The thinking is that if the movie isn’t available to rent, then we’ll buy it, either in physical format or though some form of electronic sell through. Windowing also encourages retailers to support key titles, which is a point not to be dismissed lightly.

The argument is whether scarcity, and by extension windowing, matters to consumers in today’s movie retail environment. NPD’s research shows that over 90 percent of renters would not consider acquiring a new release movie any other way. For them a window will have little effect. On the other hand, if it does move a few consumers to actually purchase the movie, that is a win for the industry — a 2 or 3 percent lift in unit sales at higher margins makes an important contribution.

The challenge is that the extended window will likely help only a select number of titles, and extending the window may actually hurt some fringe releases. Consumers will simply rent them later on, or maybe not at all.

An even bigger issue is the concept of scarcity itself: With rising DVR ownership and increasing lower margin VOD options the reasons for “appointment” viewing of movies are diminishing. If the desirable “Triple-A” title isn’t available for rental, are consumers simply being encouraged instead to watch time-shifted TV content or episodes of “Breaking Bad” on Netflix Watch Instantly?

It is terribly important that the core value of the home video structure be preserved, because that revenue flows directly back to the studios and we, as viewers, should get more compelling movies. The question is whether this longer window between release and rental availability will have the desired result.

Perhaps the most interesting component, though, is a “Disc-to-Digital” conversion capability that will allow owners to convert their DVD collection to digital files. There are some conversion capability questions that will likely be answered at CES, such as why only DVD is supported while Blu-ray is not? How does the new line co-exist with the UltraViolet initiative, which is supported by many studios? And will the digital files work with all devices, including Apple iOS?

Stay tuned for those answers.

The problem with DVD, and physical media in general, is that the content owner rarely has opportunities to bond with the customer. The DVD gets shipped from the replicator to the warehouse, and then it gets sold through a retailer. Walmart, Amazon and Best Buy have the relationship with the ultimate customer — Warner Brothers or Disney do not.

“Disc to Digital” apparently requires customers to authenticate their DVDs prior to creating the digital file. Samsung reports that DVD owners will have the option of upgrading to an HD file; however, I’m skeptical that very many consumers will do so, since DVD quality is good enough, especially for most movies in people’s collections and for the mobile devices they will play the digital files. The opportunity for the studios is to insist on access to names and e-mails of disc owners as part of the scheme to unlock the digital rights management (DRM) . . . with permission of course.

Once “Disc to Digital” becomes mainstream it could help re-ignite home video sales. Warner Brothers has released six Batman movies since 1989, and say I register and authenticate four of the movies in the series. Warner can offer me the missing titles, either on disc or as a digital file. Plus they can promote the upcoming “Dark Knight Rises,” which is slated for Summer 2012 release. The studios can exploit my weakness for Superbad and Austin Powers the same way Netflix or Amazon now serve up my movie and TV recommendations.

There are many open questions, however, such as how long it will take for “Disc to Digital” to become mainstream in BD devices? By that time video on demand (VOD) could be so well developed that nobody will be interested in converting their dusty DVDs. Will we have replaced the movies we really want with Blu-ray and UltraViolet powered Digital Copy? Who knows? But if I’m a content owner today, any opportunity to reconnect with my customers is an opportunity worth exploiting.

Qwikster, the stand-alone DVD/Blu-ray rent-by-mail business has now officially been relegated to those lists of “Top 10 Business Mistakes.” In fairness to Netflix, Qwikster actually made some sense. Wall Street would eventually show its dislike for entertainment businesses with a physical component (see Blockbuster). As their ongoing global expansion continues, Netflix is poised to become a streaming video company. Our expanding use of connected devices will inevitably usher in a new age of acquiring and watching movies and TV shows, so when Netflix separated physical discs from digital rentals, they appeared to position themselves for the future.

The problem is that future is still a few years away. American consumers continue to watch a lot of movies on DVD and Blu-ray. By separating their physical and digital businesses, Netflix strayed from its foundation — a deep catalog of movie titles, accompanied by today’s hits, supported by a seamless interface, and promptly delivered to your home. And all this on a format that is used by the majority of Americans. According to NPD’s latest “Entertainment Trends in America” update, 75 percent of U.S. consumers watched a movie on a DVD or Blu-ray in the past three months, compared to 22 percent who rented using video-on-demand (VOD), 21 percent streamed via subscription, and only 4 percent who rented a temporary download.

There’s nothing wrong with a company striking new ground, of course, but the trick is timing. In the weeks following Netflix’s announcements, NPD’s VideoWatch tracking service revealed significant declines in subscriber ratings of their overall experience and value scores. In other words, customers were angry. In NPD’s ongoing tracking of music and home video, we’ve seen a direct relationship between those customer scores and market share trends.

Netflix works because there was that one-stop shop with a unified website. If you couldn’t get Hitchcock’s Rear Window on a stream, it went into your DVD queue and you watched something else. Separating the services not only diminished the consumer experience, it may have put the streaming business at risk. Lacking a deep catalog, as well as current titles, Watch Instantly as a stand-alone service was at peril of being perceived as a direct competitor to Hulu or on-demand television channels. Even YouTube is a major challenge on small screen devices. Unifying the physical and digital markets provides the best customer experience and differentiates Netflix from its competitors. Happy customers will migrate to their streaming offering when digital video becomes mainstream and as multi-screen watching evolves. Don’t let the price increase bother you, either: Though some people are complaining, Netflix customers in general spend a lot more than average on movies — even for physical discs, and TV VOD.

I’ll offer these three predictions: First no more announcements from “The Netflix Team” for a while; second, a reversal of falling customer satisfaction scores, and finally a return to expanding domestic subscriber growth.

Somewhere along the way, this utopian vision has been lost. A dramatic shift in the industry is happening that will take the OTT market down a path quite unimaginable just a few months ago. Signs of this seismic shift are everywhere. Over the past year, Netflix has found itself vilified and rejected by HBO, Showtime, and most recently Starz. There is little chance for mending fences in the short term.

Forced to fight, Netflix appears to be headed towards a new strategy that will transform the company into an online premium-TV network. Like HBO and other premium TV channels, Netflix will attract and retain subscribers from original TV programming and high-value movies. They will be introducing their first original TV series, “House of Cards,” in 2012, and they are busy licensing a wide array of supplemental recent TV series, movies and specials. Welcome the newest premium TV channel: on-demand, unbundled, and multi-platform.

Other streaming VOD services are going down another path. Last week, DISH Network announced a Nefllix-like streaming VOD service under the Blockbuster Movie Pass moniker, but the service is not designed to compete directly with Netflix. The Movie Pass service will be available only to subscribers of DISH satellite pay TV service. Thus, Dish is positioning Movie Pass as an extension of their core pay TV service.

Even Microsoft is aligning itself more closely with the pay TV industry. The company recently announced its Xbox Live video service that will stream live broadcast TV programming. The Xbox service is linked to TV Everywhere services, such as Comcast’s Xfinity and Verizon FiOS services. As long as you have an appropriate pay TV subscription, users will be able to stream live TV broadcasts to their TV via their Xbox 360. Not exactly disruptive, is it?

As streaming VOD migrates toward a more premium TV-centric model, movie studios still must monetize their movies through online rentals and electronic sell-through (EST). The studios are realigning their release windows and introducing the Ultraviolet digital locker platform to encourage more online video purchases; yet much of their success will be left up to fledging transactional VOD (T-VOD) suppliers, such as Vudu, CinemaNow, Amazon, Alphaline, Qriosity and Blockbuster. Consumers have been slow to adopt online video rentals/purchases and the content producers have limited leverage to speed up the process.

After all is said and done, it appears that the OTT video shrew has been tamed. The OTT video market will be split between the pay TV industry commandeering the subscription VOD services and the movie studios that will control online rentals and EST. Maybe it was inevitable. Maybe it is for the best. Even though we will continue to pay premium rates for entertainment, we will at least be able to view it when, where and on the devices we choose.

No doubt DISH Network is thinking about customer acquisition. While that’s a worthy objective, the prospect of Blockbuster redux is more exciting. At some future date this service will be rolled out to the rest of the country, and it will be the late ‘80s all over again for the other “Big Blue.” So will we see market dominance from the folks who brought you VHS? When you stop giggling, consider this: There’s barely a person alive in the U.S. who has not been to a Blockbuster store or watched one of their rentals. At their peak just a few years ago, half of the disc rentals in the US came from Blockbuster.

In August 2008, an estimate from NPD’s “Entertainment Trends in America” report projected there were more than 50 million Blockbuster renters — and that was at a time when Netflix was beginning to offer major competition. Fifty million — that’s twice as many Netflix subscribers. That is a lot of brand power, and it’s equity that has not been lost. Contrary to many analyst’s reports, people didn’t hate Blockbuster — although our local stores were getting a bit long in the tooth. The convenience argument isn’t exactly right, either; we stopped at Blockbuster on the way to McDonalds, on shopping trips, and wherever we scooted around town. Is Redbox convenient? Sure. Is Netflix convenient? You bet. But many people defected to Netflix because of their deep catalog, in addition to the convenience of “by-mail.” Blockbuster was late to adjust pricing, and to address late fees, and to invest in the stores. But it wasn’t Yugo cars, or WebTV or BP or Enron.

Despite the plethora of emerging movie options, Blockbuster can be a winner. There’s the company’s brand equity: when their icon appears on your connected device, you know who they are, there’s no cost to build awareness, which is going to get expensive as connected devices get more crowded. My bet is consumers will pick one or two core rental options, so Blockbuster now has an opportunity to compete for that choice.

Blockbuster’s $10 price is competitive and equal to a couple of VOD movie purchases. There’s also a free option to get DVDs and Blu-ray discs, and people like discs. In fact 75 percent of us watched a movie on a disc in the past three months, according to NPD. Unpopular as that may be to the technofascists, it’s true. There’s still just no better way than Blu-ray if you want to watch movies like Avatar or the newly released Star Wars set. We have disc players in our cars, for our kids. Those cars can stop into a Blockbuster store to exchange discs. They’ll have 4,000 movies to stream at launch, and the studios will be happy to see some competition in the subscription business. DISH Network customers can also now get a bundle with extra premium channels. You can manage your queue with your DISH Network remote control, so there’s no need for a laptop or an iPad on the coffee table. Right now you can stream to your TV or computer — but no iPads yet. Only 6 percent of Netflix streaming is to tablets or phones, so that’s not a big miss, and it will likely be corrected in the near future.

It can be difficult to build a new brand in digital entertainment, and so far there haven’t been any second chances. Blockbuster is getting a second chance to do what they should have done a long time ago.

Right now there are three pieces up in the air that, if they align correctly, could form cable’s wireless future. For the purposes of this conjecture it’s important to first remove any doubts that cable needs mobile wireless or that Clearwire provides any clear-cut answers; it does and it doesn’t. Once that’s accepted, look at the pieces that are floating in the air just waiting to be joined.

Google acquired Motorola. For sure, Google wanted Moto’s wireless patents and will primarily pursue its mobile wireless business plan. Unless things have changed, however, it’s unlikely the acquisition bid could have been made without at least the tacit blessing of a cable industry that counts Motorola as a primary equipment supplier.

If Google becomes a primary cable vendor, it seems reasonable that the search engine giant will abandon its head-against-the-wall effort to crack cable’s walled garden. Instead it will likely pursue a partnership route using Motorola’s equipment and Google’s Android OS. One must assume that cable wants to get into the wireless business as more than just a content provider for Apple devices. That’s where Motoroogle comes in as an existing vendor with the ability to deliver the same, if not better, Android-fueled wireless devices without competing with cable operators — which at least leads to a supplement of Android tablets for iPads in cable consumer homes.

The final piece of this perfect storm is still forming in the clouds. Cable is unlikely to develop its own wireless offering in time to remain competitive with both wireline telcos and whatever Dish Network is hiding up its sleeve. Cable has been steaming ahead with broadband but has stopped pretty much short at Wi-Fi when it comes to wireless. Major MSOs own AWS spectrum but they don’t have the infrastructure to deploy their own mobile wireless service and certainly, while still printing money, don’t have enough bread to build that infrastructure in depressing economic times.

The most logical way for cable to move quickly into mobile wireless would be via a deal with Clearwire and Sprint. Here, though, is where you need historical perspective. Cable has never played well with others. Just ask those wide-eyed optimists who believed the industry’s Pivot joint venture with Sprint was the industry’s wireless play. Note also that while Sprint is rumored to be eyeing a Clearwire buyout, its cable partners have been relatively quiet on the matter.

Which brings forth the piece still forming high in the stratosphere: LightSquared. The venture has what cable needs: available spectrum on which to offer services. It also has pledged itself to a wholesale model so unlike Clearwire and Sprint, it would not compete with its cable customers; in fact, cable’s success would be LightSquared’s success.

LightSquared has been in discussions with device makers … like Motorola. Google, with an Android operating system, would be a logical bridge between cable and LightSquared and, importantly for Google, a way to drive a wedge between cable and Apple.

Of course this is all conjecture … like watching a hurricane form in the Atlantic basin and trying to determine whether it will level New York City or fizzle in the middle of the ocean. The elements are all in place to at least start tracking this storm of service providers with a need for infrastructure, an infrastructure provider with a need for a service provider customer and a new age company with an old age need to conquer.

If nothing else, it should be on the radar.

While the damage inflicted by Irene varied by location, the loss of power was significant, widespread and affected millions. Talking to friends, neighbors, and reading Facebook posts revealed that outside of the true safety issues that the power outage presented, the loss of their ability to use many of their electronic devices was very much felt by the entire family. Parents tend to have a love and not-so-much love relationship with the electronics their kids use. We love them when they can keep them busy while traveling, or when they are distracting them from what is going on out in the world (like hurricanes), but we don’t love them as much when we need our kids to focus on homework or get chores done.

No matter how they make us feel, consumer electronics are a mainstay in kids’ lives — and it’s an area that is subject to rapid change, as the technology and devices themselves change. Our recent report, Kids and Consumer Electronics, 2011 Edition, takes an in-depth look at what devices kids ages 4 to 14 are using, how much time they’re spending with them, and what activities they engage in on their devices. We have conducted this study every year since 2005, and it’s fascinating to track the changes in kids’ interaction with their favorite gadgets. New to this year’s study is a question regarding expected replacement rate of various types of devices, which gives us new insight into turnover. At just under two years, cell phones showed the fastest expected replacement rate among all devices, while high definition televisions are expected to have the greatest longevity at nearly five years before expected replacement. This is great new information that can help with modeling and forecasting.

But what are kids doing with all these devices? It’s probably not surprising to learn that gaming is one of the most commonly enjoyed activities kids engage in across the gadget gamut. We plan to delve further into the content kids are consuming in our upcoming study, Kids and Entertainment Content, which we will release later this month.

It looks like I’ve caught a break in the rain – I’ve got to run out to get some batteries for my wireless keyboard.

Riding in a car, eating breakfast before school, and even while supposedly doing homework, mobile gaming is establishing a larger presence in my sons’ lives. And they’re not the only ones. The quantity and quality of mobile apps (“Angry Birds,” or “Infinity Blade,” anyone?) pose an additional competitive dimension to the gaming landscape. NPD’s report, Online Gaming 2011, provides an in-depth look at online gaming activity across all gaming devices, examining the type and extent of digital downloading and gaming behavior that is occurring across a wide array of consumer demographics.

According to the report, digital game downloads for mobile devices represent close to half of all video full game downloads. Even among those using a console for online gaming, the biggest share of full game digital downloads purchased was for mobile devices. It is important to keep in perspective that the full-game price points on mobile devices are generally lower (and many are free) than those for console and portables systems, so mobile devices’ full game download unit share does not translate to a comparable level of consumer spending. But what is really interesting is that among i-Device online gamers, the average spend on physical games (for any device) was significantly less than the average spent by PS3 or Xbox 360 online gamers.

While mobile gaming is still in its relative infancy as compared to traditional forms of gaming, it’s the fastest growing in terms of consumer spending on games content, according to NPD’s Games Industry: Total Consumer Spend service. Right now the growth in newer ways that consumers can acquire content is making up for the decline in new physical

Of course HTC isn’t the first to try to leverage Beats’ audio enhancements to stand out in commoditized markets. Premium cable maker Monster Cable was the first major electronics brand to tap into Beats –and with great success. According to NPD’s Retail Tracking Service, Monster Cable had the highest revenue share of stereo headphones (18 percent) from July 2010 through June 2011 — up from only 2 percent two years ago. The impact of hip-hop legend Dr. Dre, of course, contributed to its success in the audio-centric category. The impact of Beats has been less clear in the fortunes of HP, which has licensed it for PCs. HP, though, has migrated Beats down from its flagship Envy line to other laptops, which signals that the license is proving its value.

HP has also included Beats audio on its recently released webOS-powered TouchPad tablet, which competes with HTC’s Flyer (also sold as the EVO View at Sprint). HTC says Beats will act as an independent subsidiary, and there’s probably no issue with HP continuing to use Beats in its PC products. But even if HP can move forward with Beats in its tablets, it seems less likely that the computing giant will be able to extend that capability to its webOS-based handsets — at least barring an HTC webOS-licensing wild card.

But how many consumers really care about the cross-compatibility of 3D glasses? According to NPD’s “3D 360 Monitor,” relatively few. In May 2011, 13 percent of consumers who identified the need to wear 3D glasses as a drawback cited glasses incompatibility as a cause for concern, a higher percentage versus last fall. And while compatibility was not cited as an objection nearly as often as price or convenience, it was on par with concerns about health.

Regarding a more imposing objection to 3D TV (at least until glasses can be eliminated completely), prices for active shutter glasses have been declining even without the establishment of a standard. With the industry’s new working group – plus rising 3D TV sales volumes, and competition from companies offering FPR displays — prices should continue to decline.