November 9, 2000 1:00 PM PST

Film studio spinoff charges for online features

Lions Gate Entertainment's online spinoff, CinemaNow, on Thursday unveiled a pay-per-view streaming video-on-demand service, forcing an early test of the market for feature-length films over the Web.

The service's first offering is a 1997 film, "Heaven's Burning," starring Russell Crowe--a little-known production made in Australia before the actor became a star. For $2.99, viewers can watch the 100-minute film as many times as they like during a 48-hour period.

CinemaNow said it will soon offer more pay-per-view selections from its library of more than 800 films for which is has exclusive online distribution rights, including movies from Lions Gate and its subsidiary Trimark Pictures, Allied Artists, Tai Seng Home Video and Salvation Films.

Several film companies are considering experiments that tap the Net. The market for film distribution online is still in its infancy, however, and analysts say technology has a long way to go before the sector becomes a blockbuster.

"I think it's unlikely (that this move is) going to make (CinemaNow) a ton of money because the audience of broadband users...or the network capability to watch the movie is very small, very limited," said Forrester analyst Eric Scheirer. "Frankly, people aren't used to paying for movies online."

Scheirer added, however, that CinemaNow's video-on-demand push provides the company with the opportunity to get customer feedback and discover what needs to be done to make such services successful.

"I think as long as they're treating it as a learning experience...it's a great opportunity," Scheirer said. "Being the first one to do a pay-per-view Internet trial for a high-profile feature film is a great place to be in because they'll be able to attract a lot of attention for it."

Heating up but still developing
The competition is already heating up in the young online movie market. Ifilm offers free short films for streaming over the Web. AtomFilms distributes free shorts over the Internet and just this week inked a deal to syndicate its library to wireless devices in a partnership with Scandavian media company Schibsted.

In addition, SightSound.com is creating original Internet-only features and for fees offers video downloads over pioneering distribution platforms such as Gnutella, one of several peer-to-peer file-sharing networks riding the coattails of the massively popular Napster music-swapping service.

While many companies are experimenting with online film distribution, most acknowledge that both the technology for delivering video online and consumer demand for feature-length productions viewed on PCs is still developing.

"I think we recognize that there is going to be some period of time before there is a critical mass of people that will be watching films in this way on a pay-per-view basis," said CinemaNow's chief executive Curt Marvis. "But what's important is to start to work on the processes, the infrastructure, the end-user experience--and the only way you can really find out what works and what doesn't is to actually do it."

Marvis said that CinemaNow is anxious to test its service with a film that has the level of notoriety and attractiveness to draw a large audience.

Marvis said "Heaven's Burning" was the last film Crowe made in Australia before becoming a well-known star. Crowe's Hollywood credits include "The Insider," "Gladiator" and "L.A. Confidential." Marvis said the film has been released theatrically in other countries, but it's received only minimal exposure in the United States. Trimark Pictures, which was acquired by Lions Gate in October, is rereleasing the film on DVD, he added.

The new service is provided through secure streaming in Microsoft's Windows Media format, which includes digital rights management (DRM) technology. CinemaNow is confident that the DRM wrapper that Microsoft has placed around the stream will prevent piracy.

 

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