Bloomberg News

Studios Work With Hard-Drive Makers on Movie Storage

February 28, 2012

A RedBox video rental kiosk sits in front of a gas station in San Rafael, California. Photographer: Justin Sullivan/Getty Images

A RedBox video rental kiosk sits in front of a gas station in San Rafael, California. Photographer: Justin Sullivan/Getty Images

Movie studios owned by News Corp. (NWSA) and Time Warner Inc. (TWX) have enlisted hard-drive makers to create storage devices for films and TV programs, part of their push to spur online purchases.

Twentieth Century Fox Home Entertainment and Warner Bros. Home Entertainment will work with SanDisk Corp. (SNDK) and Western Digital Corp. (WDC) on methods to store and watch shows on TVs, Blu- ray players, tablets and phones, the companies said today in a statement. The first products are scheduled this year.

The effort, dubbed “Project Phenix,” is part of Hollywood’s effort to coax consumers to buy digital copies of programs instead of renting them. The storage hardware would complement the studios’ cloud-based system, called UltraViolet, by letting users play films on multiple devices when offline.

“The simple message is you’re collecting all your content and putting it in one place to be able to access a full high- definition experience,” Danny Kaye, Fox’s executive vice president of global research and strategy, said in an interview.

The companies formed a joint venture called the Secure Content Storage Association. It was established in August, according to the website of the Austrian Competition Authority.

Studios are trying to counter shrinking DVD sales fueled by low-cost rentals from Netflix Inc. (NFLX) and Coinstar Inc. (CSTR)’s Redbox kiosks. Their focus is on UltraViolet, which lets consumers buy videos from retailers, store them online and on approved devices, and play them on any device.

Offline Viewing

The goal of the latest venture is to let consumers watch movies and other content even when they don’t have access to the Internet, Mike Dunn, president of Los Angeles-based Fox Home Entertainment, said in an interview.

The studios and device makers have been discussing at least one product, dubbed “The Egg,” that would connect to home networks and store movies and shows. Consumers could use USB memory cards to take content outside the home. That may be just one of many uses, said Bert Hesselink, chief technology officer of branded products at Western Digital, based in Irvine, California.

“I might also download it from a kiosk or from a store where the content might be available, using a USB 3.0-type transfer, which is very fast,” Hesselink said in an interview.

Such devices could improve UltraViolet’s chances, because they would be classified as physical products, such as Blu-ray discs, that don’t require renegotiating digital rights from content creators, Richard Doherty, research director at Envisioneering Group, said in an interview.

Ready to Play

For example, hard drives could be partitioned for participating studios and loaded with entire libraries at stores, Doherty said. The titles would be unlocked as consumers make UltraViolet purchases.

“The business model actually is a good one because a lot of young people don’t want to duplicate the huge libraries of their parents, but they do understand physical media,” Doherty said.

Previous retail efforts to offer devices that combine digital rights with storage haven’t been successful. Milpitas, California-based SanDisk in 2009 collaborated with the music industry for a device called the slotRadio player and a memory card with 1,000 popular songs from Billboard’s music charts.

The UltraViolet effort is backed by retailers, entertainment and technology companies through the Digital Entertainment Content Ecosystem, whose members also include Comcast Corp. (CMCSA)’s NBC Universal and Viacom Inc. (VIAB)’s Paramount Pictures.

Retailers Best Buy Co. (BBY), owner of the CinemaNow website, and Wal-Mart Stores Inc. (WMT) are also part of Ultraviolet, although neither website has begun using the system.

To contact the reporter on this story: Cliff Edwards in San Francisco at cedwards28@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net


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