Matthew Garrahan
Hollywood loves a format war. First VHS saw off Betamax in the great home video battle of the 1980s. More recently, Blu-ray won the right to succeed the DVD when it was preferred by film studios to rival HD-DVD technology.
However, as Hollywood looks to the digital era, the industry is split on how to manage the distribution of movies to TVs, computers and hand-held devices, setting the stage for its next great technological tussle.
In one corner is Walt Disney and its Keychest product, which it describes as "enabling technology" that allows consumers to buy or rent a film and then view it on any device they choose.
In the opposing corner is Digital Entertainment Content Ecosystem, a coalition of retailers, hardware makers and film companies, including Hewlett-Packard, Netflix and Sony.
Although DECE has taken a slightly different approach to Disney, the two sides essentially have the same goal: to thwart piracy at a time when DVD sales are in decline, and to boost digital sales of movies.
Each camp has publicly played down talk of rivalry. "We're trying to solve two different problems," says Kelly Summers, vice-president of digital distribution at Walt Disney Studios. "DECE wants to create a new format . . . Keychest isn't a format. It's an enabling technology that helps different platforms communicate with each other."
However, analysts and rival studio executives say the absence of Apple from DECE is a telling indication of the fight that may lie ahead. Apple's iTunes store is the dominant online retailer, responsible for more than 80 per cent of all film download sales, while Steve Jobs, Apple's chief executive, is Disney's biggest individual shareholder.
Disney's decision to go it alone raised eyebrows in Hollywood although the company insists it wanted to move as quickly as possible at a time when digital sales were being held back by online piracy.
In a demonstration for the Financial Times, Arnaud Robert, senior vice- president of distribution technology - and the inventor of the Keychest concept - showed how the "rights locker" concept would work: a consumer could buy a movie via an online retailer and then watch it, within seconds, on a mobile phone or television set.
Disney is in discussion with online retailers and cable TV companies about adopting Keychest. "We need a critical mass to make this work," said Ms Summers. "There's a competitive reason [for these companies] to be part of this because it increases the utility of devices that are already out there."
Keychest uses all existing digital rights management technologies. DECE, by contrast, has approved five different formats and also agreed on a "common file format" which will be used by all of its members.
Mitch Singer, president of DECE, told the FT that the absence of Apple from the consortium, which also includes Microsoft, Toshiba, Samsung and Intel, would not hold it back. "The digital market is very young and very small . . . change is inevitable. I don't think any one player controls it in a way that's going to be [relevant] tomorrow."
Opening up online access so that a single copy of a film could be stored remotely and streamed, regardless of the device, would benefit hardware makers, as well as retailers and film studios, he added.
Disney and DECE will both be at the Consumer Electronics Show, which starts today in Las Vegas, where the two approaches will face further scrutiny from possible partners. "The Keychest-DECE battle is going to be the definitive format war for the digital era," says Arash Amel, senior analyst with Screen Digest, the research firm. "Forget about Blu-ray and DVDs . . this is about who controls digital formats of the next 15-20 years."
Copyright The Financial Times Limited 2010.
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