Many people believe that video-on-demand, VOD, will be the killer application to finance the superhighway. The reasoning goes like this: say a videocassette-rental store has a selection of four thousand tapes. Suppose it finds that 5 percent of those tapes result in 60 percent of all rentals. Most likely, a good portion of that 5 percent would be new releases and would represent an even larger proportion of the store's rentals if the available number of copies were larger.
After studying these videocassette-rental habits, the easy conclusion is that the way to build an electronic VOD system is to offer only those top 5 percent, primarily new releases. Not only would this be convenient; it would provide tangible and convincing evidence for what some still consider an experiment.
Otherwise, it would take too much time and money to digitize many or all of the movies made in America by 1990. It would take even more time to digitize the quarter of a million films in the Library of Congress, and I'm not even considering the movies made in Europe, the tens of thousands from India, or the twelve thousand hours per year of telenovelas made in Mexico by Televisa. The question remains: Do most of us really want to see just the top 5 percent, or is this herd phenomenon driven by the old technologies of distributing atoms?
Blockbuster opened six hundred new stores in 1994 (occupying 5 million square feet) on the force of its entrepreneurial founding and former chairman, H. Wayne Huizenga, claiming that 87 million American homes took fifteen years to have a $30 billion investment in VCRs and that Hollywood has such a big stake in selling him cassettes that it would not dare enter into VOD agreements.
I don't know about you, but I would throw away my VCR tomorrow for a better scheme. The issue to me is one of schlepping (and returning) atoms (by what is sometimes called "sneaker net"), versus receiving no-return, no-deposit bits. With all due respect to Blockbuster and its new owner, Viacom, I think videocassette-rental stores will go out of business in less than ten years.
Huizenga has argued that pay-per-view television hasn't worked, so why should on-demand TV work? But videocassette-rentals are pay-per-view. In fact, the very success of Blockbuster proves that pay-per-view works. The only difference for the time being is that his stores, which rent atoms, are easier to browse than a menu of rentable bits. But this is changing rapidly. When electronic browsing is made more pleasant by imaginative agent-based systems, then, unlike Blockbuster, VOD will not be limited to a few thousand selections, but will be literally unlimited.
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