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Tuesday, January 03, 2006

Provider of TV Movie Channels Looks to Expand to PC's and Video Players - New York Times

Provider of TV Movie Channels Looks to Expand to PC's and Video Players - New York TimesJanuary 3, 2006
Provider of TV Movie Channels Looks to Expand to PC's and Video Players

Starz Entertainment Group is introducing a $9.99-a-month subscription service that will allow people to download movies from the Internet and watch them on their computers, portable video players and television sets.

The new offering, called Vongo, comes at a time when movie studios and television networks are rapidly expanding their efforts to distribute their content over the Internet, experimenting with both paid and advertiser-supported models.

"We see a market out there of people who are saying, 'I want to choose what I want to watch, control how I watch it and watch it wherever I am,' " said Robert Greene, a senior vice president at Starz, which operates pay movie channels under the Starz or Encore name and is owned by Liberty Media, the company controlled by John C. Malone, the cable entrepreneur.

Since 2004, Starz has offered a movie download subscription service, called Starz Ticket, using technology from RealNetworks. But the RealNetworks software does not allow movies to be downloaded to hand-held devices. With Vongo, Starz will shift to technology from Microsoft that will allow movies to be downloaded and watched on portable video players using Microsoft's software.

Until now, portable players have been costly and have found few buyers. But that is starting to change. Lower-priced players are expected to be introduced later this week at the International Consumer Electronics Show in Las Vegas. And of course, interest in portable video has soared with the Apple Computer video iPod, and the popularity of $1.99 episodes of TV shows sold at the iTunes online store.

Microsoft will promote the Vongo service in a coming release of its Media Player software. Separately, Starz will also offer Vongo through Sony's Connect download service. Until now, Connect has mainly sold music, but executives involved with Sony's plans say that this week the company will announce an expansion to video downloads as well.

Starz, which is offering a test version of the service at, has so far not been able to work out an arrangement for Vongo to run on iPods.

This is a significant problem, said Josh Bernoff, an analyst with Forrester Research.

The Microsoft Portable Media Center devices "have not done particularly well so far," he said. "They don't have the momentum that the iPod does."

He said there would be a modest market for Vongo, mainly among people who want to watch movies on their computers, or more likely on laptops while traveling.

Apple is expected to offer some sort of expanded video offering at the MacWorld conference in San Francisco next week. While Apple is closed-mouthed about its plans, there is considerable speculation among industry analysts that Apple will introduce a device that will let people watch video from the Internet on their TV sets.

So far, however, Apple has not offered any subscription services for digital content (subscription services use technology that disables the music or video files on users' PC's and devices if they stop paying their monthly subscription bill). Indeed, Apple's chief executive, Steven P. Jobs, has been outspoken in his belief that consumers want to own rather than rent what they listen to and watch.

As a subscription service, Vongo will allow users to download as many movies as they want for $9.99 a month. They will be able to choose from an ever-changing roster of about 800 movies, including about 300 films in rotation on the Starz cable channel (mainly movies released in theaters one to three years earlier) and 500 older titles.

Several years ago, when Starz renewed its long-term contracts with studios, including those owned by Sony and the Walt Disney Company, to put movies on its cable channels, it bought the rights to use them on the Internet as well. This means that other digital services cannot offer these movies in rental or subscription services during the period covered by the Starz contract.

Most of the other studios sell their subscription rights to HBO or Showtime, which have been less active in digital distribution than Starz.

How much interest consumers have in downloading movies remains to be seen. The legal online offerings so far - Starz's subscription service and pay-per-view downloads from MovieLink and CinemaNow - have attracted relatively few customers. (The pay services have to compete with illegal free trading in movie and television files over the Internet.)

Some argue that most Internet users are interested only in short video clips, like news reports and the humorous video oddities that ricochet across the Web.

Yet Apple's early success in selling downloads of hourlong television programs, a service that began by offering the hit series "Lost" and "Desperate Housewives" for the video iPod, is changing that perception.

Mr. Greene argued that Starz had learned from its earlier experience and thought that it now had the formula to attract more customers to download movies.

Vongo will be cheaper than Starz Ticket, which costs $12.95 a month and offers only about 300 movies. Vongo will also be adding some shorter original content, like music concerts and sports coverage.

Starz will continue to offer the Starz Ticket service through RealNetworks, but will put all its promotional effort into Vongo.

Mr. Greene said that the new Microsoft-based service was easier for consumers to use and that the company's deal with Microsoft was more economically advantageous than its deal with RealNetworks, although he declined to be specific about the terms.

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