Replacing DVD, a Hollywood cliffhanger

The film industry needs new home-video format and the studios are trying to help create a consumer-friendly Web. Not every studio exec agrees on how to accomplish this. Here's what's going on behind the scenes.

In a bid to sweeten the consumer appeal of a new digital format that could succeed the DVD, some at the major film studios want to prevent DVD libraries from being rendered obsolete in a format upgrade.

UltraViolet (UV) is the name of new technology standards expected to debut this summer that Hollywood hopes will help reignite the public's interest in collecting movies and cauterize the bleeding in their home-video divisions. UV was created by a consortium that includes all the big film studios--with the exception of Disney--and numerous movie-sector allies, such as Microsoft, Nokia, Sony, Comcast and Netflix. UV managers said in January that the technology will ensure consumers will be able to play their movies and TV shows on a wide range of devices and services.

At the core of UV's offer to consumers is the ability to store films on a service provider's servers, or what is commonly referred to as the cloud. One new feature being discussed at UV calls for asking users to load their DVDs into their computers so UV can scan them and verify they possess the movies, according to film industry insiders who spoke with CNET. After verification, UV would place a copy of the film in the person's digital locker.

Typically, when media sectors have changed distribution formats, consumers are forced to shell out more money to update existing libraries. VHS tapes couldn't play on DVD players and CD players were incompatible with vinyl albums.

But even as progressive as this sounds, some studio execs acknowledge that moving the public to a new format now won't be easy. For one thing, UV's launch is coming up fast and important details still need to be hashed out. Insiders say consortium members still can't agree on several important issues regarding security and whether to offer UV in high-def. Some studios involved are worried that some among them will break ranks and offer content to other locker services in addition to UV, which could undermine UV's negotiating power.

Meanwhile, UV's toughest challenge may be selling the new format to Internet-empowered consumers, many of whom are unaccustomed to paying for content following years of downloading pirated music and films at file-sharing services.

Then there's Netflix. The Web's top video-rental service forces DVD collectors to ask the question: why am I buying when Netflix's monthly streaming-subscription fee typically costs less than a single disc? For their money, Netflix subscribers receive access to thousands of catalog TV shows and films. According to film industry sources, Netflix is the kind of consumer proposition that drives the value of the studios' content down and one reason why they hope to nurture alternative outlets.

Linking up with cable
Here's what we know about how UV works so far: the system is supposed to help prevent owners of films and TV shows from being locked into individual devices or services. UV's technology works sort of like an ATM network and authorizes accounts on different media players and services. Digital rights management won't get in the way because UV's technology will sit on top of the different DRM schemes and provide the necessary permissions.

Once a person sets up their UV locker, they will be able to register up to six people from the same household to a digital locker. One studio source said that those registered from a household will not be required to live at the same address. Nice.

This is supposed to be just the start. UV backers have said they will encourage entrepreneurs to build new services and business models on top of UV. They hope that large telcos and Internet service providers will be among them.

The studios have already spoken to some of the big cable companies and ISPs about creating UV lockers, said one film-industry source. Hollywood is telling them that by creating their own locker services, they will get the chance to engage with customers' entertainment viewing in a way they never have before. The studios "would love to have them get in the game," said one insider.

Unlike the DVD or Blu-ray, there may not be much time for potential locker merchants to wait and see whether lockers are a hit. The studios are hoping that locker owners will behave similar to iTunes users, who once they began loading a 100 songs or more into the music service, got hooked.

Will studios charge for cloud?
UV still faces plenty of challenges . Some skeptics are suspicious that UV is an attempt by Hollywood to trap people's content in the cloud and then charge them to access movies they've already purchased. Some doubters say that without Disney and Apple, which are not UV members, it will be hard to generate wide adoption.

Others point out that building consensus within a consortium is difficult because it's hard to get multiple competitors to move as one. Apparently UV is not immune.

A disagreement over UV's security involving the scanning of users' PCs has cropped up, according to a film-industry source. The fear is that someone who has a DVD scanned by UV and receives locker access to the movie could then give their discs to someone else to scan. There is no way to tell whether a DVD has been previously scanned.

For that reason, the studio with the security concerns has lobbied for random checks. They want users to be required to reinsert discs subsequent to their initial scan to ensure they sill posses the discs. Those who have argued against the added security measure point out that requiring people to hold on to discs defeats the purpose of cloud video. Eliminating the clutter of DVD libraries is one of the benefits of storing movies on someone else's servers.

They also ask what happens to a UV user who is on vacation and asked to insert a disc that haven't brought along.

Josh Martin, a video analyst for research group Strategy Analytics, has lauded the studios for making DRM invisible to users and enabling families to create individual profiles. He said in an interview Friday that UV is a good idea "provided it is executed right." Martin cautioned UV's backers from heaping too many confusing, burdensome or expensive requirements onto UV users.

He suspects that UV has plans to try and charge users fees to access their cloud content, including movies they bought in the past. He thinks this will be a tough sell.

"The service offers some important benefits," Martin said. "I don't know that there is enough value for each of the individual benefits to say that paying for it makes sense."

 

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