Why buy a DVD for $15 when you can spend $20 and get the movie in a lower-quality format without the extra features ? Disney is asking this question as they introduce a deal with CinemaNow, where they'll provide movies that can be downloaded over the Internet and only viewed on a PC.
I'm not exactly sure what they're thinking here. Disney can't expect to sell more than a handful of films online with this pricing strategy. They're reducing their costs by eliminating the duplication, packaging, and distribution costs, and then increasing the sale price over what you would normally pay for the full DVD.
The cynic in me is going to suggest this is because they want to avoid the online movie business altogether. Just as they opposed the VCR because of their reduced control over distribution, they now oppose the Internet for the same reasons. When this fails, Disney and the MPAA will be able to point at the American public and say, "See! People don't want movies online. We gave them the opportunity to legitimately purchase films online, and they still just pirate them."
Nevermind that the VCR, and more recently, the DVD, has been the mainstay of movie studio revenues for the last 20 years. Even still, I can see Jack Valenti likening P2P networks to a serial killer any day now.
"I say to you that the VCR is to the American film producer and the American public as the Boston strangler is to the woman home alone."
-Jack Valenti to a Congressional panel in 1982
I couldn't have said it better myself ! Oh wait, yes I could, but I would have said it more along the lines of, "I say to you that the VCR is going to be hugely profitable for us, but we're too short-sighted and stuck in our ways to realize it." Much better.