All Things Digital

Hollywood is finally embracing day-and-date film releases.

Yesterday, Time Warner (TWX) CEO Jeffrey Bewkes said that Warner Bros. plans to experiment with VOD releases day-and-date with DVD later this year. And now this morning, Apple (AAPL) announced that a number of major and independent movie studios have agreed to make their films available on iTunes day-and-date with DVD–$9.99 for library title purchases and $14.99 for new release purchases. Among the studios participating in the deal: 20th Century Fox (NWS), Walt Disney Studios (DIS), Warner Bros., Paramount Pictures (VIA), Universal Studios Home Entertainment (GE), Sony Pictures Entertainment (SNE), Lionsgate (LGF), Image Entertainment (DISK) and First Look Studios (FRST.PK).

An impressive lineup and one that clearly heralds a shift in the movie industry’s view of digital distribution. A shift in iTunes movie purchases as well–upward. The removal of Hollywood’s typical 30-day lead time on DVD releases will no doubt boost new-release sales on iTunes, assuming customers don’t mind paying $14.99 for films that lack the extra features and picture quality of their DVD counterparts. It will boost movie studio revenues as well. With no manufacturing and reproduction costs to speak of, margins from day-and-date download releases are presumably quite high.

So much for that hard-fought DVD format war …

The next-generation DVD format war was a costly one–for Sony (SNE). In addition to the untold funds the company spent on pro-Blu-ray propaganda, it also reportedly spent quite a bit to buy the allegiances of Hollywood.

The Toronto Globe and Mail reports that Sony paid Warner Bros. as much as $400 million to throw its support behind Blu-ray and abandon HD-DVD. An interesting little footnote to the DVD format war, since Warner’s decision all but sealed HD DVD’s fate.

So it was a reported $400 million well spent, then. For the time being, anyway. “People are saying Blu-ray won the war but who cares,” Seagate CEO Bill Watkins said last year. “The war is over physical distribution versus electrical distribution, and Blu-ray and HD lost that. In this, flash memory and hard drives are on the same side. The war is over and the physical guys lost.”

The next generation DVD format war has become a format funeral. Toshiba (6502.TO) said today it is pulling out of the HD DVD business. The company will cease production of its HD DVD players and recorders immediately and shutter the business entirely by the end of March.

“This was a very difficult decision to make … but when we thought about the trouble we would cause to consumers and our partners, we decided it was not right for us to keep going with such a small presence,” Toshiba Chief Executive Atsutoshi Nishida told a news conference, adding that Warner Bros.’ decision to back Blu-ray had made the move inevitable. “That had tremendous impact,” he said. “If we had continued, that would have created problems for consumers, and we simply had no chance to win.”

PREVIOUSLY:

• Investors: We Come Not to Bury HD DVD, but to Celebrate Over Its Lifeless Body
• Bring Out Yer HD DVDead
• Will the Last Person to Leave the HD DVD Camp Please Turn Off the Blu-ray Player?
• There’s a Singing Fat Lady Here to See You, Sir.
• Ah Yes, a $2.7 Million Super Bowl Ad Will Fix Everything …
• Mistah HD DVD–He Dead …

What do you get when you cross a cowboy, a construction worker, a biker, a soldier, an American Indian and a police officer? Why, the Village People, of course. But throw in a Web Sheriff and you’ve got a lawsuit: The aging disco group has teamed up with the U.K.-based antipiracy outfit to sue Swedish torrent index The Pirate Bay for enabling illegal downloads of its song “Y.M.C.A.”

A chart topper in 1978, Village People’s “Y.M.C.A.” has been played in thousands of baseball stadiums and karaoke bars and even performed by former Secretary of State Colin Powell at the ASEAN Forum, an annual security meeting for foreign ministers (”President Bush, he said to me: Colin, I need you to run the Department of State. We are between a rock and a hard place.”) without incident.

But its alleged popularity in file-sharing circles–particularly after the appearance last year of a YouTube video combining it with historical footage of Adolph Hitler and other Nazis–has drawn the group’s ire, as well as that of Prince, who is also reportedly part of the suit. “We are suing for damages of millions of dollars, and [suits] will be filed at both Swedish as well as U.S. courts,” Web Sheriff Chief Executive John Giacobbi told Swedish online business daily e24. “Many are asking themselves why they should be paying for content when it is widely available free of charge. But such thinking disregards the fact that someone has been creating this music or movie, and [has] invested huge sums of money in the project. Therefore it should be up to [the creators] to decide how and to whom their works are being distributed.”

Giacobbi, it should be noted, is calling upon other artists to join the suit in the hopes of giving it more critical mass and credibility, though his choice of artists may achieve quite the opposite. Said Giacobbi, “It would also be good/appropriate if the members of ABBA could take up the fight against these pirates, as they personify the Swedish music industry’s successes and are renowned ambassadors for Sweden, contrary to The Pirate Bay.”

One can only the imagine the fun the folks at The Pirate Bay, who’ve publicly ridiculed legal threats from everyone from Warner Bros. to Apple, are going to have with this one.

Woolworths has declared a winner in the next generation DVD format war and it’s not HD DVD. Yesterday, the British chain said it will stock only Blu-ray discs, becoming the first major retailer to drop HD DVD.

Woolworths’ decision came after it found Blu-ray movies outsold HD DVD by 10 to 1 in its 820 stores. “Sales figures clearly show that the market is moving toward one format of high-definition DVD,” said Woolworths’ DVD buyer Steven McGunigel. “The main reason is the success of Sony’s PlayStation 3 machine. Because it plays Blu-ray discs, there are over three-quarters of a million homes in the U.K. that can view the new high-definition format. There is no where near that number of HD DVD players around.”

Another nasty blow for the HD DVD, which appears to be fast losing the support of its initial backers. Last week, Warner Bros., New Line and HBO all abandoned HD DVD. And according to Variety, Universal’s exclusive commitment to HD DVD has expired. Toshiba, HD DVD’s, main backer, is soldiering on in spite of such setbacks. It’s even gone and purchased a 30-second TV spot during next week’s Super Bowl. But as Andy Parsons, senior vice president of the Blu-ray Disc Association points out, it’s no silver bullet. “I certainly admire [Toshiba’s] chutzpah,” Parsons told Home Media Magazine. “They can certainly choose to do as they please with their marketing. Running a Super Bowl ad is not likely to convince consumers that HD DVD will win the format war.”

And in the end, is this particular format war even worth worrying about? Isn’t physical media doomed? “People are saying Blu-ray won the war but who cares,” Seagate CEO Bill Watkins said earlier this year. “The war is over physical distribution versus electrical distribution, and Blu-ray and HD lost that. In this, flash memory and hard drives are on the same side. The war is over and the physical guys lost.”

Reports of HD DVD’s death may have been exaggerated, but reports of its fast-declining health have not.

Though Paramount Pictures has denied reports that it plans to abandon the next-generation DVD format, news of an escape clause in its HD DVD contract allowing it to release films on Blu-ray has the industry wondering aloud about the format’s continued viability.

And for good reason. Earlier this week Universal’s HD DVD-exclusive contract ended. And last Friday, on the eve of the Consumer Electronics Show, Warner Bros. stunned the industry by announcing plans to end support of the format entirely in June. “[That] maybe the pivotal event that resolves the format war,” said Thomas Coughlin of Coughlin Associates. “It certainly changes the rules and the playing field. I think everyone is trying to reassess what this means–including the HD DVD guys. [If Blu-ray does come out on top] it would be poetic justice after the Betamax vs. VHS war. That time, Sony lost.”

But is it truly the format’s death knell? Ovum analyst Carl Gressum says no. “There is a lot of speculation whether this is the end of HD DVD,” he said. “It is not, but we are getting dangerously close to a ‘chapter 11’ for the group. If the other supporting studios now decide to drop HD DVD, the situation will turn dire, and HD DVD could become more of a replacement to DVD on the PC client than as a movie-distribution playback format.”

UPDATE: Universal Pictures flatly denies it’s abandoning the HD DVD format. Said Ken Graffeo, executive vice president of HD strategic marketing for Universal Studios Home Entertainment, “Contrary to unsubstantiated rumors from unnamed sources, Universal’s current plan is to continue to support the HD DVD format.”

From top to bottom, Blockbuster is deliberately and willfully infringing on our patented methods. Netflix invented a 100 percent better mousetrap that Blockbuster copied.
- Netflix spokesperson Steve Swasey, April 5, 2006

Apparently, Blockbuster isn’t as hopelessly tethered to its VHS rental-business past as you might think. Yesterday, the video-rental retailer acquired studio-owned movie download service Movielink and with it a potentially significant foothold in the video-on-demand market. Terms of the deal were not disclosed, but early this year when rumors of an acquisition first began to circulate, analysts had estimated that Blockbuster might pay as much as $50 million.

Founded in 2002, Movielink is backed by Paramount Pictures, Sony Pictures, Metro-Goldwyn-Mayer, Universal Studios and Warner Bros. Studios. But while its impressive catalog makes it one of the Web’s largest digital-movie libraries, the service hasn’t caught on because of its strict digital-rights management software and prices (roughly the same as a typical DVD). Still, it’s likely a good acquisition for Blockbuster, whose market value has declined to just over $800 million from $8.4 billion, largely because of its failure to buy Netflix when it had the chance.

Blockbuster chair and CEO Jim Keyes called the deal the next “logical” step in the company’s transformation. Presumably, that means the next phase in Blockbuster’s re-creation of the Netflix business model, which the video-rental chain has been diligently following for the past few years. Netflix, of course, is spending some $40 million this year on its own VOD service, which is already up and running.