DOJ eyes online video efforts

The Justice Department has begun investigating two joint ventures run by major movie studios that plan to provide video-on-demand over the Web, sources familiar with the action said Friday.

The DOJ may soon issue Civil Investigative Demands (CID) to film studios, requesting documents about the joint ventures to ensure they do not violate antitrust laws. The studios are split into two camps for ventures that deal with online movies on-demand. MovieFly, one of the upcoming services, is backed by AOL Time Warner, Sony Pictures Digital Entertainment, Viacom's Paramount Pictures, Vivendi Universal, and Metro-Goldwyn-Mayer. The rival service, Movies.com, is a project from Walt Disney and News Corp.'s 20th Century Fox.

Don Levy, a spokesman for MovieFly partner Sony, said the studios involved with MovieFly have not received any CIDs. He added that executives approached DOJ officials in August to explain the ins and outs of the venture.

"The process that is under way with the Department of Justice...is part of the standard operating review process for a joint venture such as the one created with MovieFly," Levy said.

So far, movie studios tied to Movies.com also have not received any requests for documents, sources said. Like MovieFly, representatives from Movies.com have offered details about the service to DOJ officials, sources added. Both services are expected to launch sometime next year.

A DOJ spokeswoman confirmed the existence of the investigation but gave no details.

"The antitrust division is investigating the potential competitive effects of joint ventures on the digital distribution of movies directly to consumers," said DOJ spokeswoman Gina Talamono.

The move appears similar to the preliminary investigation launched earlier this year by the Justice Department into the recording industry to determine whether the major labels were engaging in fair licensing practices. The government sent CIDs to a list of record companies, Internet companies and other initiatives between the music and online industries, calling for meetings with executives. The government also requested documents detailing correspondence and proposals involved in licensing negotiations.

Record labels have banded together to form two online music services: MusicNet, a venture supported by RealNetworks, AOL Time Warner, Bertelsmann and EMI Recorded Music; and Pressplay, a venture run by Sony and Vivendi Universal.