Incrementalism and Pyrrhic Victories

Last month I wrote something called Incrementalism and the New New Thing that got quite a bit of conversation flowing. While largely an observation about Valley dynamics and a malaise I feel about Web 2.0, the fact is that it’s a lot more complex than that.

Last night I was catching up on some reading and came across an article about about how Blu-ray isn’t getting much traction among consumers and why. This is something I’ve written about before here and here, my thesis is essentially that Blu-ray is a dead standard even though it is technically superior and furthermore that their recent victory against HD-DVD is pyrrhic in nature because what they have won is arguably not worth winning in the end.

Shame about the timing. New technologies often take a while to get established, and Blu-ray is fighting for acceptance at the very moment that cash-strapped consumers are pulling back. Meanwhile, Apple (AAPL), Netflix (NFLX), and (AMZN) are launching downloading and other services that could make Blu-ray obsolete before it has a chance to get traction. “We see Blu-ray’s window of opportunity closing very quickly,” says Jagdish Rebello, a director and principal analyst of iSuppli, a research firm. “The question is: Does Blu-ray really matter?

In a nutshell, Blu-ray isn’t flying off store shelves because consumers on the leading edge of the market, Blu-ray’s primary market, are already on to HD video on demand and downloads and the increased costs associated with not just the Blu-ray player but also the content itself makes converting the market to Blu-ray a tough rock to push. Even more troubling is that converting the market to Blu-ray is forecast to add only 1% of growth to the overall market, which means that while the margins are better what is happening is that consumers are expected to buy less.

Blu-ray won’t change the fortunes of entertainment companies because by the time it goes mainstream the price points will fall to where plain ‘ol DVD is today. Just replacing DVD with a better DVD is not enough and after finishing this BW article it occurred to me how this can be appropriately applied to the web 2.0 incrementalism theme.

Fred Wilson linked to my post and, to paraphrase, stated that big problems are solved one step at a time, a point which would be difficult to disagree with. This is the nature of the conflict I have about this subject, we all want big problems solved but place little confidence in small startups who proclaim to change the world in broad brush strokes so I’m willing to grant that incremental steps are necessary even if not obvious where they are going.

I want big problems solved not by proclamation but by actually enhancing the quality of my life, which at it’s core is the bargain we strike with technology companies: we are willing to put up with glitches and gaps but only to the degree that progress is demonstrable and to some tangible end.

I have rewritten this last paragraph a dozen times, which reflects my own turmoil about this topic but I keep thinking that as either investor or consumer would I bet on Blu-ray or would I put my lot in with iTunes? Should something like Mint be just as good as Quicken or should it go in a direction that Quicken never imagined?