Pining for days of DVD

The major Hollywood studios (sans Disney) and a handful of technology companies launched the Digital Entertainment Content Ecosystem (DECE) initiative in 2008, which led to the rollout of the UltraViolet cloud-based rights management platform in late 2011.

The idea — a good one at the time — was to enable buyers of DVDs and Blu-ray Discs, as well as digital downloads, to access their collections from multiple devices, regardless of conflicting DRM systems, by registering their purchases with a cloud-based UV server, which would then allow them to stream any content they had the rights to to any device they wanted to watch it on.

Like many such inter- and intra-industry efforts, however, it took so long for the parties to sort out their conflicting political, financial and technical agendas that by the time UV launched that world had largely passed it by. Consumers had stopped buying optical discs in droves, opting for less-expensive kiosk rentals instead, and Netflix had taught the world the value and virtues of subscription streaming. Meant to bolster the value proposition of owning content, UV ended up launching into a world in which ownership had been become largely unnecessary in the eyes of many consumers.

At at Digital Hollywood panel in Los Angeles this week, even UltraViolet’s strongest supporters acknowledged its limited impact on consumer behavior thus far.

“The next thing is to pour some gasoline on awareness,” Mike Teitell, GM of the DECE consortium said. Added Sony Pictures chief digital strategist Mitch Singer, who spearheaded the UltraViolet effort in Hollywood, “You never want to be the best-kept secret…Can we get to a point where consumers are as comfortable collecting in the digital arena as they are in the physical arena?”

Something similar happened with the rollout of high-definition video discs. The movie studios and CE companies wasted three years squabbling over which of two contending formats to adopt (HD-DVD vs. Blu-ray Disc), only to end up launching both, to great consumer confusion. By the time the industry settled on a single format — Blu-ray — it had missed the crucial early years of the HDTV upgrade wave. By the time HD discs hit the market, they faced a much flatter adoption curve that they might have. Though technically impressive, Blu-ray has done little to arrest the shift toward low-priced rentals and non-disc streaming.

In both cases, the studios were hoist on the petard of their own pining for the heady early days of DVD — a format shift that drove a massive change in consumer behavior from mostly renting movies to mostly buying them, producing a huge revenue and margin windfall for the studios. UltraViolet was supposed to induce consumers to purchase more discs by adding more functionality. But in the age of Netflix and Amazon Prime, which are already available on multiple devices, ownership simply isn’t necessary for most consumers to achieve the functionality they want. Cutting the price of discs to make them more competitive with rentals and streaming would have had a better chance of keeping the purchase habit alive, albeit at lower margins than before, than adding functionality while keeping disc prices high.

The choice of Blu-ray Disc as the industry’ main HD format, even when there was a less expensive, quicker-to-market alternative available, stemmed from the misplaced belief that marginally better technical specs would somehow induce consumers to pay even more for ownership.

With the video business on the cusp of a (potential) new upgrade cycle — to 4K — the old itch is tingling again. At a Consumer Electronics Assn. Industry Forum in Los Angeles this week, Twentieth Century Fox Home Entertainment Worldwide president Mike Dunn said the coming transition represented another opportunity to get people interested in purchasing movies again and sketched out his vision for how to get there.

To his credit, Dunn’s vision was not entirely disc-centric. He proposed a new generation of Blu-ray players that could accommodate 4K discs, but would also include massive hard drives to accommodate downloads and disc-to-digital format shifting.

“Consumers would have the ability to copy their physical discs and store and manage their entire digital library in one centralized location — managed in the living room, where most content is viewed on the big screen,” Dunn said.

The new players, he added, should also offer wireless connectivity so consumers could move their digital files to any device in the home — including tablets and smartphones — and would also be compatible with any video or audio disc, including CDs, DVDs and current generation Blu-ray Discs.

That would indeed be an impressive device. But it represents a vision still premised on consumers amassing their own digital libraries that need managing from a centralized location. If I were a CE maker I would want some evidence that such behavior is likely before I started building new boxes to enable it. As Hollywood should have learned from its experience with HD discs and UltraViolet, device functionality by itself has limited impact on consumers’ perception of the value of owning content.

“There are 101 million households in America already with a DVD or Blu-ray player under their TVs, giving it virtually 100% penetration,” Dunn said in his speech. “It is one of the most important pieces of real estate there is.”

So is the tablet screen.