Analyst: Disc-to-Digital Has to be Free for UltraViolet to Work

2 Mar, 2012 By: Erik Gruenwedel

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Movie studios — led by Warner Home Entertainment Group — want to push consumers toward sellthrough and cloud-based digital locker UltraViolet by encouraging them to transfer their existing disc collections into digital files.

BTIG Research analyst Richard Greenfield believes Walmart could be the first retailer to announce a disc-to-digital service. He said studios want consumers to frequent authorized retailers to initiate digital transfers rather than in the home due to concerns multiple users could upload the same disc.

Kevin Tsujihara, president of WHEG, Feb. 29 told an invester group he envisions big-box retailers such as Walmart and Best Buy offering services whereby consumers could bring in their discs and have them transferred seamlessly into digital files stored in the cloud.

Tsujihara said there are about 10 billion movie discs in U.S. households (about 90 to 100 discs), of which he said about 20% are Warner titles when factoring in the studio’s market share in home entertainment.

Indeed, discs (DVD and Blu-ray) are not serialized, which means it would be impossible to determine if a disc being uploaded to the cloud was an original purchase, or traded or shared from someone else.

“If consumers want to steal and share digital versions of movies, that is incredibly easy today without the need for discs,” Greenfield wrote in March 1 post. “Whereas sharing/stealing via disc-to-digital would be far more complicated than a simple Google search.”

Greenfield says studios should enable consumers to transfer discs to digital files for free rather than estimated prices ranging from $1 to $3 per DVD and upwards of $10 to transfer into high-definition.

The analyst said that for UltraViolet to work in a market increasingly shifting toward low-margin rental options such as Redbox kiosks and subscription video-on-demand, consumers need extremely low barriers to entry.

“We believe disc-to-digital needs to be done at home at no cost to the consumer, including a free HD quality upgrade, if UltraViolet is to have any hope of success,” Greenfield wrote.

Separately, he said rollout of UltraViolet has to be accompanied by the price of electronic sellthrough for new movies dropping to $10 with day-and-date theatrical premium VOD priced from $20 to $30.

“In a world where a wide array of content is available anytime/anywhere at increasingly low prices (think iVOD, VOD, Redbox and Netflix) or even free, as part of existing subscriptions (think HBO GO, Showtime Anytime and Streampix), we believe buying is not worth [three to four times] the cost of renting,” Greenfield wrote.

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