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Studios Release Movies for Internet

By Sue Zeidler

LOS ANGELES (Reuters) - The Internet is putting a whole new twist on box office receipts as Hollywood gears up to beam movies directly to "boxes" in people's homes.

Movie fans too lazy to run to the nearest video store or the theater, will be able to watch films when they want rather than on cable channels' schedules, provided they get a high-speed Internet connection.

Fearing a Napster-like service for swapping movies on the Web may emerge, studios like Sony Corp.'s (6758.T) Sony Pictures Entertainment and Walt Disney Co. and other big moviemakers are ramping up plans to distribute movies online.

Napster, developed by a 19-year-old college dropout, shook the world's music industry with its wildly popular service that lets fans swap songs for free by trading MP3 files.

"The movie studios want to make their films available on the Web, but they don't want to give them away," said Chuck Sims, a lawyer at Proskauer & Rose, who is defending the movie industry in a high-profile DVD hacking case.

On Wednesday, Vivendi Universal's (EAUG.PA) Universal Studios said it signed a multiyear deal with broadband network Intertainer, to deliver such as the Robert DeNiro's hit "Meet the Parents" over Intertainer's digital cable platform, starting this month.

Universal joins Miramax Films, which announced a deal with SightSound Technologies to release 12 films for download over the Internet.

"We're in the very early stages of video on demand. All the players are evaluating where they fit into this landscape," said Mark Sonnenberg, executive vice president of marketing for Intertainer.

Web security experts estimate that about 400,000 bootlegged films a day are swapped on the Net on services such as Freenet, Filetopia and the Internet Relay Chat.

Hollywood Moving Quickly, But Carefully

While Hollywood moves quickly to embrace the Internet, they have to be careful not to endanger important relationships with cable companies, pay-per-view channels or video chains, which are big revenue streams.

Studios will also need higher penetration of broadband, or high speed Internet connections like cable modem or DSL phone lines to make downloading films bearable, experts said.

Sony Pictures is planning to launch in the spring its own online movie service, MovieFly, which will rent hundreds of films from Sony, Universal Studios -- and possibly News Corp.'s Twentieth Century Fox, sources said.

Sony's video on demand model allows users to download movies from its Web site to their personal computers where they can be viewed for a fee.

Users may then burn the film to a CD and give it to a friend, who can also watch it for a fee. People can also watch these films on television if they plug their TV into their computers with a special cable, sources said.

"We believe there is an online market for entertainment, which will prove to be an important channel for consumers to access entertainment media," a Sony spokesman said, but declined to comment on specifics about MovieFly.

Alternatively, Walt Disney is said to be studying delivering films via the Internet on a wireless set-top box.

At a recent meeting with analysts and reporters, Peter Murphy, chief strategic officer for Disney, said the company was exploring ways to broadcast video services to a "box" in the home.

Murphy said that while Disney had not yet decided to move forward with this product, it was an excellent example of the new business models enabled by digital technologies.

Meanwhile, Blockbuster Inc., the nation's largest video rental chain has also launched a service in a partnership with Houston energy giant Enron to deliver on-demand movies over high-speed telephone lines.

The Blockbuster service charges $4.99 for pay-per-view movies selected from almost 200 titles listed electronically.

Blockbuster is currently carrying content from MGM, Artistan and Lion's Gate and other independent studios.

And on Tuesday it said it reached a verbal understanding with Universal Studios to carry its films.

"In my opinion, Enron and Disney are going in the right direction, television. Sony has done it quicker and more efficiently in terms of selection, but it will have to migrate the model to television eventually," said one source familiar with the different projects.

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