Why Hollywood isn’t afraid of Amazon’s cloud

On Monday evening, Amazon announced the Cloud Drive, which enables users to upload e-books, songs, films, and any other digital media to Amazon’s servers. Users can then access their content from any Web-connected devices. Among the major Internet companies delivering digital entertainment, Amazon is first to make good on the promise of ubiquitous access to content.

Amazon gave very little notice to the major film studios or record labels that it planned to handle their content this way, sources from both sectors told CNET. Amazon managers have said in recent days that licenses aren’t necessary for what they’re offering now. Many in the music industry aren’t convinced, and the studios are still reviewing the service.

But already, decision makers at some of the film companies have concluded that Amazon’s Drive poses few threats and could be a boon by helping to ignite consumer interest in the cloud, said one studio source.

Partner with the studios?
UltraViolet (UV) is the name of new technology standards expected to debut this summer that Hollywood hopes will get people collecting movies again. UV was created by The Digital Entertainment Content Ecosystem, a consortium that includes five of the six big film studios–with the exception of Disney–and numerous movie-sector allies, such as Microsoft, Nokia, Sony, Comcast, and Netflix.

UV is designed to ensure that consumers will be able to play their downloaded movies and TV shows on a wide range of devices and services, as well as store their media on third-party servers (what’s commonly referred to as the cloud). According to film industry sources, Amazon has informed some of the studios over the past few days that it won’t adopt UV right away but has signaled a deal could be worked out later. Amazon, said the sources, has expressed interest in streaming the video that users have uploaded to its cloud.

And some of the studios are OK with that. One of the hurdles that UV faces is finding an effective way to introduce the concept of digital lockers to the public, the sources said. Now they have the Internet’s top retailer pitching the cloud to the masses. If Amazon’s service is successful at attracting customers, it might even convince some of the naysayers in the film industry to hop aboard, said the sources. "Amazon can get people to buy in," said one film industry source. "They could demonstrate the value proposition."

For instance, Time Warner is a UV backer but has yet to provide much needed support, said the sources. Cloud video services would be severely limited unless HBO, the pay TV service owned by Time Warner, relaxes some its licenses. HBO has exclusive electronic distribution rights for new releases from three studios: Warner Bros., 20th Century Fox, and NBC Universal. That means no other outlet can show a movie that is being offered at HBO.

Time Warner execs have told UV members that they are confident an agreement will be worked out soon, CNET reported earlier this month. But studio sources said Time Warner has said the same thing for months. Still no deal.

If Amazon were to launch a cloud movie service now, a customer could buy a movie, store it in his or her Amazon locker, and then be blocked from accessing the film during the blackout period. That’s not a very compelling offer.

Poor video proposition
But Amazon isn’t likely to run into that problem anytime soon. At the same time Amazon debuted Cloud Drive, the company also unveiled the Cloud Player, which enables users to play their music from Amazon’s servers. The company, however, did not offer a similar player for video.

This is another reason why the studios aren’t panicked by Amazon’s new cloud service. It just isn’t built for video, say the sources. Not only does Cloud Drive not have a video player, but the price won’t be compelling for those with film libraries.

Cloud Drive’s online storage service offers 5GB free of charge. Users then pay US$1 per gigabyte per year. The service maxes out at 1,000GB. While you can hold a lot of music on 5GB, film files are of course much larger. One of the film industry sources noted that even a modest film library would quickly max out the free space and a large library could become expensive to maintain on Amazon’s cloud.

Some of the studios see few security risks because to share a movie would require users to give up their password and most consumers don’t like doing this. Any movies uploaded will also maintain their original digital rights managment. Then, there’s this: Amazon already operates a cloud movie service. Amazon customers can buy movies that Amazon will stream to them and then maintain on the company’s servers.

Film industry sources said Amazon is a good partner.

For all these reasons, Amazon managers could find a red carpet rolled out for them if and when they decide to add a video player to Cloud Drive.