3 Movie Studios Hit With VoD Lawsuit

Video-on-demand company Intertainer
has filed suit against three major movie studios, accusing them of engaging
in anti-trust
violations in an attempt to protect their competing VoD venture.

The complaint charges that the film units of AOL Time Warner , Vivendi Universal and Sony conspired to boost prices on Intertainment’s movie licensing deals with them in order to give an unfair advantage to MovieLink.

Movielink is the recent VoD venture whose movie studio backers include AOL Time Warner’s Warner Bros; Vivendi’s Universal pictures division, Sony Pictures Digital Entertainment, Viacom’s Paramount Pictures and Metro-Goldwyn-Mayer.

The suit against three of Movielink’s backers is something of a digital update on long-running complaints over the movie industry’s alleged attempts to corner the pay-per-view marketplace. At the very least, it is expected to keep the spotlight on the movie and record industries as they team up to launch their own IP-based digital entertainment platforms behind competing services that have mushroomed along with consumer demand.

Already the Justice Department is looking into whether the music industry’s joint ventures on digital distribution are anti-competitive in their approach to licensing arrangements; similar probes are reportedly underway regarding the movie industry’s digital distribution joint ventures.

All three studios, Intertainer pointed out, control over 50 percent of the motion picture market and over 60 percent of the music market through their subsidiaries.

The suit, filed in federal district court in Los Angeles Monday, charged that the three studios conspired to fix prices in the VOD business by making “less than arms length” transactions with MovieLink, (formerly named Moviefly).

In one example, the Culver City, Calif.-based company said the studios arranged a deal with Movielink in which they moved their revenue share from the in-home video rental market from 40 percent to 60 percent. Intertainer called the tactic self-dealing, and laid out lengthy details of past agreements with the studios which show the usual revenue split is 50-50.

In other aspects of the lawsuit, Intertainer claimed that the studios “conspired to inhibit competition by engaging in a group boycott of intellectual property rights to Intertainer.”

As an example, Intertainer said AOL Time Warner “induced” its movie studio divisions, Warner Bros. and New Line to terminate existing distribution deals it had struck with Intertainer in order to impede delivery of a broadband VOD service through rival Microsoft Network (MSN).

Microsoft is among the technology companies with investments stakes in Intertainer. Others with stakes in the six-year-old venture are cable company Comcast , Intel , NBC, which is owned by General Electric ; Qwest and Sony.

Indeed, the suit charged that Sony used its position as an investor and board observer with Intertainer to “compile knowledge of Intertainer’s business plans, architecture, and proprietary technology to build a business based on Intertainer’s intellectual property;”

In addition, the suit charged that Sony “induced former employees of Intertainer to violate their confidential knowledge of Intertainer’s proprietary technology” in helping to build Movielink.

A spokesperson for AOL Time Warner’s New Line movie subsidiary had no comment. Representatives for Vivendi’s and Sony’s film units were not available for comment.

Intertainment’s complaint charged that the Movielink joint venture, combined with the studios’ dominant position in the theatrical motion picture market, “gives them the ability to raise prices to IP video-on-demand service providers, which will in turn raise prices to consumers.”

Jonathan Taplin, chief executive of Intertainer, said at one time the company had licensing agreements for distribution on over 1,500 films owned by the studios his company is suing. “Now we have access to 15,” he added. “We have an industry wide crisis of over $2 trillion invested in broadband. But there’s no content.”

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