Universal to Try Film Download Service

Universal Pictures plans to allow British movie fans to download “King Kong” and other big-name Hollywood movies in a service that offers a glimpse of the future of online entertainment.

As part of the deal with Lovefilm, the European equivalent of online movie rental service Netflix Inc., customers will be able to download permanent digital copies of films to watch on their computers and certain portable media devices. They also will receive a DVD copy in the mail.

The service debuts April 10, to coincide with the release of “King Kong” on video, and also will be offered to America Online subscribers in Britain. If the British test goes well, Universal may offer a U.S. service.

Although limited to a single studio and 35 titles, the service marks a turning point for Hollywood, which has been reluctant to sell permanent downloads of major films for fear of contributing to Internet piracy or cannibalizing DVD sales.

“This is a no-brainer,” said Josh Bernoff, an analyst with Forrester Research in Cambridge, Mass. “Every studio really should be doing this in every geography.”

The download-to-own experiment could help determine whether consumers will pay a premium for the convenience of getting movies in multiple formats. Universal’s service costs about $34.72 per movie, compared with $24.30 for a regular DVD.

It’s no accident that “Kong” is first on Universal’s menu. Effects-heavy films appeal to a young male audience that gravitates to new technology.

“ ‘Gladiator’ was a huge early DVD hit, far in excess of films that did more at the box office but were not aimed at the young male technophile consumer, who loves special effects action movies and has all the toys at home,” said Tom Adams, president of Adams Media Research in Carmel, Calif. “I think [“Kong”] is the perfect choice.”

Lovefilm, like Netflix, got its start sending DVD rentals by mail. As high-speed Internet access became more available, it offered streaming video on-demand to computers. In September, Lovefilm experimented with downloadable short films.

“We’ve already done over 400,000 downloads of short films in that time,” Lovefilm Chief Executive Mark Livingstone said. “That gave us an indication of how much appetite there was ... for starting to download things to the computer.”

Universal’s research indicated that although people liked being able to download movies the way they do television shows and music, they weren’t ready to scrap their DVD collections.

“One of the things that came out very clearly -- although everyone wanted an opportunity to download quality product, the majority of consumers wanted the safety of a physical product as well,” said Eddie Cunningham, regional managing director for Universal Pictures International. “Consumers said to us they were three times as likely to subscribe to this if there was a physical copy included.”

Delivering a DVD copy of the movie -- in addition to copy-protected digital versions encrypted in Microsoft’s Windows Media format -- addresses one of the biggest shortcomings of online movie services such as CinemaNow or Movielink: It’s a hassle to watch downloaded movies on the TV.

The studios refuse to allow customers to make unencrypted DVD copies of the movies they’ve downloaded through these services.

And customers may not want to invest the time it takes to burn their own movie discs.

“These technophiles are perfectly comfortable with self-burned discs with their hand-scrawled labels on it,” Adams said. “But most consumers really like the packaging: the booklet and the stuff that comes with a professionally done job.”

If the Lovefilm experiment catches on, analysts expect other movie services in the United States to follow suit.

Online retailer Amazon is reportedly in talks with studios about launching a movie download service. It already takes a similar approach with customers buying music CDs -- giving them the opportunity to stream music online through a digital locker while they wait for the disc to arrive in the mail.

“Amazon is a company that has a large base of loyal customers who are coming to their site on a regular basis to get entertainment content. They’re buying DVDs and CDs and buying books,” Jupiter Research analyst David Card said. “It’s conceivable Amazon could do digital distribution.”

Amazon declined to comment.