02-28-2012, 04:51 AM
Home Theater Enthusiast
Join Date: Aug 2007
Wal-Mart to Give Hollywood a Hand - In Store Registration of DVDs into UltraViolet
TECHNOLOGY FEBRUARY 28, 2012
Wal-Mart to Give Hollywood a Hand
By MICHELLE KUNG And MIGUEL BUSTILLO
The movie industry is recruiting Wal-Mart Stores Inc. to help attract users to its struggling online video-library service, Hollywood's latest step to combat the challenges of digital piracy and a fading DVD market.
Wal-Mart is in discussions to provide an in-store service that will assist customers in registering DVDs they already own with the movie industry's UltraViolet system, according to several people familiar with the matter.
The UltraViolet system, which has been slow getting off the ground, is a digital "proof of purchase" system that allows a consumer to store movie or TV titles in a free, online personal library. Once a video has been added to the UltraViolet Library it can be streamed over the Web or downloaded for viewing on a computer, TV, or a range of mobile devices.
UltraViolet, which is backed by a group of more than 70 entertainment, technology and retail companies, was announced in January 2011, but so far has only about one million users in the country.
The industry's hope is that, with UltraViolet, it can encourage consumers to pay for content they might be tempted to download illegally from the Web.
While UltraViolet accounts are free to set up, the initial process has been criticized as cumbersome. That's where Wal-Mart comes in.
Employees of Wal-Mart will help customers create UltraViolet accounts, according to the people familiar with the plan. Wal-Mart staff will also check DVDs that shoppers already own, adding titles that are part of UltraViolet system to their accounts for a small fee, the people said. Wal-Mart is a member of the UltraViolet consortium.
The Wal-Mart service is expected to include several thousand movies, drawn from every major studio except Walt Disney Co., which isn't a member of the coalition behind UltraViolet. The disc-to-digital service is to be offered in the photo-printing area of many, if not all, U.S. Wal-Mart stores. An announcement is expected in early March, followed by a $30 million marketing campaign. It isn't clear when the service would begin operating.
A Wal-Mart spokeswoman declined to comment except to say: "We're supportive of the UV coalition and are still thinking through how this technology can come to life in our stores and benefit our customers."
Aside from the fact that Wal-Mart stores are visited 140 million times each week in the U.S., a Wal-Mart partnership is attractive to the UltraViolet group because of the retailer's popular Vudu streaming service. Wal-Mart bought Vudu last year for a reported $100 million and the service has become the third most popular film rental and download service, according to researcher IHS Inc. This puts Vudu ahead of similar offerings from Amazon.com Inc. and Sony Corp.
The potential Wal-Mart deal is part of a broader effort by the industry to hold on to revenue it is losing to both illegal and legitimate competition, such as some online storage lockers that play fast and loose with copyright law. At the same time, technology companies, including Google Inc. and Apple Inc., have moved into the market for streaming entertainment with their popular YouTube and iTunes services, taking a cut of the revenue from each movie or TV show streamed.
The pain has been felt by Hollywood in the form of plunging DVD sales. In 2011, DVD and Blu-ray sales totaled $9 billion, a 10% decline from the previous year. The figure is 36% off the 2004 peak of $14.1 billion, according to research firm IHS Screen Digest..
The consortium also is talking with Best Buy Co., a member of the UltraViolet group, about introducing a similar service at the electronics retailer's stores, the people familiar with the UltraViolet's plans said.
A Best Buy representative declined to comment.
UltraViolet is run by the Digital Entertainment Content Ecosystem LLC, which includes five of the six major film studios: Time Warner Inc.'s Warner Brothers Entertainment, Sony Corp.'s Sony Pictures, News Corp.'s Twentieth Century Fox, Comcast Corp's Universal Pictures and Viacom Inc.'s Paramount Pictures. (News Corp. owns The Wall Street Journal.)
The first UltraViolet-enabled titles began appearing in October 2011, but analysts say the subscriber base isn't growing fast enough to offset slumping DVD sales.
"It's going to take a long time" for UltraViolet to catch on, said Michael Nathanson, an analyst at Nomura, an investment bank.
One of UltraViolet's initial stumbling blocks was a limited selection of titles. Just two movies, "Horrible Bosses" and "Green Lantern," were available the first week of release. Since then, fewer than 100 new titles have been made available But the number of titles is expected to grow exponentially this year.
The service also suffered from glitch-prone technology. Codes given to early adopters didn't work properly, bruising UltraViolet's reputation early on.
Some customers complained the system is confusing to use because it requires an UltraViolet account and one for each company providing movies and TV shows. For example, customers need accounts for both UltraViolet and Flixster, a Website owned by a Time Warner subsidiary in order to watch "Green Lantern." Each company sets UltraViolet prices individually and they tend to be more expensive than DVDs, discouraging cost-conscious viewers.
Other customers say the streaming format limits where they can watch movies and potentially raises the cost if they have to use a cellular connection.
"If I want to watch one of my movies in an area where I don't have WiFi, I have to use 3G," Joe Siegler, an UltraViolet customer in Garland, Texas, wrote in an email, referring to cellular networks. "It will penalize me for using up my data caps quite quickly."
Mark Teitell, general manager and executive director, DECE, acknowledges the challenges and says the consortium is working on a one-account system. But he hasn't said when it will launch. He also said all new DVD and Blu-ray releases by participating studios will be UltraViolet-compatible by the end of the year.
UltraViolet currently isn't compatible with Apple's iTunes, the most popular digital entertainment platform.
"So far, I'm not sure it's proven to be as robust as expected or as consumer friendly as we had hoped," said Disney Chief Executive Bob Iger during a recent earnings call with analysts. Disney's lack of participation has been another hurdle for the program.
The industry hopes the partnership with Wal-Mart will give it an opportunity to introduce more customers to UltraViolet, the people familiar with the situation said.
The UltraViolet consortium has previously said it is working with Samsung Electronics and other hardware makers to develop Blu-ray players that prompt consumer to create UltraViolet accounts when registered titles are played.
—Ethan Smith and Stu Woo contributed to this article.