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2008 Surprise: Hollywood Studios Abandon DVDs

cowen-and-company-dvd-prediction-arnie-berman.jpgIt’s got to be rare that a financial analyst is proud to predict an event that only has a 2% chance of occurring, but my friend and occasional sounding board Arnie Berman is quite pleased to do just that. His firm Cowen and Company published a report earlier this month titled Top 10 Potential Surprises for 2008, and for every tech prediction listed, the analyst team calculated the probability of occurrence. Arnie’s prediction, that Hollywood studios will announce an end to DVD distribution in 2008, came in at #1, i.e. the least likely prediction to occur this year with only a 2% probability.

It’s kind of like playing the odds in Vegas. You probably won’t win with a 2% bet, but if you do the reward is that much sweeter. And unlike Vegas, in this case there’s a lot of knowledge to be gained even if the prediction doesn’t come true.

According to the report, the consensus view is that Hollywood will continue to pay lip service to the idea of anytime, anywhere content, but will still make fewer than 10% of movies on DVD available via on-demand service or Internet download. However a surprise is possible for several reasons. First, Hollywood has failed in so many past efforts to stop emerging technology that limits studio control: sheet music, phonographs, player pianos, radios, TVs, remote controls, cassette tape recorders, VCRs and DVRs. Second, the studios could save a lot of time and money by not continuing to fight this out in court. Third, Hollywood could substantially lower its cost of goods by abandoning physical distribution.

While I agree that the death of DVDs isn’t likely to happen in a year, the on-demand movement is snowballing. Consumers are pushing it, distributors like Apple, Comcast and Netflix are pushing it and even the content owners are getting behind it with offerings like Hulu. From a technology perspective the pieces are already in place. Indeed, companies like Motorola have already begun working on phase two of on-demand video, targeted advertising.

Next year I bet the prediction’s probability percentage goes up significantly. And by 2010, who knows? It might not be considered too much of a surprise anymore.

3 Responses

  1. Interesting prediction, but there would be a lot that needs to happen in 2008 on the infrastructure side. Imagine if every consumer picked a different program from a different provider’s library…all at once. How much strain would that put on access networks? The Internet itself?

    Might be time to take another look at expansion paths for core transport networks in addtion to last-mile access networks. While DOCSIS 3.0 is expanding the pipe from the home to the hub, can the infrastructure from the hub, through the Internet cloud, back to the origin, support this?

    Is Akamai’s caching at the edge practical in this scenario, or are there other ways of solving this problem?

    Looks like a good time to be in the CDN business :)

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  3. Hi, Really likes this post. This is test comment to your blog.

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