Market Insight

Disney launches its UltraViolet alternative with iTunes as sole launch partner

February 26, 2014

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Disney has launched Disney Movies Anywhere, the first significant manifestation of its rights locker service, KeyChest. At launch, iTunes is the sole retail partner, however Disney has indicated that it will be adding other retailers in the future. The iOS experience is integrated with Apple's digital store - if consumers elect to buy a movie in the Disney app they are pushed to iTunes and titles bought through iTunes show up in both Apple's Video app and the Disney app. Digital copies registered with Disney can also be viewed in customers’ iTunes libraries. Around 420 eligible titles are understood to be available through Apple's store at launch.

The service is accessible through Disney's Air Play enabled iOS app, through the studio's website, and registered titles also show up in user's iTunes libraries; however, for the time-being, extra features associated with iTunes-purchased titles (such as deleted scenes, director’s commentary, etc.) are only accessible through Disney’s app.

To stimulate usage, Disney is launching with an early digital release of 'Frozen' that will be available three weeks ahead of the physical release. Consumers who link their iTunes and Disney accounts will also get a free copy of 'The Incredibles' and will see Disney movies previously purchased through iTunes populate their libraries.

The service is initially limited to the US.

Our Take:

Launching with iTunes, which had a 64 percent share of the US EST market in H2 2013, and an early release of Frozen, which grossed over $380m at the domestic box office, is likely to provide Disney with a significant initial boost to registered users. Whether those users will elect to watch movies through Apple's video player or via Disney's app is undoubtedly an interesting one (the experience from music suggests they may well stay with the player that already offers access to their full library even when there is no DRM lock in); but the success or failure of the initiative should not be thought of as too tied up with the answer, at least over the short term. Regardless of where playback occurs, Disney now has i.) far better insight into the behaviour of consumers who buy its movies, thanks to the link with iTunes accounts ii.) helped to boost awareness of cloud ownership (which in turn has helped to boost EST sales) and iii.) set the stage for other premium, direct to consumer, digital video initiatives that it may offer in future.

It is an interesting contrast that the largest retailer currently supporting Ultra Violet (UV), Walmart's Vudu, had a share of the US EST market of less than 5 per cent over the same period (H2 2013). This is not to say that UV has not been growing, it now has over 15m accounts worldwide, but it does illustrate the very different situations that the two different rights lockers find themselves in when it comes to digital purchase.

It is tempting to see this developing as a sort of rights locker format war. However, IHS believes that this is not a zero sum game and that it is a mistake to think that for KeyChest to prosper it means that UV must lose. If both lockers manage to gain broader digital retailer adoption there is no reason why both cannot facilitate a relatively seamless experience across multiple services and devices, grow users, and help to stimulate demand for owning movies.

While Disney's initiative and Ultra Violet have a number of top line similarities, after all each is a rights locker that promises consumers the ability to 'buy once, play anywhere’, there are some important differences in details. Most notable of these is the functionality that the retail partner is committed to. As IHS understands, Ultra Violet brings with it a number of commitments that each consumer-facing service must support (e.g. to facilitate a minimum number of devices). By contrast, KeyChest has a more liberal approach and allows each service provider to use their standard usage rules, file format etc. With Apple already on board, these more liberal rules may yet attract some of the other notable UV hold outs, perhaps most notably Amazon - iTunes and Amazon combined made up around 80 per cent of US EST movies and TV shows in H2 2013. If KeyChest does manage to secure the other leading service providers, as noted earlier, this does not automatically spell the end for UV. But it does raise the prospect of some members of the UV consortium taking an approach that embraces UV and extends their rights locker to include some of the services that are UV holdouts, like iTunes and Amazon, as a way of enhancing both digital and physical sales.

North America USA
Apple Inc. Disney
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