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Blu-Ray will dominate the industry in three years. Or maybe it will be HD DVD. The general consensus is that whoever wins doesn't really get a lasting victory, since they're both in the last physical video format ever. That sentiment has largely been the consensus of the press and leaders in the tech industry.
The end of physical formats for movie and TV shows could be called digital convergence, a happy, wonderfully singular, unified digital world. Content moves seamlessly from your multifunction portable device to your TV, between your computers, and to every monitor and audio system and random networked appliance in between. To have that happen in a stream of bits floating effortlessly on radio waves, without physical discs or specially designated boxes, would be truly wonderful.
But an end to physical video formats doesn't mean an end to format wars. In fact, once film and television content are no longer bound by physical media, we're in for the mother of all format wars.
Don't be quick to leap over Blu-ray and HD DVD as the final hurtles before the end of the race; we're far worse off without those discs. After they are gone, there won't be just two, or three formats even. We're talking 10 or 20 disc-free formats at the minimum, all with their own subscriptions, fee rates, movie selections, file resolutions and formats, use restrictions, preferred content providers and sometimes even hardware. Without discs, we may very well be screwed.
Here are some of the players already making their way onto the field:
Amazon Unbox. Xbox 360 Marketplace. Amazon Unbox on TiVo. Wal-Mart. San Disk USB TV. Apple iTunes. Sony Internet Video Link. BitTorrent. Netflix. Slingbox. Vudu. Joost.
All have incomplete catalogs. All are restricted in where, how, and on what you can play their content. None play together well, if at all. iTunes content plays on an iPod, on Apple TV, and on your computer, but not on your Creative Zen. Your Wal-Mart wares won't play on your iPod. Good luck getting it on your plasma TV easily, or to another computer in your house. God forbid each service offers its own set-top box, like Apple TV and Amazon Unbox's TiVo setup. Can you imagine them all stacked up next to your TV?
We've got a name for this all-singing, all-dancing, all-digital melee: the N-format war, N being an unknown number of formats between 2 and infinity—since anyone and everyone can enter the game, and pretty much anyone and everyone is.
Convergence is the consumer's dream: one system that supports all. But companies are mostly thinking about their own "ecosystems"—vertically integrated offerings like Apple's iTunes, iPod, and Apple TV. Within these ecosystems, there is limited convergence: It's fairly easy to move stuff around within the Apple ecosystem, and it's not too difficult to move content around the Vista Media Center/Xbox 360/Zune ecosystem either. As time goes by, these ecosystems will only add new options, such as Windows Home Server, and hopefully build smoother systems for juggling media.
Microsoft and Apple obviously have advantages in the N-format war that the others don't, because they control entire platforms of hardware and software, and for the most part all levels of digital content playback, movement and distribution.
Apple, which develops both hardware and software, always starts with the premise that the customer will only buy Apple-branded products. Microsoft, having its origin as a software maker that supplies billion-dollar hardware partners, has traditionally focused more on developing "standards" that others will adopt.
On the one hand, this might be a good defense: Amazon, Wal-Mart and BitTorrent's stores license WMV and its accompanying DRM scheme. It's likely that Microsoft is offering its tech for rock-bottom prices to encourage adoption. And the upcoming IPTV capabilities of the Xbox 360 are just an extension of its larger IPTV platform licensing. AT&T and a growing number of other IPTV providers around the world already use Microsoft's IPTV platform.
On the front end, every decent version of Windows Vista comes stacked with Windows Media Center, which streams to the Xbox 360, itself already a VOD box—and will become even more so once the IPTV rollout begins.
On the other hand, Microsoft has lately been following Apple's lead, and spending a lot of time working on its own hardware, and not all of it plays well with Microsoft partners. At the same time, some of its DRM arrangements, particularly in audio, have atrophied for lack of support in times of crisis. (Can you say "PlaysForSure"?)
For the time being, neither Microsoft's nor Apple's ecosystems play nice with each other. They can be coerced into sharing the playground with smaller ecosystems like TiVo, but usually only with a third-party workaround, and even then they tend to be messy. They are neither integrated nor seamless. Think of, for instance, Apple TV over Slingbox or Netgear's Digital Entertainer HD.
The one thing every service has in common, the Tootsie roll at the center of the Tootsie pop if you will, is a computer. With a computer, you can run multiple applications. It might be a giant pain to launch one program to see your favorite TV show, then launch another to catch a newly released film, but it's plausible.
The trouble is, we don't like to watch movies at our computers, and computers have failed to colonize the living room.
On the Windows side, we've seen countless iterations of the Media Center PC, many very good-looking component-styled PCs, complete with HDMI and optical audio outputs. But those don't sell. The gigantic sales figures of Windows XP MCE were most often chalked up to the fact that the software came free with most PCs; people didn't even know they had a so-called "media center."
The Mac mini seemed like a primo candidate to lead the computer's charge to the TV. Small, attractive, not a speed demon, but solid enough to serve as a media center for recording shows and serving up media to and fro. Instead of pushing it for that purpose, Apple brings us Apple TV. For some reason the current state of the industry favors set-top boxes to full-fledged thinking machines. We rent them from the cable company. We buy them from game console makers or Internet movie distributors.
So we're stuck with half-assed solutions—be they Apple TV, Sony Internet Video Link, Netgear Digital Entertainer HD or Xbox 360, all under the control of format owners hell-bent on keeping out any format that might make a competitor rich. Add to that the content delivery of cable, satellite and IPTV boxes, already featuring their own set of content-access rules and regulations.
It would seem that the solution would be to choose a single distributor. But licensing on the content side makes this impossible. Frightened by iTunes' hegemony and concerned with a shrinking physical-media market, Hollywood is not licensing full catalogs to Apple, or anyone else, be it Netflix or Wal-Mart, because digital distribution puts an unprecedented amount of control into the hands of the distributors themselves. So every distributor gets a chunk of the content pie, but no distributor gets to offer the whole thing. We have 20 distributors, 20 formats.
So you're forced to subscribe to two, three, maybe even five of those. How will you know, after spending $300 on a set-top box, whether your particular movie of choice on a Friday night will even be on it? The studios one day must all appear in the same box, better still, all together in multiple competing boxes from Microsoft, Apple and Wal-Mart. That way, the differentiating factors become the user experience and the price.
Currently there is no magical box that will deliver everything. You'll definitely need a hardcore PC or Mac Pro to handle new video content, not to mention multiple client applications and some ingenious and possibly unlawful way of getting the stuff to your TV. Your best efforts will produce one jerry-rigged system handling 20 disparate services and formats, and content providers will view you as the crook, and the openness of the PC as a threat. Dedicated boxes, maddeningly piled up by your plasma, will continue to be the preferred distribution for those worried about content "security".
Welcome to the N-format war. The online distribution landscape is messy, uncoordinated and fragmented, and it's going to get worse before it gets better. It almost makes us nostalgic for the days of Blu-Ray and HD DVD yore that are yet to come.