Sorry Hollywood, UltraViolet Isn't the Answer
Several Hollywood studios hope UltraViolet is the answer to falling DVD sales and lost revenue, but a crowded market of digital options could hold the new format back.
The Digital Entertainment Content Ecosystem developed UltraViolet to "address growing discontent with today's siloed market for digital video." Studios who have partnered with UltraViolet now include a digital download of films when customers purchase a copy on Blu-Ray. Once users create an account, they can log on to UltraViolet through iOS and Android devices, along with others, and stream the films they've purchased whenever they want.
Piracy, Netflix and digital movie sales through iTunes have all cut into studios' DVD and Blu-Ray sales. In response, the studios are betting on UltraViolet, which gives customers an online copy of movies along with their physical purchase, to bring new incentive to buying movies.
Gaining Some Traction
Major studios like Sony Pictures, Warner Bros. and Fox have all jumped on board with UltraViolet, and although it's not an indicator of long-term success, the numbers show it may be paying early dividends. The service has gathered 2 million users since it launched in the fall of last year and its growth coincided with a 23 percent spike in Blu-Ray sales in the first quarter of 2012.
However, it may be a bit hasty to attribute this success completely to UltraViolet. Blu-Ray has been a growing format since it hit the U.S. in 2006, and the falling price of players and films have been the primary reason for its recent growth. In addition, while Blu-Ray sales continue to increase, they are still not enough to make up for sharply declining DVD sales, which peaked in 2006 and have fallen each year since.
A big part of the problem for UltraViolet is most customers have no clue what it is. For example, a quick survey of 30 customers leaving Best Buy showed that only three had heard of UltraViolet, and none had a strong understanding of what exactly it does. When those same 30 customers were asked if they'd heard of Netflix, 24 out of 30 responded with a yes, and 11 had active subscriptions. This is a small sample size, but it's a fairly accurate depiction of the way most of the world sees UltraViolet: they don't.
A Crowded Field of Rivals
Customers' viewing habits of streamed content suggests that even if UltraViolet is something everyone is aware of, it would still struggle against the various other ways to watch content digitally.
Netflix, which reported revenues of over half a billion dollars last quarter, lets users pay a small monthly fee to watch a predetermined library of movies and TV shows. Meanwhile, Blu-Rays with UltraViolet support allow customers to pick up the newest movies they may want to watch, but most cost $30, more than four times the cost of one month of Netflix, which allows unlimited viewing of thousands of titles.
And it's not just Netflix that UltraViolet has to contend with. The digital age has given birth to a new way of thinking among consumers that movies and TV shows are not as valuable as they once were, and as a result has stripped away that feeling of needing to own a film. Even if customers are interested in using the UltraViolet system for watching their movies digitally, they may not be interested in purchasing a physical copy of a film just to stream it.
Now, if a customer wants to watch a film they don't own, there are several different outlets they can turn to. Renting from iTunes or their local Red Box, streaming from Netflix or Hulu -- and unfortunately in many cases online piracy -- are all easier and cheaper for a customer than going down to the store and buying something they may only watch once.
Heading into the Future
UltraViolet is still a young service that may need time to grow and mature, but it will never serve anything more than a niche audience if the DECE continues to offer it only as an extension of already expensive Blu-Ray versions of films. Customers may still feel the need to own their favorite movies in a physical capacity, which could aid the growth of UltraViolet and expose more people to it, but studios will never make up lost profits on those sales alone.
The days of millions of customers spending $20 to $30 on a movie are over, even if the package includes the standard DVD, Blu-Ray version, digital copy and UltraViolet access. Studios need to wise up that it's not just formats that are changing, but the habits and expectations of consumers, and change their offerings accordingly.
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Categories: Media Mind