With Flixster Collections, Warner Bros. becomes the first film studio… (Warner Bros. )
The movie industry built DVDs into a $20-billion-a-year business with consumers who amassed collections they proudly displayed on shelves in their homes.
Now with sales of the discs plummeting, Hollywood's largest studio is looking to replicate that experience in the digital world.
Warner Bros. has just launched a beta test of Flixster Collections, a new application to organize, display and purchase movies online. It's the first time a film studio has developed a computer application intended to promote general home entertainment, instead of just its own titles.
"We think it's really important to grow the overall marketplace, and this is one of the most powerful ways we can do it," said Thomas Gewecke, Warner's president of digital distribution.
Warner sells more DVDs than any other studio with 21% of the market so far this year, meaning it would be the largest beneficiary of any overall industry growth.
But consumers thus far have not been too interested in buying movies online, with most of the digital momentum focused on rentals, which are less profitable for studios.
Warner has had a team of executives — at times reaching 30 — working on Flixster Collections for about two years. To help market it to consumers, the application is integrated with Flixster, the popular movie ratings website that Warner acquired in May for about $85 million.
It's the first of several Flixster-branded applications in the works that are designed to promote digital ownership of movies via social networking and mobile platforms, Gewecke said.
Users can connect Flixster Collections to their Apple iTunes, Netflix and Amazon.com accounts to display all of the movies they have bought or rented online. The application also scans hard drives for digital copies of movies, and users can manually enter films they own on DVD. A virtual wall of movie posters is then created that allows users to browse and share with friends within the application or on Facebook.
Warner is hoping that users who scan their friends' collections or use tools to explore films by genre, actor or other categories will get the urge to buy more movies. The application lets consumers buy or rent movies from Apple, Amazon or Netflix and from a Flixster store, which currently has only Warner Bros. titles, although Gewecke says he hopes to add others.
Flixster Collections will soon be integrated with Ultraviolet, an initiative that includes five of Hollywood's six major studios and dozens of electronics companies and retailers. Set to launch later this year, UltraViolet gives people who buy DVDs or digital downloads a copy of the movie stored in the "cloud" that they can access from any Internet-connected device.
On a conference call tied to the release of his company's financial results Wednesday, Jeff Bewkes, chief executive of Warner parent Time Warner Inc., said Ultraviolet and Flixster Collections are crucial to the media conglomerate's growth.
"We believe this fundamentally changes how people manage and watch their movie collections and could significantly alter the value proposition of digital ownership," he said.
Four analysts asked Bewkes about digital distribution, underscoring Wall Street's concern about whether Warner and other studios will be able to use the Internet to revive their home entertainment businesses.
"Flixster is a marquee point to try and sell Ultraviolet, and it makes sense to put the best foot forward," said Tony Wible, a media analyst with Janney Capital Markets. "But my view is Ultraviolet will only slow the decline of the home entertainment market, not solve it."
Warner Bros.' home entertainment revenue declined 21% from a peak of $3.4 billion in 2007 to $2.7 billion last year. Total consumer spending on DVDs, videocassette tapes, Blu-ray discs and digital downloads, meanwhile, is down 14% from its high.
Gewecke said a key to encouraging people to buy movies online is to replicate and then improve upon the benefits of owning DVDs. Flixster Collections, which is on PCs but will later be available for mobile phones and tablets, is the studio's attempt to do that.
"It will be very valuable to us to create an environment in which consumers can organize their digital collections in personal ways and then share with friends and engage in social recommendations," he said.