Intertainer Rolls Out VOD Services

Join and View

Stephen Condon, chief marketing officer for Intertainer said that the company has been testing "packaging scenarios" including the user interface and pricing models. To first get access to the VOD service, users must first join Intertainer's subscription service called FirstPass, which gives them basic TV and music content, for $7.99 per month. Then, subscribers can buy new releases via pay-per-view for $3.99 or older movies for $2.99.

Condon compared the pricing model to cable television in where you order basic service for a low fee, while getting access to pay-per-view movies. "You can't go in and just get pay-per-view," said Condon. There is some free content, however, for those just looking for previews, but Condon said it was advantageous to have an ongoing relationship with subscribers.

By comparison, CinemaNow has a subscription service called Premium Pass for $9.95 a month, which offers users all downloadable films, although pay-per-view movies are separate. But Marvis said that unlike Intertainer, users don't have to subscribe to the service in order to watch pay-per-view movies.

Intertainer said that all videos are encoded at a minimum of 500Kbps using Windows Media Video 8 codecs, to take advantage of customers' broadband connections, especially when flipping to full-screen mode. But striving for such a high bit rate may limit Intertainer's audience, and in turn, revenues. Many home users usually don't have downstream bandwidth that is above 300Kbps, while office workers that do have the big pipes, probably won't be watching 2-hour movies during work hours. "Yes, it limits us in the short term, but we made that decision," admitted Condon.

"[With high bit rates] you knock out 90 percent of current broadband users," said CinemaNow’s Marvis. "We still have the largest variety of content available to anyone over the public Internet even for those with 56Kbps modems." CinemaNow keeps its broadband content to a relatively low 300Kbps.

Marvis said that the high bit rates are probably a function of the rights agreed to by the movie studios, saying that if he had similar deals with the studios, CinemaNow would probably also have to throttle up to the higher rates. Marvis said that he's in discussions with the studios to get top-tier content. "There's room for more than one player," he said.

But the high bandwidth requirements for Intertainer content may prevent many from tuning in. "I tried to preview it at work and I couldn’t even use it," said Black. He said such a high bit rate would be a "limiting factor" for getting users.

Hollywood Calling

Intertainer's abrupt jump into the VOD space beat out initiatives by the Hollywood studios. But MovieFly and Movies.com, the two competing Hollywood VOD services, have yet to make any significant developments. Still, the competition will be stiff since the studios control their content. Condon's not afraid that Intertainer may be shut out by the studios — which are now both partners and competitors. "The best thing for studios is for us to be successful," he said. "We look forward to competing with their services, which are not available yet."

Condon also boasted about using streaming rather than downloads, which is what the studios are currently investigating. "We believe immediacy is the real benefit of pay-per-view. If you download [a movie], you might as well go to a video store." Still, Condon said that Intertainer is also looking to incorporate some form of downloads in its service.

How many subscribers will it take for Intertainer to be successful? Condon wouldn't give any exact numbers but did say that they're looking at subscribers in the "low six figures." "There won't be millions rushing to this service in the near term," he said. CinemaNow, meanwhile, hasn't revealed how many subscribers it has yet. Marvis did say that subscribers "total in the thousands."

Overall, the market may be getting ready for the upcoming rollout of more VOD services. In a report released in May 2001, WebNoize bullishly predicted that the VOD market would generate $9 billion in annual revenues. According to the report, this would essentially signal the "end of video rental stores as we know them."

"There's an opportunity to do [VOD] directly from home rather than go to stores," said Black. "VOD is a cannibal of rentals, rather than complementary."

Jupiter Media Metrix was also optimistic in its estimates of broadband penetration. In a recently released report, Jupiter said that 41 percent of online households in the U.S. would subscribe to a broadband Internet connection service by 2006 – up from nine percent in 2000.

"Despite the recent failures of several broadband pioneers, and slower growth of the overall online population, broadband will find the masses in the U.S. shortly," said Joe Laszlo, Jupiter senior analyst. "It is absolutely critical for companies with relevant content, products and services to time their business initiatives to reach the anticipated broadband audience."