Ready for movies in the cloud? Studios bet you are

LOS ANGELES Mon Oct 10, 2011 1:00pm EDT

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LOS ANGELES (Reuters) - Hollywood is making a major bet this coming holiday season that consumers will buy movies, instead of renting, and view them on the go.

Facing the steady decline of physical disc sales, studios from Warner Bros to Sony will launch their UltraViolet cloud-based movie storage -- or "digital locker" -- service.

The studios are making a push to jump-start movie sales by attracting consumers to the cloud. The new digital lockers keep purchased copies of films on remote servers for viewing any time on various devices, a move to make movie ownership more appealing.

Renting movies, far less profitable for studios, has dominated the home entertainment scene since Netflix Inc made unlimited monthly rentals cheap and convenient.

Starting this month, consumers can buy the first films offered with UltraViolet, a format designed to allow instant streaming or downloading on devices ranging from videogame consoles to tablets and Web-ready televisions.

Walt Disney Co, the only major film studio not backing UltraViolet, plans to kick off a similar option in the coming months called Disney Studio All Access.

With a "buy once, play anywhere" message, studios hope consumers see more benefits to owning movies. Backers are pitching flexibility for multiple devices, the promise of owning rights to a movie for a lifetime, and the advantage of a cloud-stored copy not hogging hard-drive space.

UltraViolet offers "more value for digital ownership. You can stream wherever you are," said John Calkins, executive vice president of global digital and commercial innovation at Sony Pictures Home Entertainment.

PRESERVATION MODE

But will consumers embrace the idea, or has renting movies become too ingrained as the top choice for home entertainment?

While renting remains more popular than buying, interest in digital lockers as a movie-storage option has increased in the past year, according to a recent survey by accounting and consulting firm PwC. That likely stems from Apple Inc's plans to offer cloud storage for music.

"Consumers are starting to understand the benefit of storing other types of content in the cloud," said Matthew Lieberman of PwC's entertainment, media and communications practice.

Others are not sure cloud storage of movies will take off.

Apple sells movies through iTunes and has not backed UltraViolet, a fact some industry analysts said would hurt adoption.

Ownership also remains a tough sell now that consumers can stream rented movies any time to a wide range of Internet-connected devices, which has caused a steady march downward for physical movie disc sales.

"We are in a preservation game," said James McQuivey, media technology analyst at Forrester Research. "We are trying to preserve an eroding base of DVD and Blu-ray spend. I don't see any way in which this is going to reverse this slide."

To be sure, digital lockers are in their early days. Just two of Hollywood's major studios have announced titles that will come with an UltraViolet option. Time Warner unit Warner Bros is selling DVD and Blu-ray discs with UltraViolet rights for adult comedy "Horrible Bosses" starting on Tuesday and superhero flick "The Green Lantern" beginning Friday.

Sony Corp jumps into the mix in early December with comedy "Friends with Benefits" and family film "The Smurfs" as the holiday shopping season gets in full swing.

Universal, Paramount and 20th Century Fox have signed on to UltraViolet but not yet announced films for the format.

Mark Teitell, general manager of the consortium that developed UltraViolet, said the initial titles are "really the beginning phase of this. It will be a ramp up."

Discs of Walt Disney and Pixar films will start coming with Disney Studio All Access rights in the next few months, said Lori MacPherson, executive vice president of global product management at Walt Disney Studios.

But films from Disney-owned Marvel Studios are not currently part of the effort.

Cloud storage "gives the benefit of ownership without the issues of long download time, storage constraints and the lack of interoperability," MacPherson said.

"It will be a game-changer for digital ownership," she said.

(Reporting by Lisa Richwine, editing by Matthew Lewis)

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