New-media darlings like Netflix (Nasdaq: NFLX) rarely follow in the footsteps of old-school retailers like Blockbuster (NYSE: BBI). But now, Netflix is taking a page from its bricks-and-mortar rival by no longer buying HD-DVD discs for its DVD rental service.
Blockbuster reached that conclusion last year, after testing both Blu-ray and HD-DVD optical discs at some of its stores. After tallying the rental results, Blockbuster went Blu-ray, choosing to spurn HD-DVD as it expanded the program.
It was a gutsy call for Blockbuster; at the time, the studios were still divided over which platform to support. However, since Blockbuster relies on video game rental systems to drive traffic into its stores -- and Sony's (NYSE: SNE) PlayStation3 has the ability to play Blu-ray movies -- supporting one format over the other made sense. It also matches my prediction of the eventual outcome.
Netflix probably didn't even have to make the decision this time around, since more and more studios have gradually migrated over to the Blu-ray side of the debate. Of the six major studios, only two still support the HD-DVD format. Blu-ray is pricier than HD-DVD, but the discs offer greater storage capacity than all but the very newest HD-DVD discs.
It's about time Netflix picked a side, really. Hopefully, this will help beef up Netflix's investment in Blu-ray, because my lone gripe as a longtime Netflix subscriber is the unbelievable "Very Long Wait" availability on the Blu-ray titles I've added to my queue.
I'm not a hyperactive renter. I know that my account isn't being throttled, since I only go through five or six Netflix rentals a month. That makes me a profitable subscriber in Netflix's eyes. It just never made sense to me that Netflix would offer HD-DVD and Blu-ray if it wasn't going to order enough titles to satisfy its users.
If anything, Blu-ray titles are a better investment than conventional DVD alternatives, since Netflix knows that the base of Blu-ray players will only grow in the coming years. Loading up on Live Free or Die Hard and Pirates of the Caribbean: At World's End on Blu-ray probably won't backfire, even if Apple (Nasdaq: AAPL) and Amazon.com (Nasdaq: AMZN) champion the digital delivery of non-high-def video.
Netflix isn't looking to scrap its existing HD-DVD titles, which will stick around until attrition plays itself out. However, Netflix will no longer order new HD-DVD discs.
In short, the battle is over. Blu-ray wins. Now let's hope that the price of the Blu-ray players drops, in order to reach the mainstream market. Let's also hope that Netflix's inventory can keep up on that front, for a change.
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