Walt Disney Co. has begun rolling out its plan to spur digital movie purchases by removing the technological obstacles that thus far have stymied growth.
The studio has quietly launched Disney Movies Online, which lets consumers buy or rent digital versions of Disney and Pixar films and watch them on the Internet. The site was conceived as a bridge to gently transition the family entertainment company's mainstream consumers from the physical to the digital world. It debuted in May without fanfare.
How much without fanfare? Disney still isn't promoting the site beyond including the Web address on a sleeve inside DVDs and Blu-ray packages. There isn't even a link to it on the company's main website.
In a more public milestone, Disney partnered with Wal-Mart Stores Inc. this month to offer a free "digital copy" of the movie "Toy Story 3" with the purchase of the movie on disc. Consumers use an enclosed code to unlock and watch the film through the retailer's Vudu online video service.
These two developments help lay the foundation for Disney's vision of the digital future, in which consumers would buy and store digital copies of the studio's films in one place and access them from anywhere. And they work in tandem with an initiative announced last year called KeyChest. Consumers would use the KeyChest technology to pay once for a movie, then watch it on any compatible device, such as Internet-connected computers and mobile phones.
"We believe if we harness the power of these separate initiatives … we'll immediately seize the opportunity, extend a lot more benefits to Disney customers and sort of catapult this thing into the future very rapidly," said Bob Chapek, distribution president for Walt Disney Studios.
Despite the convenience of renting and buying movies online — and the promotional bonanza that 38 million visitors to Disney.com deliver — the company is keeping mum about Disney Movies Online because it is still in a test phase, officials said. A promotional campaign for the studio's digital offering is expected to kick in during the first half of 2011, under the name Disney Studio All Access.
Spurring digital sales is crucial to film studios, as traditional DVD sales decline and consumers gravitate to rentals from Netflix and Redbox. Sales of next-generation Blu-ray discs are growing, but they don't make up for the shortfall. Meanwhile, Internet movie downloads and streams have yet to emerge as a significant source of new revenue.
Disney and other studios are attempting to tackle the problem by addressing some of the chief obstacles to consumer adoption: difficulty in playing back movies on devices aside from personal computers, and storage limitations on computers' hard drives.
"When people buy a file in some form, if you give the ability to play that file on multiple devices or in multiple locations, then you're creating more value for them," Disney Chief Executive Robert A. Iger said during the company's most recent earnings call. "I think lack of interoperability is an impediment or a barrier to growing digital media."
A coalition of entertainment and tech companies — including Sony Corp., Warner Bros., NBC Universal and News Corp., along with Microsoft Corp., Intel Corp. and Best Buy Co. — is creating Ultraviolet, a system for consumers to buy, store and access movies across multiple devices.
Chapek and Iger say Disney's technology is compatible with Ultraviolet.
"It's not our goal to create a format war," Iger said. "It's our goal to create product and to implement technology that ultimately creates more value to the consumer."