Disney Dumps Disposable DVDs

Selling DVDs coated in a destructive film that would let oxygen eat away at their viewing functionality within two to three days? Rubbish. At least that's what Disney (NYSE: DIS  ) seems to be saying after quietly pulling out of its test markets for the concept recently.

The retreat shouldn't have come as much of a surprise. W.D. Crotty made the right call two years ago, when he figured the concept was doomed. While I was a bit more optimistic a few months earlier, when the partnership between Disney and Flexplay was first announced, my upbeat demeanor washed away like a self-destructing disc's contents in June 2003, when even Disney CEO Michael Eisner admitted that the concept "probably won't work."

That wasn't much of an endorsement, especially since testing was still just two months away.

While environmental groups must be happy that Disney won't be contributing to any more direct-to-landfill junk -- well, at least since last year's Home on the Range home video release -- the disc's failure wasn't just its own doing. Priced as high as $6.95, the disc was initially marketed as a convenient alternative to the typical DVD rental that the viewer would have to rush back to the store.

That market cratered with the even niftier convenience of having flicks delivered by mail. Netflix (Nasdaq: NFLX  ) pioneered that field, but it also quickly attracted cost-cutting competition from Wal-Mart (NYSE: WMT  ) and Blockbuster (NYSE: BBI  ) , and in all likelihood, Amazon.com (Nasdaq: AMZN  ) will join the fray.

What would you rather do? Pick up some beef jerky and a dated DVD that was ticking toward obsolescence at your local convenience store? Or pay a little more than twice as much to go through as many home-delivered titles as a month would allow?

Flexplay didn't get any help on the bricks-and-mortar front, either. When Blockbuster launched its "No Late Fees" campaign last month -- even if it's deceptive on many different levels -- it ruptured the urgency of watching a flick the moment it was rented.

This doesn't mean, though, that the concept of destructible media is toast. Flexplay sold the technology to privately held Convex Group. Sound familiar? Convex is also the company behind LidRock, which places promotional music and video discs under the lids of soft drinks dispensed at movie theaters, theme parks, and fast-food chains.

Because the value proposition of discs with fruit-fly lifespans is close to nil, Convex will have to either significantly lower selling prices or attempt to make the product more attractive. It sounds like a tough job, but nothing seems too outlandish for a company that is also willing to package a hit single within your next cup of Coke (NYSE: KO  ) .

Want to learn more about destructible DVDs?

Longtime Fool contributor Rick Munarriz wonders whether he could coat some of his bad market calls with the same EZ-DVD technology to make them invisible in two to three days. He owns shares in both Disney and Netflix.The Fool has a disclosure policy. He is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.


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