In a major coup, pay-per-view programmer In Demand has reached a video-on-demand output agreement with Universal Studios.
The deal, effective August 1, is the first VOD deal from a major studio for In Demand, and a critical first step toward advancing its efforts to become the industry's primary VOD-programming supplier.
Neither party would reveal specific terms for the deal, disclosed last Friday, but sources close to the situation said that the studio will receive 60 percent of each VOD purchase. Currently, studios receive about 50 percent of each PPV buy.
"We wouldn't have done a deal that did not make economic sense," said In Demand executive vice president Rob Jacobson.
The agreement, which also includes a renewal of pay-per-view rights, includes such recent Universal titles as The Family Man
and The Mummy Returns, as well as library fare like The Sting
and Do The Right Thing.
Jacobson called the agreement "historic" for both In Demand and the cable industry, which is eyeing VOD as potentially its pre-eminent digital-cable revenue source.
"It's an important deal for In Demand and an equally important deal for the industry, in that it allows us to provide a consumers access to a studio on-demand experience," Jacobson said. "It also gives cable a product that differentiates itself from its competitors in the [direct-broadcast satellite] business."
Universal Studios Television Distribution senior vice president of worldwide pay-per-view and video-on-demand Holly Leff Pressman said in a prepared statement that the studio is "delighted to expand our relationship to now include VOD rights."
The agreement will also give In Demand PPV windows for Universal product that are "25 percent" earlier than traditional PPV windows, Jacobson said. On average, there is currently a 45- to 60-day window between a movie's home-video and PPV debuts.
Universal's VOD deal with In Demand is not exclusive. In fact, Universal also has VOD output deals with Intertainer Inc. and Blockbuster Entertainment.
While Universal is clearly In Demand's biggest VOD partner to date, the network has inked other VOD-content contracts. Last month, the PPV purveyor reached a three-year, VOD output deal with independent studio Artisan Entertainment.
In Demand also has VOD deals in place with a number of basic-cable programmers, including Court TV, Comedy Central and Discovery Networks U.S.
But operators clearly view Hollywood product as the key driver of VOD sales.
With a Universal deal in hand, In Demand will seek to secure similar distribution pacts with other studios. Jacobson confirmed the network is in discussions with the other Hollywood studios, although no deals are imminent.
"We hope the [Universal deal] will generate momentum for our ongoing discussions," Jacobson said.
But Hollywood sources said In Demand will have a much more difficult time convincing the rest of the studios to fork over valuable movie product for VOD distribution.
While In Demand has been able to offer some Warner Bros. and New Line Cinema content on a title-by-title basis, neither it nor any other VOD-content distributor has been able to secure any VOD movie rights from Paramount Pictures, Buena Vista or Sony Pictures.
Some studios have questioned In Demand's role as a middleman in the evolving VOD business. They've also disagreed with the programmer on VOD revenue splits: the studios are looking to keep as much as 70 percent to 90 percent of revenue per buy, while In Demand wants to secure a small slice of that pie for itself.
While In Demand and the studios negotiate, cable operators Charter Communications Inc. and Insight Communications Co. are launching VOD services, aligned with Diva Systems Corp. for studio product. Other operators, like Time Warner Cable, have negotiated deals with studios on a title-by-title basis.