Watch for falling formats — Walmart shows off its new UltraViolet cloud service

“Whenever we needed money, we’d rob the airport. To us, it was better than Citibank.” — Henry Hill, Goodfellas

Seven years ago, Walmart controlled nearly half of a U.S. DVD sell-through business that generated nearly $16.3 billion in annual revenue. But even with disc sales plunging below $9 billion last year, and overall home entertainment revenue dipping to $18 billion from $24.3 billion over that same span, Hollywood’s movie business is still beholden to Walmart’s Bentonville, Ark. headquarters.

Fortunately for them, studio executives — and members of the media and tech press — only needed to travel about 15 miles East on the 60 Freeway to Rosemead, Calif., Wednesday to see the retailer show off what might be the home entertainment business’ last hope to resuscitate growth, the so-called “Disc to Digital” service.

Disc to Digital is a key component of the major studios’ UltraViolet initiative, which is designed to let consumers store digital  versions of the movies they’ve purchased on disc in a cloud.

Starting Monday, within the photo processing areas inside about 3,500 U.S. Walmart stores, consumers can begin uploading their disc collections to the cloud, paying $2 for each authenticated title (or $5 if they want to convert a standard-definition DVD to a high-def digital file).

$2 and two minutes of your time

I showed up at Wednesday’s demo at about 1:15 p.m., right ahead of a small contingent of Universal Home Entertainment executives, led by division president Craig Kornblau, holding a DVD copy of Universal’s 1997 Jim Carrey hit Liar Liar.

“Hurry, I just can’t wait to get into the cloud,” the affable Kornblau quipped, delighting a small cadre of chain and consortium PR staffers, as well as store employees who were still learning about how to administer the Disc to Digital service.

I had forgotten to bring my discs for upload, but Louis, a kind Walmart employee loaned me a copy of Warner Bros.’ 1990 Martin Scorsese gangster classic Goodfellas, so that I could test drive the system.

Walmart’s Disc to Digital service enables users of UltraViolet-authenticated DVD and Blu-ray titles to also own digital versions of their movies in Vudu, the retailer’s popular digital movie rental and sell-through service. Since I’m already a happily registered Vudu user, getting set up was pretty easy.

I filled out a form, offering up my Vudu user email, and also indicating what version of Goodfellas I wished to upload (I chose HD).

About two minutes later, Louis emerged from a computer workstation — he had stamped the disc with a little Walmart insignia, so that it couldn’t be authenticated again, and I had a high-def version of Goodfellas waiting for me in my Vudu account, ready to download or stream to a wide range of living-room and mobile devices, and share with select family members.

Bringing back $20 movie purchases

The system is designed to rekindle consumers’ willingness to buy movies rather than merely stream them on platforms like Netflix. Last month, research firm IHS Screen Digest, for example, noted that low-margin movie and TV show streams will surpass  higher-margin disc sales and rentals in quantity, with the overall home entertainment sector still continuing to see revenue declines.

As of late February — about four months after launch — UltraViolet had claimed only around 1 million sign-ups. However, the Hollywood majors — who will greatly expand the number of UltraViolet-eligible titles to around 4,000 on Monday — hope the inclusion of Walmart and Vudu will accelerate the initiative’s buy-in.

Having already talked to a number of ranking home entertainment executives who are quietly pessimistic regarding UltraViolet’s success, I still left Rosemead Wednesday slightly excited.

The house of no Mouse

With a trip to my mother-in-law’s retirement-community condo rendered upon me for this upcoming weekend, I saw value in being able to watch Joe Pesci’s Tommy DeVito savagely beat and murder all who annoyed him as I distracted myself with Goodfellas on my iPad 2. But since a wireless connection isn’t available there, I might be as out of luck as Michael Imperioli’s poor, half-witted Spider — on the iPad, Vudu will only let me stream the movie and not download it. (I can always buy it again on iTunes — Apple, which is conspicuously absent from the UltraViolet grouping, will let me download movies to the iPad, of course — but the whole point of UltraViolet is supposed to be about letting me enjoy the movie on any device I want with a single purchase.)

Then there’s title availability. Any urge to selflessly provide my 6-year-old son the same kind of relief with a downloaded copy of Cars 2 or Toy Story 3 can’t happen either, whether or not I can find a wireless connection, since the biggest supplier of kids’ movies, Disney, doesn’t do UltraViolet.

Meanwhile, not every title from every participating studio is available. For example, as we reported earlier this week, Fox movies like Rise of the Planet of the Apes become unavailable on platforms like UltraViolet and Apple’s iCloud once they enter any of HBO’s pay-TV windows.

“Today, everything is different … I ordered some spaghetti with marinara sauce and I got egg noodles and ketchup. I’m an average nobody. I get to live the rest of my life like a schnook.” — Henry Hill