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The Honolulu Advertiser
Posted on: Tuesday, March 12, 2002

Video on demand takes off

By Jefferson Graham
USA Today

The Hollywood studios have been tantalizing the Web-surfing public for months with talk about hit movies available for video on demand (VOD) online viewing. Now they're getting real.

The animated smash "Shrek" is available on Intertainer (intertainer.com) for $3.95; CinemaNow (cinemanow.com) has last summer's "What's the Worst That Could Happen?" with Danny DeVito and Martin Lawrence. "'Shrek' is setting records for us," said Intertainer CEO Jonathan Taplin. "It's doing more business than any VOD title we've ever had."

Taplin won't give exact numbers for "Shrek," but said Intertainer made 16,000 VOD sales overall in February, "which means I have 16,000 customers who are happy to watch movies on their PC, and a growth rate averaging 100 percent a month. I can't complain about that."

He also has a long way to go. Research firm GartnerG2 predicts that VOD won't represent competition to the Blockbusters of the world until 2005 — and even then will only account for 2 percent of a film's revenues.

"Right now this is the experimental phase," said GartnerG2 analyst P.J. McNealy. "Hollywood wants to be sure this is a safe way to deliver films before they turn over the keys to the vault."

Many movies are readily available on the Web now, but in unauthorized versions, usually copied from DVDs or shot on a camcorder in a theater, and traded on file-sharing sites such as KaZaA. Earlier this month, a Taiwanese site called Movies88.com offered current films for $1 a title. After the Motion Picture Association of America complained, the Taiwanese government ordered the site shut down.

Taplin isn't worried about the unauthorized competition. "The pirate thing only works if there's no other alternative," he said. "When there are legitimate ways to get content, and it's reasonably priced, the consumer is always going to prefer going there."

The major studios have formed consortiums to sell their movies on the Internet. MGM, Universal, Warner, Sony and Paramount are involved in Movielink.com; Disney and 20th Century Fox, with Movies.com. Both services are to premiere sometime this year.

In the meantime, Intertainer has deals with DreamWorks, MGM and Warner to offer some of their films; CinemaNow with MGM; and Sightsound (www.sightsound.com) with Miramax. "Legally Blonde" (Reese Witherspoon) and "Swordfish" (Halle Berry) are now on Intertainer; "The Man in the Iron Mask" (Leonardo DiCaprio) is on CinemaNow, and "Whipped" (Amanda Peet) on Sightsound.

To watch the films, users need high-speed Internet access, now available in 12 million homes, according to Gartner. CinemaNow offers films two ways: downloaded to a user's hard disk (which can take up to two hours, even with broadband, but generally allows the best viewing experience) or streaming (playing the film over the Web, which allows viewing almost immediately but can stutter often, depending on Web traffic). Sightsound and Intertainer are streaming only.

CinemaNow also offers many independent films and lesser-known foreign titles, many for free (such as "Leprechaun" with Jennifer Aniston), to its 1 million registered users. "Over the next few years, we're going to see the Internet become a primary source of receiving movies, just like it is now with music," said CEO Curt Marvis.

The VOD advantage: You don't have to leave your house to go to the video store and worry about late fees. Click a few buttons from home and the movie starts. The quality, if you have a high-speed connection and no objections to watching on a PC screen can be surprisingly good.

MGM just cut deals with Intertainer and CinemaNow for "What's the Worst That Could Happen?" and "Legally Blonde," but makes no predictions. The studio is getting its feet wet "to see how customers use this product, what their expectations are and what they're willing to pay," said MGM's Blake Thomas.