Another View: Warner Move Could Lower Curtain

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The rumored move of Warner Bros.' pay-per-viewoperations under the control of the studio's home-video division has more than a fewPPV executives concerned.

When Warner Bros.' PPV guru Ed Bleier retires laterthis year -- and reportedly hands the PPV baton to current Warner Bros. home-videoexecutive Warren Lieberfarb -- inevitably, the once-uncrossable line between the PPV andhome-video businesses will forever be erased.

The marriage of two competing entertainment technologiesunder one roof would be unprecedented, and some PPV executives worry that the move wouldcurtail the potential growth of cable's video-on-demand business and open the doorfor the stagnant home-video business to get a piece of VOD's promising financialwindfalls.

While revenue from home-video rentals still far exceedsthat of PPV movies, most industry observers agree that VOD will ultimately be the deliverymode by which most consumers will view theatricals in the home.

The major video chains so understand VOD's potentialthat they are already exploring ways to duplicate the consumer-friendly choice andconvenience that VOD offers.

Hollywood Entertainment Corp.'s Hollywood Video chain,through its Reel.com unit, is testing VOD movies via the Internet with Sprint'shigh-speed connections in Pacifica, Calif. Blockbuster Video has also teamed up with TiVoInc. to distribute VOD titles through Blockbuster's Internet site (blockbuster.com).

Both companies are negotiating with studios for VOD rightsand Blockbuster already has a deal with MGM for distribution of its movies.

Meanwhile, cable is also talking with studios aboutobtaining distribution rights for its various VOD trails, with the hope of rolling out thetechnology within a few years. After wading through the murky waters of traditional PPVand enhanced PPV, operators are hoping to generate significant financial returns from VODto help recoup enormous investments in digital technology.

But PPV executives argue that with the studio's PPVand VOD businesses under the helm of the home-video division, any aggressive studioefforts on behalf of cable regarding windows and marketing will be thwarted to protect thenew home-video/VOD business.

Of course, PPV studio executives are beginning to look overtheir shoulders, as well, to see if the Warner Bros. convergence philosophy spreads totheir divisions.

Understandably, most believe the current separation ofchurch and state should remain. But others believe the merging of home video and PPV couldprovide benefits for operators.

With PPV able to tap into the vast resources of thehome-video division, there may be opportunities to further market and promoteoperators' VOD agendas in the short term while video concentrates on the Internet.

Long-term, as television and the Internet eventually merge-- possibly through high-speed digital boxes in the home -- all parties will reap thefinancial benefits.

Whatever the case, both studio and cable executives agreethat change is coming. The question is whether PPV will remain standing.

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