4K video gets carded

The infrastructure for a 4K consumer video ecosystem is starting to fall into place, and it doesn’t look anything like the infrastructure for HD or SD video.

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Shares of Amazon went up like a rocket in after-market trading Thursday following the company’s unexpectedly strong first quarter earnings report. And they kept going following the opening bell Friday. As of mid-morning trading the shares were up more than 12 percent, as investors applauded Amazon’s biggest year-on-year increase in operating profit in 10 years. Much of that uptick can be attributed to the increasing share of Amazon’s sales coming from digital products, including e-books, movies, music and apps, which cost nothing to ship. The company saw a 19 percent increase in media sales in the quarter and nine of the top 10 selling items at Amazon.com are now digital. The increase in digital sales is also a testament to the success so far of Amazon’s Kindle Fire strategy. According to the latest comScore data, the Kindle Fire has captured more than half the Android tablet market.

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Wal-Mart formally unveiled its in-store, disc-to-digital conversion service yesterday, which allows customers to take their DVDs to a Wal-Mart store to have them converted to an UltraViolet digital file stored in the cloud. As I speculated in a recent Weekly Update, the program seems designed in large part as a way for Wal-Mart to get the studios to fund a marketing campaign to promote Vudu, Wal-Mart’s digital movie service. Customers have to set up Vudu accounts first before Wal-Mart will convert their discs. Branding for the new service calls its Walmart Entertainement; Powered by Vudu. No mention of UltraViolet. Some analysts were cool toward the new service, citing the less-than-universal device support, lack of Disney movies and likely consumer resistance to the $2-$4 fee per disc. While the fees are likely to be a turn off for some, paying $4 to upgrade your SD DVD movies to HD digital copies could appeal to some.

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Hollywood’s hopes — perhaps its last — of getting consumers into the habit of buying movies again instead of merely renting them is about to get a couple of boosts. According to a Wall Street Journal report this morning, Wal-Mart is close to launching a major push behind UltraViolet, the cloud-based “proof-of-purchase” system that the studios hope will add value to purchasing movies by enabling playback across multiple devices. Under the plan, Wal-Mart employees would assist customers in creating UV accounts and registering their purchases in their UV rights locker, which could help overcome one of the biggest problems facing UV to date: a clumsy and confusing sign-up process. At the same time, some studios are also looking at a new approach to local storage to try to boost sales. Warner Bros. and Fox today announced a joint venture with SanDisk and Western Digital to create devices with hard drives for storage of downloaded movies and TV shows that would also allow side-loading of the content to other devices via USB drive or memory card. Still, it’s going to be a very heavy lift to move people away from renting at this point.

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Verizon and Redbox announced in a press release this morning that they are forming a joint venture to offer video streaming and downloads beginning later this year, in addition to Redbox’s DVD rental kiosk business. The press release is sketchy on details of the planned service, such as pricing, title availability and whether it will offer subscriptions. But an SEC filing on the joint venture refers to Verizon making available to the venture “certain rights to video programming content delivered via broadband networks,” which sounds like the TV rights currently owned by Verizon FiOS. Redbox will make available “Blu-ray Disc rental nights from Redbox kiosks,” an apparent reference to whatever direct distribution deals Redbox currently has with studios. The puzzling part to me is the ownership structure of the venture. Verizon will own 65 percent and control three of the five board seats, while Redbox will own 35 percent and two seats. Given that Redbox currently generates 84 percent of Coinstar’s revenue, it seems odd that Coinstar would give up control of its biggest business, unless it were entertaining serious doubts about the business’ long-term future.

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TechCrunch has the scoop of the morning, with an item claiming that Verizon’s alleged OTT plans, which were widely discussed yesterday, in fact involve a partnership with RedBox that will include streaming and downloading of movies and TV shows to a wide variety of devices. Apart from the partnership itself, the most intriguing part of the story is the venture’s purported pricing structure. According to TechCrunch’s source, pricing will be subscription and credit based. Users would pay a flat monthly fee for a certain number of credits, say $5.95 for six credits, which they would then be used to rent (and presumably buy) movies and TV shows. There would also be a mechanism for purchasing additional credits if needed. If true, the model would appear to be an effort to satisfy two conflicting priorites: consumers’ preference for subscription-based pricing and rights owners’ preference for being paid on a per-transaction basis. If Verizon/RedBox manage to square that circle the new service could pose a serious challenge to Netflix.

Will Apple’s Spectrum Bet Pay Off?

Apple has gone all-in for streaming as the primary means of getting content onto its devices. That has distinct strategic advantages for Apple, but it’s not without risks, especially for users.

Slow and Steady, Netflix Pulls Ahead in Streaming Video

Soon, it will be nearly impossible to buy any device, whether TV, set-top or mobile, that does not come bundled with Netflix service. Not all of those embedded apps will be activated, of course. But their presence will help create something no Netflix competitor will be able to touch: a de facto interoperability standard across multiple devices and platforms.