Is Streaming Killing Blu-ray?

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For the first time ever, Americans are watching more movies and TV shows via legal online streaming than on physical disc formats, such as DVD and Blu-ray.

This is according to the latest research conducted by IHS Screen Digest, which found that people in the U.S. watched 3.4 billion titles in 2011 via online streaming, up from 1.4 billion a year ago. Disc based watching, on the other hand, decreased from 2.6 billion in 2010 to 2.4 billion in 2011.

The lower price of online content may be the reason consumers are changing their viewing habits. On average, consumers paid 51 cents for movies consumed online, compared to $4.72 for disc based titles.

These latest results have some critics saying this is the beginning of the end for physical discs, including Blu-ray. Robin Harris, who writes the Storage Bits column on ZDNet, is one such believer as he boldly proclaims that "Streaming beats Blu-ray" in this latest opinion piece.

Harris says that "Blu-ray has lost the war for the American living room" because its benefits over DVD was just not great enough. Where DVDs brought convenience to people's homes, compared to clunky VHS tapes, Blu-ray "added nothing except slightly better picture quality". And improved convenience instead now comes from online streaming services such as Netflix and VUDU, where a wide library of titles can be accessed with a few clicks of the remote.

Harris demonstrates his point about the convenience of streaming, versus discs, by pointing out he recently watched The Graduate via streaming, even though he owns the DVD.

And while 4K video (that's video with horizontal resolution of 4096, compared to Blu-ray's current 1920) might be Blu-ray's, and physical disc's, salvation, as Internet connections are not yet fast enough on average to transmit data of this magnitude, Harris wonders whether the increased resolution will actually make that much of a difference. "resolution is simply not that important once you get to close to HD quality. Contrast, saturation and color accuracy are more important - and current technology is pretty good," Harris notes.

But as with every opinion, there's an opposite one, and 20th Fox's executive vice president of global research & technology, Danny Kaye, says it's far too early to write-off Blu-ray just yet.

Kaye says that Blu-ray guarantees viewing quality, while online services still struggle to provide not just superior picture quality, but also a fast and steady Internet connection needed, especially for HD content.

He notes that the recent dip in the financial fortunes of discs is not only related to the growing strength of streaming, which Kaye does not discount, but it was the effects of a "perfect storm" that made things look worse than it is. "When the recession started perhaps it hit harder and earlier in the US and then started spreading elsewhere. It was the same time that you had a number of alternative channels of distribution begin to evolve and the consumer said, 'Wow that’s pretty convenient, they’re cheaper, in some cases they’re really convenient and that’s the way I’m going to go.'" noted Kaye during his interview with T3.

Kaye notes that physical disc's fortune is changing once again for the positive, with sales stabilising in the middle of 2011, and growth predicted for 2012.