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Vongo, ClickStar Shutter Download Operations

By Erik Gruenwedel | Posted: 12 Aug 2008

Starz Entertainment's Vongo download service is no longer accepting new subscribers and current members will be able to use the site through Sept. 30, according to a spokesperson. Thereafter, all movies stored on individual accounts will be deleted.

The two-year-old Vongo service offered about 1,000 major studio movies and will continue re-branded as “Starz Play,” licensed to third parties including Verizon, which is offering plans from $5.99 per month.

Separately, ClickStar, the broadband movie download company backed by Intel Corp. and founded by actor Morgan Freeman's Revelations Entertainment, quietly ceased operations.

The service pledged to circumvent DVD distribution and offered movies online two weeks after their theatrical release, beginning last year with Freeman's independent film, 10 Items or Less. Download prices ranged from $1.99 to $24.99.

Vongo and ClickStar join a burgeoning list that includes failed movie download efforts by Wal-Mart and Google — some victim to limited content offerings, others, indifferent consumers.

A recent survey of 1,975 broadband users found that fewer than 9.5% respondents regularly downloaded movies from the Internet onto their personal computers, according to The Diffusion Group.

The Dallas-based research firm said nearly 54% of respondents were completely unfamiliar with movie downloads, while 37% were aware of movie downloads but had not downloaded them.

Eric Becker, communications director with Starz Entertainment, insisted Vongo and movie downloads had been a success giving the company a foothold in electronic distribution and developing a springboard for Starz Play.

“Our affiliates are now ready to launch broadband-delivered services and, because of our experience with Vongo, we are well positioned to help them do so,” Becker said. “Starz has always been in the wholesale business, so it was a natural decision to move to Starz Play.”

Studios continue to tout the prowess of digital downloading, with Lionsgate president Steve Beeks this week saying electronic distribution generated $600 million in revenue through June and was on course to top $1 billion by the end of the year.

Beeks reiterated that with DVD, rental studios get 30% to 35% of the consumer's dollar, while in digital, the studios get 60% to 65%, and at significantly higher operating margins.

“If there is any shift from DVD rental to digital, that is actually good news,” Beeks said. “The studio portion of the consumer's dollar is going to continue to grow dramatically.”

Forrester Research analyst James McQuivey said only iTunes has managed to make money on downloads, accounting for about 80% market share.

He said the download business remained tiny and fractured, with rental, electronic sellthrough and ad-supported streaming mudding the waters as to whether any of these models are growing or if they are simply benefiting from a rush of experimentation that's helping Netflix and iTunes for now.

“I expect some clearing of the market to occur once people figure out what devices they'll be watching movies on in the future,” McQuivey said. “We're still a year out from that clearing, however.”


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