Hollywood Studios to Launch On-Demand Movie Service

Five of the seven major film studios — MGM, Paramount Pictures, Sony Pictures Entertainment, Universal Studios and Warner Bros. — have announced a joint venture to develop a movies on-demand service.

The companies did not say when the service would launch, nor has the service been named. Absent from the alliance are major studios owned by Disney and News Corp.

The service will securely deliver movies over broadband, the companies said. Users will be able to watch the movies on PCs or on TVs connected to PCs. The service will eventually let consumers access movies on other devices. Movies will be supplied to the service on a non-exclusive basis.

The participating studios said the 35 million broadband-enabled PCs in homes, universities and offices provide a sufficient market "to support the creation of an on-demand digital distribution channel."

Phil Leigh, vice president for Raymond James & Associates said that the announcement signaled the studios’ desire to pre-empt a video Napster, promising a legitimate online movie subscription service before illegal alternatives begin to flourish. Another motive for the service is to create a copy protection scheme when movies are distributed online. Copy protection circuitry companies such as Macrovision and digital watermarking companies such as Convera, could potentially benefit from the implementation of the studios’ plan.

But Leigh suggested that a significant delay in implementation of six months of more would be "discouraging" for investors. "We trust that at some future points the announcement will not appear to have been all hat and no cattle," said Leigh. "Since no date is provided, we infer that implementation is not going to be around the corner."