Miramax Downloads

Cable World, May 1, 2000 by Karen Brown

It is one small step into video streaming distribution for Miramax Films, but is it one giant leap toward using the Internet as a movie delivery competitor to cable?

Miramax, in the first move of its kind for Internet-wary Hollywood, has entered a partnership with SightSound.com to release a dozen movies for digital download distribution on the Web. While the specter of content creators using the Internet to bypass cable and broadcast outlets got a bit more real last week, analysts and the cable industry aren't overly concerned, yet.

Analysts say there are as many hurdles to the technology as there are opportunities for MSOs to co-opt it.

Miramax's deal with Sight Sound.com encompasses 12 films for pay-per-view digital download to U.S. cybersurfers only. The films will be digitized and encoded by SightSound. The distribution will be handled via Miramax Web sites, and the film studio will keep the lion's share of the revenue.

"We've always looked to be on the cutting edge of technology and figure we will try out this method of distribution to see how it works and to protect our copyright," said Miramax Films spokesman Matthew Hiltzik.

The Walt Disney Co. film subsidiary has opted to first try a pay-per-view format, but it may consider future movie sales via download, Hiltzik said. The specific movies and pricing haven't been determined. The first titles could be offered by year's-end.

Miramax also hasn't decided how the Internet will fit into existing distribution windows. Copyright is one reason why Hollywood hasn't jumped into Internet streaming. In the Miramax deal, movies will only be distributed on Miramax-run sites. Hiltzik said that's important not just to maintain the branding power but because "we want to maintain the quality and protect our copyright."

The deal is a big step for SightSound.com, a Mt. Lebanon, Pa.-based company that has made a tidy business selling downloadable movies. In one year, its catalog has grown to about 250 titles, offered from $2.95 to $3.95 for pay-per-view and from $5.95 to $19.95 for purchase, said Jennifer Pesci, SightSound.com's marketing director.

SightSound uses Microsoft Corp.'s Windows Media technology to encode and encrypt the movies. When compressed, the average 90-minute film will run between 100 to 200 megabytes in file size and are only viewable using Microsoft's reader.

Not surprisingly, the company is targeting broadband Internet users. While it takes about 10 minutes to download a standard 90-minute movie using a high-speed cable or digital subscriber line modem, that time balloons to nearly eight hours for narrowband users.

Users will go to the Miramax Web site, click on a title and be taken to a payment screen, where they can "rent" movies using a credit card. The movie is then downloaded to their computer along with an encryption key, which is good for 48 hours.

Customers can watch the movie several times during that period, but when the encryption key expires they will not have access to the file.

The advent of Internet movie streaming could push cable down the distribution ladder, according to Cynthia Brumfield, president of new media analyst and publishing firm Broadband Intelligence Inc.

"Cable operators certainly have to accommodate the changes -- whether it is a threat or an opportunity hasn't been worked out yet," she said. "It's certainly a threat if cable is no longer the full gatekeeper of video programming that is going into the home."

MSOs acknowledge the issue is on their radar screens. A Time Warner Cable spokesman pointed to the TW-AOL memo that prohibits the cabler from inhibiting the use of streaming on its systems.

"We've certainly discussed the issue posed by video streaming and other entertainment products -- more specifically in regard to streaming cable programming," the spokesman said.

On that point, Time Warner would not forbid networks from distributing programming via Internet download, but it could cheapen the value of that content and therefore the overall value of the network programming to the MSO.

A spokeswoman at Cox Communication Inc. said the MSO doesn't see downloadable movies as an immediate threat, saying, "It is probably not something widespread that people will be using a lot."

Streaming may also be an opportunity, she said. "In the future we will be looking at those kinds of applications with video on demand, so if anything it could be something complimentary to our service," she said.

Jupiter Communications Inc.'s Dylan Brooks, meanwhile, sees Miramax's move as a defensive one.

"We're seeing the music and film and television industries grappling with how to benefit from the Internet without cannibalizing their existing revenue streams," Brooks said.

One hurdle to widespread digital movie downloads is the strain on the broadband network, he said.

"I would be surprised if the networks capacity issues would allow for this to become a distribution trend in the Internet world," Brooks said.

Pipe ownership does become an element of control, Brumfield said.