At last, movies to keep arrive on Net

By Saul Hansell
The New York Times

Published: April 2, 2006, 8:50 PM PDT



Six major studios on Monday plan to begin selling movies over the Internet that buyers can download and keep for watching at any time.

Until now, the only downloads the studios have offered have been online rentals, which can be watched only for a 24-hour period--an idea that has not caught on with consumers. But the high prices and technological limits of the new permanent downloads suggest that they may not be an instant hit.

New movies will cost about $20 to $30 to download; older titles will cost as little as $10. The downloads will be available on the same day that the DVD is released--quicker than rentals, which are put online about 45 days later and cost $2 to $5.

The studios hope that more people will want to own digital copies of movies, just as more people pay to download songs than sign up for online music subscription services that require a monthly fee. Download sales have been discussed for several years in Hollywood, but the studios have been spurred to action by the success of television programs sold through Apple Computer's iTunes Music Store.

"The Internet has really come of age now, and it is a viable method of distributing our content," said Rick Finkelstein, the president of Universal Pictures, a unit of NBC Universal, who noted that the studio's sales through iTunes have been much greater than he expected. Moreover, Universal's research showed that the majority of those downloads were watched on computer screens, not video iPods, indicating that people are willing to watch video on their PCs.

Starting Monday, nearly 300 films will go on sale through Movielink, which until now has been largely an online rental site. Movielink (owned by Warner Brothers, a unit of Time Warner; Sony Pictures; Universal; MGM; and Paramount, a unit of Viacom) will offer films from all of its owners and from 20th Century Fox, owned by the News Corp.

Another movie site, CinemaNow, will start selling downloadable versions of about 75 movies from Sony, MGM and Lions Gate, which owns a large stake in CinemaNow. Curt Marvis, the chief executive of CinemaNow, said he was talking to other studios about selling downloads.

Apple, Amazon.com and other online retailers are also busily trying to cut deals with Hollywood to sell downloads, according to several studio executives. In general, the studios want to make downloads available on largely the same terms, in as many places as possible.

"We are talking to a lot of people, and hopefully our movies will be on many other sites shortly," Finkelstein said.

For now, these movie downloads are a bit cumbersome, and the studios have limited the way they can be watched. A movie will need about 1 gigabyte of hard-drive space and will take an hour or two to download using a high-speed Internet connection. CinemaNow will allow the movies to be played only on a single computer. Movielink will allow the movie to be copied onto a DVD, from which the movie can be downloaded to two other computers, but it cannot be played on a conventional DVD player.

Nor can the movies be copied to Apple's video iPod or the much less popular handheld video players that use software from Microsoft. The studios expect to permit downloads to portable devices later this year.

For now, it is difficult but not impossible to watch the downloaded movies on a television. Some computers, like those using Microsoft's Windows Media Center, are designed to be connected to a television in the living room.

When Movielink's customers rent movies, only about 15 percent watch them on a television, said Jim Ramo, Movielink's chief executive. A third use a laptop computer, and the rest use a desktop computer.

"Fixing the 'last 10 foot' problem of getting the TV set connected to the Internet is starting to happen this year," Ramo said, referring to the resolution of technical hurdles.

The downloads do not include the bonus features, like deleted scenes and filmmaker interviews, that often accompany DVDs.

Industry executives say these limitations will dampen the appeal of downloads, particularly because the services must compete with chain stores and Web retailers that often discount DVD's to below their wholesale cost to attract shoppers. Such low-priced items are known among retailers as "loss leaders."

For example, "Memoirs of a Geisha," from Sony, will cost $19.99 to download from CinemaNow and $25.99 from Movielink. As a DVD, by contrast, it is priced at $16.87 at Wal-Mart. "King Kong," from Universal, which will cost $19.99 from both download services, is being sold on DVD for $14.96 by Amazon.com and $13.99 by Circuit City.

"They are giving the consumer less and charging more for it," said Warren N. Lieberfarb, the former president of Warner Home Video and now an entertainment technology consultant. "To me this really stacks the deck against mass consumer adoption."

One major advantage of sales over rentals online is that the studios would be free to sell a much greater proportion of their film library because there would be less conflict with the exhibition contracts between the studios and the TV networks. Online rentals are limited to the period when movies are on cable pay-per-view services, which is generally for a few months starting 45 days after the DVD is released.

Some studios, including Warner and Universal, plan to withdraw some movies from online sales in the period that they are appearing on pay TV networks like HBO.

Marvis of CinemaNow said he believed the studios had set their price for downloads too high.

"Customers expect prices to be cheaper online than in a retail environment, whether that is for diamonds or cars or airplane tickets," he said. He predicted that the studios would quickly improve the features and lower prices to appeal to consumers.