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Intertainer adding patents to its plate

May 14, 2001  •  Post A Comment

Broadband video-on-demand service provider Intertainer has quietly stepped into the intellectual property arena, hoping to keep the new initiative under wraps.
Having watched its programming-guide cousin Gemstar-TV Guide tarnish its image during the past several years by vigorously defending its dozens of patents through aggressive litigation, Intertainer is surreptitiously embarking on its new intellectual property journey.
Earlier this year, Intertainer was awarded its first patent from the U.S. Patent and Trademark Office-a slice of intellectual property that Intertainer is expecting to build on later this year, with several more approvals expected from the government clearinghouse. The patent, which a group of inventors including Intertainer CEO Jonathan Taplin originally filed for in 1998, grants Intertainer rights to distribute over broadband networks “digital content” that is “periodically and automatically refreshed.”
The recently approved, broad-reaching broadband entertainment patent is separate from the licenses Intertainer has obtained from entertainment studios such as Universal, Warner Bros. and A&E Television Networks to stream the contents of their programming libraries.
Intertainer is protecting those studios’ content rights from would-be pirates by channeling its video-on-demand service over closed broadband networks. Such systems are guarded via the digital-rights management technologies embedded in Microsoft’s Windows Media video player.
Aside from Intertainer, a short list of other technology companies, such as Fujitsu and Hewlett-Packard, has also been awarded VOD patents-albeit for narrower pieces of the VOD technology pie than the Intertainer patent covers.
Even if Intertainer’s video-on-demand patent strategy continues to build momentum, Intertainer faces the same obstacle that Gemstar-TV Guide once confronted as an outsider trying to gain a foothold in the incestuous cable industry.
One of Intertainer’s most powerful competitors, iN Demand, is jointly owned by multiple system operators AT&T, Time Warner, Cox and Comcast. Intertainer, which has had as much success as any video-on-demand service in establishing relationships with Hollywood movie studios because of Mr. Taplin’s connections as the producer of hit films “To Die For” and “Mean Streets,” has to date partnered with only one multiple system operator-Comcast.
Cable operators, which have traditionally used competitive market economics to their advantage by doing business with a wide assortment of third-party service vendors, appear hesitant to place their treasured video-on-demand businesses in the hands of strangers.
“iN Demand will be our provider of movies for video on demand,” said Time Warner Cable spokesman Mike Luftman. “We’re working with them on this exclusively.”
Faced with the long odds that any venture-backed operation contends with in an austere funding environment, as well as the peculiar network of relationships that govern the VOD business, Intertainer is hedging its bets by steering its businssbusiness in several uncharted directions.
Later this year, Intertainer is hoping to introduce its video-on-demand service within the next several months on Microsoft’s MSN Internet portal. According to an executive familiar with the situation, Intertainer wants to launch its VOD offering later this year within MSN’s portal that appears on Baby Bell telco Qwest’s DSL service in six markets-Denver; Minneapolis; Phoenix; Portland, Ore.; Seattle; and Salt Lake City. Yet to be determined is how prominently the Intertainer service will be displayed on Microsoft’s Web gateway.
Representatives from Microsoft and Qwest would not confirm or deny that Intertainer’s service would be featured on the MSN portal in those markets.
The VOD provider is also considering offering a subscription-based service that would bill viewers for a monthly lump-sum charge. At present, Intertainer’s audience is billed for the films and programs from its library in a piecemeal fashion. iN Demand also follows the one-program-at-a-time, or “transaction” VOD model for billing, while pay-per-view cable networks Showtime, HBO, and Starz! Encore are developing subscription-based VOD services that will be billed on a monthly basis.
“I think at this stage the jury is still out on how [cable] operators are going to proceed with subscription VOD,” said iN Demand spokesman Joe Boyle.
Time Warner Cable, for one, is planning to start a trial of HBO’s subscription VOD service within the next few months. But, iN Demand’s Mr. Boyle acknowledged that it would be difficult for any VOD provider other than Starz! Encore, HBO, or Showtime to start a subscription VOD service, because those cable networks hold contractual rights to use some entertainment studios’ content for subscription-VOD purposes, and any new competitor in the subscription VOD space would risk replicating the services being planned by those strongly branded pay-per-view cable networks.
“No cable operator would launch another pay TV service,” Mr. Boyle said. “There would be too much duplication.”