Following the release of its iCloud offering, Apple is widely expected to launch a streaming movie service. This would compete not only with the likes of Netflix, but with the hopes of Hollywood studios for its UltraViolet initiative, which has now launched with its first two titles. Every major studio apart from Disney is working on UltraViolet, the brand name for the Digital Entertainment Content Ecosystem, DECE, in which Apple has been notably absent.
An issue that has threatened to hold back movie streaming has been the exclusivity hold that HBO has held on movies, which prevents them from being streamed while they are still being screened on the American network. It now seems this has been resolved, at least as far as Warner Bros and HBO, both part of the Time Warner group, are concerned.
Warner Bros has released the first two UltraViolet titles, Horrible Bosses and Green Lantern and will be closely followed by Sony Pictures with the latest Harry Potter release. Purchasers of UltraViolet labelled DVD or Blu-ray discs will also have access to online versions that they can watch on compatible internet-connected devices and displays.
The hybrid format faces a challenge as the studios seek to replace their significant but declining revenues from physical discs with online services. Not least, is the issue of the infrastructure required to support streaming of movies.
The UltraViolet service will initially work with Flixster, the owner of the movie rating service Rotten Tomatoes. Time Warner acquired Flixster in May 2011 and the UltraViolet consortium is proposing to use it as a reference platform.
While it is not beyond the resources of the major studios to establish their own hosting arrangements, Apple has already made significant investments in cloud based infrastructure and operations.
Apple has successfully built its own ecosystem, based around iTunes, which currently offers movies for download but not streaming. The iTunes platform now accounts for two-thirds of online movie sales and rentals, although the total market still remains small. Apple makes most of its money from hardware sales.
The ability to stream movies could finally make sense of the Apple TV platform, which has so far failed to reflect the success of the company with other iOS devices.
The late Steve Jobs, the co-founder of Apple, was the largest individual shareholder in Disney by virtue of its acquisition of Pixar. One unknown is how the absence of Steve Jobs as the head of Apple and on the board at Disney could affect strategy. A possibility is that UltraViolet titles could be accessible on Apple devices, which lead the market in tablets and smart phones, while Apple would also offer movies through its iTunes and iCloud platforms.
Netflix, which has apps for Apple devices, is an UltraViolet partner. While Netflix has done much to create a market for movie streaming, it has recently managed to upset its loyal customers as it transitions from physical rentals to streaming titles. Having announced a plan to spin off its DVD rental business under name Qwikster, Netflix rapidly reverted to a single brand in response to derision and dismay expressed by subscribers.
With no consumer devices expected to be natively compatible with UltraViolet until early 2012, the proposition and its prospects remain unclear. But the movie industry desperately needs a digital download solution, and seems equally concerned that it should not be dominated by Apple in the same way that it has cornered the music market.