Movielink hires DBS Vet to take service online: movie studios' VOD venture sees its future in the networked home

Cable World, Feb 4, 2002 by Andrea Figler

Movielink, formed last year by Sony Pictures Entertainment, Universal Studios, Paramount Pictures, Metro-Goldwyn-Mayer Studios and Warner Bros., will look to the home-networking market in its efforts to attract video-on-demand subscribers, according to the company's new CEO, Jim Ramo.

The VOD distribution service plans to launch its Internet protocol (IP) system in the second half of the year, said Ramo, a former venture capitalist who was an executive at DirecTV from 1990 to 1997. Movielink will distribute movies from the studios via the Internet first, then work some deals with cable operators and direct broadcast satellite providers for distribution, Ramo said. He said it was too early to determine revenue splits.

"One of the areas I think that's about to explode is home networking," said Ramo, shortly after the company's board announced his hiring last week. "To the extent that there is an Internet or an IP connection to the home that gets distributed to all appliances, including any individual display device, I think it will be very helpful to the Movielink business."

The delayed VOD release of top Hollywood films to cable operators may help Movielink gain subscribers, a difficult task since cable operators already have a head start in the race to attract VOD customers, several analysts said. About 1.7 million cable subscribers had VOD at the end of last year, said Gary Farber, a cable analyst at SunTrust Robinson Humphrey Capital Markets. That total should double this year. There are no known IP VOD subscribers, he said.

"Unlike cable-based VOD, Internet VOD does face challenges related to bandwidth, compression and home gateway devices," said Murray Arenson, a digital-media and entertainment analyst at Morgan Keegan & Company, in a report. "In our opinion, the mass market will gain access to VOD through digital cable television service, as we are forecasting more than 30 million cable VOD subscribers in the next four to five years."

Brian Santo, a broadband analyst at Kagan World Media, the newsletter and data book publisher that, like Cable World, is a subsidiary of Media Central, said Movielink and Ramo will do well if they can successfully integrate Movielink with a home-networking system that downloads movies from a personal computer and transfers them to a television. Otherwise the company must convince subscribers to watch movies on their personal computers.

While Ramo would not give details on which home-networking companies he plans to work with, he said that integrated set-top boxes, such as Moxi Digital's Moxi Media Center, will be a place to start.

Before home-networking integration begins, Ramo must determine how to store, encrypt and transfer content for Movielink. He said he is willing to work with any company on a contractual basis.

Movielink's revenue model for delivering VOD content to consumers is similar to that used by cable operators. "Our revenue stream becomes a split of the retail price that the consumer has paid," Ramo said. He expects Movielink's open-access IP-based system for content delivery to open up additional commerce opportunities, such as selling movie-related products or referring consumers to related commerce links.

The movie studios, which have invested tens of millions of dollars each in Movielink, have helped boost the prospect for IP-based video-on-demand, said Stephen Ste. Marie, president and COO of Intertainer, a company that aggregates VOD content. Consumer education and marketing by Movielink will only help increase awareness about VOD in general, he said. And Ramo, Ste. Marie's former boss at DirecTV, knows how to build a good subscription entertainment business.

"He understands the aggregation of good content and how to price and package," Ste. Marie said. "He's the perfect kind of executive for a business such as I understand Movielink is going to be, which is an on-demand IP business."