Report: UltraViolet Could Save Video Retail23 Dec, 2011 By: Erik Gruenwedel
Nascent efforts to revitalize physical and electronic sellthrough through cloud-based UltraViolet could produce big dividends for studios in the coming years, according to a new report.
UltraViolet is the industry initiative launched in the fall by Warner Home Video with movies Horrible Bosses and Green Lantern that automatically grants viewing rights to movies purchased on disc into a virtual digital locker that can be assessed on compatible media devices. Titles can be played on any one of 12 devices owned by up to six members of a household, either via download or streaming from the cloud.
With combined sales of Blu-ray Disc, DVD and electronic movies projected to decline 29% in 2011 to $9.3 billion from a peak of $14.1 billion in 2004, it is imperative that consumers view UltraViolet as a value-added proposition to purchasing — not renting — movies, according to a new report from IHS Screen Digest. Failure to thwart low-margin rental options such kiosks and subscription video-on-demand could see sellthrough of movies drop to $8.1 billion by 2015.
"The U.S. video retail business is in decline,” said Tom Adams, principal analyst and director, U.S. media, for IHS. “Although the rate of decrease moderated during the last two years from the double-digit drop in the recessionary year of 2009, we don't see those declines turning into renewed growth without a fundamental change in the ownership proposition for consumers.”
Adams said UltraViolet offers the requisite options required to change consumer behavior that the existing electronic sellthrough (EST) business by increasing access of purchased media.
"We think it's important that UltraViolet is being launched not so much as a feature of EST files, but as a value-added feature of the digital disc, on which consumers have spent $113 billion since they were introduced in 1997," Adams said. "Even if our projections are correct that annual disc sales in the United States will have declined in 2011, that's still about 14 times the size of the EST business. So, there are two advantages to a disc-focused strategy. First, tens of millions of the studios' best customers will be quickly exposed to the UltraViolet pitch in the box. Second, if UltraViolet it sparks just a 7% increase in consumer disc buying in the years ahead, it would pay off for studios as much as a doubling of the EST business."