Screen Digest

29th March 2006

Universal and LoveFilm launch download-to-own

UK rent-by-post specialist LoveFilm is expanding its Internet video-on-demand (VoD) offering to include permanent downloads under a deal with Universal Pictures. The studio will make 35 titles available for digital retail in the UK from 10 April 2006.

Catalogue product such as Love Actually and Bridget Jones' Diary will be available at one of two price points, £9.99 ($11.99) or £14.99 ($17.99) depending on the title, whilst new releases - King Kong being the first to feature - will be launched on the service day-and-date with UK DVD release priced at £19.99 ($23.99).

Consumers will receive three copies of the film for every purchase: a digital copy for storage on PC/laptop; a digital copy for storage on a Windows Media-compatible portable device; and a DVD copy of the title, the latter being despatched via first-class post the same day. The offering will initially be limited to film content but Universal expects to broaden it to include TV programming from its US broadcasting arm NBC in future. Meanwhile, the studio is in discussions with the relevant players in international markets to expand its VoD offering in geographical terms.

LoveFilm will integrate Universal's digital retail content alongside its existing pay-per-view (PPV) service, not only within the LoveFilm portal but also the UK domain of AOL as part of its white label deal with the ISP. The company is in discussions with Warner - which is providing content for PPV on revenue-sharing terms - to renegotiate its existing deal on the same wholesale retail basis as its agreed with Universal, as well as other major content providers to secure more content for digital retail.

This is arguably the most interesting strategy employed in the Internet VoD space to date. It represents the first premium download-to-own offering in the UK and the second worldwide following Warner's participation in German digital retail platform In2Movies with Arvato. However, unlike Warner, Universal offers consumers three copies of a title in a single transaction, although the disc provided as part of the digital retail package is a vanilla DVD (features no value added material) and is delivered in an envelope without standard DVD packaging.

Despite this strategy being designed to facilitate a gradual migration from traditional video formats to digital delivery by borrowing elements from both physical and digital distribution channels, the lack of a function allowing the consumer to burn their own copy to DVD and absence of greater flexibility and portability of content (as opposed to two device 'locked' digital copies) are likely to hinder uptake of the service. The price-point of £19.99 for new releases is also arguably prohibitive, when compared to the usually cheaper retail DVD version. What this strategy needs to address, if it stands any real of chance of not only growing the market but going some way to address the digital piracy plaguing the film industry, is the simple process of the consumer illegally ripping and encoding existing DVDs for digital use. This is unlikely to happen until at least some type of price parity is reached with DVD.