Major Studios To Launch Movies-On-Demand Internet Service

Five of Hollywood’s major motion picture studios announced Thursday they were partnering to create an online movie service that will offer digital downloads of both new and old movies to broadband Internet users.

The studios behind the project are Metro-Goldwyn-Mayer (NYSE: MGM), Viacom’s Paramount Pictures (NYSE: VIA), Sony Pictures Entertainment (NYSE: SNE), Vivendi Universal’s Universal Studios (NYSE: V) and Warner Bros., a unit of AOL Time Warner (NYSE: AOL).

The studios said service will also be available to other film producers and distributors who want to distribute their films. Each content provider will independently determine its own movie release dates and pricing strategies.

Calling the new service a “significant advancement in the development of the Internet as an entertainment medium,” Sony Pictures Entertainment president and chief operating officer Mel Harris said that studios are seeing audiences turn toward broadband Internet in increasing numbers as a channel for accessing entertainment.

The name of the new service and its launch date will be announced at a later time, the studios said.

Base Camp

The studios said that with more than 10 million broadband households and 35 million broadband-enabled screens in the U.S., there is now a large enough base audience for an on-demand digital download service delivering movies to consumers.

The movies will primarily be delivered through an open-access Internet protocol-based system, the studios said. However, other means of delivery will be explored after the service launches.

“It’s certainly an ambitious move,” Matt Bailey of Webnoize told the E-Commerce Times. “The level of broadband penetration inthe U.S. is still relatively low, and even with a broadband connection it takes an hour to download a high-resolution movie.”

According to Bailey, the Internet-based delivery ofmovies also runs up high bandwidth bills for the service provider, with each movie costing around $1.30 to serve.

“The good news for the studios is that delivery costs will fall over time, with Webnoize expecting delivery costs to drop to 40 cents per movie by the end of next year,” Bailey said.

Consumers will be able to view downloaded movies on their computers or on a television connected to the computer via an ordinary video cable or radio frequency device, thestudios said.

Caution: Copyrights

The new service will provide an “appropriate level of copyright protection to enable the legitimate distribution of content on the Web,” according to the studios. They added that the latest digital rights management (DRM) software would be incorporated and updated as needed.

“We believe human nature is not predisposed towards piracy,” Warner Bros. chairman and chief executive officer Barry Meyer said. “By proactively offering a convenient, affordable, high-quality source of content, the film industry can meet the needs of the public, while successfully protecting our intellectual property as we move further into the digital millennium.”

Now Showing

Movies are already being downloaded online, through such Web sites as Cinema Now, which is majority-owned by Lions Gate Entertainment (AMEX: LGF) and is also backed significantly by Microsoft (Nasdaq: MSFT) and video rental powerhouse Blockbuster (NYSE: BBI).

A report released in June by Boston, Massachusetts-based Viant put the number of feature films being traded on the Web at 300,000 to 500,000 a day.

In July, seven major film studios filed a lawsuit in California against Johnny Deep and several business partners backing the Internet file-swapping network Aimster.

In the complaint, the studios allege that Deep and the corporations that run Aimster, including AbovePeer and BuddyUSA, have knowledge about “the massive copyright infringement occurring by and through the Aimster system.”