Hollywood: Hooray for Broadband!

The concept of watching movies on your computer has been around for a while, and finally the big Hollywood studios are making a play for this nascent market, launching an online movie rental service called Movielink.

The megabucks question for the studio moguls, however, is not so much whether the technology and broadband connections are up to snuff, but whether enough consumers will care.

The video-on-demand (VoD) industry is still in the early stages and already there is competition from file-sharing operations. The unwritten Internet rule seems to be that if somehow it can be copied, it will be copied and made available for all for free. That’s pretty much what’s been happening with online music, despite the lawsuits and the demise of Napster.

Still, the backers of Movielink — a joint venture among Metro-Goldwyn-Mayer, Paramount Pictures, Sony Pictures Entertainment, Universal and Warner Bros. — clearly think this is worth risking some of their recent box office hits.

“Video on demand is undoubtedly the future of home movie viewing,” said Jupiter Research
senior analyst Ken Cassar. “This will be a niche market in the near term, however, because broadband has penetrated only 20 percent of online households and because few consumers want to watch movies on their home computer, anyway.”

Films available on Movielink at launch include “A Beautiful Mind,” “Harry Potter and the Sorcerer’s Stone” and “Ocean’s Eleven,” among about 170 contemporary and classic films.

The deal here is that consumers download the film (average file size of about 500MB) over their broadband connection, then watch the movie on RealNetworks RealPlayer 8.0 and Microsoft Windows Media Player.

Users are charged on a per-film basis, and cost is expected to run from $1.99 to $4.99, payable by credit card. Consumers don’t need to buy a membership. After a customer pays, the consumer has 30 days to watch the movie. Once a buyer activates it, it’s good for 24 hours.

Initial launch is somewhat in beta and limited to the United States. Movielink said that during this initial phase, it “will be testing various consumer preferences as well as product enhancements to ensure that the service meets the needs of savvy broadband subscribers.”

“We hope video piracy isn’t in the culture the way music piracy is,” Jim Ramo, Movielink’s chief executive, was quoted as saying.

Competition, in addition to the online swapping services, includes CinemaNow (claiming 650 on-demand movies), majority owned by independent-film producer and distributor Lions Gate Entertainment, as well as Intertainer Inc., which has shut down its streaming movie service and is suing some of the studios, claiming they stood in its way.

While the VoD market has still not fully caught on for even the most committed movie-watching fanatics, there are still high expectations that by 2006, movies delivered over the Internet or television will account for 25-35 percent of the $10 billion video rental business.

Ramo said that with 25 million broadband residences, “we believe the market is now ready…”

Not everyone agrees, however.

“While we are a few years away from this being a viable mass market business, there is undoubtedly potential among a niche audience,” said Jupiter Research’s Cassar. “Let’s just hope that this niche audience isn’t as abusive of the movie studio’s IP as they were of the record labels’ [IP].”

Movielink employs digital rights management technologies as well as “other protective measures” to protect itself. And clearly it had better be good because every script kiddie in the world is likely to take a run at it.

Videodisc burners are increasing in popularity (a quick search on Amazon.com turned up 11 references), and once a movie’s encryption is broken, it can quickly become widely available on the P2P sites. And 321 Studios sells “All the software you need to copy your own DVD Movies” – for $49.99.

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