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Having witnessed the checkered past and recent resurrection of video-on-demand, it appears Hollywood film studios are slowly starting to get the picture-but it is still a grainy one.
With cable companies and some network providers ramping up VOD market rollout plans, nearly all of the major film studios reportedly are in talks with providers. But deals so far largely have been short-term, and for only a limited number of film titles. The video-over-DSL platform being trialed by Enron Corp. and Blockbuster Inc., for example, only will offer about 100 titles, many not even first-run flicks.
And it appears the studios remain wary as they try to focus on how VOD will impact their bottom line, bearing in mind not only failed VOD rollouts such as Time Warner Cable's failed Full Service Network in the early '90s and what they consider lukewarm returns with pay-per-view.
Not surprisingly, the studios aren't exactly eager to go on the record about VOD. A range of studios large and small contacted for this article either could not-or in some cases would not-provide a representative for comment.
But despite this information fog, some do see the studios slowly coming around to VOD.
A film-studio veteran herself, Honey Beman sees the VOD landscape now as vice president of programs and licensing for video-on-demand provider SeaChange International. She thinks movie studios are hesitating because they want to avoid what happened with pay-per-view movie distribution.
"A lot of them feel that this is an opportunity to get it right this time," she says. "They weren't pleased with what had happened previously, with how pay-per-view was managed and even going back to home video-that's another area where they feel they have lost control of the business. And this is going to be an important area, and so it's kind of like, 'Let's figure out what we are doing. Let's get it right because we may not have another opportunity to go back in so readily and renegotiate things.'"
How frequently the movies are shown is also a concern for the studios, Beman says. Scheduling clauses within pay-per-view contracts have allowed studios to dictate when, where and how often movies are shown.
"Once you get into a video-on-demand environment, there is no such thing as scheduling," she says. "It'll always be that there will be more of those 'A' titles that you haven't seen that you can watch any time you want. So they are very concerned that less-stellar titles will get lost in the shuffle."
Another likely hurdle among movie studios is the not-so-sexy bean counting needed for digital video delivery, according Russell J. Sapienza, a partner with PricewaterhouseCoopers' Global Risk Management Practice. Sapienza specializes in the information, communications and entertainment industries.
He likens the situation to online advertising, which didn't get off the ground until there was an accurate way to record click-through rates. Such systems are needed in video to confirm that customers paid for the content and actually received it.
"There needs to be this industrywide acceptance of content management standards and accountability and the settlements process," Sapienza says. "This is all about maximizing revenues, and part of maximizing revenues is not letting revenues leak."
But pressure may be mounting as the number of VOD service rollouts increases. AT&T Broadband is among the cablers delving into VOD, with service launched in Atlanta and plans to add Pittsburgh, Los Angeles and San Francisco in the near future.
Matt Bond, executive vice president of programming at AT&T Broadband, says while studios may be hesitating to release their movies, the long-term allure of VOD is powerful. He thinks the content for video on demand will follow that of digital television, where the content followed quickly in the technology's footsteps.
"It's a new technology, and some content providers are cautious with respect to new technologies," he says. "I have every faith in the customer acceptance of this technology and like most things, the people that decide to play first are the ones that end up ahead of the pack."
iN DEMAND, the pay-per-view provider jointly owned by AT&T Broadband, Time Warner Cable, Comcast Cable Communications and Cox Communications Inc., has taken the lead in arranging the content libraries for the cablers' VOD deployments. Steve Brenner, president and CEO of iN DEMAND, says that despite initial hesitation the studios are deep in discussions and most should ink deals with his service in the next three months.
"Some of them are concerned that video on demand-that there may be a variety of ways to deliver it to the home," he says. "Ultimately, this may be their one means finally of controlling the distribution of their product to the home directly. Some of them are concerned that they not let this opportunity pass by without at least investigating whether they want to be doing this on their own."
Indeed, there are reports Sony Pictures Digital Entertainment and Walt Disney Co. are in talks to create such a platform for Internet delivery. But Brenner is confident iN DEMAND's access to the cable pipe will offer safer, better product delivery.
"Right now we've got the best mousetrap," Brenner says. "Whether the other one gets better in time or is equally is good, that's yet to be seen. And even if it is perhaps better, it doesn't mean that everyone's going to be sitting there watching movies from their computer, or taking products from their computer and transferring it over to the television set."
He acknowledges, however, that going into VOD will require a better relationship than the one forged for pay-per-view. "This organization, as an organization, has not done certain things very well historically," Brenner admits. "There's certain things that we have to overcome and prove that we are going to be a lot better at, and I think we are in the process of doing that."
Ultimately, the fact that VOD offers another way for people to pay to watch movies will be stronger than the concerns they have about the technology or questions of the business impact.
"I think there are some concerns about what this means long-range and what they ought to be doing in terms of their long-term interests," Brenner says. "But my feeling is that we are in the process of overcoming those concerns and presenting them with a good, solid thought-out plan with projections as to the growth in the availability of real VOD-how many subscribers in what period of time and that there's going to be a real market here."
Beman, too, thinks the studios' fence-sitting days may be numbered. "It would be my expectation that things are going to get worked out by and large this year," she says. "I don't think the studios want to sit on the sidelines forever, and this is the year that we are going to see the rollout of digital cable."
And maybe that will be enough to get the studios, en masse, shouting "Action!"
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