Disney has been the lone hold-out from the movie industry’s solution for online sales, UltraViolet. Does the Disney Movies Anywhere announcement and close partnership with Apple spell the ultimate demise of UltraViolet?
2013 was a good year for online movie sales. The business grew 50% last year, to $1.2 billion. On the face of it UltraViolet also had a good 2013, increasing the number of accounts 65% to 15 million. Unfortunately, most of the online movie sales did not end up in those new UV accounts.
Apple’s iTunes store dominates the electronic sales of movies. NPD group last year reported that iTunes had a two-thirds share of movie and TV show sales. What’s more the number of iTunes accounts reached 600 million last year, growing at a reported 500,000 a day.
So, what drove the increase in UV accounts? Disk sales. Many DVD and Blu-ray disks now include a code to gain access to a digital version of the movie in UV format. However, the trajectory of DVD sales is very different from online movie sales. Physical disk sales plummeted 8% last year.
In the light of these numbers, Disney’s move to launch Disney Movies Anywhere (DMA) with close affiliation to iTunes sounds like a no-brainer. It is especially so because Disney knows that Apple products, in particular older iPads and iPod Touches, are heavily used by the kids that form the backbone of the company’s audience. They know this because so many youngsters now engage with Disney through the Disney Watch Apps.
At the core of Disney Movies Anywhere is Disney’s own online movie format called Keychest. UltraViolet and Keychest are not compatible. When a consumer purchases a Disney movie through iTunes the movie shows up both in iTunes and in DMA, in Keychest format. The other route to getting movies into DMA is through disk redemption codes through the DigitalCopyPlus website.
If all of this news isn’t bad enough for UltraViolet, the recent entry of Comcast into the digital movie sales market just adds insult to injury. Comcast has leapt out to an estimated 15% of online sales. These movies do not use UltraViolet either.
Taking Comcast and Apple iTunes together, up to 80% of the electronic movie sales market is in a format other than UltraViolet. This is pretty disappointing performance for the four years the standard has been in market.
There is another danger for UltraViolet in the Disney announcement: the close integration with iTunes, and the huge market it leverages is very compelling. If others jump on board, and abandon UV this could spell disaster. Just as Warner Bros surprise announcement in support of Blu-ray in 2008 sank HD DVD, another major movie studio embracing the Disney Movie Anywhere approach could well herald the end for UltraViolet.
Why it matters
UltraViolet has made very slow progress since its launch, in part because Disney does not support the format.
Disney’s move to stick with Digital Copy for Disney Movies Anywhere shows the company won’t support UltraViolet anytime soon.
Were another major studio move to the Disney Movies Anywhere approach, it would likely signal the end for UltraViolet.