Much like videogames, I don't think licencing is where the real money is made on a format; the billions of dollars they put into research, development and maketing a format would (potentially) eat up most of the licencing revinues.

Where Sony intends to make their money is selling you content you already own, how many people own movies that were produced by the following companies:

Columbia Pictures
TriStar Pictures
Sony Pictures Classics
Screen Gems
Triumph Films
Destination Films
Jim Henson Pictures
Sony Pictures Animation

If you move up to a new format odds are pretty good that you'll end up owning some of the same movies in the new format ... Disney has made Billions off of the concept that people will re-buy something they already own and everyone is copying them; simply consider how many people will end up having owned Star Wars 4-6 originally on VHS and then in a boxed set, The Special Edition on VHS, The Special Edition on DVD, The non-butchered edition on DVD, the Special edition on Blu-Ray and the non-butchered edition on Blu-Ray and how much money that represents to 20th century fox

These small amounts add up over time. And whoever holds the patents/rights doesn't have to do any work once the format is adopted. I'd live very happily on only $.00001 per DVD sold in the world.

I don't think this article gives people enough credit. We know that Sony is trying to push Blu-Ray with PS3. D'uh. We know the implications this has on cost reduction, and how various parts of Sony will see huge sales and profits if Blu-Ray becomes the Next Big Thing. D'uh and D'uh.

But we also question how effective selling 20-30 million PS3s over 5-6 years will be in creating cost reduction down to DVD level costs. DVD drives were in hundreds of millions of standalone video players and PCs, in addition to 150 million gaming consoles. That kind of demand will drop cost from $1000 to $20 pretty quickly. Do current weak PS3 sales assure Blu-Ray will see the same widespread adoption and cost reduction?

And if current PS3 sales cannot assure that adoption before its collapses as a gaming console, the massive cost reduction that PS3 itself would see will be moot; Sony's gaming business will be lost for the time being.

This article makes it sound like all of this is a sure thing, or even that throwing away their gaming business was part of the plan. The article makes extensive mention of the fact that the gaming market is small in comparison to these other markets. So how is failing in this small market going to be enough to assure success in these larger markets?

Clearly, Sony thought they were the de facto market king of videogames. Only vast, market-dominating PS3 sales, allowing them to execute their "10 year plan," would maybe give way to DVD-level Blu-Ray adoption several years down the road.

Sony owns the BD IP. Now, it does have some contracts with other companies, in a sort of revenue sharing vein, but I doubt that Sony would give legal rights or even "partial legal rights" over the BD intellectual property.

How do you figure? If the Blu Ray format keeps continually and increasinly growing the gap with HD DVD, then the format war will subside quickly with all HD movies coming out on the Blu Ray and all players becoming Blu Ray players. They don't need the PS3 to completely dominate the console race to pull this off, they just need it to sell a good amount.

Blu-Ray will by default see DVD-level adoption if it is the only available HD format. HD adoption will continually get stronger as HD TVs are bought in larger and larger numbers, unless you think that downloadable movies will become the norm very quickly in the next 3-5 years which I don't think will happen.

HD-DVD is nothing. The fact that dismal PS3 sales have so quickly and totally crushed HD-DVD highlights how small and insignificant this HD format war was.

The problem is surplanting DVD. They cannot surplant DVD until they bring Blu-Ray players down to a reasonable price. The idea was that by selling a high volume of PS3's, they could aggressively cost reduce Blu-Ray and bring it down to a mass market price. In terms of cost-reducing Blu-Ray, there's a big difference between the 20-30 million PS3's over 4-year lifespan that PS3's current sales point towards, and 120 million units over 6-7 years and an eventual 10 year lifespan, which I think SCE literally thought was guarenteed.

Remember: People bought DVD because it was easy to use versus VHS. No rewinding, disc can be cued up anywhere (which is practically necesary for TV shows or bonus content), and discs can be played in multiple devices (standalone players/PS2/PCs). Blu-Ray doesn't have convenience advantages over DVD.

What's more, HDTV adoption is due to convenience and style as well--big screens which don't take up much space. PS3 and 360 sales are low, Blu-Ray and HD-DVD sales are lower, and most broadcasts are not yet HD, yet HDTVs are selling faster and faster. Clearly its not the extra pixels that people are most interested in.

So no, DVD-level adoption is not automatic. For this snowball to get started, the price of Blu-Ray is going to have to come down alot before it matches the value people put in extra pixels. And in the time being, more convenient options could come along. Upscaling is very convenient for those who value the pixels but don't want to rebuy their collections. Digital distribution isn't here yet, but Apple TV is highly competitive with both HD formats already.

If the current low PS3 sales are enough to get the snowball started, you have to question if there was a way to start the snowball without sacrificing PS2's position in the gaming market.

I see downloadable content getting *much* bigger in the next few years, and apparently so do the companies. Tivo with Amazon's Unbox, Netflix now offers 'Watch Now' for some of its movies, AppleTV and iTunes Store, probably most Digital Cable boxes out there these days.

It is just so much easier to download movies, especially in these days of huge bandwidth. Heck, I am not sure of the exact quality of it but Netflix's looks DVD-resolution to me.

I personally believe the market for downloadable content is much greater than that for HD content. After all, did DVD audio go anywhere? Why did vinyls disappear when tapes came around? Convenience plays a *huge* part in consumer luxury purchases, and better quality only sells if the previous solution is ignoring a need of the marketplace.

So the way I see it is, the Physical Medium Media are already pretty decently served by DVD. Everyone has a player, the format is well known (and cheap, and trivially crackable). A little bit of quality difference will sell to the high end (think, people who build vacuum tube amps for their vinyl setup and use gold speaker wire) but for mass market, I think the downloadable market is *much* bigger.

I think that $200 or less is the sweet spot for HD/Blu-ray players.  Once they get into that range, you may see a dramatic increase in adoption.

The problem is that for most people, when they get a new HD widescreen TV, going from 4:3 at 480i to 16:9 at 480p is a pretty big jump in quality.  480p may not be HD, but its pretty damn good when you are use to 480i.  I can live with it for a while.  Until the $200 HD player are available.