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THE MORNING BUZZ: Forget the Millennium, We Have To Deal With the <I>Interregnum</I>

16 Apr, 2002 By: Holly J. Wagner

Video rental dealers, by and large, don't perceive video-on-demand (VOD) as a threat – at least not any time soon.

But if anything became clear to me Tuesday at a VOD panel discussion the Digital Coast Roundtable sponsored, it was this: some of the people in the VOD business view video rental as an obstacle to be stamped out as soon as possible.

Intertainer CEO Jonathan Taplin – who did a truly impressive job of moderating the panel – called this period in entertainment evolution an interregnum – a period between the death of one king and the accession of his successor. That, with all of the chaos and struggle for leadership it implies, is the best description I've heard yet.

Panelist Andrew Wolfe, SVP and chief technology officer at personal video recorder (PVR) maker SonicBlue , even made it clear he wants the rental window. He said nothing of his pitch to studios, networks and other content providers, but based on this I'd expect PVR makers to position their boxes as big, fat cans o' Rental-B-Gone.

That's going to mean rentailers have to fight for their market position even harder. They'll have to convince Hollywood that rental is a value proposition, which won't be easy when studios have options to provide the same content without any manufacturing costs.

Right now the specter of piracy is keeping that at bay, but if the pipers can convince studios they can make more piping content into homes than they would lose on piracy, that's big trouble on the rental horizon.

The pipers – the middlemen who supply neither content nor hardware but the pipeline to connect the two – are raring to go. They do have the technology to make it happen now and they seem almost mystified that none of the big studios want to come to their party. Rather like the cat who's confused when you aren't as pleased as she is about the dead mouse she left on your pillow.

These folks are aware of Movielink.com and Movies.com (the studio VOD joint ventures in development). They are watching those ventures closely, knowing neither effort has yet yielded a stream or download. It's generally accepted that the studios announced their plans as a sort of placeholder, to tell the public they will bring VOD before anyone else gets a foothold.

Folks like Taplin and Cinemanow CEO Curt Marvis are the ones getting that foothold. They don't have the brand recognition of a Warner, Disney or Universal so while they are trying to make their own names, a studio VOD failure could give them a bad rap.

As usual with palace intrigue, it's amazing how much fear and greed are keeping the situation in check. Hollywood's reputation as an almost medieval court system is long and it's clear the studios want to play this game by themselves. They could have VOD up and running right now if they ever get over the fear of piracy and make peace with the techhies.

That is the real obstacle to widespread, big-title VOD any time soon. Even this field holds a few bright spots of opportunity for the packaged side:

1) DVD has deviled VOD (they even look like dueling abbreviations) to the precise measure it has benefited you. Accessibly priced, ownable video frustrates efforts to get people to pay subscription fees for content and the pipeline to get it.

2) The VODers acknowledge that slowing uptake of home broadband is a barrier to homes. That part of their system is largely out of their control so their best marketing weapon is to pursue content that's irresistible enough to make people pay for bandwidth they don't want for its own sake.

3) Pipers and content providers seem to be looking at event-based content like sports and high-profile reality shows as a great way to get VOD into homes. They say the demand for content is a bottomless pit. For as long as the studios stall, the VODers can move forward with less of an impact on the packaged market. People will still rent and buy movies.

4) The set-top set is getting ready to roll out DVD-enabled boxes. Whether that's an olive branch or a Trojan horse remains to be seen. They may just be eyeing DVD as the video equivalent of a gateway drug.

5) Wolfe said people don't collect video to like they collect music, to build libraries. Uh, wrong, but thanks for playing. Apparently he has never seen DVDs, or the people who hoard them. That statement might have been true at VHS' zenith, but it's a major miscalculation today.

The next few years – the interregnum-- will be wild and woolly for this industry. The entertainment kingdom is a fief system and the lords are feuding. Technology has put more weapons in the arsenal than anybody knows what to do with. Sorting it all out will be fraught with skirmishes, coup attempts and maybe even a few conquests.

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