Lack of Key Industry Support, ‘Clunky’ Use Model Could Keep UltraViolet from Reaching Potential

Forecasts for UltraViolet to reach 65 million active users by 2018 are jeopardized by key players not supporting the ecosystem, said a report by ABI Research. “After a shaky start, UltraViolet is starting to pick up steam,” said analyst Michael Inouye, but key players Apple, Disney and Amazon have yet to embrace the digital content locker format backed by Sony, Warner Bros., Paramount, RIAA, Best Buy, Walmart and numerous hardware companies.

Apple already has a strong ecosystem and Amazon is trying to replicate Apple’s success with its own, he said, giving neither company incentive to make its content available elsewhere. Amazon showed some support for UltraViolet at CES 2012 by making a token appearance at an UltraViolet coming-out presentation, but nothing has been announced since. If the big players don’t end up joining, that would “diminish UltraViolet’s value,” Inouye told us. It could also further “fragment” the market, already chopped up into iTunes, Microsoft, Netflix and Amazon ecosystems, Inouye said.

The UltraViolet service has been referred to as “clunky” from a consumer point of view, especially compared with straight streaming services that are more streamlined, but Inouye said UltraViolet has enough studio and retail support to be successful. “As long as consumers continue to buy Blu-rays, which they seem to be doing, it seems like a pretty good transition to UltraViolet,” he said.

Inouye said ABI didn’t have specific data on the number of disc-to-digital transactions that have been made since Walmart rolled out that service last spring through Vudu, where consumers pay a fee to access cloud-based content from discs they've already bought. Most UV activity today occurs through Blu-ray purchases and that will transition to electronic sell-through and digital rentals down the road, Inouye said.

Long-term continuity of a consumer’s digital library is another key uncertainty that could “diminish UV’s appeal,” according to ABI. Consumers are looking for access on all their devices as well as assurances they will not be forced to repurchase digital rights to content they thought they already owned, said ABI analyst Sam Rosen. The shift is on from physical to electronic media, he said, but “consumers continue to opt for subscription services and premium rentals rather than purchases,” he said. For UltraViolet to be successful, video transactions have to be as simple to access and store as music is in the digital realm, he said. “If competing video libraries gain consumers’ trust without joining the UltraViolet ecosystem, many of the components of UltraViolet will help facilitate B2B commerce but will fail from a consumer perspective,” he said.

ABI estimates UltraViolet’s active user account base at between 6 million and 8 million and predicts a base of 108 million by 2018, if key players support the platform.