Disney and Apple’s UV FUD

Last month Disney launched Disney Movies Anywhere, a service that lets users stream and download movies from Disney and associated studios on their Apple iOS devices.  You can purchase movies on the site or from the App Store app and stream them to any iPhone, iPad, or iPod Touch.  You can also get digital copies and streaming access with purchases of selected DVDs and Blu-ray discs.  And you can connect your iTunes account to your Disney Movies Anywhere account so that you can gain similar streaming and download access to your existing Disney iTunes purchases.

A couple of things about Disney Movies Anywhere are worth discussing.  First, this is yet more evidence of the strong bond between Disney and Apple, a relationship formed when Disney acquired Pixar from Steve Jobs, who became a Disney board member and the company’s largest shareholder.

More particularly, this service is a way for Apple to experiment with video streaming services without attaching its own brand name.  Disney Movies Anywhere works with only iOS devices, and there’s little indication that it will add support for Android or other platforms.  For whatever reason, Apple has shied away from streaming media services until quite recently (with iTunes Radio and the latest iteration of Apple TV).

More importantly, Disney Movies Anywhere is the first implementation of Disney’s KeyChest — a rights locker architecture that is similar to UltraViolet, the technology backed by the other five major Hollywood studios.  The idea common to both KeyChest and UltraViolet is that when you purchase a movie, you’re actually purchasing the right to download or stream it from a variety of sources; the rights locker maintains a record of your purchase.

One of the main motivations behind UltraViolet was to prevent content distributors or consumer electronics makers from dominating the economics of the digital video supply chain in the way that Apple dominated music downloads (and Amazon may dominate e-books), and thus from being able to dictate terms to copyright owners.  By making it possible for users to buy digital movies from one retailer and then download them in other formats from other retailers, the five studios hoped to create a level playing field among retailers as well as interoperability for users.  UltraViolet has several retail partners, including Target, Walmart (VUDU), and Best Buy (CinemaNow).

The problem with these technology schemes is that it is very hard to make them into universal standards.  Just about every software technology we use settles down to twos or threes.  In operating systems, it’s all twos: Windows and Mac OS for desktops and laptops; Android and iOS for mobile devices; Unix/Linux and Windows for servers.  Other markets are similar: in relational databases it’s Oracle/MySQL (Oracle Corp.), DB2 (IBM), and SQL Server (Microsoft); in music paid-download formats it’s MP4-AAC (Apple) and MP3 (Amazon); in e-books (in the US, at least) it’s Amazon, Barnes & Noble, and Apple iBooks.  Antitrust law prevents a single technology from dominating too much; market complexity prevents more than a handful from becoming roughly equal competitors.

It would be a shame if this also became true for rights lockers for movies and TV shows.  It does not help the studios if consumers get one flavor of “interoperability” for movies from all but one major studio and another flavor for movies from Disney.  Disney surely remembers the less-than-stellar success of its last solo venture into digital movie distribution: MovieBeam, which launched around 2004 and lasted less than four years.

And that brings us back around to Apple.  The only plausible explanation for this bifurcation is that Apple is really in charge here.  UltraViolet is not just an “every studio but Disney” consortium; it is also an “every technology company but Apple” initiative.  The list of technology companies participating in UltraViolet is huge, though Microsoft occupies a particularly important role as the source of the UltraViolet file format and the first commercial DRM to be approved for use with the system.  In other words, the KeyChest/UltraViolet dichotomy is shaping up to look very much like Apple vs. the Microsoft-led Windows ecosystem, or Apple vs. the Google-led Android ecosystem.

Still, the market for digital video is still in relatively early days, and things could change quite a bit — especially if consumers are confused by the choices on offer.  (Coincidentally, there’s a good overview of this confusion and its causes in today’s New York Times.)  UltraViolet is enjoying only modest success so far — compared, say, to Netflix or iTunes — and the introduction of Disney Movies Anywhere is unlikely to help make rights lockers any clearer to consumers.

In that respect, the UltraViolet/KeyChest dichotomy also has a precedent in the digital music market.  Back in 2001-2002, the (then) five major record labels lined up behind two different music distribution platforms: MusicNet and pressplay.  MusicNet was backed by Warner Music Group, EMI, BMG, and RealNetworks, while pressplay was backed by Sony Music and Universal Music Group.  MusicNet was a wholesale distribution platform that made deals with multiple retailers; pressplay was its own retailer.  In other words, MusicNet was UltraViolet, while pressplay was Disney Movies Anywhere.  Yet neither one was successful; both suffered from over-complexity (among other things).  Apple launched the much easier to use iTunes Music Store in 2003, and few people remember MusicNet or pressplay anymore.*

In other words, there are still opportunities for new digital video models to emerge and disrupt the current market.  And consumer confusion is a great way to hasten the disruption.

*The two music platforms did survive, in a way: MusicNet is now MediaNet, a wholesaler of digital music and other content with many retail partners; pressplay was sold to Roxio, rebranded as Napster (the legal version), and resold to Rhapsody, where it still exists under the Napster brand name outside of the US.

 

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