Blu-Ray 'Quaking in Its Boots'?

The videos are available through several compatible devices -- the Roku digital video player, several TiVo DVRs, the Sony Bravia Video Link, and Panasonic VIERA CAST-enabled HDTVs.

Rental prices are $3.99 to $4.99. HD TV shows can also be purchased and watched on Macs or PCs through compatible devices or downloaded for offline viewing for $2.99.

Some observers have contended that online delivery of HD is a major competitor to the still-growing Blu-ray Disc format. But Ross Rubin, director of analysis for consumer technology at the NPD Group, said that Blu-ray is still the preferred medium for HD purchases.

Josh Martin, an analyst at Yankee Group, agreed, saying that he doesn't "think Blu-ray is quaking in its boots quite yet." He added that Amazon is still a relative niche player in this market, with only Apple's iTunes Store the "800-pound gorilla."

Good-Enough Quality

But James McQuivey at Forrester pointed out that there's HD, and then there's HD. "HD streamed over the Web," he noted, "is usually lower quality than HD in Blu-ray." The issue for Blu-ray, he said, is that the quality is good enough for most people, just as up-converted regular DVDs can be good enough.

McQuivey said this is one reason Blu-ray prices are falling, because "fewer people are willing to pay a premium to get hold of Blu-ray content when other experiences are good enough."

Rubin said the on-demand impulse might be awakened by Amazon and others like it, but it would currently be better satisfied by cable companies, "who can provide a level of convenience that niche companies like Roku and TiVo can't match."

In fact, the cable companies and others who provide Internet broadband service could be a potential fly in the ointment for hopes of a high-definition online movie theater for everyone, because of a variety of recent tests of a tiered approach to charging for bandwidth.

'Could Stifle' HD Online

Time Warner Cable, for instance, announced several trials that would charge by download levels, with the "virtually unlimited" level costing $150 a month. Martin said the trend toward caps on bandwidth could "stifle the use of high definition online, making it important for users to better understand how their viewing affects their usage caps."

TMC recently said it was delaying the trials following intense opposition from consumer groups, some local newspapers in the trial markets, and several legislators. TMC and other providers have said that increased infrastructure costs are the reason for the new pricing models, but some industry watchers have dismissed that, saying cable companies are protecting their programming turf.

Cable companies know "that people are less likely to sign up for premium video content if they can get that content elsewhere," even for free, said McQuivey. He said TMC and others are moving toward "charging extra for broadband bandwidth, under the assumption that people who use the most bandwidth are doing so to circumvent cable subscription fees."