Sony launched their new video-on-demand service last night. While it's not really revolutionary and only has 1,500 programs so far, it is the slickest offering to date, with convenience and quality unmatched by other VoD services.

 Of course, VoD has been around for a while. Digital cable and satellite have offered movies on demand for a price for some time now, with the only downside being that there's typically only a couple of dozen of the latest popular movies available. iTunes and Netflix VoD services are extensive, with tens of thousands of programs available now, with one minor downside and one major one. In the minor category, the quality of the programs isn't that great at sub-SD resolutions with a good deal of compression. I list this as a minor downside, because the quality will continue to improve very rapidly as we move into the future. The major downside (and I think this is the deal breaker), is that you need to watch on a computer (or a dedicated Apple TV box). No one likes to watch movies on their computer. (Yes, I know geekboy: YOU like to watch movies on your computer, because you have a computer humming away in the corner of your living room next to your stereo and cabled to your HD television. So do I, and I STILL don't like watching movies on my computer. Normal people don't: just ask Microsoft or Dell how Windows MCE is doing.)

Sony's service does two things that have not been done before: (1) It is true, high-quality VoD, with 1,500 programs available (so far) and (2) it brings this service into the living room. Well, it does for people who own a PS3. That's about 13 million households, which isn't really all that many.

The interface works through the PlayStation Network store. Pretty conventional. The cost is $1.99 for a 30-minute episode of Family Guy and $14.99 for the SD version of The Bank Job. Nerdy gamerboy programming dominates the current 1,500 title lineup. You can't buy HD movies, but the rental rate is pretty standard: $4-5 bucks for a first-run movie, $3 for also-rans (like Bloodsport IV). Still, I can't see collectors being interested in buying this content anyhow. Boxed sets and collector's editions are definitely a part of the whole collector's mentality and, besides, how much can you really collect on a 40GB hard disk?

So it's the VoD rental part that's really interesting. As an anecdote, I wanted to go see Hellboy II the other night, but my girlfriend hadn't seen the first Hellboy. Netflix would take a few days to get here, so we hopped over to the supermarket DVD rental kiosk: it was broken. Blockbuster was on the corner, so I stopped in there: the movie was rented out already and they didn't have the Blu-ray version anyhow. Fired up the PS3 and - after a $4.50 tax write-off and 15 minutes of downloading to buffer - I was watching Hellboy in better-than-DVD HD quality.

Technically, the quality is rather good. Back-of-the-napkin calculations reveal that the SD content is coming in at just over 2Mbps and HD movies at around 11Mbps. That's not "Blu-ray" quality, but it is better than any other VoD service available and better than DVD-Video. At those data rates, an SD program will stream into my home without a hiccup over cable broadband, but HD movies will not and need to be a least partially downloaded before watching.

Which brings up a strange irony. Sony is claiming Blu-ray is the victor in the HD disc format war, almost entirely because of the 13 million PS3s sold in the US. Now they are launching a service that offers HD content that competes with Blu-ray and is more convenient than old-school physical media delivery anyhow. It's definitely smart for content-owning goliath Sony to play in both the physcial disc market and VoD, but once you own a PS3 and can instantly rent HD movies for $5, what's the point of driving to the store and renting the disc? Or waiting for Netflix to ship you a copy?

Will Sony's PS3 movie service kill off Blu-ray? It certainly sounds like a death knell. Since Sony has been losing money on the PS3 in an attempt to capture more market share, one way they could cut costs on the device would be to eliminate the Blu-ray player, say for $300? That certainly won't happen this year and while the PS3 is first and foremost a game console, it is also a very capable media server already. Add in VoD, maybe a music service and you have a pretty interesting device, even without the games. 

References:

• Sony cutting price of PS3, adding video downloads - The Mercury News. July 16, 2008.
• Netflix + XBox = Movies on Demand
• Official[TM] Super Long Boring Sony© Press Release(R)