SVOD Could Fill Up Ops' Theatrical Void

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Uncertain of their ability to acquire major Hollywood product for video-on-demand services, operators are taking a closer look the various subscription VOD services as a potential breach of the content void left by studio defections.

Inquiries about SVOD services have been on the rise in recent months, according to pay-network executives, as Hollywood studios withhold top movies from VOD providers while negotiating new distribution deals.

Buena Vista last week joined Paramount Pictures and Sony Pictures in refusing to provide its titles to cable operators and Internet companies that offer VOD.

Encore, Home Box Office and Showtime are all proposing SVOD services, which would allow operators to offer movies that debut within their premium windows on a VOD basis. Subscribers would pay an extra $3 to $6 per month to access movies, complete with fast forward, stop and rewind capabilities.

Encore subscription VOD vice president Greg DePrez said operators are embracing the concept, particularly given the uncertain Hollywood environment.

"Toward the end of last year, it was clear that operators were looking at SVOD, but only recently have we seen the first real urgency among operators," he said. "Operators are now looking at SVOD as an extension of VOD."

An HBO spokesman said SVOD has been a "hot topic" in talks with operators over the last six months, but would not give further specifics.

Representatives from Showtime could not be reached for comment at press time.

An East Coast operator confirmed a growing interest in the SVOD product.

"We are certainly looking at alternative content for VOD, including SVOD and local sports and event programming," said the operator.

Most major studios have already signed SVOD distribution deals, premium-channel executives said. Encore currently offers SVOD library titles from Buena Vista and will begin offering newer titles within two years.

Encore also has an SVOD deal with Sony, which begins in 2005.

HBO officials said that the company holds SVOD rights to titles from 20th Century Fox, Warner Bros. and Dreamworks. It also will have SVOD rights to New Line Cinema and Universal titles beginning in 2005.

Unlike SVOD, the studios have been reluctant to sign long-term VOD agreements with cable providers. The studios are also keeping an eye on the development of such alternate distribution technologies as the Internet to determine which will be the best mode of distribution-and provide the greatest financial windfall-for their valuable and often expensive product.

Although the VOD window is often five to six months ahead of the SVOD window-and many of those titles can also be offered simultaneously on a VOD basis via the Internet-industry observers believe that SVOD can generate a robust amount of revenue for operators.

Morgan Keegan & Co. VOD analyst Murray Arenson indicated services such as SVOD could play a major role if operators are unable to secure top Hollywood product in the near term.

"If the studios are slow in making the deals, then in the second half of the year, SVOD could drive revenues for operators," he said.

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