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To: Johnny Canuck who wrote (36230)	2/25/2002 3:27:31 PM
From: Johnny Canuck	Read Replies (2) \| Respond to of 69920

POSTED AT 4:27 PM EST Friday, February 22 Video on demand is no killer app By MATHEW INGRAM Globe and Mail Update Video on demand. Doesn't that sound like a great idea? Watch digital movies in the comfort of your own home, whenever you want — not when your cable company says you have to, with its current "pay per view" system. Rogers Communications is so excited about the idea of video on demand that the company said the new VOD service it is rolling out will be a key competitive weapon against the dreaded satellite TV companies. If this excitement strikes you as familiar, you probably remember all the other times over the past decade that VOD was touted as the Holy Grail by the cable guys — not to mention the phone companies, who bragged about how their networks would soon be delivering cable-style programming, video on demand and all manner of wondrous things. VOD, the old joke goes, is "the technology of the future ... and always will be." In the early 1990s, video on demand was the centrepiece of the "information superhighway" plans that were being hatched by cable companies such as TeleCommunications (now part of AT&T) and Warner Communications (part of AOL Time Warner). Before the Internet arrived in most people's lives, the cable companies had grand plans to send first-run movies and digital entertainment down their pipes into people's homes. The big cable players spent tens of billions of dollars upgrading their networks and launching trials of their new services — just in time for the arrival of the Internet, which made most of their plans seem irrelevant, not to mention expensive and even comically inept. That didn't stop many of them from continuing with their trials, however, and the phone companies later got into the game too, as they rolled out their own high-speed networks they said would offer the same kinds of interaction. Eventually, it became clear that people didn't really want these services — including video on demand — from their cable company or their phone company. For one thing, they weren't willing to pay enough to justify the investment the cable companies had made. And they also seemed more interested in just getting a connection to the Internet, where they could go wherever they wanted, or download what they needed. Those two factors remain the central hurdles for video on demand over a cable network. In fact, VOD had a better chance of success when the Internet was still new and high-speed access wasn't widely available. Now, anyone with a cable or DSL connection can download virtually any movie, using any one of a number of quasi-legal networks — Morpheus, Kazaa, Grokster — that provide a Napster-style source for movies. In as little as couple of hours, a fan can have a fairly good copy of virtually any movie. There are legal issues involved, of course, but that hasn't stopped anyone so far. There are also a number of legal ventures being launched that will offer major-market movies for download or "streaming" — including one called Movielink, which is backed by the five major Hollywood studios (MGM, Paramount, Sony, Universal and Warner Bros.). Walt Disney Studios is in a partnership with Movies.com, while MGM also recently announced its own venture in partnership with CinemaNow, which is controlled by Canada's Lions Gate Films with backing from Blockbuster and Microsoft. Some people would probably rather use the cable set-top box arrangement they currently have instead of downloading movies, since they either don't want to watch movies on their computers or can't figure out how to hook their computer up to their TV set. But there are other things that make cable VOD less appealing than other alternatives — things that make it more likely Rogers' VOD service will be a nice added feature rather than a killer competitive weapon or a major addition to the bottom line. One problem is that the major studios would prefer to control the release of their content through video and DVD rentals before they hand it off to the cable guys, since rental income makes up as much as 60 per cent of a Hollywood studio's revenue. That means the movies that will be available through VOD will inevitably be older or less popular films — and to the extent that they are newer, they will also likely be more expensive to view. This conflict is part of what killed earlier VOD attempts. This could doom the attempts of the studios as well. The CinemaNow trial, for example (which isn't available in Canada), features the little-known bomb What's The Worst That Could Happen and the poorly-received movie The Man In The Iron Mask — hardly a compelling offering for anyone but the most entertainment-deprived. That doesn't bode well for the studio services, just as the legal music offerings from the major record labels (through PressPlay and MusicNet) have also been rather underwhelming. Perhaps the studios are making their services less than compelling on purpose, so that they will fail and everyone can go back to renting DVDs, which probably carry much fatter margins. But that still won't make Rogers' video on demand service look all that appealing. E-mail Mathew Ingram at mingram@globeandmail.com Look for exclusive Mathew Ingram commentary at GlobeInvestorGold globeandmail.com