RealTime IT News

Movie Titans Struggle Against Tides of Fate

Feel like watching a movie tonight on your PC? The choices aren't anything to rave about at the moment.

But if you're a Jennifer Aniston fan with a broadband connection, there's always the box office bomb "Rock Star" on intertainer.com, a video-on-demand (VoD) entertainment network backed by Microsoft , Intel , Comcast , and Thomson Multimedia.

Or there is the straight-to-video, low budget horror flick "Addicted to Murder" on CinemaNOW, an IP-based entertainment site backed by Lions Gate Entertainment , Microsoft, and Blockbuster Video that offers a fairly average selection of new releases, dramas, comedies, and family features for a modest monthly fee.

The viewing process is simple and requires a credit card, an updated version of Microsoft Windows Media Player, and a minimum 56k modem or broadband connection of 100k or higher.

Not impressed? Not many people are. But piracy as an alternative is no more appealing and is extremely illegal, although it is becoming deeply entrenched in Internet culture. Still, movie studios seemingly continue to bide time and neglect a market demand that has reared its head time and again.

In It For The Benjamins
What seems to be the hold up? Well, for starters, last year's flurry of business deals surrounding the cable broadband market that went bust unexpectedly. Disney's Buena Vista, Sony Pictures , and Paramount all pulled out of cable video-on-demand deals, and similarly Blockbuster and corrupt energy giant Enron -- which also had its fingers in the telecommunications pie -- aborted plans at the altar to provide broadband cable content to consumers.

There is also speculation that services that isolate themselves to the PC will eventually be crushed by cable on-demand rollout over the next few years, which holds the advantage of being a more familiar and comfortable platform for the viewing of feature films and entertainment content.

But if you ask Gerry Kaufhold, principal analyst for In-Stat/MDR and author of a recent study on VoD over IP networks, the movie industry's latency period is all about money. The traditional revenue split that has been used between movie studios and cable television and satellite networks for pay-per-view content needed to be re-worked for "on demand" services.

"The movie industry is focusing on the IP broadband market to make sure no one beats them to it," said Kaufhold. "There is a long-term threat that if they don't come up with something on the Internet, they could lose control of it to some college kid, like what happened to the music industry with Napster. Many studios are already sitting on cable alliances where they can bide their time until the right deal comes along."

But can a business strategy that belly flopped 1-2 years ago with the closure of AOL Time Warner's Entertaindom and Digital Entertainment Network still build a critical mass of broadband-enabled consumers?

The majority of profits from cinematic releases, DVD, and VHS sales go to the movie studios. However, with an Internet-based subscription system the profits are miniscule by comparison and the studios have been mulling over ways to make money off such a risky business model.

"This is the Tarzan era of economics," said Phil Leigh, a digital media analyst for Raymond James & Associates. "The movie industry realizes there is a new vine they have to swing out and grab hold of, but they really don't want to leave their old vine. There is no question they are resisting change, but eventually they're going to have to make their move."

According to Kaufhold, a new generation of more appealing, consumer-driven VoD services for IP-based broadband is on the verge of being rolled out by Hollywood's leading entertainment companies.

Can't Get There From Here
Part of the VoD hold up is that not all of the carriers are ready to go. Cable companies like AT&T , Cox Communications and Comcast have been scrambling to make deals this year to make sure that they can stay on par with what the satellite companies are planning. But satellite companies like DIRECTV are currently battling technical issues. VoD evangelist and co-author of the book "DSL: A Wiley Tech Brief," Dave Burstein says the technology is ready to go now, but a bandwidth problem is delaying VoD rollouts from satellite companies by about three years.

"There are some technical issues, but it's mostly a bandwidth problem," said Burstein. "In cable there are a limited number of channels but all they have to do is give up one or two to dedicate to video-on-demand. Satellite companies have pretty much used up all their bandwidth and there is only a limited supply."

DSL companies are also pushing for VoD services but most won't be offering anything more than what they already do for a while.

Burstein said there is also the issue of too many middleman companies that are trying to take a slice of the pie.

For example, Bell Canada recently tacked on an extra $7.90 (Canadian) per gigabite on high-speed traffic, which is about ten times the real cost of the traffic load, based on public figures and the competition. And a patent lawsuit is heading to the courts over MPEG-4 (a higher industry standard alternative to current MPEG-2 video). The complaint has Sony and Panasonic looking to gather fees for each stream.

"The great fear among Internet pioneers is that large companies will carve out subnets, blocking content from others. SBC has threatened that many times. The cable guys already do that for video," said Burstein.

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