Can Amazon Save Hollywood?

Hollywood studios, on the back foot due to falling DVD sales, are counting on Amazon (NASDAQ:AMZN) to “return them to the golden era of DVDs when money fell out of the sky.” Studios including Sony Corp (NYSE:SNE) and Warner Bros (NYSE:TWX) are in discussions to draw Amazon into the UltraViolet fold.

Ultraviolet is a service which lets consumers purchase videos and store them online, to be played back later on any device of their choice. According to Bloomberg, “Retailers Best Buy Co. (NYSE:BBY), owner the CinemaNow website, and Wal-Mart Stores Inc. (NYSE:WMT) are also part of the Ultraviolet group. The Ultraviolet effort is backed by retailers, entertainment and technology companies through the Digital Entertainment Content Ecosystem, whose members also include News Corp’s (NASDAQ:NWSA) Fox Entertainment, Comcast Corp.’s (NASDAQ:CMCSA) NBC Universal and Viacom Inc.’s (NYSE:VIA) Paramount Pictures.”

So, why Amazon?

The studios are hoping the struggling UltraViolet platform could get a boost if its content could be made available on the retailer’s Kindle Fire tablet and other devices. Amazon became a member of the Ultraviolet group by purchasing LOVEFiLM, a Netflix-like subscription service in the U.K.

U.S. DVD revenues have fallen 19% from a high of $20.2 billion in 2006 to $16.3 billion in 2010 — largely due to rentals from Netflix Inc. (NASDAQ:NFLX) and Coinstar’s (NASDAQ:CSTR) Redbox. By including more retailers, there’s a two-fold effect. According to Corey Ferengul, an executive vice president of Rovi Corp., “there’s not a massive amount of money to be made, but it gives studios the ability to quickly change consumers’ behavior about collecting movies again, and for the retailer storing your collection, it builds loyalty.”

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