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Editor's Note: Ultraviolet and TV Everywhere are attempts by the large movie studios and TV networks to connect with the "connected" consumer. Are these initiatives really pushing the envelope of innovation or do they just preserve old models that require more dramatic change? Will Richmond tells us that they may not be enough. What do you think?
I'd wager the two most spoken words in the media and entertainment industries these days are "devices" and "access." Executives are gripped by the idea that consumers must have access to their content across a growing universe of video-enabled devices. In fact, the premise of the industry's two most strategic initiatives — UltraViolet and TV Everywhere — is that by enabling access to content on multiple devices, traditional business models will either be reinvigorated (in UV's case for DVD purchases) or buttressed against attack (in TVE's case for pay-TV's multichannel bundle).
If only things were that straightforward. While it's undeniable that improved access on multiple devices is extremely valuable, especially for today's on-the-go viewer, the shortcoming of both UV and TVE is that neither addresses fundamental changes in consumer behaviors or preferences. Broader access is only half the battle here; the other half is devising the right business model that meets consumers' vastly changed expectations. Until this piece of the equation is solved, I doubt that either UV or TVE is going to have the industry's hoped-for impact.
The plan for UV to inject new life into the beleaguered home video industry got a boost yesterday as Walmart and five Hollywood studios announced a "disc-to-digital" program that enables DVD owners to bring their discs in to have them transferred to VUDU, which, with UV, makes them accessible on multiple devices. It's a nice way to add new value to DVD libraries, and for some genres (namely kids movies), I think it could gain some traction, even despite the glaring absence of Disney and Pixar. However, Walmart's and the studios' real goal here is to get consumers back to buying high-margin DVDs, with the UV enhancement.
The problem is that renting movies has become dirt cheap, via any number of easily accessible outlets (e.g. Netflix, Amazon, iTunes, Redbox, etc.). By definition, a key value to owning anything, movies included, is to gain ready access. But if renting a movie offers de facto ready access, then the value of owning decreases. That's the new dynamic in the movie business — consumers now have the ability to make "buy vs. rent" decisions.
But Hollywood doesn't seem to want to recognize this. Instead it has kept the cost of movie ownership high — typically $15-$30. And it hasn't done much to improve the timing for owning a movie — still usually 2 months or more post theatrical release. No surprise, with the exception of certain kids movies and destined-to-be-classics, DVD ownership has fallen off a cliff. UV is not a silver bullet that will solve this problem. As long as cheap and abundant movie rentals are available, better access alone will not materially change consumers' "buy vs. rent" decision. While not nearly as dire, the pay-TV industry is on the leading edge of a similar situation. New OTT alternatives are bringing more viewing choice to consumers, at much lower price points, including free. While TVE adds value to existing subscriptions, it doesn't change the underlying problem that these subscriptions are quite expensive and bloated with all kinds of programming that most viewers don't care about. I discussed this yesterday and in the past.
Once again, no amount of enhanced access through TVE will address the underlying issue that for many, the "multichannel bundle" is an anachronism. Since there's no wave of cord-cutting yet hitting pay-TV's shores, it's tempting to think this isn't a real problem. But I'd argue that dissatisfaction lurks just beneath the surface, and once there are bona fide options (analogous to cheap movie rentals), things could change very fast, as Hollywood has found. One catalyst to keep an eye on is a forthcoming TV-like device from Apple, which could significantly upend the living room experience.
The lesson here is not that improved access to multiple devices isn't important. It's that it's not sufficient. Satisfying consumers with ever-higher expectations can only occur when their fundamental pricing and packaging preferences are addressed. And that requires executives pursue genuine business model reform, rather than cling to the prerogatives of past success. I suspect that as UV and TVE continue to rollout this will become increasingly clear.