While having recently beat out HD-DVD as the standard for disc-based High Definition movies, Blu-Ray’s battle to remain relevant is far from over. Many obstacles remain before Blu-Ray adoption can begin to take off.In order for Blu-Ray consumers to benefit from the technology, they must be using their Blu-Ray player with a High-Definition Television (HDTV). As a result of this, Blua-Ray’s success is somewhat dependent on the success of a different technology. While HDTVs are dropping in price and sales are starting to increase dramatically, the potential Blu-Ray market is still significantly smaller than the current DVD market just because adoption of HDTVs is not yet as high as traditional televisions. Additionally, the average consumer may have trouble distinguishing the difference between Blu-Ray players and up-scaling DVD players.
This, however, is far from the only problem that companies promoting Blu-Ray technologies face. Blu-Ray players and media are selling at a slower than expected pace despite massive price drops from retailers. In addition, the majority of sold Blu-Ray players come in the form of the Playstation 3, and studies show that most Playstation customers are buying their units to play games and are not purchasing many Blu-Ray movies.
The root of the problem that Blu-Ray backing companies face is the fact that Blu-Ray is a sustaining technology. It improves upon a product that is already existent in the marketplace. Blu-Ray improves on DVDs by offering significantly more storage space, which in turn, allows for higher definition movies to be stored on them. Many analysts predict that as the prices of Blu-Ray players and movies continue to approach that of DVD technology, adoption will continue to grow until traditional DVDs are no longer relevant. However, there is a sense of urgency to get Blu-Ray more widespread as quickly as possible because there is a disruptive technology looming on the horizon.
Digital movie downloads are now available from many different sources and they meet the description of a disruptive technology almost exactly. They offer worse product performance in the near-term. Streaming high-definition movies over the internet is not a simple task, and with the large size of the files, customers are often left waiting for long periods of time for the download to finish. The other alternative is to stream video that is lower quality than what Blu-Ray can offer in order to help speed up the process. Digital downloads are also cheaper due to a lack of manufacturing costs, smaller (no physical product at all), and more convenient to use (consumers may choose what movies they want to purchase from the comfort of their home instead of having to drive to the store).
The Innovator’s Dilemma is that large companies tend to ignore disruptive technologies at the beginning because they are not as profitable as sustaining technologies. Disruptive technologies often do not meet the all the requirements of an existing market and as a result end up being adopted by new markets instead. However, as these technologies mature, they begin to attract the larger, more mainstream market and it is at this point that large companies often begin paying attention to these technologies. However, at this point it is often too late as new rising companies have already established themselves as the standard in the new market.
It is easy to see this starting to happen in the movie industry. Something similar has happened (or arguably is still happening) to the music industry. CD sales slowed down as the digital music market began to mature. As companies got the rights to sell larger libraries of music, people were more willing to try digital downloads. The movie industry is heading down a similar path, with current digital movie providers such as Microsoft, Netflix and Apple all fighting for the rights to as large of a movie library as possible. As these libraries grow and one company establishes itself as the primary source of movie downloads, digital distribution will begin to really take-off and could cause serious problems for the Blu-Ray market. It is at this time that manufacturers of Blu-Ray products will try to jump on board the digital distribution train only to find out that it left without them long ago.
