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Monday, November 11, 2002
Movie studios begin renting films on the Internet


The anticipated online movies-on-demand venture formed by five major Hollywood studios was launched Monday, marking the first time a large supply of recent, popular films are available legally on the Internet.

The effort, called Movielink, allows people to download films over a high-speed Internet connection. It is the industry's alternative to the distribution of pirated films over peer-to-peer computer networks — services such as Napster (news - web sites) that threatened the music industry.

Movielink was formed last year and is owned equally by Sony Pictures Entertainment, Universal Studios, Paramount Pictures, Metro-Goldwyn-Mayer and Warner Bros.

Other services, such as CinemaNow, offer movies on the Internet and over cable television. But none has Movielink's selection of Hollywood hits.

"The key is they put their faith in the system and they've come out with good content," said Lee Black, senior analyst Jupiter Research. "They're not coming out with second-tier stuff."

Movielink offers individual titles for $1.99 to $4.99. The compressed files average about 500 megabytes in size and take about an hour to download with a high-speed DSL or cable modem (news - web sites) connection.

The films can be watched using media players from RealNetworks Inc. and Microsoft Corp. The full-screen quality is roughly equivalent to that of a VHS tape, but suffers as the image is enlarged. Viewers can pause, fast forward and rewind the films.

The movies can be viewed an unlimited number of times during a 24-hour period. The movies delete themselves after the one-day license expires, and will sit on the computer hard drive for 30 days if not watched.

Movielink is offering the movies in file formats developed by RealNetworks and Microsoft, which have their own copy protection and compression schemes. The files are encrypted and will not play the movie if it is sent to another computer. A small program called "Movielink Manager" tracks dowloanded files and how long a user has to watch them.

Movielink's launch is being closely watched because it is the first broad test of whether consumers will use the Internet to rent and watch movies.

The industry points to the availability of pirated first-run films as proof that such a market exists.

"Research tells us that between one-quarter to one-third of broadband users are interested in movies and either haven't had the content or have had a bad experience with pirated films," said Jim Ramo, Movielink chief executive. "There is, we think, pent-up demand from this target group for a reliable product."

Analysts are not so sure, although they praise the studios for embracing Internet distribution faster than their counterparts in the music industry.

"You have to start to be in this channel or you'll lose the channel altogether," Black said. "But it's going to be a really small market. The majority of all movie watching is going to be taking place through traditional channels."

The company plans to test the service for 90 days to determine consumer preferences, such as whether people want films in letterbox or full-screen format.

Movielink has about 170 titles, ranging from the recent films "A Beautiful Mind" and "Harry Potter (news - web sites) and the Sorcerer's Stone," to library titles such as "Blazing Saddles" and "Barbarella."

Studios plan to provide films to the service about six weeks after they are released on DVD and home video.

The Walt Disney Co. and Fox Entertainment Group formed their own rival video-on-demand service but it was disbanded earlier this year after Fox pulled out, citing regulatory concerns.

Movielink has been scrutinized by the antitrust division of the Justice Department (news - web sites), but Ramo said the investigation did not prevent the venture from launching.

"The company is set up to be pro-competitive," Ramo said. He noted that studios will license films to Movielink non-exclusively. Some of the top movies, such as "Ocean's Eleven" and "The Majestic," also are available on the Internet service CinemaNow and on the cable service InDemand.

"Whenever five studios get together, I think people will always want us to be vigilant in how we conduct our business practice and we intend to do that," Ramo said.


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