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At Last, A Look at Hollywood's Missing (Movie) Link

11 Nov, 2002 By: Holly J. Wagner

If you build it, will they come?

That's the question five studios hope to answer this week as Movielink.com, the studio-backed Internet video-on-demand (VOD) service announced more than a year ago, was scheduled to start offering full-length feature films via Internet download.

So why haven't we heard more about it? Because there has been very little advance publicity -- and the powers at Movielink.com wanted it that way. The debut this week is what CEO Jim Ramo calls a “soft launch,” a very quiet start to one of the biggest topics of industry speculation in years, kept closely guarded in a studio office complex with security like Fort Knox.

“We're not yet going to do a major consumer outreach,” said Ramo. “This is very much a preview period, a time of creating a dialogue with consumers, finding out who they are, what their demographics are … and there are a lot of questions relating to their satisfaction.”Between now and the beginning of next year, the studios providing movies will test pricing, preferred aspect ratios, scalability and marketing approaches, all online. In January, the world may see advertising on other media.

But starting this week, users may browse trailers and download movies on the site. Films will be offered with DVD-style extras, to the extent that licenses allow. Movies will be priced between $2.99 (catalog) and $4.99 (new release) each. Movies are offered by download, a process that takes anywhere from 20 minutes to three hours, depending on the consumer's connection speed and the volume of Internet traffic at the time, execs said.

“Right now, the idea of having a transaction model gives the consumer the ability to come into Movielink for free and sample, look at the trailer, look at clips,” Ramo said. “If you want to just try a movie, it's not $20 a month. It's just $4 to try it. While that may, in the long term, not be the end-all business model, it's one we think encourages early adoption.”

Streams will not be offered, at least until streaming technology and the supporting connections are more robust.

“We want to brand ourselves with reliability,” Ramo said. “Downloading provides that today and streaming doesn't.”

Service Positioned as Online Rental
After the flashy logo, the first thing video retailers will notice about Movielink is how the service is positioning itself as online movie rental. The site says as much at the front door and at every transaction opportunity: The button to choose a movie doesn't say “buy,” it says “rent.” Users will have most of the features available with packaged video, including fast forward, rewind and pause functions.

The movies offered are ‘A' titles -- Harry Potter and the Sorcerer's Stone, A Beautiful Mind and Ocean's Eleven are among the 175 or so titles offered for download. But so far, at least, titles offered on the service are in the pay-per-view window.

“We've got, fortunately, a flexible business model, a flexible platform, and these are things we can look at,” Ramo said. “On the other hand, we don't have flexible licenses. They are transaction-oriented licenses. … [W]e get a revenue-share on a commerce transaction.”

After a download, the consumer may keep the digital rental for up to 30 days, but opening the file will trigger a doomsday clock that terminates the file 24 hours after it's first launched for play. The movies will be playable on Microsoft Media Player 9 or RealNetworks' RealPlayer -- a possible marketing advantage because an estimated 90 percent of PC users have at least one of those players already installed. The player companies also satisfied the studio and Movielink hierarchies that their copy protection is strong enough to move forward. The PPV window also makes Movielink less of a piracy target.

“Our content isn't as valuable as a theatrical window, so I'm not sure there is a big incentive to hack us,” Ramo said. “We're after DVD. If you want to be a hacker, you can hack into DVD today.”

Movielink users will need a PC (the service is not compatible with Mac systems) running Windows 98 or a higher version on a system equipped with a Pentium 3 and a 300 MHz processor. Consumers will have to download a Movielink Manager software interface, but it takes little room on the hard drive and plants itself on the desktop for easy access.

Most homes with broadband access have equipment of that caliber, but just 17 percent of Internet homes in the United States have broadband connections, thus limiting the size of the potential customer pool, which Ramo estimated at about 15 million households and 10 million dorm rooms, about 25 percent of which are deemed “likely Movielink consumers.”

Few Competitors to Challenge
“Really what we're doing is getting ready to launch what we hope is a very long-term business, and one where we are using the Internet as a brand new channel of delivery for theatrical motion pictures,” he said.

Not everyone would agree with that phrasing. Smaller fish in the Internet VOD pond have been operating for years. Among those, Intertainer.com has sued Movielink and its backer studios -- MGM, Universal, Paramount, Sony and Warner Bros. -- contending they have conspired to keep studio content out of its hands, and Cinemanow.com, majority owned by Lions Gate, which offers a broad selection of independent films and is in trial deals with Universal and Warner to offer some of their titles.

“Our space can use this kind of validation and marketing lift to raise consumer awareness of the benefits today and in the future for broadband-based IP delivery of movies,” said Cinemanow.com CEO Curt Marvis. “We are convinced the market is ready to take off and there will be room for more than just one player [Movielink] in the same way that there is in home video, broadcast TV, etc. We subscribe to the theory that rising tides raise all boats and see 2003 as the year in which that ‘tide' really starts to come in.”

Movielink's best-financed potential competitor, Disney's Movies.com, did not return calls seeking comment about when that service might live up to its name.

The federal Department of Justice, which has been conducting a civil investigation of studio-backed VOD ventures for a year, is keeping mum on its findings and what the debut will mean to its investigation. A spokesperson declined to comment for this article.

“Studios sell to us on a nonexclusive basis,” Ramo said. That and studio-set prices and release windows should keep the service out of antitrust hot water, he said.

With a wide open future, Ramo hopes Movielink will “help crack the chicken-and-egg problem”: Will studio content drive more broadband subscriptions, or will it take greater broadband penetration for studio content over the Internet to catch on?

Internet movie piracy has led some observers to suggest consumers will take a “why buy the cow when the milk is free” attitude toward the service. Ramo believes quality will be the major point of distinction.

“We serve bottled water in a community that can get tap water,” Ramo said. “Fortunately, the tap water is kind of dirty, so we have the ability to differentiate what we are doing from what you can get on a pirate site. A lot of the differentiation has to do with the risk of what you are getting

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