Sony Deal Aids In Demand's VOD Plans

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Two down, five to go: In Demand landed its second video-on-demand deal with a Hollywood studio last week when it said Sony Corp.-owned Columbia TriStar International Television would begin releasing movies to its VOD affiliates starting Sept. 1.

Last month, In Demand signed a similar deal with Universal Pictures in its quest to compete with Diva Systems Corp. for VOD share of mind among MSOs.

Not to be outdone, Diva affiliate Charter Communications Inc. announced last week it was launching VOD in four new markets: Greenville, S.C.; Hickory, N.C.; Slidell, La., and Long Beach, Calif.

The other studios also weren't silent during the dog days of August. The Walt Disney Co. and Twentieth Century-Fox appear to be set to unveil plans for Internet-based movies-on-demand. Published reports last week said their efforts would be tied to Disney's movies.com Web site.

Hollywood's other major studios — Sony Pictures, Universal Studios, Warner Bros., Paramount Pictures and Metro-Goldwyn-Mayer Inc. — two weeks ago announced their own Internet-based movies-on-demand service, dubbed MovieFly.

Until the past few months, studios had been reluctant to ink VOD deals with cable operators. That's because studios generally want more favorable revenue splits from VOD than they get for pay-per-view and the Internet movies-on-demand strategy. And the piracy concerns Napster Inc. created for the music industry also gave the studios some leverage in their negotiations with cable operators.

Since the studios went public with their plans to offer Web-based VOD service, In Demand has finally inked some VOD deals — whether by coincidence or not. The pay-per-view programmer is owned by AT&T Broadband, Time Warner Entertainment, Comcast Corp. and Cox Communications Inc.

"They needed to formulate some of their strategies as it related to the protection of content over the Internet," said In Demand executive vice president Rob Jacobson. Many of those same people were handling VOD negotiations with In Demand.

Jacobson hopes landing a second studio "will go a long way to get the other majors to jump on board. In six to 12 months, hopefully we'll have all the product."

And additional hit movie product on VOD should spur operators to roll out the service more quickly, said Jacobson.

In Demand expects to be in 1 million to 1.5 million homes through Cox, Comcast and Time Warner Cable by year-end.

Industry sources said In Demand's typical window with Columbia would be 45 days. Sources also indicated that studios are getting roughly 60 percent of the revenue split for VOD titles with In Demand.

As In Demand signs more studios and cable systems for VOD, it plans to increase its marketing efforts. "We're focused on promoting this product in a meaningful way," Jacobson said.

For instance, he said, "we need to get our arms around committing to purchase cross-channel spots in systems."

That would be welcome news to Hollywood studios, which, collectively, are waiting for MSOs to commit to launching VOD.

"We're trying to help push the VOD business with In Demand," said Columbia TriStar International Television president Michael Grindon. As to the timing, Grindon said that until MSOs showed enough interest to roll out servers and launch VOD in dozens of systems, there was little reason to do a deal.

"There wasn't a compelling need," he said.

Grindon expects that VOD and the new proposed Internet movie-delivery service would fall within the same general PPV window.

"The new technology will be a different means of delivery within the same window," he said.

Whether VOD windows shorten to 30 days from home video will depend on how big a business it becomes, he said.

At the same time, VOD is helping studios to sell library product, since at present few hit movies are available via the platform. "People are taking the opportunity to sample a lot deeper," Grindon said.

The expanded Diva launch within Charter gives the VOD provider access to 1.7 million homes.

"Our early research has already shown that Charter Digital Cable customers are experiencing great value through our VOD offerings," Charter senior vice president of corporate development and technology Steve Silva said in a statement.

In other VOD news, SeaChange International Inc. announced a 7-percent increase in quarterly revenue, to $27 million from $25.4 million reported a year earlier. The company was bolstered by increased VOD sales.

VOD-server revenue amounted to $10.9 million in the quarter, said president and CEO Bill Styslinger.

SeaChange posted a net loss in the quarter ended July 31 of $684,000, compared to a profit of $330,000 for the year-earlier period.

The company said it shopped 527 video servers in the quarter.

If Time Warner, Comcast, Adelphia Communications Corp. and Cablevision Systems Inc. launch VOD on the systems they've previously announced, SeaChange said its server technology would be in front of 7.6 million basic subscribers by year-end.

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