Cable executives last week were confident of obtaining critical video-on-demand film rights from the major studios, despite Hollywood's recent moves toward competing technologies.
Several studios are working on plans to deliver their top theatrical films over high-speed Internet lines, studio executives confirmed last week.
At a Western Show conference on VOD two weeks ago, Universal Television & Network Groups U.S. senior vice president of worldwide pay-per-view and video-on-demand Holly Leff-Pressman would not rule out offering top titles via the Internet, which could conceivably leapfrog over cable in terms of windows.
"The Internet is just another means of distribution," Leff-Pressman said.
In Demand executive vice president Rob Jacobson said the studios' interest in online distribution is not surprising. Hollywood has always said it wanted to keep all of its options open, even as the PPV network aggressively pursues movie VOD rights.
As a result, In Demand has not sought exclusive deals, leaving studios to explore alternative distribution technologies.
But Jacobson said cable provides studios with the most secure and dependable signal in a VOD environment.
"We think our system is the best, the safest and the most viable opportunity to generate [VOD] revenues right away," he said. "The Internet holds a number of concerns about rights protections."
Indeed, industry observers said studio attempts to offer movie product via the Internet could expose their product to the same "Napster-like" file-swapping copyright issues the music industry has faced.
"We've always anticipated competition, but we feel comfortable that cable will win the day," Jacobson said.
Nevertheless, the studios have made high demands for their valuable content. Sources close to the situation said some film companies have asked for a much greater percentage of the VOD revenue split than the 50 percent cut they currently receive from traditional pay-per-view buys.
"Some studios are asking for as much as 80 percent to 90 percent of VOD revenues, much like they're getting from the theatres," said one source.
Operators are already looking to VOD's huge revenue upside to cover their capital expenditures. Any major rate adjustment would be a significant blow to the bottom line.
"The economics wouldn't work in that scenario," said one PPV executive.
Leff-Pressman said the cable industry would also have to fulfill certain technical requirements before any long-term VOD deals could be considered.
One thing is certain: studios and industry executives all believe VOD could be cable's next killer application. Leff-Pressman said that in markets where the technology has been deployed, buy-rates average around 250 percent.
But the key to driving the VOD business would be in marketing the service to consumers, she added.
"VOD is not PPV," Leff-Pressman said. "It must be carefully marketed and explained to the consumer."