How Blu-Ray’s win demonstrates the flaw of the not-always-free market.

Well, it looks like we can now call it – the terribly named HD “format war” seems to be over or very very close to over as main player Toshiba is looking to shut down production of HD-DVD players. This is, in broad terms, good news, partly because it means titles will shortly be available in a soon-to-be-universal format and partly because every idiot who said “porn will decide things” as if it were still 1985 has been proved to be, well, an idiot.

So the HD-watching, PS3-owning geek in me is happy. My inner cultural critic is, however, less so. Why? Well, to my mind the HD format war is yet another example that highlights the limits of the free market. In theory, the market is supposed to operate through a combination of entrepreneurship, innovation and choice: companies create products and services, advertise them and the consumer then chooses which best serves their needs. The market ‘works’ because consumers, reacting to their wants and needs, elicit competition between companies and the cream rises to the proverbial top. The market drives innovation while serving the needs of the individuals who comprise it. While I am far from a being expert on free market economics, this seems pretty inarguable.

So, if this is how things are supposed to work, the question is whether or not this happened in the HD format wars – and my short answer is: no, no it didn’t. While the potential technical specifications of the two formats were identical, the key lay in how they were implemented. Simply put, HD-DVD had their platform tech finalised and in place while Blu-Ray did not. This means that anyone buying a Blu-Ray player, even now, won’t be able to access features on discs coming in a year or so (unless it’s a Playstation 3) that one could get with HD-DVD. One might be tempted to say “fine, early adopters caveat emptor and all that – but what really decides things is what movies are available” and here, Blu-Ray had won, so to speak, before it had actually won as it had more studios producing in that format from the start.

But how did Blu-Ray get more movie studios on-board? Simple: through back-room deals and corporate self-interest. When Warner switched, they did so in response to their own atrophying DVD sales and the slow uptake of HD discs. Best-Buy, Wal-Mart and Netflix made the switch to Blu for the same reasons. And why, when forced to pick between two formats, did they go Blu? Because Sony used the PS3 to get Blu-Ray into homes, drastically increasing Blu-Ray’s user base through designing a product that was meant to do exactly that. It was not consumer choice that necessitated the switch to Sony’s format. Rather, it was the need to push consumers towards a choice so that one cash-cow could replace another, to effectively choose for consumers what they wanted to buy.

While one might claim that Sony & Co. ‘won’ through the good ole’ capitalist values of wheelin’ n dealin’, my point here is that there are limits to the issue of choice in the free market. When we eventually buy Blu-Ray en masse, we will be doing so only in part because the ‘market spoke’; we will also be doing so because of choices made in the best interests of Sony, Blu-Ray manufacturers and retailers, choices made by those very organisations. The free market principle of choice is constrained by the simple fact that what one chooses from is determined by forces much bigger than the individual consumer. Furthermore, as I’ve argued elsewhere, the market is not something that simply reacts to tastes but also produces them, shaping consumer choice by determining what is available and how it is marketed. The simple fact that one needs to be convinced that there is a big enough difference between standard-def DVDs and high-def discs may be but one example of this trend.

The image in this post came from silencematters on Flickr.