July 6, 2005 4:00 AM PDT
Where's the iTunes for movies?
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the old pay-per-view category, which means they get first-run movies as much as two to three months behind video stores or Netflix, and are allowed to offer those movies for only a few months at most. Cost is also a factor, with Netflix providing a much better bargain for frequent movie watchers.
That's badly hampered on-demand's ability to compete with DVD rentals. Even Netflix CEO Reed Hastings, who plans to launch a Net-based service later this year, has publicly said he expects the first versions to be "underwhelming."
Indeed, these tightly drawn categories also hamper the ability to create such an online Netflix, in which subscribers would pay a monthly fee for unlimited viewing. Under the studios' current contracts, cable television companies Starz, HBO and Showtime have exclusive contracts for subscription services that cover both broadband Internet and cable television distribution.
"The truth is that VOD (video on demand) can get a lot better," said Macrovision Senior Marketing Director Adam Gervin, whose technology is used to protect movie content against copying. "What people want is the ability to get a movie from a cable or satellite provider closer to the same day they can buy it at Wal-Mart. But that won't happen until the studios feel confident that their content won't be cannibalized."
To be fair, the technology for the perfect video-on-demand service isn't quite ready either.
On the cable television side, what's available is essentially constrained by the server capacity of the cable company. Starz, which tends to have several thousand titles under license at any given time, usually has only a few hundred available through cable networks such as Comcast.
Internet-based services have the flexibility to offer far more content. But even as bandwidth has grown, and video-compression technologies such as Microsoft's Windows Media 9 and the new MPEG 4 AVC have improved, studio executives aren't satisfied with the quality of delivery.
Once a movie reaches the home, most Internet services remain aimed at the PC, which remains a poor alternative to the television for watching movies. However, a new generation of "media adapter" devices, scheduled for release this fall, promise to make it increasingly easy to stream video from a PC directly to a television.
Taking the long way around
Given these constraints, it's no wonder that the Net's on-demand services have remained small. But a few changes are on the horizon that could transform the business.
Some involve new technology that will bring on-demand rental services into the movie sales business. Studios are warming quickly to the idea of "digital sell-through," an industry term for selling a permanent copy of a movie that can be downloaded to a computer. Sony Pictures, Warner and others expect to offer this kind of online distribution as early as this year, executives say.
CinemaNow CEO Curt Marvis, who has been negotiating with studios since his service opened in 1999, says this could help reinvent his business.
"I think the DVD business has proved that people like to collect movies, maybe more than people anticipated," Marvis said. "I think when we get into digital sales, where sell-through has some pricing advantages, the content offering can be more broad and vast and deep than what you get in the retail store."
Studios are also talking about new digital sales channels, such as selling movies on flash memory for mobile phones.
"It's not about locking things up," said Marsha King, the general manager of Warner Home Video. "What we like to do is find as many ways as possible to make compelling propositions about movies, so that consumers can find exactly what works for them. What we investigate are things that consumers would like to see. It comes down to whether consumers want to do it."
Marlow's Greencine and a handful of other companies are pursuing a more indie approach, which may ultimately do as much for the future of digital distribution as the efforts of Greencine's venture-funded and studio-backed rivals will.
Greencine today has about 3,000 works available for on-demand viewing. It's in the final days of an online documentary film festival, where the winners will be shown in a San Francisco theater.
It's still a hard road, although he thinks some filmmakers with recognizable names will assent this year. The problem is that old traditions, from the windowing to eligibility for Academy Award nominations, still die hard.
"If you're fortunate enough to get a review in The New York Times, but you're only playing in New York, it seems wise to leverage that publicity with a way that people can actually watch the film," Marlow said. "We keep talking about it but haven't found anyone bold enough yet to try. But we're close."
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