Download Solutions

Cable World, May 1, 2000 by Matt Stump

Now you see it, now you don't

The loud crash you heard last week from the West Coast wasn't California falling into the ocean.

No, it was the announcement by Miramax Films that it would put a dozen movies on the Internet for consumers to download for a fee. Pay-per-view movies on the Internet have arrived.

It is a landmark development because for the first time a major Hollywood studio, a Walt Disney Co. subsidiary no less, will use the Internet as a PPV medium.

There are plenty of caveats. Consumers will be able to download the film and only watch it during a 48-hour period. After that, the content vaporizes and can't be seen, unless you want to order again.

The content is encrypted, so consumers won't be able to make a hard drive copy and pirate it on the black market.

Miramax also isn't saying which movies will be made available or when. That means the studio hasn't figured out where to put an Internet window in the current distribution structure.

Currently, films move to the airline/hotel industry after their theatrical release. Then it is on to home video, PPV and the broadcast and cable networks.

Hollywood's become so dependent on home video as a revenue stream, Miramax won't upset the apple cart by releasing movies on the Internet before home video.

It's conceivable the studio could release the Internet movies at the same time as PPV, but I doubt it. Disney's actually been one of the more cable-friendly studios when it comes to PPV windows. With the dawn of VOD and interactivity around the corner, the company won't want to alienate operators. So the Internet window will likely follow PPV.

Miramax also wasn't saying which movies it would make available. The sure-fire hits may never reach the Net, so Miramax can maximize their value in the broadcast and cable markets. But movies that bombed at the box office yet had young adult cult appeal, are perfect Internet candidates. In that case, the Internet release could be prior to PPV. Think bad Blair Witch Project knockoffs.

It's interesting that Miramax has chosen this moment in time to jump onto the Net. Broadband capability has arrived. Broadband users could download a 90-minute movie in 10 minutes, then watch it later or even port it over to the TV. On the other hand, there are only two million broadband homes today. That's 2% of the population.

Miramax doesn't want to get caught flat-footed, like much of the music industry, as Internet rebels move to usurp their business. If there is a business to be made distributing films on the Internet, the studios want a controlling front-row seat, now.

Hollywood has long labored under a middleman distribution system for its films. In Miramax's case, it's using SightSound.com to transmit the movies, although films also will be available on Miramax's Web site.

Even with the involvement of SightSound.com, Miramax is essentially cutting out the middleman. Name a significant window -- theater, home video or PPV -- and Hollywood is sharing in the revenue.

The Internet cuts out the middleman. Disney chairman Michael Eisner talked about selling movies through the Internet for $2.95, a rock bottom PPV or home video rental price.

Under that scenario, Disney would probably share a few dimes with an Internet streaming company or Web site, and keep the rest. That's a far better proposition than current home video or PPV revenue splits.

That's what makes the Miramax story interesting for cable operators. Now a major Hollywood studio is going direct to consumers. And others are sure to follow.

What's cable's role?

Fortunately, cable's got a broadband pipe. The industry is in a dead heat with DSL modems today, although cable's got a significant head start.

The folks at Excite@Home and Road Runner should be on the phone today, offering to help Miramax market these movies. In fact, a Road Runner call might help assuage the fears at Disney/ABC that AOL and Time Warner will seek to block Disney content once their merger is complete.

The ability to have a dozen films available for download in any given month would be a strong content asset for Excite or Road Runner.

It gives mainstream consumers another reason to sign up for broadband Internet service.

It's also good news for cable operators, who need to lift modem penetration beyond 5%. Operators can't worry they might lose Miramax movies to PPV or premium services with the advent of Internet downloads. The market's going to develop with or without them.

The smarter operators will be aware of these trends and help the market develop right alongside them.