1. Let’s start with the obvious question: What is UltraViolet?
UltraViolet was developed by a group of 70 to 75 content and hardware companies—including Fox, Universal, Paramount, Sony Pictures, and Warner Bros.—that share a common vision for the future of collecting entertainment content. We know people watch movies on TV sets in their homes, on iPads and smart phones, on PCs and Macs. So UltraViolet is a cloud service that brings that all together and gives consumers the ability to play content across all of their devices. People can now actually collect their entire library in this digital cloud. It’s an enhancement to what they get when they purchase a movie or TV show.
2. How does it work?
In a nutshell, it works in a way very similar to how the ATM platform works. With an ATM you put in your credentials, the ATM machine looks into the cloud, it sees what you have in your account, and you get access to your money. UltraViolet is a very similar platform in that consumers now can collect content in their own personal cloud. It doesn’t matter where the consumer bought the content from—it’s all aggregated on a bookshelf. Today, in the digital environment, there’s no way to do that. If you buy a movie from Amazon, it’s only maintained by Amazon; if you buy it from iTunes, it’s only maintained by iTunes. UltraViolet was really meant to connect all of those clouds.
3. What content can you put in your UltraViolet locker?
The way you get UltraViolet content today is you can buy a Blu-ray disc from Sony, Warner Bros., Universal or Paramount, and the disc comes with a code. And when you enter the code into your UltraViolet account, the code represents a digital proof of purchase. Then your UltraViolet account knows that you have the rights, for example, to Moneyball. I haven’t really used this term before, but UltraViolet is an authentication service.
4. In 2011 there were only 19 titles released on Blu-ray and DVD with UltraViolet compatibility.
We only launched about five months ago, but expect that 200 to 250 million discs sold in the U.S. in 2012 will come with UltraViolet rights. As major retailers such as Walmart and others join, you’ll be able to buy a Blu-ray disc or a DVD and add the UltraViolet rights to your locker. We also anticipate digital retailers will be coming onboard in 2012 and consumers who no longer want or need physical media will be able to buy UltraViolet directly from an online service provider.
5. Is one of the potential benefits of UltraViolet that it can boost DVD sales, which have clearly been on the decline in recent years?
Well, DVD has been declining, but Blu-ray has been picking up. Today, the best way to get 50 gigs of data into your home is on a Blu-ray disc, and I don’t anticipate that changing anytime soon. So those consumers who want the highest fidelity and lossless audio in their home, and at the same time want portability and to share content with their family, are probably going to choose Blu-ray with UltraViolet. If that means Blu-ray sales pick up even more, that would be a great benefit. If it means that digital sales now start to pick up, because overall digital sales have been generally flat, then that would be a great benefit for digital sales as well.
6. Do you see the market for UltraViolet moving from disc to digital?
We know as we migrate into the digital space that consumers don’t want to be locked into a platform. They want to be confident that if they buy something it will always be there, regardless of the device they want to play it on. So UltraViolet is really an important service as we migrate from physical to digital. Now, I don’t believe that migration will happen overnight. I think that migration will happen over a very long period of time. But this is a great way to transition consumers from physical to digital. Samsung has already announced a Blu-ray player that enables consumers to take existing DVDs and Blu-rays
in their libraries and convert them into the UltraViolet cloud.
7. What impact can UltraViolet have on Internet theft?
I’ve always said that the way for us to really succeed against Internet theft is to create something that’s better than free. Now we’re not just coming with a stick, we’re coming with a carrot. Not only do we have to enforce our copyright and be vigilant to protect against online theft, but now in the home entertainment market we can offer consumers the ability to watch their movies across all of their devices in a very easy and convenient way. It’s a great step to combat Internet theft. It’s not the end game, but it’s a tool.
8. How does the creative community and directors in particular benefit from UltraViolet?
We all know about the significant increase in revenues when we launched DVDs and consumers started buying movies instead of renting them. Now we see a lot of consumers migrating over to video-on-demand and subscription services. From an industry perspective, those business models don’t bring in as much revenue to the industry as the sell-through model does. But buying content online is very complex; there’s a lot of friction. UltraViolet is really meant to take the friction out of owning content digitally. When we take the friction out of collecting content in the digital world, we anticipate people will buy more. And when people buy more, it’s good for everybody in the industry.
9. You’ve said that the music industry was our ‘canary in the coal mine.’ What lessons can the film and TV business learn from what happened to the music industry?
To me, the idea that you need to react to disruption is the main takeaway from the music industry. It’s that maintaining the status quo in an environment of disruption is a failed strategy. And if we know we’re going to get disrupted, it’s better that we disrupt ourselves, so a third party doesn’t disrupt us at their own financial gain.
10. So do you think UltraViolet reflects a new mindset and a basic change in the business model for distributing content?
If you think about it, UltraViolet is very disruptive to the motion picture industry. It requires all of the players to do things differently, whether you’re an online service provider or a content provider. It would have been unthinkable five or six years ago that the content providers would sell content to a consumer and let them share it with their family, make multiple copies across devices they own, and allow them to stream content to unlimited devices. That model would have been unheard of. So I give a lot of credit to the studios that are supporting UltraViolet in that they saw what happened to the music industry and were able to react in a relatively fast period of time to make the changes necessary to develop UltraViolet. The business model in UltraViolet, for all of the players in all of the functional roles, is a substantial change in the way we’re used to doing business in the digital environment.