You may send these links to Herb Greenberg at TSC. He seems to be in touch with Henry Nicholas.
Video On Demand:
Video on Demand Delivers Movies
At Home, but Film Choices Are Slim
By Martin Peers
Staff Reporter of The Wall Street Journal
"Return to Me," a love story starring David Duchovny and Minnie Driver, wasn't a big hit when it opened last spring, generating about $33 million at the box office. But it is one of the most popular titles on Blockbuster Inc.'s embryonic video-on-demand service.
For couch potatoes who have been waiting for the next big thing in home entertainment, video on demand, or VOD, may be it. Several companies, including video-rental chain Blockbuster in partnership with energy giant Enron Corp., are starting to offer the long-promised service, which enables TV viewers to order a movie with the click of a remote for between about $2 and $5.
While the service is somewhat akin to pay-per-view, available on many cable and satellite TV networks, there are some big differences. Not only does the new technology make movies available anytime, rather than at fixed times, but the films can be stopped and started again or even rewound, virtually speaking, like a tape in a VCR, for at least a day after ordering. And, the selection of movies should be much greater than with pay-per-view setups.
Consumers who have participated in test versions are enthusiastic. "We love it," says 36-year old Lisa Olsen, a high-school teacher in American Fork, Utah, who is one of about 600 people testing the Blockbuster-Enron service. "It's right there in our home, we don't have to go anywhere, don't have to worry about late fees."
But there are still plenty of hurdles. Many consumers say they want to be able to choose from movies that haven't shown up in their video stores. Yet the video-on-demand services will mostly offer only a few hundred movies for the foreseeable future, and in some cases other features like reruns of TV shows. Nearly all the movies will have already been on video and many will be several years old. "If they had as many movies as ... the Blockbuster store I think it would be well worth it ... It would be great," says Shannon Waller, a 25-year-old mother of two from Portland, Ore., who is participating in a trial of Blockbuster's service in which she receives two free movies a week.
A variety of technical, legal and economic issues currently stand in the way of making more titles available. The movies used in video on demand are stored in digital form on computers, but these expensive systems can hold only so many movies before they become uneconomical. Hollywood studios, which own the movies, are nervous about such new electronic services -- even though video on demand has been under discussion for at least a decade. Executives are not just worried about illegal copies being made from digital versions of films, they also fret that offering on-demand electronic versions of movies simply won't generate as much money for them as the extremely lucrative video-rental business. The studios are particularly reluctant to let the electronic services get the movies at the same time as they go onto tape.
In addition to Blockbuster and Enron, cable-TV operators including AOL Time Warner Inc. and Cox Communications Inc. are offering video on demand, as is Intertainer, a four-year-old company backed by several heavyweights, including Intel Corp., Microsoft Corp. and General Electric Co.'s NBC. Cable operators plan to offer the service as a feature on digital cable networks now being rolled out. Intertainer and Blockbuster both plan to offer their services on souped-up phone lines known as digital subscriber line (DSL) or on cable, often using a special TV set-top device. Blockbuster plans to use its customer database of 42 million households to market the new service, while Intertainer has begun advertising its service in newspapers.
Some movie studios are planning to get in on the act with their own Internet-based services, transmitting movies to home computers, although these setups aren't yet operating. Both Sony Corp.'s Sony Pictures and Walt Disney Co. are trying to sign up other studios to invest and participate in their ventures.
In addition, Web sites such as sightsound.com have started movie downloading services, so far with movies mainly from smaller film companies. The big studios remain worried about issues such as security on the Web (Blockbuster and Intertainer both use private networks rather than the Internet).
Partly in order to avoid objections from antitrust regulators, the studios are expected to license their films to a variety of electronic video services. Intertainer has signed deals with several major studios, including AOL Time Warner's Warner Bros. and Vivendi Universal SA's Universal Studios. The deals provide it movies at the same time as pay-per-view services, roughly six weeks after video stores get them. Recent movies on Intertainer's service included "The Perfect Storm""Gladiator," for $3.99 each.
A group of cable operators, which are partners in a company called iN Demand LLC, and Blockbuster still are negotiating to get similar deals. "Its going more slowly than I would have liked, but we are making some real progress," said Steve Brenner, chief executive of iN Demand, which has licensed films on an interim basis. Blockbuster so far hasn't licensed movies from any of the major studios except Metro-Goldwyn-Mayer Inc., which gave it "Return to Me" and various other titles under a short-term deal. Instead, it gets most of its films from MGM and independent studios such as Artisan Entertainment Inc.
One studio executive says Blockbuster was disadvantaged because it wants a financial deal with studios similar to the one it has with its video-rental business. But studios want to use the opportunity of a new technology to make more money under such arrangements, the executive adds. Blockbuster Chief Executive John Antioco, however, says Blockbuster is offering better economic terms for video on demand, and is making "very good progress" in negotiations with studios.
Some in Hollywood remain skeptical about whether the new services will succeed. "I'm unsure as to the strength of consumer demand," says Amir Malin, chief executive of Artisan. He says that only 67 people downloaded Artisan's art film "Pi" when it was available on demand through sightsound.com (Scott Sander, CEO of Sightsound Technologies, says the download took place with "no promotion or marketing" in April 1999).
And expanding the range of movies isn't going to be easy. Jonathan Taplin, CEO of Intertainer, says his company has access to between 8,000 and 10,000 titles, about the number in the average Blockbuster store, but it offers only about 300 at any one time. The cost of storing digitized versions of all the movies in a computer, able to be ordered anytime, would be "very expensive," Mr. Taplin says. He predicts that within a year or two, declining data-storage costs plus new computer-network designs should make it feasible for more movies to be available simultaneously.
Another problem in making more movies available is the dense thicket of licensing deals between the studios and various pay-TV channels, which generally get movies after they have been in the video stores. One cable executive says there are many movies which are in exclusive airing periods on channels such as AOL Time Warner's Home Box Office, precluding them from being offered via video on demand. "Long term, I think that goes away, but getting through these business issues is going to take some time," the executive says.
People on both sides predict that both the cable industry and Blockbuster eventually will strike more-favorable deals with studios. But video-on-demand services may have to be available more widely before Hollywood offers them movies at the same time as video-rental chains. Executives don't expect video on demand to be widely available for at least five years, given the heavy costs of installing the necessary equipment and the need to upgrade cable and telephone networks.
-- Anna Wilde Mathews contributed to this article
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