Monday, August 07, 2006

Calls of Note Part 3

- Piper Jaffray notes recent news from the two major providers of feature film downloads (Movielink and Cinemanow) related to the incorporation of the ability to burn downloaded content to DVD has increased Street interest in the download & burn model and how it will impact entertainment content distribution.

While the firm do not expect to see significant growth in the download & burn market in CY06, Sonic Solutions (NASDAQ:SNIC) is well positioned as a facilitator of this model and will benefit as this becomes a commonly accepted distribution platform.

Piper believes download & burn will prove to be a popular method for buying/renting feature film and other video content (TV, etc.), given this model addresses two inherent consumer demands: 1) convenience -- better than going to video store or CE retailer, and 2) familiarity - DVD has been the fastest growing and most popular distribution format in history; more than 80% of U.S. TV households have one or more DVD player. Clearly, other entertainment content distribution models are in the works, but they believe the majority of consumers tend to flock to what they perceive to be easiest and most familiar. Major players like Amazon are likely to move into download video this year and could incorporate DVD burning.

Sonic will play a significant role in the success or failure of the download & burn model. The company is a provider of the core DVD burning technology (AuthorScript) and has created a framework for content providers to offer a download & burn model by making its burning engine interoperable with many different kinds of copy protection that can secure content, even after it has been burned to DVD.

Maintains Outperform and $25 tgt.

Notablecalls: Not actionable but good to know category. This note will have zero impact on share price in the s-t.

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