With video-on-demand high on the entertainment industry’s hot list, Hollywood studios are joining forces and establishing new businesses to deliver on-demand content to U.S. consumers. One such project is Movies.com, a joint venture between The Walt Disney Co. and News Corp. that is expected to launch in early 2002.
“[We talked] to all the studios about the idea of creating some sort of venture to do video-on-demand, to create a service and to play a more important role in this new medium,” said Salil Mehta, senior VP of strategic planning for The Walt Disney Co. “And through that process we ended up seeing the most eye to eye with News Corp. in terms of what our key strategies were for this particular venture.”
This common vision shared by Disney and News Corp. extends to three key areas: content, delivery and brand identity. Peter Levinsohn, executive VP of worldwide pay television and pay-per-view for Twentieth Century Fox, said Movies.com will be available to consumers with all forms of broadband Internet access as well as enhanced cable systems with on-demand capabilities.
“[Our competition’s] focus is predominantly Internet-driven,” he said. “We think there are a number of ways to deliver video-on-demand into the home, Internet/broadband being one of them. We also think cable delivery, at least in the short term, is the preferred means of delivery for VOD.”
As for branding, Mr. Levinsohn said both Disney and News Corp. believe developing a distinctive brand identity is important. To do that, new releases will be made available to Movies.com on an exclusive basis for a limited period of time ahead of the traditional pay-per-view window. The service will feature live-action films and other content from The Walt Disney Studios, Twentieth Century Fox and Miramax Films as well as movie-related information and promotional video content such as interviews, behind-the-scenes footage, and movie-related games and contests.
“We see this new medium as being able to deliver a whole new kind of entertainment experience-and one that we see marries all the possibilities of what people had been talking about with digital convergence,” said Mr. Mehta, who noted that the company plans to talk with other studios about licensing their content for the service as well. “There are many different ways to get content that relates to movies. You can go to the Internet and see movie trailers on demand, see interviews with your favorite stars or background material on movies that are currently in release, and see what’s in theaters and buy tickets. What we’d like to do is have our service be able to do all that and more.”
While Mr. Mehta and Mr. Levinsohn declined to discuss subscriber projections, Jim Stroud, a senior analyst for The Carmel Group, said building the service’s subscriber base will take some time.
“There’s always real value in being the first on the block,” Mr. Stroud said. “Not only can you learn from your mistakes you also get that publicity of being first on the block. In the next two years, Disney and News Corp. are really going to be breaking the ground in the industry. Two years may be a little optimistic for it to turn the corner. But post-24-months, video-on-demand is going to enter its golden age.”
In addition to the slow roll-out process, Mr. Stroud said Movies .com may also face roadblocks with its delivery systems.
“Either way there are hurdles,” he said. “The Internet offers everyone access … but people are not used to watching long-form videos on the Internet. People are used to being entertained in front of a television set. So the cable aspect is going to be critical. How critical is going to depend on if they open it up to all sorts of movie studios, all sorts of content, and make it a true video-on-demand. I heard SVOD [defined)]as `subscription VOD,’ but it’s also `selective VOD’-in other words, you can only watch what’s being offered to you by the cable company. For VOD to be successful, it needs to incorporate more choice in programming.”
Though Disney and News Corp. are expecting positive things from this new venture, Mr. Mehta said video-on-demand will be an addition-not a replacement-to the studios’ current distribution models.
“About 20 years ago, movies pretty much had their run in the theaters and then you could see them on network television a few years down the road,” he said. “Since that time, we now have pay TV services that license the movie, there’s a home video window, there’s pay-per-view, there’s cable channels in addition to the network TV airing of a movie. That entire life cycle is something we see video-on-demand as taking an important role in-but in no way cannibalizing the others, instead sitting side-by-side and giving consumers yet another option to see our movies.”