NYTimes.com Article: Hollywood Moves to Rent Movies Online

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Hollywood Moves to Rent Movies Online

By RICK LYMAN



LOS ANGELES, Aug. 16 — Five major movie studios, including some of
Hollywood's top players, unveiled plans today for a joint venture
that would allow computer users to download rental copies of
feature films over the Internet.

 The service, which will be available only to those with high-speed
Internet connections, is an attempt to get ahead of piracy problems
that have plagued the music industry through services like Napster
and which were beginning to be felt in the film industry with newer
file-swapping services.

 "I think the majority of consumers believe that copyright has
value and that if they have a pay vehicle to watch movies on the
Internet, they will pay for it," said Yair Landau, president of
Sony (news/quote) Pictures Digital Entertainment. "We want to give
honest people an honest alternative."

 The venture is also seen by many studio executives as a first step
toward true video-on-demand, when consumers will be able to watch
any movie they want, whenever they want. Initially, the films will
be available for download only onto personal computers, or
television monitors linked to an Internet connection, but
eventually video-on-demand service is expected to include cable
television and other delivery systems.

 "I think anybody who is in the movie business wants to reach the
day when you can watch any movie you want, any time you want," Mr.
Landau said. "I personally believe that launching an Internet
service like this is a necessary first step in that regard."

 The studios that will be partners in the service are MGM,
Paramount Pictures, Sony Pictures, Warner Brothers and Universal
Pictures. Noticeably absent were Disney and 20th Century Fox,
although sources close to Disney said that it intended to announce
its own video-on-demand service within 10 days. Fox issued a
statement late this afternoon saying that it, too, would announce
plans soon for such a service.

 Executives at Sony's Moviefly, an Internet movies-on-demand effort
that will provide the technical backbone for the venture, had been
saying since early this year that they intended to go online as
soon as they could.

 They delayed the move, the executives said, in hopes of persuading
as many Hollywood studios as possible to join the effort, a process
that took longer than expected as each studio brought its concerns
about pricing, security and competition with other outlets like
cable television.

 "It's very expensive to create something like this, so economics
plays a role in bringing so many studios together," said Jack
Waterman, president of worldwide pay television for the Paramount
Television Group. "And this allows a lot of companies to come
together to create a common viewpoint on the technology and
security behind the system."

 In the coming months, a chief executive will be hired for the new
venture, which will have an equal number of representatives from
each studio on its board; a name will be chosen; and the site will
be tested extensively to make sure its security system works as
promised. Then, the first 100 or so films, a mix of recent releases
and films from studio libraries, will become available, either late
this year or early next.

 The selection of films, and how much it will cost to download
them, will be left to the individual studios. Studios that are not
part of the venture will also be allowed to post films on the site.

 The average feature film is about 500 megabytes in digitized form
and will take 20 minutes to 40 minutes to download, Mr. Landau
said, depending on the type of broadband connection. Download times
would be untenable for those with slower Internet connections.
Studio officials estimate that there are 10 million households with
broadband connections, a number they expect to increase
significantly, as well as 35 million screens in offices and
colleges.

 A film will remain on a computer's hard drive for 30 days but will
erase itself 24 hours after it is first run. In that 24 hours,
consumers will be able to watch the film as many times as they wish
— pause, fast forward and perform other functions typical of a
videocassette or DVD.

 Studios traditionally release movies in a series of so-called
windows, starting with theatrical release, followed by
videocassette, DVD, pay- per-view, pay-cable networks and,
eventually, broadcast networks. Executives at several studios said
films would be released on this new system, initially at least,
only when they entered their pay-per-view window, usually months
after the theatrical release. The rental cost will be about the
same as a pay-per-view film, the executives said.

 "We are not looking to undermine DVD, which is a great business,"
Mr. Landau said.

 The new venture will be neither the first video-on-demand service
(cable operators in a few markets have offered such a service to
some customers, though the movie selection has been limited) nor
the first time that feature films have been available for download
on the Internet (companies like CinemaNow and SightSound
Technologies have offered a limited roster of films for download).
But it is the first effort involving Hollywood studios and offers
the promise of thousands of potential films.

 "This announcement confirms that film producers are eager for the
Internet to enlarge and flourish," said Jack Valenti, president of
the Motion Picture Association of America. "For the first time, in
the very near future, a broad selection of motion pictures will be
available online, protected by encryption, and delivered directly
to consumers at a reasonable price."

 In general, the studios have been hesitant to allow the
distribution of digital copies of their films on the Internet,
fearing they would be too easy to copy and share through
unauthorized sites. What has made studio executives agree to this
venture has been a growing confidence that the necessary security
is in place to prevent copying of the downloaded files.

 However, since almost all film pirating has involved the latest
releases and this service will make movies available only months
later, it is unclear what effect it would have on illegal copying.

 "That remains to be seen," said Ric Dube, an analyst for Webnoize,
a research company that focuses on digital entertainment
industries.

 "What this does is to compete with piracy more effectively than
the movie industry has in the past," Mr. Dube said. "And the real
issue isn't whether it will affect piracy, but whether the movie
industry is willing to tolerate the amount of piracy that's going
on in order to grow their market."

 The music industry, which shares parentage with many of the
studios involved in today's announcement, has also fought against
file-sharing sites like Napster, and had a harder time because of
the relative ease of downloading a piece of music.

 But movie studios have also been faced with file-sharing sites
like Aimster, which allows swapping of both audio and video files.

 "The film industry does have a better history of coming through on
plans like this than does the music industry," Mr. Dube said. "So
when five major film companies say they will use an online channel
to distribute their films, that means a lot more than a similar
statement coming from five music companies."

 The real question, though, is how many people really want to
download movies onto their personal computers.

 "To be really honest, we have no idea," Mr. Waterman said.


http://www.nytimes.com/2001/08/17/technology/17STUD.html?ex=999055436&ei=1&en=c9ee710697a10157

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