UltraViolet Studios: HBO Blackout Will Lift In Time For Wal-Mart Launch

Don’t worry, we’ll work this out in time for the big dance. That is the essential message from top home entertainment officials who are still negotiating with HBO over pay TV window restrictions that currently prevent some Universal and Fox (NSDQ: NWS) titles from being distributed through the UltraViolet cloud initiative and other digital platforms.
HBO’s exclusive deals with Fox and Universal restrict access to the studios’ films from digital distribution once they enter the pay TV window, which generally comes six months after DVD release and lasts about a year. That’s why, for example, you can’t currently rent or buy movies like Universal’s Bridesmaids or Fox’s Rise of the Planet of the Apes on platforms including Vudu, CinemaNow and iTunes. And as it stands now, this restriction also applies to UltraViolet, the studio’s big movie-cloud initiative. You can still buy a Blu-ray or DVD version of those movies, but you can’t also enjoy a digital version that can play on multiple devices.
But at a press conference Tuesday in Hollywood to announce Wal-Mart’s much-anticipated participation in UltraViolet, several home entertainment division presidents expressed confidence that an agreement will be made with HBO by the time Wal-Mart (NYSE: WMT) launches its big “Disc to Digital” UltraViolet promo campaign April 16. The studios backing Ultraviolet are Fox, Universal, Disney (NYSE: DIS), Paramount (NYSE: VIA), Sony (NYSE: SNE) and and Warner Bros. (NYSE: TWX) Of the five, three — Warner, Fox and Universal — have deals with HBO.
Warner Bros. The latter, which shares a corporate parent with HBO, has already relaxed its windows arrangement.
Indeed, in negotiating with HBO, Fox and Universal are hoping for an arrangement similar to what Warner Bros. Home Entertainment enjoys with its Time Warner Inc. pay-cable sibling. Warner Bros. is able to distribute movies that are in the HBO pay-cable window through UltraViolet — it just can’t put those movies out through other digital distribution channels. That means that, for a Warner title like the Robert Downey Jr. comedy Due Date that’s in the HBO pay-TV window, a consumer who has purchased — or purchases in the future — the DVD, Blu-ray or download copy of the film can watch on multiple devices through the UltraViolet cloud. But they can’t see it digitally otherwise.
“It would be better if there was no blackout at all,” said one home entertainment division president, speaking Tuesday to paidContent on the condition that not be named. “But it’s absolutely clear we have to get this worked out for the sake of UltraViolet.”
HBO, while not commenting to us, did tell the Wall Street Journal on Sunday that it would also be “relaxing” some of its exclusivity so that Fox and Universal can distribute through iCloud, too.
The issue of digital access through the HBO pay window has been a tricky one for several years. I first broached this subject with HBO and the affected studios in January 2010. At that time, all parties also expressed confidence that an agreement would be made soon that would free up Warner, Universal and Fox movies in the pay TV window to participate in digital platform distribution.
The negotiations are tricky for the studios, which are locked into lucrative longterm exclusive contracts with HBO. In 2007, for example, Fox signed a $1 billion agreement to tie its movies up on the premium cable network for the next 10 years.
Conversely, in 2010, Disney extended non-exclusive pay-TV contracts with Starz and Showtime through 2015. Those deals haven’t kept Disney titles like Alice in Wonderland and Cars 2 off platforms like iTunes and UltraViolet. However, it remains unclear on the outside if Disney is averaging anything near or above the $100 million a year Fox is getting through pay-cable distribution.
Meanwhile, UltraViolet’s top executives on Tuesday also explained the “Disc to Digital” features that were announced at January’s Consumer Electronics Show by Samsung for its new Blu-ray players. At the time, Samsung and UltraViolet’s backers said nothing about having to go to Wal-Mart to get your disc authenticated and “uploaded’ into the cloud — the new Samsung players were supposed to let you do that in the comfort of your own home for a “nominal fee.”
As it turns out, Samsung’s version of disc to digital is a little less baked than Wal-Mart’s. Samsung currently has an agreement with Warner Bros. to execute at-home authentication of titles through its players, but it hasn’t worked out deals with the rest of the major studios like Wal-Mart has.
Another bit of clarity Tuesday: Fox, which had been a member of the consortium backing UltraViolet but had not yet made any titles available for UltraViolet distribution, plans to be “all in” once Wal-Mart begins its in-store education push in April.
“We’ll start with 360-370 titles confirmed on the launch date,” said Simon Swart, executive VP of Twentieth Century Fox Home Entertainment.