many traditional large to small brick and mortar retailers have also made the most of the e-commerce boom. Offering most of their in store selections and additional inventory online with various shipping and in store pick up methods. The Internet has also provided mainstream and independent movie distributors the opportunity to distribute their content directly. The low overhead and broad accessibility that the internet and e-commerce provides have especially made it a viable distribution model for smaller independent producers and distributors.

In addition e-commerce has revolutionized the video rental industry. Netflix an online mail delivery DVD rental company is a prime example of this new success. Netflix boasts a catalog containing over 95,000 titles as well as a more limited catalog of titles available for online viewing. With this large inventory (one that traditional brick and mortar rental and retailers could scarcely spare the shelf space for), the company claims that 70% of its business is in back catalog movies, where as traditional stores rent as much as 90% new releases and provide a limited selection of back catalog movies. Their ability to provide an efficient way to search through their enormous catalog online (also a capability that most brick an mortar stores could not efficiently accommodate) and their innovative methods for linking people with videos they might like, are keys to their success and profound examples of the impact that the internet has on DVD and other video format distribution. McCarthy clearly feels that electronic video distribution is what is next for Netflix, providing a more efficient way to deliver media and a way to expand abroad in countries where postal infrastructure is lacking. The company has anticipated this shift in media distribution and invested early on in its development (2). They have also begun to distribute the next best physical video format, Blu-ray.


DVDs successor, at least in the physical realm of video distribution, is the Blu-ray disc. Beginning in 1998 high definition television sets, which provide higher resolution images, became available on the consumer market. There however was no broadly available method to play or record high definition content. This changed with the utilization of blue lasers diodes, as opposed to red laser diodes used by DVDs. Blue lasers have a much shorter wavelength and allow for the storage of more data and larger video files on optical discs that share the same dimensions of DVDs and CDs. Two leading formats for this new technology would surface, and following a costly and stifling format war Blu-ray discs emerged victorious over their HD-DVD competition. Unfortunately, unlike the success in DVD format mediation, attempts to prevent the high definition format war proved to be futile as neither side was willing to sacrifice revenues produced by royalties (5,6).

Although HD DVD was the first to reach the market, they failed to gain a foothold in the marketplace. Several factors contributed to this. One such factor was the launch of Sony’s PlayStation 3 gaming console that used a Blu-ray disc drive. Another factor often cited is Blu-ray’s adoption of the BD+ anti-copying systems which drew many content rights holders to the format. By January of 2007 Blu-ray had outsold HD DVDs. A chain reaction of events, including the pullouts of content providers and nation wide retailers prompted Toshiba to cease production of HD DVD products in February of 2008, ending the high definition format war. With the format war ended all major movie studios embraced the Blu-ray technology (5,6).

This format war clearly hindered sales and acceptance of the high definition formats. It is apparent that consumers were unwilling to invest in a system that had an unclear future. Nielson Media Research and Adams Media research report that 16.3 million standard DVDs were sold in the first two years of release as compared to the 8.3 million combined Blu-ray and HD DVD sales in 2006 and 2007. Analysts also suggest that since high definition video can only be viewed on high definition television sets, the number of HDTV’s in households, 26.5million compared to 100million standard TV’s also influenced HD video sales. Additionally, many average people do not see as much of a difference between standard and high definition picture quality, at least when compared to the difference between VHS and standard DVD. On the bright side of things these analysts do suggest that since a single format has been settled on, Blu-ray sales will likely increase (7).

The new and improved Blu-ray format will likely have the same success as DVDs had in the e-commerce realm; particularly if prices of HDTVs and Blu-ray players as well as movie titles continue to decrease. Video rental companies have already embraced the newer format and if by only using their existing business models, both brick and mortar as well as online stores, could expect the same success. However as a late comer to the industry, Blu-ray technology is increasingly at risk of being overlooked due to the increasing availability and popularity of digital download and streaming distribution. Duncan Riley of Tech Crunch explains why this will not happen anytime soon. He says that old habits die hard, and although newer generation are now accustomed to digital downloads, a substantial number of generations are accustomed to physical formats. Though he does see an end to physical format preference, he feels it is at least 5 to 10 years away (8). Another factor that plays a role in physical videos preference, both DVD and Blu-ray, is the fact that many want to watch content on their television sets. The computer provides a personal viewing experience, while a larger television screen has more potential for a social interaction. One must also account for the substantial investments that persons have made in home theater systems of both high and standard definitions. There are alternatives that do allow downloaded and streaming content to be viewed on TV sets, however there are many alternatives and few share a standard format and once again we have lack of consumer confidence in a product that only works with certain content and has an uncertain futures. For these reasons Blu-ray will likely see continued success, however it could likely be the last major physical media format (8).


Most believe that electronic distribution will become a viable and mainstream option for media distribution and acquisition. However the amazing penetration that the DVD market (and likely the Blu-ray market) has had and continues to have in US households cannot be ignored. It is also very evident that the so called format wars have influenced consumer behavior as well as the rate at which victorious formats and resultant products penetrate the market. It is clear that regardless of format or medium, the power that the internet and e-commerce provide in capitalizing on the video distribution industry is immense. The success of online physical and digital video distribution is dependent on leadership and business models that absorb lessons in innovation, in letting the marketplace determine what works and doesn’t work as well as what it wants. The ability to incorporate, anticipate and fearlessly confront technological change in an ever changing industry is essential to the survival of a video distribution company.

Thank you for reading this initial installment of the E-commerce and Video Distribution blog series. I hope that it has been an enjoyable experience and that it has informed and fostered some points for discussion. Please feel free to comment and provide additional or updated information, as your participation is crucial for the enlightenment of the author and the readership. Stay tuned to the next installment in the series that will discuss the e-commerce of digital downloads and streaming video distribution


(1). How America Searches: Online Retail Survey conducted by Opinion Research Corporation. report written by iCrossing September 2007. www.i crossing. Com
(2). Barry McCarthy, Chief Financial Officer of Netflix. Sunday, January 13, 2008. iinnovate, A Podcast by Students as Harvard’s Business and Design School.
(3). DVD From Wikipedia, the free encyclopedia:
(4). Digital America. 2008. Consumer Electronics Association.
(5). Blu-ray Disc From Wikipedia, the free encyclopedia.
(6). Format war From Wikipedia, the free encyclopedia.
(7). High-Definition Sales Far Behind Standard DVD's First Two Years. February 20th, 2008. Movieweb.

8. Digital Downloads Are Not About To Kill Blu-Ray by Duncan Riley. Tech Crunch on February 17, 2008.