A number of experts are pointing out why Blu-Ray is a mess. In hindsight, Blu-Ray should never have existed. Looking back at what happened with this technology can help us avoid similar mistakes in the future with a variety of products.
Today I'd like to cover the warning signs and point to Blu-Ray as the current example of a problem product that can crop up in any company, from IBM to Microsoft.
Now, I know a lot of people still believe Blu-Ray is winning (though that number declined sharply after Paramount and DreamWorks jumped ship), but if you really step back, you'll realize all it is doing is ensuring HD-DVD doesn't win either, and the impact of that on the movie industry has to be in the billions.
Danger Sign One: It Can't Stand on Its Own
I've seen this over and over again, and am surprised more of us don't point this out. If a product requires substantial support from the parent to keep it alive, including funding levels that probably can't be reasonably recouped, it has a very high likelihood of failing.
Successful products generally need some boost in terms of marketing and backing, but if they need sustained investment over long periods of red ink, at some point there is likely to be an executive change, and the new guy will immediately realize that the product needs to be killed.
We saw this years ago with OS/2. The level of investment was unprecedented, and to keep Louis Gerstner, the CEO who was brought in to turn IBM around, from killing it out of hand, he was maneuvered into publicly promising to support it indefinitely. Shortly thereafter, he killed funding for the offering quietly, leaving a lot of companies that had listened to the empty promise hanging in the wind.
With Blu-Ray, the warning sign was the tie-in to the PlayStation 3, which was the big crutch for the product. I was just as blind to this early on as everyone else, and didn't realize until too late that rather than the PlayStation assuring the success of Blu-Ray, Blu-Ray assured the failure of the PS3.
A product has to hit on three vectors: it has to work to expectations, it has to be something people want, and it has to be affordable. The fact that it wasn't affordable killed not only Blu-Ray but effectively took out the PS3 in the process. Without the PS3, Blu-Ray couldn't beat HD-DVD, which had no similar crutch and advanced into the market much more easily (and shipped much earlier).
Danger Sign Two: Key Competitive Advantage Unimportant
In the case of competing technologies, there are advantages and disadvantages between the products. For instance, in the case of Windows vs. Linux on the desktop, the key advantage is that Linux is open source which, to the average Windows user, is not only unimportant -- when explained it might actually scare them away from the offering. Apple, on the other hand, is providing advantages consumers at least want, and is showing considerable success at the moment.
For Blu-Ray, the big advantages seem to be capacity and special features (something HD-DVD shared). On capacity, the reality was that you really didn't need as much as Blu-Ray offered for movies; since game developers (most of them) develop for several platforms, they were limited to standard DVD capacities, anyway. For backup, initially they had an argument, but with the growth of storage and the speed of writing to optical discs (which is very slow), both HD-DVD and Blu-Ray became impractical as backup and transport media for PC files. Portable hard drives are cheaper, easier to use (all you need is a USB port, not another Blu-Ray drive at the other end), vastly faster, and actually more portable. For special features on Blu-Ray or HD-DVD movies, folks simply didn't care. They just wanted to watch the movie. So arguing who had the best features quickly became a waste of time.
So Blu-Ray was better, if the buyer doesn't care, it doesn't make any difference, and the vendors who haven't yet learned that lesson are way too prevalent.
Danger Sign Three: Excessive Cost
Whether we are talking IT products or consumer offerings, there are price windows that the market will accept. While you can (and Sony is actually expert at this) bring out some things high and let them drift down successfully, this generally only works if you are entering a green field (Global Positioning Systems are a good example) or moving against a technology that is stagnant (Apple's entry into the MP3 player market).
In most cases, a new technology will enter on top of an old technology which is still advancing, and if the company doesn't own the market for the old technology, as was the case with DVD, and the old technology is both seen as good enough by many buyers, up-selling will prove to be tough.
While HD-DVD had a heavy focus on cost, both from the standpoint of media and drives, Blu-Ray did not -- it was more of a technology pure play. Blu-Ray has, in terms of retooling, already consumed massive amounts of investment on the manufacturing side. Most of this is actually done now, and this was pointed out as a serious problem at the front end.
But on the player side, the HD-DVD players are now close to high-volume pricing, which kicks in at $200; Blu-Ray is still 12 to 24 months away from these price points. Why this is critical is up-converters (scalars) are both getting better and coming down in price. A scalar takes a low-definition image and electronically augments it so it looks like a HD image. Right now, DVD players in the $200 range have excellent scalars which most find look more than adequate on their new HD sets. The cost advantages of the old technology remain high, as the media for both HD-DVD and Blu-Ray are substantially higher than standard DVDs.
Next year, good scaling DVD players will be well below $200 and that gives both formats limited time to start building a base.
Blu-Ray, from day one, couldn't get to where it needed to be in time. Had this been fully vetted (and I'm quite sure Sony's partners were not aware of this), Blu-Ray would have never left the lab.
Getting excited about cool technology is great; letting that excitement get in the way of good judgment can be expensive. In looking back, I actually wasn't asking the right questions either, and know better (I initially supported Blu-Ray and assumed Sony wasn't foolish enough to sacrifice the PS3 for Blu-Ray). So this is as much a reminder for me as it is for you. Remember if a product:
1. Can't stand on its own; 2. Has competitive advantages that actual customers don't care about; and 3. Can't possibly meet cost targets on time.
Then don't invest your money in it, and for your company's sake, don't invest your company's money in it, either. As I conclude, the news is hitting that another Sony storage technology has a problem; it seems F-Secure has identified Sony's MicroVault USB memory stick the source of a significant PC vulnerability. Maybe there is a fourth rule having to do with Sony.
In the end, technology battles can be painful for all involved. This one has cost the movie industry billions and put Sony at extreme risk in several business areas. Keep your eyes open and make your choices not on what you want to win, but on what likely will win, and you may want to hold off making any choice when the choice isn't clear. In this case, that last option still may be your best choice.