Disney Sees Red Over Ruling on Download Codes

Ever since sales of DVDs and Blu-ray Discs began their long eclipse behind the rise of more convenient digital alternatives the Hollywood studios have sought ways to extend the life of the high-margin disc business by finding ways to integrate disc sales with the broader digital economy.

The most systematic effort was the UltraViolet initiative. By creating an UltraViolet account, consumers could register their purchase of a DVD or Blu-ray Disc and obtain access to a digital version of the same movie, which they could then stream to connected devices without a DVD or Blu-ray drive, via participating streaming services.

Disney, which never joined the UltraViolet consortium, had its own version it called Disney Movies Anywhere (now re-christened simply Movies Anywhere and incorporating most of the former UltraViolet studios). Disney packaged its discs with an insert containing a code, which, when entered by the consumer in her online Movies Anywhere account allowed her to stream the movie through participating online services, or to download the movie onto up to eight registered devices.

DVD rental kiosk operator Redbox has likewise struggled with consumers’ declining appetite for DVDs and Blu-rays. It’s main strategy has been to keep its rental prices extremely low, which has often put it at odds with the studios, who by and large would prefer to see the low-end rental market wither away. But Redbox, too, has sought ways to make itself digitally relevant. Read More »

Kaleidescape leaves Hollywood blu in the face

Well, here we go again. With its five-year litigation with the DVD Copy Control Association over its original DVD jukebox still not resolved, Kaleidescape Systems on Tuesday announced plans to roll out a new disc player that will import high-def movies from Blu-ray Discs onto Kaleidescape home media servers, along with conventional DVDs and CDs. The new player, the M500, won’t actually ship until May 18, which gives the studios (or the Advanced Access Content System Licensing Administrator, the Blu-ray equivalent of DVD-CCA) a week to try to file a new suit and persuade a court to issue a temporary restraining order preventing the M500 from shipping.

Assuming they decide to sue, that is. On the face of it, Tuesday’s announcement by Kaleidescape would seem to invite a very similar lawsuit as the one DVD-CCA filed against the company back in 2004. As it did with its original DVD system, Kaleidescape secured all the necessary technology licenses needed to build a Blu-ray player, including a license for the AACS copy-protection system. Also as with the CSS copyright protection system for DVDs, Kaleidescape maintains the AACS license does not, as a legal matter, prohibit the copying of Blu-ray discs, at least not in the manner by which Kaleidescape creates a hard-drive copy of the movie.

In the case of DVDs, of course, the DVD-CCA, which oversees the CSS license, had a very different interpretation of what was and was not permitted under the license agreement, and sued Kaleidescape in California state court for breach of contract on grounds that the Kaleidescape player violated the provisions in the license agreement that prohibit copying.

In April 2007, however, the trial court found that the rules purporting to prohibit copying were not actually part of the CSS license because they were contained in a separate document that was not incorporated by reference into the main license agreement. That finding rendered the question of whether Kaleidescape had actually violated the rules moot — you can’t be in breach of what’s not in the contract — so the court never decided the question.

DVD-CCA appealed the decision and in August, the California Court of Appeal overruled the lower court, declaring that the rules regarding copying were, in fact, properly part of the contract. Since that was the only question before it, however, the appeals court also reached no decision on whether Kaleidescape had actually violated the rules. Instead, the case was sent back for a new trial to determine whether in fact the rules prohibit copying and whether in fact Kaleidescape is not in compliance with those rules. Read More »

Blu-ray: Licensed to be killed

Back in 2008, explaining the lack of Blu-ray Disc drives on Apple’s newest line of notebooks, CEO Steve Jobs famously described the licensing process around the format as “a bag of hurt.” After this week’s announcement by the newly formed BD4C Licensing Group, he’s going to need some more bags.

Photo: ArsTechnica

The members of the new group, Toshiba, Warner Bros., Thomson and Mitsubishi, claim to own, collectively, a portfolio of patents “that are essential for BD Products.” Though none of the four are known to have contributed much original IP to the Blu-ray spec, they do own a number of patents essential to DVD products. Insofar as the Blu-ray spec requires that BD devices be backwardly compatible with the older format, device makers are stuck (or stuck up, depending on which end of the deal you’re on), to the tune of $4.50 per Blu-ray player, $7.00 per Blu-ray recorder and $4.00 per Blu-ray drive.

Blu-ray media manufacturers and replicators are also on the hook, the group claims, for 4 cents per disc and 8 cents per BD/DVD flipper disc. Read More »

Walmart Does That VOD Vudu

Let’s stipulate that the $100 million price tag being bandied about for Walmart’s acquisition of Vudu is exaggerated, or includes various earn-out targets that likely will never be met, making the ultimate price something less than nine figures. Walmart hinted at as much in its press release, indicating the acquisition would “not be material” to its first fiscal quarter despite being scheduled to close within that period, suggesting there are triggers and contingencies in the deal that will play out over time, if at all.

Yet the fact that we’re even talking about a price that could reach into the $100 million ballpark suggests there’s something more going on here than meets the eye.

Or maybe not. Perhaps, as has been suggested, Vudu,  somehow, simply blew smoke up Walmart’s ass and convinced it to overpay for a marginal VOD provider. Or perhaps, as Streaming Media’s Dan Rayburn argues, Walmart simply doesn’t know what it’s doing in digital delivery and is setting itself up for another massive VOD fail.

But I think that’s too narrow a view of what Walmart is up to.

From Walmart’s perspective, Vudu has a number of valuable assets that make it more than simply a VOD provider with some nice content licensing deals. One of those is the HDX encoding format, which Vudu introduced back in 2008. With HDX, Vudu claims, it can deliver genuine 1080p video over the Internet in 4.5 Mbs of bandwidth. The format is optimized for LCD and plasma screens over 40-inches in size and incorporates a process Vudu calls TruFilm, which simulates the cinematic experience in a home theater by preserving film grain and other textural qualities of film. Read More »

Miscalculating movie release windows

Speaking of windows, Disney has touched off quite the firestorm in Europe over its plan to release “Alice in Wonderland” on Blu-ray and DVD just 12 weeks after its March 5 worldwide theatrical debut instead of the usual 16 to17 weeks. Holland’s National Board of Cinema Owners is up in arms, and has organized a boycott among that country’s four largest theater chains, representing some 80-85% of screens. Three top chains in the U.K. are threatening to follow suit, vowing to keep Tim Burton’s 3D extravaganza off 95% of the 3D screens in the realm unless Disney backs down.

Good luck with that. I don’t see Disney backing down on this one. It obviously picked this fight with theater owners now because it knows it has the leverage to win. “Alice in Wonderland” will be one of the biggest-grossing theatrical releases of the year, with or without wide distribution in The Netherlands, and it has “Toy Story 3” in the wings, which will be even bigger. In crude terms, the theaters currently threatening boycotts need Disney’s movies more than Disney needs their screens, and both sides know it (U.S. theater operators have more leverage, of course, which is why Disney apparently has cut some sort of deal with NATO that would let it “experiment” with windows on one or two movies a year so long as it doesn’t make a habit of it).

The real question is: why is Disney so intent on getting “Alice in Wonderland” out on DVD and Blu-ray so soon.

In an interview with CNBC last week, Disney CEO Bob Iger said the early “Alice” release would allow the studio to “put the video out before the doldrums of the summer and to put it out when the movie is very fresh in consumers’ minds.” Read More »