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UPDATE: Fox Pulls Out of Movies.com

29 Apr, 2002 By: Holly J. Wagner

Fox Entertainment Group has abruptly pulled out of the planned Movies.com video-on-demand (VOD) joint venture with The Walt Disney Company, the companies said in a joint statement.

The joint venture service, which planned to provide movies and other entertainment content on demand to consumers in the United States, was expected to be offered via either digital on-demand cable systems or to the broadband Internet.

"The partners have now chosen to pursue alternative strategies to distribute their films to the growing broadband audience," the statement said. "Fox indicated that after considering the potential regulatory process and logistical issues and carefully examining technological and marketplace developments, it had determined that the joint venture was not an appropriate initiative at this time… Fox has indicated its willingness to license its feature films non-exclusively to Disney's distribution initiatives in these areas upon negotiation of mutually acceptable business terms."

The statement seems to indicate that concerns over digital piracy and copy protection are keeping some players out of the market. But the clock is ticking for the major studios as smaller, content-hungry VOD providers like Intertainer get a foothold.

Disney confirmed it will continue to own and operate the existing Movies.com Web site, which operates as an informational and e-commerce site but carries no reference to downloadable movies.

"Disney plans to continue to license and aggregate feature film content from multiple studios to create on-demand services to be delivered through the emerging set of digital technologies, including cable, satellite, broadband Internet and datacasting," according to the statement.

But observers are skeptical as to when that might happen, given that Disney CEO Michael Eisner has led a contentious charge on Capitol Hill to control digital copies.

“We still believe that there is opportunity,” said Michelle Bergman, director of corporate communications, Walt Disney Internet Group. She declined comment on the federal Department of Justice investigation into the VOD proposals, on how the Fox pullout would affect Disney's VOD timeline, and on what consumers can expect from movies.com going forward.

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