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Tsujihara: UltraViolet Is 'on the Right Path'

13 Sep, 2013 By: Erik Gruenwedel

Warner Bros. CEO Kevin Tsujihara remains bullish on UltraViolet.

Speaking Sept. 12 at the Bank of America Merrill Lynch Media, Communications and Entertainment Conference in Beverly Hills, Calif., the executive said the industry-backed (sans Disney) cloud-based locker system remains a good strategic move in a digital era.

“UltraViolet is definitely on the right path,” Tsujihara said, adding the industrywide sellthrough platform is now available in six countries with two more slated to join by the end of the year. He said retail support for UV will get a boost in October when Target rolls out its digital platform.

While the executive cautioned that UV (which has 15 million registered accounts) hasn’t achieved its goals, it is moving in the right direction, however slowly.

“I would expect to see more retail announcements between now and the end of the year as more retailers come on board,” Tsujihara said. “We’re getting the traction, [and] the user experience is definitely better and we’re continuing to make it even better.”

Separately, the CEO said he hoped capital infusion by Hulu’s co-owners into the digital platform would help it become the third major SVOD service behind Netflix and Amazon Prime Instant Video.

Tsujihara said Netflix and Amazon’s forays into foreign markets has prompted bidding wars for content with regional TV broadcasters and multichannel video program distributors.

“You now see LoveFilm and Netflix competing with [British satellite operator] Sky for [pay-TV] rights,” he said. “You’re seeing a lot more competition for content.”

The executive reiterated that the focus in home entertainment remains on sellthrough, including pushing digital sales of movies, despite the growth in rental.

“The declines in standard-definition [discs] are being more than offset by the increases in Blu-ray and electronic sellthrough,” he said, adding the latter has seen 50% growth domestically and 25% abroad. Tsujihara said that while home entertainment revenue may remain flat, margins generated by digital sales are significantly higher and end up elevating the overall bottom line.

“The more we can do to improve the digital offering [with pre-street-date release, pricing], we have the opportunity to bring growth back into sellthrough and margins. So it’s a good thing,” he said.

Indeed, the CEO said digital sales, rental and SVOD now account for 35% of domestic home entertainment revenue.

“It’s a very meaningful number,” Tsujihara said, adding that expected pushes by Amazon and Apple abroad could accelerate digital revenue accordingly.
Meanwhile, theatrical success of Warner movies in China, Russia and Brazil, among other international territories, has prompted the studio to double down on distributing content in foreign home entertainment markets, including retail, according to Tsujihara.

He said China has emerged as the world’s No. 1 theatrical market from the 15th largest just five years ago. Tsujihara said the Russian theatrical business has grown to No. 5. Both markets at the same time remain comparatively untapped in regards to retail and home entertainment revenue.

The executive pointed to the movie Pacific Rim generating $112 million at the box office in China compared to $101 million in the United States. He said the same trend occurred with Life of Pi and the re-release of Titanic in 3D. But none of the titles generated anything at the Chinese retail level.

“It’s become a very important theatrical market,” Tsujihara said. “What it hasn’t translated into is a market with a real ancillary business behind it. We don’t have a big home entertainment business. We don’t have a huge television business in China.”

He said a recent deal with Chinese ISP Tencent for a subscription video-on-demand business called “Hollywood VIP” is an opportunity to build an ancillary business. Universal Studios, Walt Disney Studios and separate local content holders are also involved in the project.

“When you look at the theatrical business, you know the appetite is there, you just have to create the right consumer offering,” Tsujihara said. “It has a huge growth potential.”

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