Top 12 Film Industry Stories of 2012: #11
Ultraviolet Spectacle
By David Mumpower
January 2, 2013
BoxOfficeProphets.com
For those of you who are unfamiliar with Ultraviolet, the concept is simple. A consortium of movie distributors have joined together to create a movie cloud service. Via the cloud, consumers gain permanent access to their film library via any platform. Ultraviolet’s mantra is “Buy Once, Play Anywhere.” There are apps that enable Ultraviolet usage on computers, tablets and smartphones. Smart Televisions and videogame consoles also have the same capability. Ultraviolet is like Netflix in this regard. The key difference is that the consumer seeds their cloud with the movies of their choice.
The idea is to create a film version of iTunes without having to deal with Apple’s legendary control issues. Yes, iTunes still sells the same digital licenses for feature films as Ultraviolet. Those are not Ultraviolet purchases, though. Effectively, the Apple licenses exist outside the purveyance of the movie studios themselves. If you are confused as to why, you have joined the rest of the civilized world in wondering about the madness of digital rights.
Who runs Ultraviolet? Five studios are the power players in this collective. They include Paramount Pictures, Warner Bros. Pictures, Columbia Pictures (aka Sony), Universal Pictures and 20th Century Fox. Notable by its absence is the most powerful studio of all, Walt Disney Pictures. This brings us to sunny point number two about Ultraviolet. Not only is Apple currently eschewing participation but Disney has also chosen to create a competing cloud endeavor. Ultraviolet wants to be the presumptive choice for non-theatrical movie consumption. Its early attempts to corner the market have been erratic at best.
At its core, Ultraviolet is an attempt by studios to eliminate the middleman. When a movie is released into theaters, exhibitors split the revenue with the distributor. When a movie is released on home video, revenue is shared with the store facilitating the transaction. A perfect digital distribution system, on the other hand, would have only the financial outlay for transactional expenses and digital storage/ & maintenance. Every other penny would be pure profit. This is exactly why five of the six major studios have banded together on Ultraviolet.
At the start of 2012, exactly 19 Ultraviolet titles were available. Depending on perspective, there are either several hundred or several thousand at the end of the 2012. How did Ultraviolet expand its library so quickly? The first step was to include digital licenses in most mainstream releases.
To the consortium’s credit, there was no cherry-picking of middling titles. Heavyweight blockbusters such as The Hunger Games, The Amazing Spider-Man and The Dark Knight Rises were all available for instant streaming at the same time they were released on home video. Purchasing the DVD or Blu-Ray of a title would provide the consumer with a coinciding digital copy. DVDs include standard definition digital licenses while buying a Blu-Ray entitles the user to a 1080p digital license, thereby virtually negating the need for the physical media.
Ultraviolet’s management team was hell-bent on widespread adoption of the service in 2012. Their first attempt at significant market penetration involved the most popular brick and mortar store in the world. Wal-Mart announced an agreement in March that would allow for digital conversion of physical media. Via their recently acquired Vudu platform, yet another movie cloud service, Wal-Mart joined with Ultraviolet to create an unprecedented service.
Disc to Digital affords consumers the ability to take their current collection of physical media, DVDs and Blu-Rays, and convert them to digital titles. The economical pricing standard provided the proper enticement for early adopters. Converting a Blu-Ray to a 1080p Ultraviolet license costs only $2. A similar conversion for a DVD to 1080p is $5. The Ultraviolet management team began with a surprisingly feasible price point.
Such fiscal responsibility is a rarity for Hollywood. As we chronicled in last year’s Top Film Industry Stories, 2011 featured an attempt to sell that instant classic, Tower Heist, for $59.99 a month after its theatrical release. Wait, did I say sell? I meant rent. Swapping a Casablanca Blu-Ray into a 1080p digital license for $2 is a much better deal than renting Eddie Murphy’s and Ben Stiller’s latest bomb for sixty bucks.
As is the case with most Hollywood endeavors, there was some red tape involved. Consumers were forced to sign up for multiple services, Ultraviolet and Vudu, in order to facilitate the transaction. Also, Wal-Mart employees were trained to stamp the appropriate physical media in order to prevent people from passing around the same few discs in order to attain multiple digital licenses from a single piece of media.
How popular was the project? Weeeeeeell… This gets to the heart of uneven year that defined Ultraviolet’s introductory phase. In late December, CinemaNow, still yet another movie cloud service, offered a second Ultraviolet Disc to Digital physical media conversion service nine months after the Wal-Mart attempt.
The key difference from the previous Vudu service is that any and all conversions could be accomplished in the comfort of one’s home. All a customer has to do is insert a disc into their DVD drive (CinemaNow does not accept Blu-Ray conversions yet) on their computer. The CinemaNow program verifies the titles then offers the user a choice of an SD copy for $2 or an HD/1080p copy for $5. The set-up is similar to Wal-Mart’s Vudu, only with the added incentive of convenience.
Why is Ultraviolet changing the rules after less than a year? The bleak reality is that despite the competitive pricing, few customers took advantage of the Vudu Disc to Digital service. The initial disappointing sales have been blamed on the reticence of users to perform such a transaction at Wal-Mart. Managing the same task in the comfort of one’s home is theoretically more convenient. Such an attempt speaks to the awkward debut of Ultraviolet. The relationships with Wal-Mart, the owner of Vudu, and Best Buy, the owner of CinemaNow, also negate an intended goal of Ultraviolet, eliminating the middleman.
There have been a couple of direct attempts to address the elimination of the middleman. In September, Fox made a splashy debut with Prometheus. The $400 million global blockbuster became the first release in their Digital HD program. Even better, the Digital HD had a price point of $14.99, $10 cheaper than the suggested retail price for the Blu-Ray.
The underlying premise for this tactic is simple. Weeks prior the home video release of a title, Fox begins to sell an Ultraviolet copy. Consumers who choose not to wait for a physical copy are rewarded with early ownership of a digital license for said film. This is the same bold first step Apple introduced with the debut of iTunes in 2001. The studios involved seek to train consumers away from physical media the same way that Apple destroyed compact disc sales over the past decade.
A core philosophy of the Ultraviolet conglomerate is that the service needs to attain quick market penetration in order to accomplish this task. Their 2012 decisions above were predicated upon this philosophy. Despite the bold initiatives, many of which are remarkably forward thinking for Hollywood, the service is not accomplishing its primary goal. By the end of 2012, barely nine million users had adopted the emerging format. For comparison, iTunes has 400 million active users. Not all of those iTunes users purchase movies but the difference in customer numbers is staggering.
The idea of the Ultraviolet movie cloud storage may yet prove to be popular. All of the marketing tactics I have mentioned are good ones, unusual for the Hollywood studio system. Attempting to attain as many users as possible in the early days of the service is an admirable goal. The problem is that it hasn’t really worked thus far. Twice as many people watch an episode of a top five-rated television series as have signed up for Ultraviolet. The studios-backed endeavor needs expansive growth in 2013 in order to become a viable cloud service.