UltraViolet Shutting Down on July 31, 2019

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1Q 2019 | IN-5419

UltraViolet (UVVU) was announced in 2010, launched in late 2011, and will cease operations on July 31, 2019. ABI Research covered UVVU in its earlier days, but expressed a healthy level of skepticism throughout most of that coverage. First impressions were not positive, and even with some things going UVVU’s way (e.g. Tesco joining UVVU) the platform couldn’t overcome the fragmentations and--perhaps most critically--the lack of support from Disneyand other key video services like iTunes, Amazon Video, and Google Play.

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Short of a Decade since It Launched, UltraViolet, the Industry's Digital Locker, is Coming to an End

NEWS


UltraViolet (UVVU) was announced in 2010, launched in late 2011, and will cease operations on July 31, 2019. ABI Research covered UVVU in its earlier days, but expressed a healthy level of skepticism throughout most of that coverage. First impressions were not positive, and even with some things going UVVU’s way (e.g. Tesco joining UVVU) the platform couldn’t overcome the fragmentations and--perhaps most critically--the lack of support from Disneyand other key video services like iTunes, Amazon Video, and Google Play. There are other factors as well:

  • Some of the streaming services that supported UVVU shut down (e.g. Cinema NowTarget Ticket, and Flixster Video--although Fandango acquired Flixster and M-GO and launched FandangoNOW).
  • 21st Century Fox’s pending sale to Disney could have removed another major studio from its list.
  • Media sales (which UVVU was mostly tied to) have declined--Samsung also recently announced it is ending sales of Blu-ray players (both 1080P and 4K UHD) in the US market at least.

Is There an Impact?

IMPACT


The shutdown announcement came at the end of January, and after waiting a few weeks to see how consumers and the industry would respond it almost appears as if this was a test of the proverbial tree falling in the forest conundrum. Whether or not reactions become stronger by August, it is clear that UVVU failed to impact the content landscape as it had intended from its outset back in 2010. UVVU did not drive Blu-ray sales (DVD still outperforms Blu-ray disc sales, although kiosks/rentals impact this) and electronic sell-through (EST) has not kept pace with the growth seen in SVOD and other streaming business models. UVVU’s faults and failure to solve the fragmentation problem certainly contributed to its demise, but this outcome was likely inevitable.

Content consumption has changed dramatically since the launch of UVVU. Music, video, and, increasingly, gaming are moving to subscription and service models. While the music market has been transitioning away from physical media for some time, the gaming market’s transition started in earnest around the same time UVVU launched and serves as a good parallel to how changing content behaviors impacted UVVU’s long term potential in the video space (i.e., one that was predicated on physical media and has since moved to digital and services). Before the Xbox One launched in 2013 gamers fervently objected to an “always online” console (a console that would require a consistent connection to the Internet) and mostly rejected the notion of a download only platform, touting the need for offline gameplay and discs as backup because they bought and “owned” the content (for instance, in the event support for a game ended). Step forward to today and the market is remarkably different, with free-to-play spread across all platforms, games designed as a service/platform, and digital outpacing physical media. Microsoft is also rumored to be announcing a partnership with Nintendo soon to bring its Game Pass service to Nintendo’s Switch (potentially streaming via Microsoft Project xCloud versus download).

Beyond entertainment content, other markets have taken a similar trajectory away from “content ownership;” companies like Microsoft and Adobe have pushed subscriptions over purchases. As consumers move away from “ownership” of individual pieces of content to services, the groundwork for a new future of content and, likely, business models, is laid.

Pervasiveness of Content is Closer Than You Think

RECOMMENDATIONS


The pervasive screen/display is often cited as a potential future for video, befitting of the narrative around viewing behavior discussed in this foresight and the adoption of new technologies like XR, 5G, autonomous vehicles, the shift from app-based to web-based experiences, and new display types (e.g. rollable screens and displays as mirrors/walls/windows). Content at large, though, will help drive this trend as displays become less “personal” and more ubiquitous. Just as consumers have relinquished the notion of “owning” content, the display itself will move from something you watch in certain rooms or have in your pocket to conceivably any surface or area, be it virtual displays via mixed reality or multiple screens in the environment. For example, public transport for example could allow passengers to play their cloud game services on screens embedded in their seating areas. All of this will require seamless connectivity along with the large number of displays (physical and/or virtual), but by the time this aspect of the market comes to fruition the services and user behavior coming into play today will already have primed us for this new content reality.

This shift from pay-to-play to pay-as-you-play models also suggests we will see a range of new pricing and business models in the coming years. We’ve seen quite a few attempts at maximizing value through timed releases, but new methods will come into play once consumers become fatigued by too many subscriptions. Some consumers are already starting to notice that their collection of OTT video services is starting to approach the cost of their previous TV bills. These subscriptions will only get worse when you consider the myriad of other subscription services consumers can now partake in, ranging from food to cars (and of course the most common ones, i.e. like mobile and broadband services). At some point consumers will start to evaluate their time versus expenditure and cut some subscriptions out--the gym membership phenomenon only lasts so long. This could push consumers more toward a TVOD model, but we might also see a switch to subscription tiers.

Much like it was in the days before unlimited data plans, viewers could be given the option to select a subscription from tiers of service and/or packages of content. Netflix for example could charge US$8 per month for a HD tier that allows subscribers to watch X number of movies and Y number of TV show seasons and, like mobile plans going, over could push the viewer to the next tier above (it currently costs US$12.99/month for Netflix’s standard plan and US$8.99 for basic/SD and one screen). While this would result in some lost revenue potential from infrequent users, who would otherwise pay a higher flat subscription rate, it could prevent them from churning as Netflix increases monthly rates--eventually these users will end their membership as rates climb. Adhering to a business model like this would also encourage Netflix to invest in original programming more carefully in order to ensure their projects are profitable, as expenditures in this arena are a challenging balancing act for many OTT services.

Regardless where the market ends up, the demise of UVVU is a reminder of a market that once was and another indicator of how fast the content space is evolving today.