Hollywood's First Digital Christmas to Cause Pain

Disney distribution president Bob Chapek calls it the "digital Trojan horse." He's referring to "combo packs," which are how most big movies will be sold on home video this holiday season. Blu-ray Discs will come with a digital file that buyers can register on one of two new services: UltraViolet and Disney's All Access Keychest. These free accounts will exist on cloud-based computer servers available anytime, anywhere, on any enabled device.

The move, say studio insiders, is the most serious effort but to wean consumers away from the DVD, which has dominated home entertainment for near 15 years. "The evolution from a physical disc-based business to a digitally based business is inevitable," says Chapek. "I think the only debate is the period of time over which that will happen."

The big question is

The big question is: How much pain will the transition inflict on Hollywood? Studios already are enduring wrenching change as DVD sales dwindle faster than digital revenue rises. A year ago, Sony eliminated about 450 positions, by and large in home entertainment, during in recent months Disney dropped close to 200 jobs, Warner Bros. cut 50, Fox trimmed 22, and Lionsgate laid off 10.

Windfalls from DVD sales powered explosive Hollywood growth while the 2000s, however the industry has realized -- as difficult as it might be -- that it must turn its back on the dying format if it aims to compete in a digital world. "This is very disruptive to studios," admits Mitch Singer, president of Digital Entertainment Content Ecosystem and Sony's chief research officer. "Yet it's better we disrupt ourselves than allow a third party to disrupt us for their financial gain."

Jim Noonan, senior vp worldwide strategic promotions and communications at Warner Bros., uses the hit drama The Blind Side for instance the pitch: "You bought it and you've been meaning to watch it, however you haven't been able to find the two hours to set aside. Now, all of a sudden, you are at a two-hour layover in Dallas where there's Wi-Fi in the airport. Because you have access to a digital copy on your laptop, enjoy the movie right there at the airport. That changes the whole proposition of the value of ownership."

Disney believes its proprietary innovation is simpler and easier for consumers to use. "They are creating a format for 70 companies that have to agree on usage rules, digital rights, management rules," says Chapek. "They create interoperability by creating a format. We do it by a handshake in the cloud between platforms and devices."