DECE Member Companies Stress ‘Flexibility,’ ‘Simplicity’ as Keys to UltraViolet’s Success

Mitch Singer, DECE president, speaking before the panel, provided sobering numbers for digital video downloads and justification for a service designed to build value back into video purchases. Year-to-year growth of digital downloads fell from 130 percent in 2008 to under 40 percent in 2009 and was on track for another 10 percent drop last year, Singer said. He blamed consumer frustration and confusion about “what to do with content,” incompatibilities across platforms and fear of obsolescence.

Peter Levinsohn, president, new media and digital distribution, Fox Filmed Entertainment, said consumer confidence and lack of flexibility in how to play back content were holding back consumer interest in digital downloads. In response to recent published figures indicating VOD is outpacing digital downloads by more than double, Levinsohn said consumers want assurance that when they buy something, “it’s going to get delivered.” Audio and video quality has held back purchases, too, he said. “They want to know the picture isn’t going to be jerky” and that “it’s not going to take six hours to get it into the home,” he said. Consumers also worry that content they buy today will be “nonusable within 2 years,” he said.

The breadth of content distribution methods is challenging the market, said John Calkins, executive vice president, global digital and commercial innovation, Sony Pictures Home Entertainment. “The sales model is only a sliver,” he said. The shift from sales to rentals is a result of “improved convenience” and UltraViolet will add convenience back to the purchase model, he said.

Panelists stressed the importance of simplicity and flexibility in the UltraViolet chain to ensure consumer adoption. “You buy a movie, it comes with a copy on the cloud; you buy a disc or download and it comes with a copy on the cloud,” said Thomas Gewecke, president, Warner Bros. Digital Distribution. “You won’t have to worry about a hard drive crashing or that the device isn’t compatible with the service you bought it from,” he said. Because users can “always get it and always play it back,” the model will “fundamentally change -- and stimulate growth in -- the marketplace."

The pricing model hasn’t been established, but it needs to be differentiated from rental offerings to justify value, said Jean-Briac Perrette, president, Digital & Affiliate Distribution, NBC Universal. The ability to play back content on up to 12 registered devices and the assurance that it’s “always there” and “futureproof” will differentiate the sales model from the rental model, he said. Consumers will “find a lot more value in the sell-through experience whether it’s physical or digital,” he said: “That’s the goal."

"Always there” isn’t exactly true when it comes to studio distribution agreements, and how that plays out through UltraViolet is a potential issue. A movie in a customer’s digital locker may not always be available because of windows of exclusivity. Sony’s Calkins said “we understand these challenges” and there will “always be rights issues we have to address.” Everybody has to sort that out “on their own,” he said, saying there will be “plenty” of product available that doesn’t have restrictions.

Windows attempted a similar distribution scheme for music about 10 years ago with the ill-fated Plays For Sure program that was designed to ensure compatibility among devices. When asked what’s different this time around, and why UltraViolet will succeed where Plays For Sure couldn’t, Blair Westlake, corporate vice president of Microsoft’s Media & Entertainment Group, said Microsoft didn’t require device manufacturers to “build to a specified spec pack,” which UltraViolet does. Microsoft “should have been more prescriptive on Plays for Sure and told [partner companies], ‘if you want to make a device that falls into the category and gets logo certification, that it does all of these things.'” He said some companies had a “hard time developing the software, which has its challenges."

The two major players not in the UltraViolet camp are Disney and Apple. Perrette of NBC Universal said third-party apps will solve the hardware issue on the Apple device side. On the service side, he noted Apple, too, has struggled with video downloads and doesn’t have a big video business. “We hope over time they'll choose to participate on the service side.” He said he’s optimistic Disney will join UltraViolet, too. When asked about a possible format war, he laughed and said, “It’s one versus everyone else."

Samsung represented the CE hardware side of the consortium on the panel, but the company won’t have an UltraViolet-stamped connected TV or Blu-ray in the market this year because the product roadmap is already set, said Tae-Jin Kang, senior vice president of Samsung’s Media Solution Center. “Hopefully it will get into next year’s product,” he said, saying current TVs and Blu-ray players don’t have onboard storage for downloads. He said more consumers are now watching video on mobile devices like Samsung’s Galaxy but gave no timetable for an Ultraviolet tablet. He said initially it will be important to support legacy devices with a dongle solution for backward compatibility.

Sony’s Calkins said it’s “reasonably clear” that UltraViolet’s introduction isn’t contingent on a hardware rollout.

Consumer education is another critical piece to Ultraviolet’s success and Best Buy’s Chris Homeister, senior vice president, Entertainment Business Group, said demonstration at retail is key to showing consumers how physical media formats and digital lockers will merge. The UltraViolet setup process offers opportunities for Best Buy’s Geek Squad service business, he said, describing a process where Geek Squad members stream and purchase content for a device bought in the store, set up and register the device, and “it works and is ready to go before you leave the store.” Best Buy’s hope is that such a model will reduce product returns.