Studios are spreading the risk in offering movies to a multiple of nascent retail Internet providers. But that's not the only business reason for dealing with multiple players. Analysts say movie studios want to allay any monopolistic sentiment among regulators that could be stirred by their efforts to work together.
Initially, broadband content will be priced and offered similar to pay-per-view on cable. But with one exception: Internet technology is finally allowing for true video-on-demand delivery.
Movielink and Movies.com are two major studio-driven efforts. Movies.com is a Walt Disney Co. and News Corp. venture still in its early stages. Movielink-a partnership among Metro-Goldwyn-Mayer, Viacom's Paramount Pictures, Sony Corp.'s Sony Pictures Entertainment, Vivendi Universal's Universal Studios and AOL Time Warner's Warner Bros.-is further along and due to launch this fall.
Movielink will let PC users download movies to their hard drives for a fee. Jim Ramo, chief executive officer of Movielink, believes this is a safer and higher-quality way to deliver content than "streaming video," where users can see content immediately on a particular Web site.
"Streaming has one good thing: It has immediate gratification," he said. "On the other hand, it doesn't have reliability and the quality. And it requires a fairly high bandwidth."
Mr. Ramo estimates there are about 12 million users currently with the bandwidth-at least 300 kilobits per second-needed to download films. "We believe we are at a minimum critical mass," he said. "It's a five-year business plan. And we expect to reap the awards in the outer years."
Other providers are already up and going. One is Intertainer, which started late last year under www.intertainer.tv, offering theatrical movies, TV shows and speciality videos to 60 large U.S. cities. The company said this covers 85% of the broadband audience. Intertainer's monthly charge of $7.99 gives users access to all its TV and videos; movies are priced at an additional $3.99 for new releases and $2.99 for older films.
Intertainer, backed by Microsoft Corp. and Comcast Corp. , also is a digital cable content provider in 350,000 cable homes. In addition, it offers a private-branded content service, Demand E.S.P. The company claims 80,000 registered users on its Internet service. Profitability will come in a few years, say executives, especially if it can get set-top cable boxes that will send Internet signals easily to the TV. One of the company's investors, Thomson Multimedia's Thomson Consumer Electronics, is working on such boxes.
Intertainer is a streaming video service. That means users need a higher connection speed for improved quality. Intertainer executives define this as at least 540 kilobits per second but suggest 700 kbps for service comparable to DVD discs.
CinemaNow is another Internet company that started up this past February with investors Lions Gate Entertainment-the Canadian producer and majority owner-as well as Microsoft and Viacom's Blockbuster Video.
Other Web services are staying away from the big theatrical films, focusing instead on short films. The key is that content is free, as these Web sites look to build business through advertising and marketing models.
Ifilm Corp. is one such company whose investors include Yahoo!, Paul Allen's Vulcan Ventures, Sony Pictures and Eastman Kodak Co. Its Web business, www.ifilm.com, boasts some 3.2 million unique users a month.
Basing an Internet business on an advertising model has been dangerous for many recent dot-coms. But Ifilm has managed to survive.
"We really cut our costs and streamlined the operation," said Frank Voci, president of Ifilm. Mr. Voci thinks Ifilm has a good niche. "We have really stuck to our model, which has been broadband content and providing it for free," he said.
Mr. Voci said virtually all major studios have advertised on the site, as have mainstream consumer product companies including Coca-Cola Co., Sonicblue's ReplayTV, Mitsubishi Motors Sales USA and Verizon Communications. Recently Ifilm struck a major paid-advertising and marketing deal with Walt Disney Co.'s Miramax Films.