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Is UltraViolet Finally Ready to Save Hollywood’s Day?

Almost a year after its dim debut, the cloud-based platform now boasts more than 5 million accounts — thanks to a deal with Walmart

Is UltraViolet finally ready to save Hollywood’s day?

After signing an agreement with Walmart — and with deals with other major retailers a distinct possibility — the cloud-based home-entertainment system seems primed for a breakthrough.

It’s been nearly a year since a consortium of five of the six major Hollywood studios — all facing a looming crisis with shrinking DVD sales and unchecked piracy — placed its bets on UltraViolet, which enables consumers to upload movies bought through retailers to the cloud, allowing them to be played on a variety of platforms.

Just one problem: With a confusing name, little consumer marketing and no natural place-of-purchase, the new system didn’t immediately find an audience.

Also read: Walmart Supports UltraViolet With 'Disc-to-Digital' Service

Between its October debut and the end of the year — which included the all-important holiday season — it signed up fewer than 1 million accounts.

Worse, entering 2012, it lacked deals with major retailers like Best Buy, Amazon, Apple, Xbox and Walmart

Then, in March, Walmart came aboard.

The signing helped push UltraViolet’s user base beyond 5 million accounts, and a strong 2012 holiday season now seems a real possibility.

Also read: UltraViolet Arrives Soon: Will It Save the Day for Hollywood?

But it wasn’t just a matter of adding a major outlet. The deal with Walmart allows customers to upload not just new items but old DVDs and Blu-rays to the cloud, using the retailer’s Vudu service.

It also allows consumers to access and set up UltraViolet accounts through one site where they can watch the films they buy from the digital cloud, instead of arranging accounts in a piecemeal fashion through various studio sites.

"What consumers have to do has gotten a lot easier,” Mark Teitell, general manager and executive director of DECE, UltraViolet's parent consortium, told TheWrap.

“There’s more of a centralization of services that consumers can use. With Vudu there’s a more natural aggregation point, whereas in the earliest days people had set up as many as four different accounts with the movies they bought. It was always intended to be a pan-studio partnership with retailers — and now that’s happening,” Teitell added.

Teitell also notes that a growing number of studios have launched titles on the format. Save Disney, all of the major studios have unveiled UltraViolet releases.

Most recently, Lionsgate got its feet wet by rolling out “The Hunger Games” as its first major title using the format and Fox premiered an UltraViolet addition of “Prometheus” this week.

“All along, we set our expectations around gradual, organic growth, and that is exactly what we are starting to see as the amount of UltraViolet content increases,” Teitell said.

“It compares pretty favorably, although it’s not a perfect analogy, to the way that other new home-entertainment products like DVDs have rolled out.”

Indeed, there has been a slow recovery in the home-entertainment sector overall, driven by explosive growth in digital revenue. During the first half of the year, the movie business racked up $8.4 billion from renting, selling and steaming movies, representing a 1.4 percent jump from the previous year, according to the Digital Entertainment Group.

But the big news was that aided by UltraViolet electronic sell through of movies was up nearly 22 percent during the first six months of the year.

“It’s anecdotal at best to guess, but we believe that offering more value in a product, which this obviously is doing, may help influence consumers’ intent to purchase,” Thomas Hughes, senior vice president of worldwide digital at Lionsgate, told TheWrap. 

"People are much more comfortable with cloud technology than they were when UltraViolet launched," Hughes said. "Almost a year later, it’s easier to go to the site and create an account; it used to be a terribly difficult. The friction is dramatically less."

And the Walmart name doesn’t hurt, either.

"Walmart lets the American consumer know en masse UltraViolet has a stamp of approval," Tom Adams, principal analyst and director of U.S. media for IHS Screen Digest, told TheWrap. "It's a huge positive and it must be driving account creation."

Meanwhile, Disney, the lone major studio that did not cooperate, has not had the same level of adoption with its separate disc-to-digital program, Keychest. In 2010, the studio began to rethink the program. 

"We didn’t get much buy-in from the industry on it," Disney CEO Bob Iger said on an earnings call.

Some marketing challenges still remain for UltraViolet, however.

Some analysts caution that UltraViolet remains too dependent on Walmart and suggest that widespread studio support is not enough to reach a critical mass of people. 

“There’s still not the universal retailer support studios hoped there would be,” Adams said. “Best Buy and Amazon are other key people who need to come on board, and until there’s more support from retailers there’s not going to be mass acceptance.”

That may be about to happen.

Though UltraViolet refuses to say who it is, another retailer is about to come aboard.

One possibility is the Xbox, a logical partner, given its significant presence in households across the country.

Another is Amazon — though Amazon did not add UltraViolet to its newest line of tablets, unveiled earlier in September. 

And on Thursday, Walmart announced it will no longer sell Amazon products, including the Kindle, hoping to boost its own online profits.

Also read: Walmart Drops Kindle, Amazon Inventory

But regardless of who the next partner is, Hughes thinks the day will come when UltraViolet does break through into the popular consciousness.

“If more major retailers come on board, which they will, the UV logo may have the same level of awareness around it as the DVD or VHS logo,” he said.