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Hollywood is betting that its cloud initiative UltraViolet will become the new way the people buy movies for the next decade. But so far the…

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Hollywood is betting that its cloud initiative UltraViolet will become the new way the people buy movies for the next decade. But so far there have been questions around how many people are actually using the service — and, perhaps more importantly, doubts about when it will gain a foothold in a big consumer-electronics chain, a step that is critical to its success.

UltraViolet is dwarfed by other offerings that allow people to use content in the cloud — Apple’s iCloud, for example, which also launched in October, now touts 100 million users. But unlike iCloud, Ultraviolet isn’t dealing in music — its main thrust is movies. In fact, for the movie industry, it’s the most elaborate and expensive collaboration around an emerging technology since the Blu-Ray. The service is trying to rebound from reports by earlier adopters of technical glitches.

This week, research firm IHS Screen Digest reported that the UltraViolet usage figure at 800,000, which, if true, would be an incremental growth from the 750,000 that UltraViolet reported at the Consumer Electronics Show in Las Vegas early last month. But Mark Teitell, executive director of the Digital Entertainment Content Ecosystem (DECE), the consortium of major studios, consumer electronics brands and retailers trying to put UltraViolet together, says the user base is actually more than a million now.

He also said that backing from one or more of the top retailers — that list would include Wal-Mart (NYSE: WMT) and Best Buy in the U.S. and Tesco in Europe — is vital, and promised a partnership announcement on that front by the end of the year. Participation by a retailer would give UltraViolet much-needed frontline support in terms of both marketing and technology. Not only could a big retail channel offer such basic things as signage, it would also be a big help in introducing customers to the technology. Staffers, for example, could help Blu-ray buyers sign up for UltraViolet and authenticate their discs in the store.

Teitell compared the launch of UltraViolet to that of the credit-card system five decades ago — consumer usage couldn’t grow without wide-scale adoption first by merchants and banks.

DECE is trying to assemble a cloud-based rights management system whereby purchasers of studio DVD, Blu-ray and electronic sell-through (EST) movie and TV show titles can access their video content on a range of electronic devices and share them with family members. As it stands right now, four studios — Warner Bros. (NYSE: TWX), Paramount (NYSE: VIA), Sony (NYSE: SNE) and Universal — are packaging their physical discs with instructions on how to authenticate digital copies in the UltraViolet cloud.

UltraViolet’s backers hope that by establishing flexibility and playback choice, and discouraging consumer fears about format obsolescence and interoperability, they can reverse a trend whereby consumers are increasingly engaging in low-margin rental streaming and forsaking higher margin movie purchasing.

Beyond the retail partnership, the group is also waiting for member companies Panasonic and Samsung to release new Blu-ray players — announced at CES — that will support the technology. Samsung’s devices, for example, will allow users to authenticate their existing discs for a nominal fee ($1 for standard definition and $4.99 for high-definition). “When we’ve surveyed consumers, that’s the thing that comes to their mind almost right away,” Teitell said. “And we think that will drive growth.”

Having more consumer-electronics and retail backing in the market will also accelerate participation by other constituents, he believes — Twentieth Century Fox (NSDQ: NWS), for example, has stated its intention to start releasing UltraViolet titles once the technology is built out a bit more.

Teitell said DECE has overcome the early complaints about its technology by consumers. Most of those, he said, stemmed from the inability to play UltraViolet digital copies on iOS devices like iPads. That was quickly remedied, he said, by creating iPhone and iPad player apps through Warner’s Flixster operation. “As 2012 goes on, you’re going to start to see a lot of progress,” he said.

  1. Creating awareness of recent technologies will greatly influence consumers in embracing the cloud technology and offering incentives could also draw them.

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