I've just read an article "Films on Xbox 360 threaten DVD rentals" and it got me wondering. Is Xbox's digital distribution service really going to hurt DVD rentals? I've done another round of online research and the facts seem to point to one thing - digital distribution service is not something to underestimate. But will it replace DVD rentals in the near future? Not likely. Here's why:
The main factor in online distribution is your internet connection speed - you don't want to spend ages downloading your favourite flick while you can just drive to the store and grab it in less than fifteen minutes. And not everybody has a 1 MB per second connection. So it could take a while to hit mainstream. Then not everybody has an Xbox 360 :-) The install base of Xbox 360 is just around ten million while almost everyone has a DVD player nowadays.
But, people with Xbox 360s are already making the switch to digital distribution and this is the place where it really shines:
You can start watching as soon as a certain percentage (called the buffer) is downloaded - enjoy it while the movie is downloading in the background (much like YouTube). The HD (High Definition) movies on Xbox Live feature much better compression so it takes up less space (and hence less download times) while maintaining a great picture quality at 720p resolutions. Besides, these rentals automatically expire so you have no worries of running out of hard drive space. And look at it this way - you don't have to get your butt off the couch (or your house, for that matter) to rent a movie - how convenient!
And the digital distribution service of Xbox 360 is an inexpensive option to HD movies. You don't need a HD-DVD or BD (Blu-Ray disc) player - just download and start watching (although I am assuming that you have a HDTV in the first place). As the format war rages between HD-DVD and BD-Discs, and with no clear winner in sight, digital distribution might be your only ticket to enjoy HD movies. You get to experience movies from both camps (HD-DVD and Blu-Ray Discs) without having to worry about compatibility. Disney has already signed to offer their BD movies collection - Warner Brothers and Paramount Pictures is soon to follow.
Microsoft has also reported that Xbox Marketplace has already moved $110 million worth of content in just 8 months - and that's no joking matter! Sure, there is the potential, but I don't see digital distribution as a real threat to DVD rentals in the near future.
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