In this week’s blog we are going to talk about information goods, and specifically the road from VHS to streaming services.
The Video Home System (VHS) was a new technology released in the 70’s that gave the consumer the ability to record video cassettes for later use. This technology meant a drastic change in how television watching worked. This meant that videocassette recorders were a threat to the existing television companies. Adoption went by fast: after 20 years, over 84% owned a VCR in the US (Highbeam Business, 2017).
The DVD (Digital Versatile Disc) has some distinct advantages over VHS: with a DVD you can load every scene whenever you want, rewinding is made much easier, it had a higher storage capacity than the VHS (resulting in higher quality sound and video) and the DVD was much smaller leading to easier storage and production.
The DVD also hit some speed bumps along the way: adoption rate was rather slow, mainly due to its high initial price. Only in 2001 did the DVD actually overtake VHS and become the standard.
However the DVD market could be classified as vulnerable:
• The market was newly easy to enter: new technological advances such as larger bandwidth and faster internet made it easier for streaming markets to serve customers.
• The market was attractive to attack due to a large supply at a lower marginal cost than for which DVDs could be sold.
• The market was difficult to defend due to many companies lacking the vision in using the new internet.
As stated technological advances opened the door for online streaming: accelerated loading speed enabled opportunities for companies to spread streaming media, as well as high adoption of devices to show entertainment on.
Internal opportunities of online streaming would be low marginal cost which is information pricing applying to all of information goods and the media being available on most devices. A weakness is over-dependence of bandwidth and internet. External opportunities are the erosion of the DVD market, a threat is the easy ability of customer to switch to competitors and the ease of illegally downloading.
So what does the future hold? Streaming is becoming more prevalent, especially among younger generations. People want control, which is something DVDs cannot really offer. The downward trend in their popularity will keep up in the future, possibly leading to DVDs becoming just a niche market. Streaming has also impacted the TV industry, cable providers are getting overtaken in subscription numbers in the US (Huddleston, 2017). So what about the streaming industry itself? Market dominance will depend on who can provide a large line up in terms of entertainment, whether that is self-produced or bought. We think the market will keep being dominated by its current leaders such as Netflix and Amazon Prime as they have the offering and infrastructure.
Huddleston, T. (2017, June 15) Netflix Has More U.S. Subscribers Than Cable TV. Retrieved from http://fortune.com/2017/06/15/netflix-more-subscribers-than-cable/
Highbeam Business. (2017) Video Tape Rental. Retrieved from https://business.highbeam.com/industry-reports/personal/video-tape-rental
