Online Movie Service Launches

Five major movie studios plan to begin offering films via the Internet today through Movielink, Hollywood’s most aggressive move yet onto the Web.

The long-awaited service is designed to open a new path for movies into the home, relying on the Internet and digital bits instead of physical media such as videotapes or DVDs. Its initial lineup of about 175 movies will be available only to U.S. consumers with high-speed Internet connections, who will be forced to watch the films on computers powered by Microsoft Windows unless they can connect their television sets to their PCs.

Analysts say Santa Monica-based Movielink faces several hurdles that could take years to overcome, most notably the fact that the vast majority of consumers aren’t equipped to watch the service’s films on their TVs.

“The average movie-lover is not going to run out on Monday and try this,” said P.J. McNealy of GartnerG2, a technology research and consulting firm.

Spokesmen for Movielink and several of its Hollywood sponsors said they view the first few years as a time for experimentation and discovery, not profit.

A main goal for the studios, they said, is to avoid the fate of the record companies. Most major labels didn’t make their songs available through the Net until after online piracy became rampant, leading some observers to wonder whether they’ll ever regain control of their businesses.

“We need to start the process and get this service up and running, test it, get feedback, and spend the necessary time to perfect it,” said Rick Finkelstein, president and chief operating officer of Universal Pictures, a subsidiary of Vivendi Universal. “You want to be sure that you’re there when the demand occurs. Otherwise, there’s a risk that the pirates come in and occupy this space.”

The five studios behind Movielink -- Universal, Sony Corp.’s Sony Pictures Entertainment, AOL Time Warner Inc.’s Warner Bros., Viacom Inc.’s Paramount Pictures and Metro-Goldwyn-Mayer Inc.’s MGM Studios -- have each made a five-year commitment to the service, with an eventual investment of more than $100 million, said Yair Landau, president of Sony Pictures Digital Entertainment.

“This service is not so much about what it is today but what it can become,” said Landau, who started working on the project in early 1999. “It’s not about what the market for movies on PCs is, it’s about what Internet delivery of movies can evolve to.”

A handful of companies has already tried to deliver movies and other forms of video through the Internet, with limited success. Downloadable digital movie files are so large that it can take more than an hour to deliver them even with a high-speed connection. And “streamed” movies, which play on a user’s computer as they’re being transmitted, typically don’t offer as clear or steady a picture as a TV set.

A more serious problem has been the studios’ reluctance to let unaffiliated companies offer their movies online. One video-on-demand company, Intertainer Inc. of Culver City, recently filed an antitrust suit against several studios for allegedly withholding titles and colluding to favor Movielink. The Justice Department is examining whether the studios’ online practices violate antitrust laws.

Some of the survivors still welcome Movielink to the marketplace.

“We’re thrilled that Movielink is launching,” said Curt Marvis, chief executive of CinemaNow Inc., a video-on-demand service in Marina del Rey. “You never want to be the only horse in a race.”

Movielink CEO Jim Ramo said the service will offer every movie from the five participating studios that’s available for pay-per-view on cable or satellite TV, starting 45 days after the movies appear in video stores. Initially, about two-thirds of the movies on the service will be older titles, but about 15 new releases will be added per month, he said.

For about the same price as a pay-per-view film -- $3 to $5 per title -- users can download movies to a computer and keep them for up to 30 days. The downloading process, however, could take 45 to 90 minutes on a typical high-speed phone or cable connection. Users can keep the movies for only 24 hours once they start to play them.

Software from RealNetworks Inc. and Microsoft Corp. is designed to prevent the movies from being copied or played on any device other than the computer that downloaded them, Ramo said. When anti-piracy technology gets more advanced, he said, Movielink intends to allow customers to burn movies onto DVDs and play them on other devices.

Movielink’s backers say they’re eager to see its movies migrate from computers to TVs and hand-held devices. One of the first extensions probably will be to game consoles, particularly Microsoft’s Xbox and Sony’s PlayStation 2, which is incorporating RealNetworks’ software.

“Our expectation is, we’re going to learn a heck of a lot by launching this and getting something out in front of the consumer,” said Kevin Tsujihara, executive vice president of corporate business development and strategy for Warner Bros. “What’s going to enable the Internet to become a viable distribution channel is going to be heavily dependent on what consumer electronics companies [build] and what consumers buy.”

Movielink serves at least two other purposes for the studios. It gives them a new bargaining chip when negotiating deals with cable TV and other distributors. It also could help the studios in Washington as they urge Congress to mandate uniform anti-piracy technologies in computers and consumer electronic devices.