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UltraViolet Key to Electronic Sellthrough Future

2 May, 2013 By: Thomas K. Arnold

The DEG numbers released May 1 were a pleasant surprise. Not only was total consumer spending on home entertainment up a solid 5% in the first quarter of this year, but spending on packaged media — Blu-ray Discs and DVD combined — was up as well from the same period last year, by more than 2%.

That’s significant because, for the first time since the format was introduced, Blu-ray Disc sales were strong enough to offset the continued decline in DVD sales and put the disc business back into positive territory.

I was also thrilled to see that electronic sellthrough (EST) posted a huge increase of 51%, comparing the first quarter of 2013 to the first quarter of last year. The actual dollar amount, $231 million, is still relatively small potatoes, but multiply by four and you’re getting close to 20th Century Fox chief Mike Dunn’s prediction several years back that once EST hits $1 billion in annual sales, “you’ve got a viable business.”

I can’t help but think that EST’s sharp gains were due at least in part to excitement over UltraViolet, the digital rights authentication and licensing system, based in the cloud, that lets consumers who buy content access that content anywhere, at any time, on any device. Currently, UltraViolet is available primarily to purchasers of Blu-ray Discs, but ultimately it will apply to digital purchases as well.

In the meantime, it’s a useful tool for transitioning consumers to the concept of owning something digitally — a tough nut to crack, particularly for oldsters like me who still like to get something they can touch and look at if they plunk down $15 or $20 for a movie.

Regardless, UltraViolet is certainly a wonderful concept, even if the execution still has some kinks in it — namely, an arduous registration process and a proliferation of proprietary websites instead of a one-portal-for-all that appeals to today’s “one-click” generation.

But that’s all in the works, and already UltraViolet has found a growing legion of fans. Indeed, it’s a fair assumption that the surge in online movie sales is due largely to the fact that Apple iTunes is no longer the only player in the game, even though it still dominates (65%, according to a study by The NPD Group that was released last month).

Looking at the overall increase, iTunes is certainly selling more movies than ever before, but so, too, are competitors such as Microsoft’s Xbox Video and Amazon’s Instant Video, both of which are aimed at consumers outside the Apple ecosystem.

And, again, UltraViolet is likely driving EST sales as well, simply by making people comfortable with the idea of digital ownership by tying it in with a disc purchase, a process with which they are all too familiar.

Once UltraViolet streamlines its process to the point where the one-click generation can actually watch a movie on a smartphone or tablet as easily as they can watch a disc on their home theater set-up, the studios would be wise to launch a major consumer outreach campaign, perhaps one that involves Blu-ray disc as well.

The studios are great at marketing individual titles, but could use a little help in coming together for a massive joint effort — even though the benefits, to me, are so obvious.

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