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Apple's iCloud vs. Ultraviolet: Movies Anywhere?

Buy a movie once, watch it anywhere, on any Internet-connected device, through the cloud . That's the new business model making waves in Hollywood.

Apple's senior vice president of Internet Software and Services Eddy Cue speaks about iCloud during introduction of the new iPhone 4s at the company’s headquarters October 4, 2011.
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Apple's senior vice president of Internet Software and Services Eddy Cue speaks about iCloud during introduction of the new iPhone 4s at the company’s headquarters October 4, 2011.

Apple's in advanced negotiations with the movie studios to offer movies through its iCloud service and UltraViolet, from a consortium of media and tech companies, rolls out its first cloud-enabled DVDs this week. And Hollywood's hoping that these new options will grow digital movie sales to compensate for DVDs' decline.

Right now Apple is in the final stages of negotiations with Hollywood studios to add movies to its iCloud service, which rolls out this week. Apple won't comment, but sources tell me the talks, which have been ongoing for some time, are quite advanced.

It's a natural evolution for Hollywood: this week Apple rolls out iCloud for music, photos and TV shows—but not movies. And Apple already sells movies on iTunes. Once the deals with the studios are done, iCloud access to your iTunes library would launch quickly because all the infrastructure is in place.

UltraViolet
Source: uvvu.com
UltraViolet

Meanwhile a rival cloud movie service, UltraViolet, launches this week with Warner Brothers' DVD releases of "Horrible Bosses" and "Green Lantern." Here's how it works: buy the DVD or Blu-Ray discs for those movies, and input a code on the DVD into the UltraViolet website. That creates a 'digital locker' that you can access through the Internet from anywhere, from your Smartphone or iPad to your Internet-connected TV (most new ones are these days).

All the studios but Disney are on board—it's working on its own alternative. And the one tech giant not participating in the UltraViolet platform is Apple— Microsoft , Sony , Intel and Samsung are all on board.

But despite the fact that Apple isn't playing ball and is working on its own alternative, users will still be able to access their UltraViolet library on Apple devices through an app, Flixter, which is owned by Warner Brothers and is easily loaded from the iTunes App store. The fact that both UltraViolet and iTunes will eventually offer the same cloud access to movies will make for interesting competition.

Source: bluemilecloud.com

As UltraViolet and Apple compete for consumers digital movie dollars, they're both fighting for consumers to *buy* digital movies instead of renting them or streaming them on Netflix .

Digital sales are much higher-margin than digital rentals (i.e. VOD), and studios need to compensate for the massive decline in DVD sales, once their bread and butter. Total Blu-ray and DVD sales fell 14 percent in the first half of the year to $3.9 billion, while digital movie sales grew only 4 percent over the same period to $270 million, according to DEG.

Will either of these cloud solutions convince consumers of the real value to digital movie purchases? It would help if everyone participated in a single platform. BTIG analyst Rich Greenfield points out that UltraViolet is flawed, but that the concept does make sense to increase the value of buying a digital movie.

The question is whether it makes it more valuable than the convenience and ease of rentals. Billions of dollars in home video revenue sway in the balance.

Questions? Comments? MediaMoney@cnbc.com

  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.