Universal inks deal with iN Demand

Jul 23, 2001  •  Post A Comment

Universal Studios has reached a wide-ranging video-on-demand rights deal with pay-per-view network iN Demand, which is owned by four of the nation’s largest cable system operators. The landmark deal includes Universal’s theatrical motion pictures.
Until now, the reluctance of major Hollywood studios to license their theatrical film product for VOD has been the major stumbling block to the expansion of the highly anticipated new digital-cable service. Studios have feared that VOD would cut into other revenue streams, both current (home video) and future (video streaming on the Internet). This deal, which preserves Universal’s right to video-stream its product on the Internet, is likely to break that logjam.
Universal has also signed VOD content deals with two of iN Demand’s competitors, Diva and Intertainer. It remains to be seen whether two major MSOs who are not owners of iN Demand-Adelphia and Cablevision-will negotiate VOD pacts with Universal that are separate from the nonexclusive iN Demand deal.
The multiyear, nonexclusive output deal, which encompasses current and library theatrical features as well as television product, goes into effect Aug 1. As of that date, approximately 500,000 cable subscribers in six markets will be able to access Universal movies, including “The Mummy Returns” and “The Family Man,” via their digital-cable set-top boxes. Those subscribers are in Time Warner Cable systems in Austin, Texas, Tampa, Fla., and Honolulu and with Cox systems in San Diego and Hampton Roads, Va., and Comcast’s Savannah, Ga.,
The customary iN Demand PPV deal gives it the right to air theatrical films 45 to 60 days after their home-video release. The VOD component of the Universal deal gives iN Demand the right to sandwich the VOD window home video between the home-video and PPV windows, so that the VOD release will occur around 45 days after the home-video release.
By the end of the year, iN Demand expects to have “north of 1 million” VOD customers, according to Rob Jacobson, executive vice president, iN Demand. The VOD agreement with Universal is in effect a “consignment deal,” he said, under which the studio will reap fixed percentages in various product categories. iN Demand already has VOD deals with a number of other nonmajor-studio players, including Artisan Entertainment, TNT, Comedy Central, CNN, and others.
At last month’s national cable convention in Chicago, the Hollywood-studio roadblock to VOD was a topic of concern, particularly for large multiple system operators that have bet heavily on the new technology. For example, Michael Willner, president of Insight Communications, a strong proponent of VOD, said he was seeing the impact from Hollywood’s holdback of product, and that it was resulting in VOD buy rates going down. Mr. Willner predicted, though, that “at the end of the day, Hollywood is going to sell more movies [to VOD]. It’s the most efficient way to deliver movie product to consumers.” The Universal-iN Demand deal is a big first step down that delivery road.
Of the remaining studios, the cable industry expectation is that Paramount will be the toughest studio negotiator, simply because it is part of Viacom, which also owns Blockbuster. Presumably Viacom would be most affected of all the studios’ corporate owners if VOD resulted in fewer video rentals and the diminishment of the video-revenue stream, in effect just taking money out of one Viacom pocket and putting it in another.
New York-based iN Demand, which has a 28 million addressable-household national universe, has been licensing Universal product for PPV since 1994. iN Demand’s owners include AT&T Broadband, Time Warner Entertainment, Advance/ Newhouse Partnership, Comcast Programming Ventures and Cox Communications.
iN Demand offers “near” video on demand (NVOD) to digital customers, allowing them to view first-run movies with start times every half-hour. The new deal moves the start time for Universal product in a half-million homes to whenever the viewer wants to watch.