HBO clears way for film studios' UltraViolet

A group of technology and entertainment companies appears to have defied the doubters and is actually launching a new cloud-video platform--thanks in large part to Time Warner's HBO.

UltraViolet (UV) is the name for a set of standards and technology designed to enable consumers to store their movies and TV shows in the cloud. Participating retailers and services will store customers' video on their servers and then users can view the films on a wide assortment of devices from member consumer-electronics makers.

UV is what most of the Hollywood film studios, as well as many others connected to online-movie delivery, hope will reignite the public's interest in collecting films.

Warner Bros. Studios is making available the first UV movie today with the release of "Horrible Bosses." On Friday, the studio will release "Green Lantern" for UV. Buyers of those films on DVD or Blu-ray discs will find within the packages a code, which they can use to obtain a cloud version of the movies at Flixster, an Internet video service. Users must also create a Flixster account; but once that's finished, the movies are stored in their own digital locker.

Sony Pictures will begin releasing movies for UV with a December offering of "Smurfs" and "Friends With Benefits." And CNET has learned that Universal Pictures, the studio owned by Comcast, has also agreed to release the title "Cowboys And Aliens" on UV.

What's significant about the UV releases from Warner Bros. and Universal is that, until recently, HBO possessed exclusive electronic distribution rights for their films, in addition to movies from 20th Century Fox, during specific time periods (or "windows" as they are known in the film business). This HBO window was a significant hurdle for UV.

Here's how it works: bricks-and-mortar retailers that wish to sell discs from these studios during HBO's window are unrestricted. Web merchants, however, are blocked from delivering downloads or streams of the same movies during the restricted period. Negotiations between HBO and UV's backers have dragged on for months. While there's no signed contract yet, the sides have reached an agreement in principle and HBO has agreed to step aside, sources said.

This is exactly the kind of cooperation that naysayers predicted UV would lack and would doom the effort. Critics noted that consortiums like the one that formed for UV don't have good track records. It's tough for members to put aside their competing interests and work together, they said.

The Digital Entertainment Content Ecosystem, the consortium backing UV, includes five of the top six Hollywood film studios (Disney is not a member), and companies as diverse as Best Buy, Walmart's Vudu, Intel, Adobe Systems, Samsung, and Comcast.

As far as working well together, this is only the beginning, said Mark Teitell, UV's general manager. Right now, Warner Bros.' cloud movies can be viewed at Flixster. Other studios will have their own cloud distributors. In the future, Teitell said, a UV user's locker will follow them regardless of what studio made the film or what retailer sold it.

There's plenty of motivation for UV members to get this right. Reason No. 1: the DVD is dying.

Home-video sales, which have helped fill the studios' coffers with billions of dollars over the past decade, are in decline. Add to that bleak fact the news that revenue generated from movie downloads may be shrinking.

Rich Greenfield, an analyst from BTIG Research, wrote yesterday that electronic-sell through (EST) of movies, typically another way to describe movie downloads, has "been a complete failure to date."

Greenfield wrote that EST for the first half of the year was up from the same period last year by only 4 percent to $270 million. Revenue from the second quarter actually shrunk from the same period in 2010.

Against this backdrop, the studios can't lose with UV. At a minimum, the foray into cloud video will help the entertainment sector learn whether consumers are still interested in owning movies.

Netflix is the Web's leading online movie distributor and subscription streaming service. The company offers a pool of more than 20,000 films for viewing and subscribers don't have to worry about ownership or storing anything.

But the thing is, Netflix is struggling. Hollywood doesn't appear to be willing to license its better films for the merchant's streaming service. The company also alienated many customers this summer by raising the cost to access DVDs and streaming from $10 per month to $16 per month.

Then, last month, Netflix managers announced it intended to spin off DVD-by-mail operations into a separate service called Qwikster. Fans slammed the idea. On Monday, Netflix flip-flopped and killed the Qwikster plan. But many pundits are asking whether the damage is done. Customer confidence is shaken. What seems certain is that Netflix's grip on Web video doesn't appear as firm as it once did.

UV, Amazon, Apple, Walmart's Vudu, HBOGo and everyone else competing in online video distribution should take their best shots now. In this nascent sector, the field is wide open.