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Summary:

The DECE will soon find itself trying to convince consumers to buy a piece of digital content online that they buy once and watch anywhere. But if it’s going to show the value of its Ultraviolet rights locker, it’ll be fighting against on-demand rentals.

ultraviolet logo

After two-and-a-half years in the making, the DECE finally announced its road map for a digital rights locker, which will begin to be made available to consumers in mid-2011. But not long after the industry consortium introduce the road map for its “buy once, watch anywhere” offering, evidence has emerged to show that consumer interest in actually owning digital media is on the decline. Apparently, people don’t buy movies online anymore; they just rent them.

BTIG Research analyst Richard Greenfield released new data today that shows revenues from electronic sell-through (EST) — i.e. buying a movie online — actually declined in the fourth quarter, after showing relatively steady growth throughout the rest of the year. While EST sales grew a total of 16 percent for the full year 2010 — from $589 million to $683 million — those sales fell 8 percent in the fourth quarter of the year, from $273 million a year before to $251 million in the last three months of 2010.

At the same time, the digital rental market proved extremely robust. Greenfield showed that video-on-demand (VOD) and iVOD (online rental) revenues grew 23 percent in the fourth quarter, from $488 million to $600 million, and 21 percent over the course of the full year. That growth in rental revenues, especially when compared to the decline in digital sales, suggests a shift in consumer behavior that might be difficult for the industry to overcome.

Of course, the DECE’s entire raison d’être is to combat this shift to on-demand viewing, by offering viewers the ability to buy a piece of content and watch it across multiple devices — whether they be connected TVs, Blu-ray players, smartphones, tablets or other mobile viewing contraptions. The idea is that once a consumer has purchased a piece of content, he or she will be able to watch it anywhere, and will no longer have to worry about buying it ever again. But that’s all a pretty nebulous concept, and one the DECE will have a hard time explaining to consumers.

At the same time, consumers are getting used to the transient nature of video content online, and are finding on-demand viewing a better value, anyway. Blame Apple and, to a certain extent, Netflix for getting consumers used to the idea that they no longer need to own a piece of content to enjoy it. Apple is aggressively pushing video rentals as opposed to purchases, particularly with its second-generation Apple TV set-top box. And Netflix is enabling users to pay a relatively low subscription fee for an unlimited amount of video viewing, not just online, but on more than 250 different connected devices.

All of which is to say that the DECE has its work ahead of it if it’s going to convince users to pay for a piece of content they can’t hold, but that will be viewable online.

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  1. Wake me up when they start selling DRM-free digital downloads of movies. I will probably buy when they are sold in the same fashion that iTunes, Amazon, and others currently sell music downloads. Until then, it’s netflix only for me, or buying physical DVDs if I really want to have a “permanent” copy.

    Why is it that these industries take a decade after they are being decimated and after there are much better solutions available (i.e. Netflix) before they will ever give the customer what he wants? They will never learn, will they?

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    1. Why worry about content being ‘DRM free’ if you’re going to watch it on essentially closed systems? If a digital rights locker allows you to stream a piece of content to your TV, to your phone, and to up to 12 other different devices, why’s it so important to be able to have a non-DRM’d copy of it on your PC?

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      1. For one, so I can incorporate it in projects that qualify as ‘fair use’ under copyright law.

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      2. It’s neither difficult nor illegal to borrow a cd, vinyl record, book, dvd or bluray from a friend.
        But it is almost impossible for me to borrow a DRM’d file from a friend.
        Even if he doesn’t copy it (break the law) but instead loans me his external harddrive, I won’t be able to play it, now will I?

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  2. Ninety percent of me agrees with the notion that cheap anytime rentals are probably better than owning a digital film—especially one you can’t store in the cloud. But I do wonder whether cloud storage, coupled with the “buy it once” guarantee won’t make owning more attractive—after all, one reason for a decline in sales might be a recognition on the part of consumers that formats and delivery devices are in enormous flux right now. No one wants to have paid through the nose for the 21st century equivalent of the ultimate LaserDisc movie collection.

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    1. I think a lot of whether or not people will adopt this model will depend on the price — and I think from that perspective, Hollywood is in for a rude awakening. There’s every indication that studios will want to charge a premium for Ultraviolet content, and why not, since consumers will never be buying copies of whatever title ever again? But they’re probably going to need to price at a discount to physical media if they’re going to want people to actually buy — and especially if people are going to buy without having a physical reminder that they actually “own” a piece of content.

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      1. And price is where it’s going to fail. If there’s one thing Hollywood had shown is they expect to be able to charge the same amount for a movie whether it’s physical or digital.

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  3. Could it be that there are a lot of people, like me, who will not buy a movie until they have rented it and decided it was worth buying. A simple explanation could be that we rented a bunch of movies and decided they weren’t worth buying.

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  4. @Bash

    I think you hit the nail on the head right there. Out of all the new movies I’ve watched in 2010 I deemed only 2 worthy of purchase.

    This is coming from a guy that used to buy scads of movies. Anymore there’s just a lot of options all fighting for my limited entertainment dollars. I see no reason in buying something I can just stream over Netflix eventually or rent at the Redbox.

    Heck even if I decide to buy it eventually chances are I’m going to be looking for the best deal I can find and if I can get it used and save even more money then so be it. There are tons of great deals to be found on second-hand movie discs, they really do not hold value anymore at all.

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  5. “People” in this article refers to Americans.
    Americans are not representatives for the entire global market.
    But then, with DRM and geographic limitations, the business isn’t interested in a global market.
    No wonder “people” don’t buy movies online.

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