Report: Walmart To Charge $2-$4 Per DVD To Convert Movies To UltraViolet Cloud

[Updated: Tuesday, March 13th – Walmart announced they will charge $2 for SD and $5 for HD.]

Tomorrow at 1pm ET, Walmart along with UltraViolet partners Universal, Paramount, Warner Brothers, Sony Pictures and Fox will announce Walmart's UltraViolet offering. Studio execs I have spoken with say that consumers will be able to bring their DVDs into Walmart, which will then charge the consumer between $2-$4 per DVD to give the consumer access to that movie in the UltraViolet cloud locker system. DVDs will then be stamped at the store, so they can't be used by multiple people and I'm told pricing for converting the DVD to digital will vary based on either SD or HD quality.

I'm sure the studios and Walmart are going to talk about how great this is for consumers and they will probably use a term like "nominal" to describe the fee consumers will have to pay. In reality though, the studios are doing exactly what consumers don't want, which is forcing them to pay multiple times for the same piece of content. The fact that consumers already spent money to buy the DVD apparently is not good enough to allow them access to a free digital copy, which they could easily get if they ripped the DVD on their own. It costs the studios almost nothing to store the movie in the cloud, about two cents per movie, and it only costs about four cents, at most, for them to pay a CDN to stream the movie to the user. So at $2 per DVD, a user would have to watch the movie 50 times from the cloud before the studio was losing money from digital.

Consumers have been vocal in saying they want more content digitally, at a fair price, and many of the studios are acting like they are giving consumers what they want, when in reality, they aren't. You can get digital, but only of you pay for the movie again. And you can get a digital copy with the Blu-ray disc, but only if you pay between $5-$10 more for a copy that includes a digital copy. Pricing seems to be all over the map for a Blu-ray with digital copy, but they are clearly much more expensive than just the Blu-ray only disc.

While there have been a lot of technical issues with the UltraViolet system that have been well documented in the media, those issues could be resolved over time, but it's no guarantee. UltraViolet is not easy to use, it requires multiple accounts with multiple websites, there is very little device support and Disney and Apple refuse to join the consortium. Physical Blu-ray copies with digital are more expensive and studios are charging so much for their download and own offerings, between $15-$25 a movie, that it makes more sense for a consumer to rent the movie for $3.99 instead of buying. Many studios have gotten so greedy that they are pricing themselves out of the digital download to own market. In addition, with the way the content windowing works for content going from theatre, PPV, rental, purchase etc. the studios are now going to have to augment that window in some way to allow for the new UltraViolet offering.

Aside for all of this, UltraViolet is a cloud based system that requires you to have to be connected to the Internet. As far as I know of, there is no way to play your movies from the cloud locally on your machine if you don't have access to the Internet. You have to connect to UltraViolet's system to get you license key and if you can't you won't be able to play any content. Unless UltraViolet comes up with an option for local playback, your entire library of movies and content will be in the cloud not accessible locally. That's not going to be ideal for a lot of people and it also requires consumer to once again choose between one quality over another. Studios should want to deliver consumers the best quality video available, yet they are going to force many users away from HD, simply due to price. That's not the best user experience.

Another topic one has to wonder about is privacy. UltraViolet is going to know every movie you stream from the cloud. And with so many studios, broadcasters, CE manufactures etc. in the program, what you what and when you watch it is going to be known. Who has access to that information? I can't find any language on the UltraViolet website that talks to the privacy of one's account in the cloud. Are they going to be data mining our usage habits and sharing that with third party companies? If they do, and I expect they will, that data is worth a lot of money to advertisers who will then know the demographics of who is watching their movies. That is very powerful data that UltraViolet is collecting, which they can make a ton of money from.

And what if UltraViolet starts using that information to track what you do outside of UltraViolet? Can they now deny you access to a movie in the cloud if they notice your IP address shows up in a torrent site? Can they now disable your UltraViolet account? In the end, do you really own the content that is in the cloud? I think this could be a major concern if the service starts to get some traction and is something UltraViolet will need to address

In January, Paramount rolled out a service to sell ten year old movies via the UltraViolet cloud for $22.99 for HD. Many of these same movies are available via Blu-ray for $8-$10 cheaper and I still can't find any definition from UltraViolet on what they classify as an "HD" movie. What exactly is the quality? How was it encoded? Is the digital copy in the cloud comparable to the Blu-ray disc? I highly doubt it as it would probably require 8-10Mbps to stream, which means the studios are selling HD digital copies, which are less quality than the Blu-ray, yet are charging consumers more for it. And the studios think this is something consumers won't notice?

Every year the studios seem to come up with new ideas and ways to try and charge consumers for movies. First it was the studios delivering two-hour movies to cell phones, even though consumers weren't and still aren't asking for the service. Then came the studios charging more for a digital download over the physical DVD. That was quickly followed by Sony charging $24.95 for a 24-hour rental and admitting it does not want to upset Walmart and the studios own DVD business. Then you had studios charging consumers more for movies on USB drives, and you also have some of the studios forcing Netflix and Redbox (and library's) from renting physical DVDs for 28 or 56 days, because the studios are trying to force consumers to buy more DVDs. Not to mention you constantly have the MPAA complaining about piracy. I don't condone stealing, but what do the studios think will happen when they aren't giving customers what they want at a fair price and will do everything in their power to prevent consumers from copying their own DVDs?

As a whole, the studios still don't get it. They aren't listening to consumers, they haven't truly changed their way of thinking and their pricing and business models don't make sense. In reality, a back-end system like UltraViolet that would allow such seamless viewing across all devices still hasn’t been created and it won't be the studios that make it happen.

  • Ken Stark

    At those prices very few will go for the upgrade, at least not until Ultraviolet is widespread and provides a lot more value to have your movies in the cloud. I was hoping for more like $1 to upgrade. If Walmart fully integrates the service with Vudu it will make it more compelling.
    You can play Ultraviolet movies offline, at least with Flixster. I have not tried disconnecting my PC from the internet to see if the local playback apps from Paramount, Universal, & Sony still work but I would guess that they do.
    People don’t seem to be worried about Netflix, Redbox, Blockbuster, Vudu, Amazon, etc. knowing what their viewing preferences are so I don’t know how this changes that much with Ultraviolet. I guess the studios would have more direct information but who knows what information their partners pass on to them.
    All the Ultraviolet movies I have downloaded to my PC have been in standard definition with stereo audio with the exception of Paramount who provides 1080p video with stereo audio. The quality is actually pretty good but obviously not as good as Blu-ray. The 154 minute movie was around 9 GB which works out to a bitrate of around 8 mbps, similar to Vudu HDX.

  • Ric

    This seals the DOA status on this little pipe dream. the cloud is going to frak the consumer and you are going to make them pay a premium to do so?
    Good luck with that.

  • what da?

    Why would anyone even use this? Why not just setup your own NAS and stream your movies yourself? Or use your own “cloud” account with some other vendor? Plus, if you wanted you could share cloud access with family and friends(may not be legal, but that isn’t going to stop people from doing it)?

  • Not Given

    Proofreading is so overrated!

  • ray ban

    make them pay a premium to do so?
    Good luck with that.

  • Katie R.

    I agree with the other comments above about streaming videos on your local network. Don’t quote me on this, but I believe you are legally allowed to produce one digital ‘backup’ copy of a DVD that you’ve purchased. Why not store that backup on a local streaming media server where you can access it through you gaming consoles or other set top device? Perhaps the big hangup is that people don’t have the time or know how to do it.

  • http://twitter.com/sunilmud Sunil Mudholkar

    For as low as $2 a movie it’s worth the time savings alone. I have boxes of DVDs in my basement waiting for this…

  • Luke

    Are they going to make all the copies or just link to the one on the CDN? This service seems idiotic. You could buy a Netflix account that probably has all your DVDs available anytime plus thousands more…

  • bathswana

    Dan Rayburn said: “Aside for all of this, UltraViolet is a cloud based system that requires you to have to be connected to the Internet. As far as I know of, there is no way to play your movies from the cloud locally on your machine if you don’t have access to the Internet. You have to connect to UltraViolet’s system to get you license key and if you can’t you won’t be able to play any content. Unless UltraViolet comes up with an option for local playback, your entire library of movies and content will be in the cloud not accessible locally. That’s not going to be ideal for a lot of people and it also requires consumer to once again choose between one quality over another. Studios should want to deliver consumers the best quality video available, yet they are going to force many users away from HD, simply due to price. That’s not the best user experience.”
    Simply not true. Read the Ultraviolet FAQ:
    http://uvdemystified.com/uvfaq.html
    “The UltraViolet system has a record of your streams. It does not have a record of your downloads. Once you download an UltraViolet file you can play it as many times as you like without ever being connected to the Internet. It’s impossible for UltraViolet or studios to track your offline playing habits.”

  • Pete

    I think there are a lot of people who’d like a way to “store” their movies on-line that can be accessed by multiple devices and taken on the go. One of the big drawbacks thus far is no HD for Warner Bros and Paramount doesn’t support download to mobile devices as well as no support for Android. Flixter’s mobile app video quality is poor for larger tablet devices. Streaming from Paramount website is poor. I made the mistake of purchasing a Warner Bros blu-ray thinking I’d get HD ultraviolet but not the case.
    By the way, ultraviolet codes are already creating a market for itself without the discs so one could conceivable go to Walmart to acquire a code (I’m assuming) and then sell for a higher price on ebay.
    How bout we drop discs altogether and go with entirely online purchases at reasonable prices? $8-10 standard def and $10-12 HD and charge a nominal annual fee for streaming account (flixter or whatever) but just one streaming service of choice.

  • film streaming

    make them pay a premium to do so? Good luck with that.

  • http://google.com nancy adams

    All this and still they will not permit vcr videotape owners to make a copy of a vcr movie in dvd format pfr preservation purposes…o the inequity!!!