I'd like to examine some of the same issues I brought up in "Does buying videos from the iTunes Music Store make sense?" as they apply to UMD movies. Sony introduced the UMD ("Universal Media Disc") format along with the PSP, with the idea that they could be used for both games and prerecorded videos (and I wouldn't be surprised if they thought about using it to sell prerecorded music as well). The UMD format works reasonably well for games (its main problem is access time, which leads to long loading times in some games) and the prerecorded UMD movies look surprisingly good on the PSP's screen. But does it make sense to buy movies in the UMD format? (More after the jump.)
First is the issue of quality. As I said above, if the Spiderman 2 disc that came with my PSP is any indication, UMD movies look great on the PSP. A lot of people don't realize, though, that UMD movies are often not in their correct aspect ratios. Even though the PSP is widescreen, it has a 1.78:1 aspect ratio, which isn't wide enough to display movies that are very wide without black bars on the top and bottom of the picture. In order to get rid of these bars and have the video completely fill up the screen, many (most?) UMD movies chop off the sides of the movies. Whether this is a reasonable compromise will vary from person to person, but the point is that you're missing some of the movie that you would get if you bought it on DVD.
Speaking of missing information, the video on UMD movies has also been heavily compressed compared what you find on a DVD. A UMD disc can only hold up to 1.8GB of data, while a double-layered DVD can hold almost 8GB. The reduced capacity of the UMD means that you won't get many of the extra features that DVDs offer. Of course, you can only play UMD movies on the PSP, so the difference in video quality and resoluton isn't really noticeable, but this brings up a more important problem — you can't play UMD movies on anything but a PSP, so it's impossible to view them on a big screen. You're basically buying something only for use while on the go (or at home, if you prefer watching movies on a small but private screen). In either case, you're quite limited in the ways you can use a UMD movie compared to a DVD.
How about price? You might expect a format that delivers less quality with more restrictions on its use to be less expensive than DVD. But surprisingly, the UMD versions of most movies are considerably more expensive than the DVD version. Take the Pirates of the Caribbean – The Curse of the Black Pearl, for example. The UMD version is $29.99 at Amazon, while the 2-disc DVD version is only $19.99. The same pricing holds true for Kill Bill and Kill Bill 2. You're paying one third more for a product that is inferior in every way but one to the DVD version — it's portable. Plus, if you like a movie well enough to want a portable version of it, you're probably going to want the DVD anyway, so you're paying even more. I don't think it's any wonder that UMD sales aren't that brisk.
Of course UMDs aren't the only way to get portable video. Even if you think (as I do) that portable DVD players are usually too bulky to be worthwhile, there is a whole universe of products open to you if you're willing to take the time to figure out how to convert your DVDs to another format. Despite having a smaller screen than the PSP, the video iPod is a good option because of its large amount of storage and iTunes integration. And there are many other portable media players out there as well. But even if you'd like to stick with the PSP, you can still convert your own videos for use on it. Unfortunately, in an ill-considered move designed to support sales of UMD movies, Sony has crippled the PSP's software so that you can't display video using the native resolution of the screen. But you can still get relatively good looking video using one of the many conversion programs out there. The main problem is storage. Video takes a lot of room, and the biggest MemoryStick Duo is 4GB and costs about as much as the PSP itself.
If Sony had come up with some sort of "value pack" that included the DVD and the UMD for a modest extra charge (no more than a $5-10 premium over the normal price of the DVD) I think they would have sold like gangbusters. UMDs should not have been treated as separate editions of the movie, but rather as portable companions to the DVD. Of course there are probably licensing issues that would make such an arrangement difficult, but there's little doubt in mind that doing something like this would have made UMD movies a hit and the defacto standard for portable video. As it is, they are in danger of being discontinued.
I wish Sony and others would stop doing everything in their power to make consumers buy the same product in different formats (multiple editions of DVDs, multiple video formats, multiple downloadable video formats, etc) and start giving the customer what they really want. They might find that it works better than they think.