September 14, 2003 9:00 PM PDT

Disney, CinemaNow ink Net-movie deal

Disney agreed to license some of its feature films to movie rental site CinemaNow, in a move to fight Net film piracy and further experiment with new technologies.

On Monday, Walt Disney Company unit Buena Vista Pay Television begins its deal with CinemaNow, a service that lets people rent downloadable or streamed movies. Marina Del Rey, Calif.-based CinemaNow will sell viewing for nearly 100 Disney new release and library films, including those of Disney-owned studios Miramax Films and Touchstone Pictures. Those include films such as Martin Scorsese's "Gangs of New York" and Oscar-winner "Chicago."

Terms of the deal were not disclosed.

The agreement is Disney's second foray into Internet movie rentals. In July, the company licensed some films to Movielink, a film distribution site backed by five major studios, in the first test of its kind. Earlier plans for Disney's own video-on-demand service in partnership with 20th Century Fox ended more than a year ago when Disney pulled out of the project.

Also, the move fits in with Disney's broader strategy to test new digital delivery systems for its film library. This week the company started distributing some movie titles on a new self-destructing DVD format, called EZ-D, in four U.S. cities. The discs, which sell for about $5, are sealed in plastic and, once exposed to air, expire after 48 hours.

The company also plans to start testing a new video-on-demand film service in the fall, called Movie Beam. It will use leftover broadcast "bits" to download recent first-run releases onto TV set-top boxes. Customers will be able to store up to 100 feature films at a time using the service and a related storage product, which will include DVD and TiVo-like features.

Dan Cohen, Buena Vista Pay TV general manager, said the CinemaNow deal, like other projects, is part of Disney's overall strategy "to make digital content available in a convenient manner for a customer-friendly price."

For CinemaNow, the partnership deepens ties to Hollywood. Disney will be the fourth major studio to license films to the service, and CinemaNow is in negotiations with others. In April, it brought in MGM Home Entertainment, following a deal with 20th Century Fox Film. MGM is the second studio CinemaNow has nabbed that also backs rival video-on-demand service Movielink. Sony Pictures, Universal Studios, Warner Bros., MGM and Paramount Pictures all back Movielink. CinemaNow inked a deal with Universal in October 2002.

Bruce Eisen, executive vice president of CinemaNow, said that with the help of broadband connections and networked devices, more people are watching films via the Internet. Computers like those from Gateway, which will include a network DVD player to hook up to the TV, will also help jump-start Internet video on demand, he said.

"When my mother can watch CinemaNow on her TV, that's the holy grail, and that's around the corner," Eisen said.

CinemaNow uses Microsoft's Windows Media 9 Series format to encode and play the films.

Disney, like other studios, has been reticent to digitize its assets and make them available over Internet Protocol networks because of the threat of piracy. By experimenting with legal options for consumers, the studios may avoid the nightmare that the music industry encountered.

Disney has been active legally in a fight against piracy of its movie trailers. A federal judge ruled in August that copying and digitizing Disney's movie trailers constituted copyright infringement, in a blow against Video Pipeline.

Analysts said that self-destructing DVDs and Disney's other projects are going to do less to thwart piracy than consumer education would.

"Disney recognizes the need to get into some of these distribution areas. But it still only appeals to an enthusiast market," said Michael Gartenberg, research director at Jupiter Research, a New York-based research company. "These are experiments, not long-term strategies, just to see whether they help boost sales."

 

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