UltraViolet Opens for Business With Rollouts Likely by Fall

Mark Teitell, GM & Executive Director, DECE

Mark Teitell, GM & Executive Director, DECE

July 15, 2011 – Digital Entertainment Content Ecosystem (DECE) has pulled the trigger on commercial rollout of its UltraViolet platform with release of the licensing terms that will allow various stakeholders to structure business models and relationships suited to their roles in the new supply chain.
With the licensing terms in play in combination with previously announced specifications for a common file format and accounting platform, it’s now up to market players to get the ball rolling, says Mark Teitell, general manager and executive director of DECE. “When you put those three components together, companies in the U.S. can start to actually deploy UltraViolet to consumers,” Teitell says. “We expect we’ll see the first deployments in the fall.”

The license terms are tailored to the needs of players in five defined roles: content provider; retailer; streaming service provider; app/device maker, and download infrastructure/services provider. Teitell says other licensing categories may emerge down the road. “There are likely to be several other role players we can envision in a mature ecosystem,” he explains.

Once entities are licensed they can leverage their positions in the UltraViolet ecosystem to create business relationships with other entities with confidence that a lot of the hassles and delays traditionally associated with such deals have been eliminated through common agreement on the UltraViolet components. “One of the really large benefits of UltraViolet for businesses is it streamlines the process of cementing business relationships for distributing content electronically,” Teitell says.

“In today’s world,” he continues, “every deal between a content provider and a retailer or service provider is negotiated from an essentially blank slate on the questions of content protection, what devices are permitted, what the usage model is. It takes ten times longer to negotiate on those issues than on prices or windows and market considerations for each other. Now, because this is an UltraViolet licensing deal, they will have already agreed on what devices are included, the usage model and what the DRMs are.”

This puts electronic distribution deal making on a fast track akin to the way things are done in the DVD and Blu-ray arenas, Teitell adds. “In disc sales questions like how many times you can copy content or the characteristics of devices that can play the content are already handled,” he says. “Content providers can spend their time and energy on engaging with consumers.”

Studio Plans

The emergence of a workable model for electronic distribution is the moment major studios that comprise the core membership of DECE have been waiting for in their efforts to recover from the falloff in DVD sales. By making it easy for consumers to purchase and access cloud-stored content over electronic distribution outlets from virtually any type of device, whether or not they choose to purchase physical copies of the content, UltraViolet has set the stage for a resurgence in digital sales, says Jason Spivak, senior vice president for worldwide digital distribution at Sony Pictures Home Entertainment, a key player in the DECE initiative.

“Consumers get the immediate gratification of viewing what they’ve purchased but also the usage flexibility and multi-device interoperability that have been missing up to now,” Spivak says. “If your hardware choices change, you still retain a true ownership experience with that cloud-stored content.”

Convenience is key to turning things around on the digital sales front, agrees Curt Marvis, president of digital media at Lionsgate, another DECE member. “The problem in the digital business from day one has been the lack of standardization,” Marvis says,

Proprietary box-based approaches to online movie sales and rentals don’t cut it, he says, noting that Netflix’s success in moving its rental business online stems from its ability to overcome some of this fragmentation. But, he adds, “Confusion remains the barrier to digital taking off.”

With UltraViolet positioned to overcome that barrier Twentieth Century Fox, another DECE member, will be striving to make digital purchases as much a mainstream business in the year ahead as video on demand is today, says Aubrey Freeborn, a senior vice president responsible for marketing and managing the studio’s video-on-demand and electronic sell-through products worldwide. But he stresses this goal will not come at the expense of other efforts to maximize high-margin secondary markets for content.

“We’re focused on driving benefits from everywhere, whether it’s digital download, VOD or Blu-ray,” Freeborn says. “If you only want to rent, we want to make sure you have that option.”

An interesting question in studios’ evolving business strategies is the degree to which they’ll sustain the traditional windowed release approach to managing revenues across these different distribution modes. The studios’ experimentation with early release windows for high-price VOD rentals within two weeks of theatrical release is a sign of things to come, Marvis suggests.

“We’ll see a lot more experimentation with making digital, VOD and packaged offerings available day and date,” Marvis says. “It took awhile for the day-and-date concept to take hold, but it’s clear day and date hasn’t been a factor in the package media sales falloff.”

The Roles of Other Stakeholders

Who will be first to license and bring UltraViolet to the public is not yet clear, but several DECE members, under terms of short-term test licenses, have been integrating with and beta testing the Digital Rights Locker system built and operated by Neustar, which DECE is offering as a shared cloud resource for all licensees. “In the case of members who’ve been privy to and creators of the specifications, they’ve been able to get a head start,” Teitell says.

But there’s been a lot of early preparation underway among non-members as well.”Several hundred non-member entities responded to the opportunity to evaluate the UltraViolet specs we announced at the Consumer Electronics Show in January,” he says. “This is one of the reasons we say there will be commercial implementations by fall.”

While entities can quickly obtain licenses, it will take them awhile to implement the specs in their own spaces, Teitell notes. “Retailers, for example, will need to implement the platform on their Web sites and set up the processes for interacting with the UltraViolet domain,” he says.

But, for retailers, he adds, this will be immensely less cumbersome than previous online sales arrangements where the likes of Best Buy and Blockbuster, both members of DECE, have had to set up their own ingestion, coding and other support mechanisms to create electronic storefronts. “The capital and operations expenses just weren’t worth it for the volume of business they were getting,” he says.

This is where the group identified in the UltraViolet licensing categories as download/infrastructure services providers have a crucial role to play. “There are certain companies that happen to be infrastructure-intensive middlemen who can make their services available so that retailers don’t have to build their own digital backends,” he says.

These companies, along with providing support for downloads in the UltraViolet format, are vital to providing the massive storage base that will be essential to the emergence of a universal cloud-based distribution ecosystem. “Storage is an issue,” says Fox’s Aubrey Freeborn. And it’s not just storage capacity; it’s also a matter of supporting the search and discovery functionalities that are essential to providing consumers universal navigation interfaces for accessing all their content. “A better solution for storage is essential,” Freeborn says.

Beyond the download model, streamed access support, as licensed under the streaming service provider category, is essential to the cloud-based multi-device access paradigm that is one of UltraViolet’s key differentiators. In some case the download/infrastructure services provider licensees’ storage centers will provide the source files for streaming by streaming service provider licensees. Or storage can be part of the functionality handled by the streaming licensees within their own domains.

As previously reported (June, p. 1), established service providers can help to accelerate UltraViolet penetration by leveraging their existing distribution infrastructures to support subscribers’ access to UltraViolet content. “UltraViolet gives all types of service providers, including IPTV, satellite, cable MSOs, access to a business model that supports expansion into supporting digital sales,” Teitell says. “It could be an important opportunity for them.”

As for the development of a device ecosystem to support downloading of purchased content for local storage in the UltraViolet format, “we’re going to phase in use of the common file format,” Teitell says. Many devices, including PCs, gaming consoles and many brands of smartphones and tablets, can be software upgraded to support the new format. “It will be like a media player update,” he says.

But most Blu-ray players and many other devices with limited excess processing power such as smart TVs will require factory-based upgrades. New UltraViolet-compatible versions of such devices are expected to hit retail shelves starting early next year.

Rollout and Marketing Strategies

Teitell says it’s likely that some licensees will soon announce their UltraViolet plans while others will wait until they’re ready to launch. “What I’d expect early on is to see a meaningful critical mass of content” to be made available to the early players on the distribution side, he adds. “One of the great strengths of UltraViolet is the commitment of the studios. They’ve stated explicitly they will start using UltraViolet in a substantial way.

“I expect we’ll see a large portion of home entertainment releases on Blu-ray being associated with UltraViolet digital locker rights to access that content in the cloud. And we’ll also see [UltraViolet-branded content] offered for purchase through online outlets.”

Teitell predicts the process will grow from this start in the fall to include ever more licensees and greater volumes of content. “Some parties will be aggressive, others will hold back for a cycle to see how it’s playing out,” he says. “But it will be a reasonable, substantial beginning in the fall.”

In the short run marketing will be left to run organically based on individual licensee strategies tied to consistent messaging explaining UltraViolet and its benefits. “It will be less of a big-bang rollout then we’ve seen with device classes of content offering,” Teitell says. Indeed, he adds, the fact that consumers don’t have to engage in some type of new behavior or purchase costly devices is one reason DECE is optimistic UltraViolet will be widely embraced.

Longer term there may be some industry-wide marketing campaigns centered on UltraViolet. “That’s something we’ll be working with licensees to develop,” Teitell says.

As for the DRM component of the UltraViolet equation, the platform is going to launch with certified DRMs from five suppliers, including Google’s Widevine, Adobe Flash Access, CMLA-OMA V2, Microsoft PlayReady and the Marlin DRM Open Standard, which is being used in a solution offered by DECE member Verimatrix. The file format is designed to allow content providers and their distribution affiliates to support any of the certified DRMs without requiring changes in the client software running on user devices.

“There may well be additional DRMs from additional companies,” Teitell says. “We have other applications for certification pending, but we’re not saying when the next wave might be approved.”

The key point to understand is that DECE isn’t re-inventing any wheels with regard to content protection, he adds. “We’re utilizing DRMs from leading companies that make and constantly update their technologies. The hard-core science of moving the ball forward is in the hands of those companies.”

The DECE membership is continuing to expand, with eight new members added in the first half of 2011, Teitell notes. Among the approximately 75 member companies, there are six major studios on board, including NBC Universal, Paramount and Warner Bros. in addition to the previously mentioned companies. Major cable players include Comcast, Cox, Liberty Global and CableLabs. The UK’s BT is the only telco member at this point, and British Sky Broadcasting is the sole satellite player in DECE.