@ CES: Could Ye Olde DVD Actually Help Digital Distribution?

While zillions of new products come to CES in hopes of getting noticed, sometimes it’s the technology still in development that captures the imagination. To wit: A new service in the works from Sonic Solutions has the potential to turn one of the electronic sell-through market’s biggest obstacles–the persistence of the DVD–into a key driver.

While Sonic certainly has plenty to crow about at CES, from its pending acquisition by metadata giant Rovi to its charter partnership with the Intel (NSDQ: INTC) Insider chipset, it was a demo of an offering called e-Copy that stood out.

Here’s what e-Copy does: Consumers can take a licensed DVD they already own and, by scanning it on the CD drive in their PC along with Sonic-provided software, receive a digital copy at what could be a fraction of the price they would have to pay to buy an entirely new version. For an extra fee, the service could even conceivably upsell a standard-definition disc to a high-definition digital copy, or give them a discounted opportunity to buy digital sequels to a disc copy they already have.

With Hollywood intent on trying to establish digital ownership of films and TV programming, a service like e-Copy could be really helpful toward converting the target audience–DVD collectors–to upgrading their habit. Studios get to train consumers about this new marketplace while opening up a new opportunity to collect some incremental revenues.

Sonic is working with the studios to bring e-Copy to market sometime later this year, according to Mark Ely, president of strategy at Sonic. “The studios see this as a great merchandising opportunity,” he said. “We’d be re-monetizing the DVD, giving consumers a bridge to digital delivery.”

Already in the market is e-Copy POS (acronym for “point of sale”), which allows retailers to offer consumers who buy a physical disc a digital copy right there in the store.

Getting the right price point for a home-based e-Copy is going to be critical here. Sonic is experimenting with $1-2 charges for conversion. (Here’s an idea: Offer some kind of discounted bulk rate as well for collectors who might want to convert hundreds of discs.)

As recently released 2010 stats from the Digital Entertainment Group indicate, the physical-disc market isn’t going anywhere anytime soon. While IHS Screen Digest estimates that standard DVDs sales dropped 16% to $8.3 billion, Blu-Ray sales skyrocketed 69% to %1.8 billion. Internet film sales are up 17%, but to only $683 million.

With the introduction of the UltraViolet initiative later this year, the studios are going to need all the help they can get to light a fire under the EST market. Sonic’s e-Copy could be another spark worth igniting.

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