New system aims to boost sales, curb piracy

Changes in copy-protection rules have opened an exciting new world of possibility for retailers nationwide and Walgreens is eager to become the first to jump on this bandwagon.

Walgreens locations across the country will have kiosks installed in their photo department next year.  These kiosks will burn and vend popular movies on DVD within 15 minutes.

Walgreens representatives claim the system will increase selection and decrease piracy.

Walgreens is looking to one-up rival CVS with incentives like improved photo departments, in- store health clinics and exclusive merchandise.

Studios are intrigued at the possibility of these kiosks because they see it as a way of possibly marketing niche movies -- everything from old black and white films to B-horror movies.  Traditionaly many of these films have "gone extinct" and are no longer available as there is not enough market for to pay for manufacturing, storage and shipping fees.  This may soon change with this system.

Walgreens is the largest drugstore chain in the U.S. with over 6,000 stores.  Spokeswoman Tiffany Bruce was enthusiastic about the move, saying:

"We hope to launch DVD-burning kiosks in the next few months. We think its a type of solution that will work very well in our stores, giving us the ability to provide a virtual inventory to a diverse customer base."

DVD Copy Control Association, a group of movie studios and hardware makers that watches over DVD's CSS (Content Scramble System) Protection Scheme are responsible for the change in policy.  After meeting last month, they decided to allow their technology to be licensed more broadly.  This allows for movie kiosk licensing of the technology, making such devices legal.

Such copy protection schemes are typically broken.  Even the ACSS, the Advanced Content Scramble System used on Blu-ray and HD-DVD has been cracked lately, as reported at DailyTech.

Sonic Solutions is providing the software backbone for Walgreens kiosks.  The software firm markets its software based on recently approved industry specifications.

Making DVD discs isn't as easy as some think according to Sonic.  They say that their Qflix software needs special DVD burners and recordable discs in order to be used.

If such a system could be made to be compatible with modern dvd writing drives, it would open even more possibilities as sales direct to customers of dvds via services such as iTunes and Amazon would be possible.  Some customers might prefer this to buying the episode in digital format, as the services currently provide.

Sonic is licensing the QFlix software to kiosk manufacturer Polar Frog Digital LLC, which is obtaining the licenses for films from studios.  Polar Frog Digital indicated that it will focus on older movies, to avoid competing with or undercutting sales of new releases.

Blockbuster hopes to implement such a system in the near future, be it via proprietary consumer hardware or standard DVD drives.

Randy Hargrove, Blockbuster spokesman was emphatic about this possibility.  He said:

"The burning capability is a perfect complement to our Movielink download business, because it will eventually enable consumers to store movies on their hard drives or DVDs for future usage."

He also sees Blockbusters installing similar kiosks on site to provide hard to find or out of stock titles.  He says if such possibilities make sense, Blockbuster will jump on them.

The only downside to the Walgreens system, which may also come to Blockbuster is that studios have not indicated a willingness to discount the DVDs at all, even for older titles.

Still some will enjoy the ability to locate scarce titles.

Analyst Kurt Scherf with Parks Associates sees such motivations as the driving factor for the creation of a sizable new movie sales business sector.  He says that by 2011 he predicts on demand dvds will generate on-demand DVDs will generate $1.3 billion, about 1/19 of today's total market.  Such a business sector would be small, but of high interest to big retailers.

For now Walgreens is hoping it will gain a competitive edge by leading the way with this new technology.

"People Don't Respect Confidentiality in This Industry" -- Sony Computer Entertainment of America President and CEO Jack Tretton
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