Hollywood Still Doesn't Get It

A consortium of movie studios and electronics companies has banded together to launch UltraViolet -- which is supposed to make watching movies on all of your various gadgets easier. Although I applaud Hollywood for moving toward digital distribution, I'm afraid the studios still don't get it.

The trailer looks good
On the surface, UltraViolet looks promising. Time Warner's (NYS: TWX) Warner Bros., Viacom's Paramount Pictures, Comcast's (NAS: CMCSA) Universal Pictures, and Sony (NYS: SNE) Pictures have all signed on, so acquiring content shouldn't be a problem.

The service hits a lot of the right notes on the tech side as well. Microsoft (NAS: MSFT) and Intel (NAS: INTC) have both joined the consortium, giving the service some tech cred. UltraViolet's description includes all the hot buzzwords, like "cloud" and "digital locker." It even spells its name with a capital letter in middle, like all the cool kids in technology.

But that's about it
All the promise of the service starts to break down when you look into how it actually works. If you go out to purchase either Horrible Bosses or Green Lantern on DVD or Blu-ray this week, you'll find a 12-digit redemption code for a digital copy of the movie. After you have created an UltraViolet account, as well as a Flixster account -- Warner Bros.' social movie portal -- and entered the 12-digit code, you can stream your movie through Flixster's website and App. At the moment, UltraViolet has no set-top-box support, but the service should eventually be available on the Xbox 360 and connected TV's.

The idea is you buy a movie once and watch it anywhere. In general, I like this, but UltraViolet missed when it made the first purchase a physical copy. It marks the service as an attempt by movie studios to reinvigorate DVD and Blu-ray sales.

Frankly, fighting to preserve physical media is a waste of time. Services such as Apple's iTunes and Microsoft's Zune Marketplace allow users to buy or rent HD movies from the comfort of their couches. Meanwhile, Netflix (NAS: NFLX) streaming, Hulu, and Amazon.com (NAS: AMZN) have introduced consumers to the concept of paying for access to a buffet of movies and shows rather than owning them outright. With so many better options, DVD and Blu-ray will most likely go the way of VHS and compact discs.

Foolish takeaway
I know it's early, but I'm betting that UltraViolet will tank. Its only differentiating factor is that you get a physical copy to go along with your digital options. Once the demand for optical discs dries up, I don't see a place for the service in the already crowded online video market.

If you would like keep an eye on UltraViolet, as well as the ever-changing world of Internet video, then add these companies to your Watchlist. We'll keep you up to date on all the latest news and analysis.

At the time thisarticle was published The Motley Fool owns shares of Apple, Microsoft, and Intel.Motley Fool newsletter serviceshave recommended buying shares of Netflix, Amazon.com, Apple, Intel, and Microsoft, creating bull call spread positions in Apple and Microsoft, creating a diagonal call position in Intel, and creating a bear put spread position in Netflix. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.Fool contributor Patrick Martin owns shares of Netflix. You can follow him on Twitter, where he goes by @TMFpcmart03. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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