Clicks Vs. Bricks: Let the Form Factor Wars Begin


THERE WAS AN INTERESTING NEWS item this week in the Wall Street Journal that quoted a sharply worded letter from Target President Gregg Steinhafel, who said that the chain had become aware that “some movie studios have made new-release movies available to download service providers at lower cost” than DVDs, allowing the downloaded movies to be sold to the public at lower prices. This is interesting stuff. For years pundits have been saying that download customers are not the same as DVD customers. Are they? Are Target and Wal-Mart customers considering the price of a download vs the price of a DVD before making a purchase? Will they view these two video formats the same way on the same devices? No to all of the above.

This is not the classic “online vs. brick and mortar” debate. Current downloadable video files are simply not comparable to DVDs– at least, not the way ordinary retail products are comparable. My son likes to buy his Nike footwear online. I have no idea why he doesn’t need to try them on first, but he doesn’t. He gets the identical shoe from some Web site for about 30 percent less than he’d pay in a retail store–the key word being “identical.”

DVDs are physical copies that are already backed up. They will play in any $35 DVD player on any television set, and they look great!

Files are not physical copies and they do not arrive with a back-up. They will only play on computers, and they can look OK or not–depending on what you are watching them on.

Hmmm….they are not really the same items in the “good, better, best” school of Big Retail.

To be fair, video files are coming of age; sometime in the not-too-distant future, they will be the only way anyone will want to purchase a copy of anything. But that time has not yet arrived.

What we have today are two basic download-to-own distribution methodologies: “Burn your own DVD” and good old-fashioned “download over the public Internet to your hard drive.”

Amazon’s Unbox (a burn-your-own-DVD-over-the-wire fiasco) is a technological nightmare. Only the most sophisticated and fearless technogeeks will even attempt it. Will DVDs over the wire ever be mainstream? I don’t hold high hopes for this technology. It is not that people won’t do it, it’s just that the current methods are extremely clumsy and not conducive to customer-service-oriented business models. The only way this becomes real is if a bunch of computer manufacturers or consumer electronics manufacturers start building the technology into their systems and make the software absolutely transparent to consumers. It really has to be, put in a blank disk and take out your labeled copy. I don’t see this happening at scale any time soon, especially if the price is the same as a prepackaged retail DVD.

Apple’s iTunes store sells movies in 640×480 MP4 video files. They look pretty good and, that being said, most people think they are too expensive for what you get. For some people, .m4v files are extremely convenient. They are relatively small and you can move them fairly easily from computer to iPod and back again. But, by comparison, DVDs are unbelievably convenient. They are easy to store, portable and of such high quality that they really cannot be compared to consumer-purchasable video files in any way. One might argue that the only meaningful consumer value proposition for these files is “lower price.” Which, at this writing, is not the case. Files of current DVD releases are $14.99, and library titles are $9.99–no demonstrable savings over physical DVDs at all.

I truly hope that content creators do not bend under the pressure of the large retail chains on this issue. Content is ultimately going to be sold over the public Internet, and lower-quality download products need to be less expensive than their higher-quality physical counterparts.

On the other hand, in seven to 10 years, when a substantial number of discount superstore customers have FIOS or other 100GB download capacity broadband connections, when they each have $3,000-$5,000 home theater installations with household storage-area-networks, and more than half of them live in a broadband cloud, we should expect to see the price of a full resolution download be comparable to the price of a current-day DVD. Of course, we will still expect it to be cheaper than a physical copy since it will be cheaper to produce. After all, savvy mass consumers in the future will know what their present-day compatriots know–the costs associated with producing a downloadable file do not include the printing, packaging, warehousing and shipping costs associated with their physical counterparts–and they never will. Shelly Palmer

About Shelly Palmer

Shelly Palmer is the Professor of Advanced Media in Residence at Syracuse University’s S.I. Newhouse School of Public Communications and CEO of The Palmer Group, a consulting practice that helps Fortune 500 companies with technology, media and marketing. Named LinkedIn’s “Top Voice in Technology,” he covers tech and business for Good Day New York, is a regular commentator on CNN and writes a popular daily business blog. He's a bestselling author, and the creator of the popular, free online course, Generative AI for Execs. Follow @shellypalmer or visit



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