Buy versus Rent
Music and video are often grouped together, but in reality they are quite different markets. Very few pieces of music are worth listening to once, but not twice.
In contrast, few films or TV shows are worth repeatedly watching, but a lot are worth watching once. This makes renting video a lot more attractive than renting music. It’s possible, buying only one album every a month or so, to build up a respectable music collection that you are happy to listen to over again.
A few films are worth watching again and again, particularly to small children, but most are only watched once. Rental services rely on this, since they can supply a much wider range of movies than any home collection at the expense of access.
The DVD, being a small form factor, was able to fit into an envelope. For the first time, it was possible to economically rent films by mail. A similar service for CDs would have been possible, but not popular, because few people want to listen to a CD once and then send it back.
The current explosion in Internet bandwidth means that it’s already possible to stream DVD-quality content to a large number of people. The big disadvantage of this is that it means the customer has to watch on her computer screen. Devices such as the AppleTV, which plug directly into a television, reduce this, and low-price HDTVs are likely to reduce it even more.
A decent HDTV provides a reasonable resolution for computer use, and with the addition of a bluetooth keyboard and mouse, it makes a nice system.
Samsung is currently working on the ARM port of Xen with the aim of allowing a virtual machine running on a mobile phone to be migrated to a television, further blurring the line between computer and entertainment system.
A decade ago, floppy disks were common. They were the main way of moving data between computers, with serial cables and networks a potential alternative for desktops in close proximity. Network bandwidth now outstrips the fastest floppy disk drives, and for small files sending them over the Internet is more convenient than using a removable disk.
For much larger files, a USB flash drive is more convenient, since it is physically much smaller than any optical disc. Digital video is the only common kind of data that can justify dense optical disks. With better video CODECs bringing the size of "good enough" video down, this is likely to change.
More importantly, services such as NetFlix remind consumers that what they want to buy is access to the latest shows instead of any specific show. This is likely to cause a shift in the way video is sold toward a subscription model instead of a purchase model.
The growth in mobile video players will make it very hard to offer such a service with any kind of DRM without rendering it useless, however, so it remains to be seen whether the industry will respond intelligently.