Competition Heats Up in Streaming: UltraViolet Plans Fall Start, Blockbuster Eyes Netflix Customers

It’s getting crowded in the content subscription space. Netflix, which also made news this week by saying it’s splitting its video rental service between streaming and disc-based plans, told us Thursday that it’s an “inactive member” of UltraViolet. The company is still listed on the UltraViolet website as a member company. When we asked how the UltraViolet subscription plan would work with Netflix subscribers, the company’s spokesman cited the company’s inactive status, saying “we're not commenting on it."

Blockbuster, meanwhile, is trying to capitalize on disgruntled Netflix subscribers and the negative sentiment Netflix generated this week by hiking prices on combination plans. “Blockbuster is reaching out to upset Netflix customers to show them an affordable alternative,” a spokesman said. It cited a poll by USA Today that 74 percent of roughly 6,000 respondents said they plan to quit Netflix in response to the subscription plan change. Blockbuster Thursday “began rescuing upset Netflix customers” by launching a limited time, nationwide promotion for all Netflix customers who switch to Blockbuster’s Total Access plan, it said. Netflix customers who switch to one of Blockbuster’s two most popular Total Access plans will receive a 30-day free trial, Blockbuster said. After the trial, customers can subscribe to Total Access for $9.99 per month for a one-disc-at-a-time model or $14.99 per month for a two-disc plan, it said. Blockbuster is also using the negative Netflix visibility to promote services it offers that Netflix doesn’t including “many new releases 28 days before Netflix,” unlimited store exchanges, video games and “no additional charge for Blu-ray movies,” it said.

"Netflix finally appears ready to kill off their DVD business, so the company can forge ahead with its streaming service” that offers greater operating leverage, BTIG analyst Richard Greenfield said in a blog post. Netflix is making that choice “even if it means the near-term sacrifice of some customers,” he said. The mix of new Netflix subscribers who selected the streaming-only option versus a combination of streaming and discs “reached an inflection point” in the past three months, “with the vast majority of new subs now choosing streaming only,” he said. “We sense this inflection point occurred far sooner than management expected and likely gave them the confidence to make … price plan changes.” DVDs are variably priced, but streaming has a fixed cost, Greenfield told us (WID July 14 p11). Dropping DVDs would enable Netflix to eventually shut down its shipping and distribution operations, he said.

How all this will play out when UltraViolet joins the mix of streaming services remains to be seen. The launch of UltraViolet’s B2B licensing program represents “another key step in the development and roll-out of this new ecosystem,” said General Manager Mark Teitell. He said interest in UltraViolet “has been robust” and DECE is “excited about the number of companies seeking to play roles in the delivery of UltraViolet to consumers in the coming months.” Recently added member companies include AMD, Blockbuster, CyberLink, Nvidia, PacketVideo, Roadshow Entertainment, SeaChange and Walmart’s Vudu, DECE said. The cross-industry consortium boasts more than 70 companies. DECE didn’t respond by our deadline to our question about how many are active.

DECE also published its technical specifications that define how the various roles work together to bring UltraViolet to consumers. The specs will “ensure a consistent consumer experience and ease the implementation process for participating companies,” DECE said. Among the specs are a universal common file format for downloads, which will allow consumers to copy playable files directly among multiple brands of registered apps/devices, even as they may run different UltraViolet-compliant digital rights management systems, it said. With that format, titles intended for downloading will be encoded and encrypted by the entertainment content providers once, but will play across multiple platforms, DECE said.

Initial licensees are currently integrating with and beta-testing the UltraViolet digital rights locker system that will operate as a shared cloud resource for all licensees, DECE said. It selected Neustar to build and operate the UltraViolet technology infrastructure. DECE said it “continues to anticipate” that beginning this fall consumers in the U.S. will be able to purchase “select movies and TV shows with UltraViolet rights.” It describes UltraViolet as a means to “combine the benefits of cloud access with the power of an open, industry standard” so that consumers can use multiple content services and devices, regardless of brand, at home and on-the-go. DECE didn’t respond to our questions about pricing or rollout plans or how UltraViolet will be positioned against cloud-based services from Apple or Amazon.