Sonic Solutions makes it easy to download movies and play them on any DVD player—not just on a computer.
As an American, I can speak with some degree of authority on what we find indispensable. We need the love of a good mate, for no man (or woman) is an island. We need someplace that’s home, a place where we feel warm, secure and loved. And we need an HD LCD or Plasma TV the size of a medium SUV with surround sound and a DVD player and receiver that ties the whole thing together so we can feel the walls shake and smell the smoke when Bruce Willis lights up in “Die Hard.”
To say television is merely important to us is like saying George Bush has just a passing interest in the Iraq war. We may call it the “boob tube,” but we aren’t fooling anybody. And Novato’s Sonic Solutions knows it. It knows we want our DVDs—and we don’t want to wait around ’til the studio heads in Hollywood are done taking meetings and calling each other “babe.”
Sure, we can get some on-demand action from cable and satellite providers, but we don’t own the movie. We can’t take that disc and put it in the player in the car and bring peace and joy to our darling-though-high-spirited children who were previously throwing objects and beating our headrests like a young version of Charlie Watts on a double espresso.
Sonic Solutions has put together an on-demand system that lets consumers download movies from an online source, record them securely to DVD and view them in any DVD player—not just on a computer. The company has also put together a platform that will let even the most tech-challenged dinosaurs walk confidently into a retailer, punch a few keys designating their flick of choice and, within about 10 minutes, have a disc ready in a shining jewel case complete with musical credits and a rating. Sonic has covered all the bases by also having a system available for e-retailers that can churn out movies at a volume pace so consumers who are, perhaps, not as technologically savvy can order the movie (which, rather than sitting in a warehouse, is produced on-demand at the time of the order), which is then delivered via snail mail, Fed Ex, UPS, DHL or some other group of initials decked out in dark socks.
Don’t argue with the Boss
You can argue that Sonic’s innovation is nice—and certainly a bonus for its shareholders—but come on: We’re talking about Hollywood movies like “Dude, Where’s My Car?”
There are, however, several upsides to Sonic’s on-demand system. Please think back to a time, not long ago, when my writing brethren in Tinsletown were on strike and TV programming was a steady diet of reality shows like “So You Think You Can Dance,” “Your Momma Don’t Dance” and “America’s Best Dance Crew,” not to mention “Dancing With the Stars.” So many dance shows that you thought you had “Saturday Night Fever.” Then there were endless reruns of “Law and Order,” “Law and Order SVU” and “Law and Order Criminal Intent” to the point where I was ready to commit a felony. Jack McCoy no longer scared me.
And “The Replacements,” “The Perfect Storm” and “Mr. Deeds” were shown on TNT in such tight rotation that soon you knew the whole script to Mr. Deeds, which is sad, because Adam Sandler was in the movie—was paid millions for it—and even he didn’t know the script. Even without the strike, Bruce Springsteen had it right when he penned “57 Channels and Nothing On.”
On-demand movies let you sidestep all that nonsense.
OK, the writers probably won’t go on strike again for another year or two if they’re anything like, say, Major League Baseball players. So why is Sonic’s on-demand system such a high-tech wonder?
To begin with, the fact that there’s an on-demand platform that lets consumers burn discs to be viewed on something beyond a computer is a triumph of both technology and common sense. For some time, consumers have been able to view streaming movies on computers and order on-demand movies and view them on TVs. But movie studios have always worried about letting viewers download a movie that didn’t have anti-piracy technology built in (to protect the studios and their profits). What Sonic was able to do was to not only create a system that copyright-protects downloaded and recorded movies in exactly the same way as commercially mass-produced DVDs, but it also managed to get all eight of the major movie studios to agree to participate, which, by all accounts, is similar to herding cats.
At Sonic, the product platform is known as Qflix, which covers the direct-to-consumer online platform, the in-store kiosk setup, and the e-retailer model. For Sonic, the Qflix product line is the kind of innovation the company was hoping for when it acquired Roxio’s Consumer Software Division (including all software products, IP and the Roxio brand) four years ago for $80 million. The deal, which closed in December 2004, called for Sonic to pay $70 million in cash and $10 million in stock.
Coming soon to a TV near you…
According to Mark Ely, vice president of strategy, consumers should see Qflix-enabled kiosks and have access to the online services by the end of the year. And for all of the in-fighting and backstabbing so prevalent at the studios, the fact is, Ely and Sonic are doing the high flyers at Universal, Disney, Warner Brothers, Sony, Paramount, New Line Cinema and Fox a favor by making these new distribution methods available.
While the studios have always excelled at producing product, they’ve been less successful at getting the product distributed. As a matter of fact, the distribution chain has historically posed such a roadblock that the studios have gone as far as buying theaters to assure their movies were finding audiences in specific geographic markets. With the advent of for-sale VCR and DVD movies, the distribution has become even more splintered and haphazard, with the studios at the mercy of retailers who decide where the movies are in the store, how much space is dedicated to sales product versus rental, and how many other products consumers could choose from.
To use Qflix technologies to download and burn movies at home, comsumers will be able to purchase new, Qflix-equipped desktop systems. Sonic has yet to announce which system vendors will be shipping Qflix technologies, but the company does have existing relationships with major OEM such as Dell and HP. Consumers will also have the option of buying an add-on burner that will let them go online and download titles onto specially programmed discs, then copy the movie of their choice. The burners are expected to be priced between $50 and $100.
Speaking for the gender that’s prone to liking gadgets, all I can say (at the risk of perpetuating a stereotype) is that the only burners we aren’t drawn to are in the kitchen. CD burners are strong, and cars that rank as burners are money in the bank. So, why wouldn’t we want a DVD burner?
Blank cases and labels will also be available and can be printed from the desktop with the same information that’s available on copies sold at Blockbuster or Best Buy. The newly created disc will play in any DVD player, so the movie can go into a car or a plane or even be given as a gift.
The in-store version will work this way: Consumers will walk into a retailer and find a user-friendly kiosk that will have a touch screen or keyboard on which they can choose from literally thousands of titles and order their movie of choice. A few minutes later, the movie and its case will be waiting behind the counter to be picked up.
“As the technology provider, Sonic won’t ultimately define the in-store experience,” says Ely. “That said, our kiosk/retail partners’ plans will let multiple customers order at the same time. Some retailers plan to offer multiple touch screen displays, so several customers can place their orders at the same time. And back-end systems will include multiple burners, so titles can be recorded simultaneously.”
Always in-stock
As much as consumers may like Qflix, retailers are going to eat it up for a number of reasons. To begin with, video retailers have historically had a love/hate relationship with video and DVDs. Because the fickle nature of what the public wants to watch and buy is open to wide interpretation (how else do you explain Dr. Phil?), retailers have always felt like they were missing too many sales on a daily basis as a result of inventories that were too small. Industry data shows that as many as one out of every two consumers who enter a retailer looking to buy a DVD leave empty handed because the store doesn’t have the product the shopper desires. On the other hand, margins on DVD rentals and sales are fairly healthy, so retailers can put up with a little frustration.
For general merchandisers, like Long’s or Target, the decision that’s dogged them hasn’t just been about which DVDs to stock, but also how much room to dedicate and where to set them up. A kiosk is a dream come true for these retailers, because issues of space and inventory are no longer a consideration. That’s why Walgreen’s has already signed up to bring the kiosks into its stores on a national basis.
The economics of DVDs makes Qflix a no brainer for retailers as well. The market for DVDs is $26 billion a year in sales and rentals—and that’s just the domestic market. Add in the international community, and the figure swells to $50 billion a year.
Most of the money on sales is made the first four weeks after a title’s release. This reality puts pressure on studios to have product out and distributed within a fairly thin widow. It also puts pressure on retailers to keep shelves full or miss the boat on selling product at the top of its price point.
This is why companies like MOD Systems, Polar Frog Digital, Lucidiom, TitleMatch Entertainment Group and YesVideo are licensing the Qflix technology from Sonic to manufacture kiosks that can produce on-demand DVDs in a retail setting.
Roxio has other partners as well. Hardware companies such as DataPlay, Pioneer, PLDS (Phillips & Lite-On Digital Solutions Corp.) and Plextor TSST (Toshiba Samsung Storage Technology Corporation) are producing drives that will go into computers to burn the DVDs. Still other partners, like Mitsubishi Kagku Media, Verbatim and RITEK, are producing recordable DVDs.
One other platform that’s in the works at Sonic is for set-top boxes like the ones used for delivery and operation of cable TV. Manufacturers like MediaTek and Sunext are looking at ways to bring Qflix directly into consumers’ living rooms.
The choice is yours
Ely of Sonic Solutions is uncertain from a financial standpoint exactly what Qflix will mean for his company, but the value of the digital on-demand market could be as high as $15 billion a year, and the Qflix technology and product line would certainly put the Novato company in the driver’s seat when it came to a profits race.
If retailers love the product, so do the content providers and studios. At present, there are 75,000 different DVD titles in existence, everything from Oscar winners to documentaries to old television series and instructional discs on how to paint a room. Wal-Mart, the world’s largest retailer, carries just 1,400 titles at any given time.
For studios, this means they can make their entire catalog available, and retailers don’t have to worry about carrying inventory or missing out on sales of just-released titles because they’re stocking classic movies. Moreover, the technology will let consumers looking for specific content find it more easily. “The working systems we’ve seen offer consumers sophisticated Browse/Search options, including the ability to search by keyword, actor, genre and date, among other things,” says Ely.
And unlike an iPod—where you can purchase songs but, if your hard drive goes down, you lose your collection—the on-demand DVD is safe on your shelf along with the others you purchased the old-fashioned way.
And Ely assures us that the Qflix system won’t be slowed down in the fight between HD and Blu-ray. “Our products are scaled to Blu-ray, so that isn’t a concern,” he says.
The Qflix product line will also let collectors put custom discs together. For instance, let’s say you’re a San Francisco Giants fan (as all right thinking people are). You could put discs together that captured your favorite wins. Or you could do discs that just showed the Giants beating the Dodgers like a rug. Trekies could download their favorite episodes or just the ones where Spock said, “Fascinating, Captain.”
At any rate, Qflix products should start showing up during the third quarter of this year, and retail kiosks should begin sprouting by Christmas.
