Movies on disc: Not dead yet

The CEO of Netflix just told investors that the DVD-by-mail business will "peak" in five years, and that movie streaming is the future—and on that last count, he's right. But is he sounding an imminent death knell for DVDs—and movies-on-disc in general? Hardly.

Reuters reports that Netflix CEO Reed Hastings recently told investors that the "by-mail business is very strong but will probably peak in the next five years," while a PowerPoint slide showed the peak somewhere in the five- to 10-year range.

Now, some are taking that to mean that the DVD-by-mail business—and by extension, DVDs and Blu-ray discs as a whole—will be dead and buried within the next decade.

I don't see it that way. First of all, Hastings didn't say that movies-by-mail have five years left; he said the business will peak in five to ten years, after which we'll see a gradual decline. So (if his prediction is true), we're looking at, oh, 10 more years of DVDs (and/or Blu-rays) in the mail, at least—and maybe 15 years or more.

Of course, DVDs and Blu-ray discs are facing competition from movie downloads, and I have no doubt that downloading (or streaming) movies of the Net will be huge—eventually.

But (as Steve Jobs pointed out when unveiling the new Apple TV software), no one's nailed the movie download business yet. The boxes are expensive, rentals are costly (and saddled with viewing restrictions), and except for the sliver of HD movies available, video quality ranges from fair to awful, especially compared to standard-def DVD. (And even the downloadable HD movies look pretty fuzzy compared to the razor-sharp, 1080p images you get from Blu-ray.)

And yes, Netflix has its new, $100 Roku box, complete with free rentals for subscribers. But have you seen the selection of movies available? Save for a handful of new releases, it's pretty weak. And we're only talking VHS-level quality here.

Will movie download services get better, cheaper, and more popular in the coming years? Sure. Will the video quality of movie downloads improve? You bet. And all things being equal, will viewers choose the instant gratification of downloads over waiting days for their red envelopes to arrive? No doubt.

But it'll take Apple, Vudu, and Netflx years to get their downloading ducks in a row (not to mention the paranoid movie studios, which still cling to annoyances like the 24-hour viewing window). And in the meantime, Blu-ray players and movies—which are outrageously expensive now—will get much, much cheaper, especially once Sony loosens up and licenses Blu-ray technology to wide range of manufacturers.

So don't write off DVDs—or Blu-rays, for that matter—quite yet.

Related:
Netflix sees DVD-by-mail peak in as soon as 5 years [Reuters]
Apple TV (or Vudu, or Xbox Live) vs. movies by mail [Yahoo! Tech]