Misadventures in Capitalism: DVD formats

September 27th, 2005  |  Published in Uncategorized

Today I inaugurate an occasional topic, or what Harry Shearer would call “a copyrighted feature of this broadcast.” I’ll be highlighting signs of capitalism’s obsolescence, economic developments which indicate the need for production not based on profit. I’ll cover products that could be produced better by non-capitalist means, and products which shouldn’t be produced at all.

Today’s entry is a little from column A, a little from column B. The Financial Times reports today that Toshiba and Sony can’t get it together to agree on a format for high-definition DVDs.

The first question is, do we really need a new generation of DVDs? The DVD was a real step forward–I won’t debate its superiority to VHS tapes. But DVDs are pretty great looking, and a higher definition format isn’t going to be noticeably better looking unless you have a 100-inch TV. The article makes it clear what this is really about:

High definition DVDs look increasingly important for the movie industry on two fronts. First, sales of traditional DVDs are slowing after a fantastic run of growth. The new technology allowing better picture quality and more recording capacity could help stimulate demand, not least from consumers rebuilding their libraries with the new discs. Second, and probably more importantly, the new technology would help confront the growing problem of piracy for the movie industry. The new discs will be harder to copy.

So, the point of a new generation of DVDs is to make everyone replace their DVD library, and to prop up movie industry profits by reducing piracy. There you have it: the magic of the marketplace.

But assuming, for a moment, that high-definition DVDs truly represent a great leap forward in human happiness, is the capitalist marketplace the best way to introduce such an innovation? Apparently not. Rather than having some rational process to determine which is the best format for the new DVDs, this is what we could get:

If both formats are launched, many consumers will hold off buying either until a de facto standard has emerged. Such a stand-off makes no sense for any of the companies involved. With the launch of next generation DVD players approaching, the industry should hurry to bang heads together at Sony and Toshiba and secure a solution.

In other words, get ready for VHS v. Beta, round II. And, as the videotape wars showed us, the best format does not necessarily win.

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