Op-Ed: Monopoly at work as Blu-ray player prices rise, potential for consumer abuse?

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The major US movie studios, whose techno-savvy is nothing less than lemming-like, have been suckers for formats for years.

Widescreen, the ridiculous, unnecessary, compulsion to create a visual letterbox and attach a lot of expensive technology to it, and the interminable media players, which all do the same thing, usually badly, are examples.

HD is higher quality, no doubt about that.

But whether creating whole new systems for it was really that great an idea in the first place is another matter. The technology isn’t that different, there’s just more of it, and added data. It’s still digital content.

Having nailed themselves to a single HD format, the next phase for the studios is obvious:

No choices left. They’re now stuck with whatever Blu Ray produces.

Commercially, it’s a bit like saying you’ll only buy proprietary hardware for your computer, and about as practical, and as expensive, and those costs are always passed on.

To date, entertainment technology has been one long saga of slugging the consumer with whatever load of ephemeral garbage is on sale.

It’s entirely anti-competitive, even without a competitor in the market, which is no minor achievement, and it’s expensive, even for the distributors.

By tacking their business on to a single format, they’ve now handed their own margins over to Blu Ray.

The price saga is pretty interesting.

According to the Sydney Morning Herald:

“Blu-ray proponents long complained that the vicious price war waged by the HD DVD camp as it desperately battled for market share was eroding margins for all companies in the high definition player market.

In January, Toshiba cut the prices of three of its players by as much as 50 per cent.

The Blu-ray camp responded, with GfK figures showing average prices on Blu-ray players dropped four per cent in January compared to December. The figures for March are not yet available.

The price rise for Blu-ray players is curious as technology products typically only drop in price after they are released.

One explanation is that the Blu-ray camp is using its newfound monopoly position in the HD disc format market to claw back some of the margins lost to HD DVD during the price wars.”

These players aren’t cheap. The medium they’re playing, however, is very cheap.

An ordinary DVD costs about 20c to make.

HD is different, but you’re still not talking huge costs here, and industrial production volumes reduce unit costs drastically.

Most of the rest of the retail cost is in packaging, and paying 200 people to design cut and paste labels, most of which could usually be produced by a myopic illiterate goat in its spare time.

Real cost of packaging, zip, some print time, and a few trees.

This vast luxury of expense is normally passed on to the consumer at the rate of about 1000 times production costs. If you happen to have had the idea to outsource to Asia, it’s an even higher ratio.

For a real cost of about 25c, wind assisted, you’re paying those retail prices.

So why the massive cost of the Blu Ray players, at all? They’re almost the cost of a new PC, and they don’t do a tenth of the actual processing.

HD is new, so the prices are higher to start with, the standard “cost recovery program” which has people buying new tech at 20 times the prices of a year or so later.

Now- Add a format which is by definition expensive, and requires equally expensive new technology to use.

The consumer has no choice at all.

Ironically, prices and unit sales do have a direct correlation.

People will always go looking for a way around prohibitive prices. It's happened with every form of media technology, even vinyl records.

The likely scenario is that this will create a boom in illegal products, as people’s wallets run out of Aspirin and counselors and consumers run out of patience.

Also not good for consumers, because illegal product tends to be pretty lousy.

But they do have the comfort of making themselves liable for prosecution, which will keep judges and lawyers off the streets for a few more minutes.

Mass media is about distribution.

Free to air TV took off when people stopped charging TV licenses. Cable shot itself in the foot with subscriber fees. Internet subscriptions are an endangered species.

Adding costs to distribution just doesn’t work, and it never has.

Even the glitzy big HD TVs are having to reduce pretty drastically in prices, because the market just doesn’t want to pay, or have the money to spend.

The equation is that the higher the prices, the lower the distribution volumes.

You’d think that’d be obvious, but not to the studios. We’re talking about an industry which had to have the original Star Trek explained to it as “Wagon Train To The Stars”.

The most recent ST series, Enterprise, was taken off because it “only” had 2-3 million viewers or so. Look at the box sets, multiply the price by 2-3 million, and that’s the kind of business they couldn’t be bothered doing.

We’re talking about discount-level intellects, relative to average fruit flies.

Consumer abuse is to mass media what vodka is to an alcoholic.

It’s a big money sector, but it’s a cash intensive sector, and it needs the consumers to provide the hard cash.

So the last thing the industry needs is a formatting bottleneck, raising prices.

Let alone a monopoly, and no options.

In practice, the Blu Ray prices will go down, partly because they’ll have to, and partly because the big money volumes will improve margins for Blu Ray.

Blu Ray will have to adjust to the volumes, and like Microsoft, will have to have partners or affiliates handling the consumer stuff. They’re a manufacturer/developer, in many ways, and definitely not a retailer. They have very little to gain from direct exposure to the retail market.

So there it is, a sort of travel itinerary for a media format.

They’re no longer under any compulsion to be competitive, or even cost effective. Consumers will just have to take what they can get.

My bet would be that disk formats will stop mattering to anyone in a few years. Downloads will be the natural reaction to ridiculous prices and one trick wonder technology.

But in those few years, billions will be spent by consumers, purely on the basis of how the studios decided to handle their distribution.

The fact that multiple Blu Ray models haven’t led to any significant decrease in prices, at least not yet, isn’t encouraging. Prices normally reflect margins. If the retail prices are in the same general bandwidth, so are the manufacturer’s margins.

That will, probably, change.

But if it doesn’t, there’s not one damn thing anyone can do about it.