Intertainer to get backing from Microsoft

Los Angeles Times
January 24, 2000

The $57-Million deal would extend software giant's reach and widen interactive TV services distribution network.

Microsoft Corp. plans to announce today that it will invest $57 million in Intertainer, a Culver City-based interactive TV service that's about to launch its video-on-demand business nationwide.

For the Redmond, Wash.-based software giant, the plan is the latest in a series of alliances to lock up software deals in emerging high-speed broadband networks that cable and phone companies are trying to sell.

The Microsoft alliance also would give Intertainer access to a wider distribution network that Microsoft has developed through deals with cable giants AT&T Corp., Comcast Corp., Rogers Cable in Canada and United Pan European Communications in Europe.

Those companies and other Microsoft partners such as NorthPoint and Rhythm, which offer high-speed phone connections, are adopting Microsoft's Windows TV software platform into their cable and digital subscriber line set-top boxes.

Intertainer, launched 3 1/2 years ago, bypasses the Internet to offer movies, music, television shows, videos, shopping and advertising directly to the home through the personal computer or TV using either high-speed telephone or cable connections.

As part of the investment deal, Intertainer will use Microsoft's TV software to distribute its programming.

Intertainer counts Sony Corp., Intel Corp., Comcast, US West Communications Inc., Merrill Lynch & Co. and NBC as its prime investors, and has a library of about 50,000 hours of movie, video and TV programming that it can offer on demand to home users.

Intertainer has licensing deals with every Hollywood studio except Paramount Pictures for the rights to show first-run movies when they are released to pay-per-view distributors.

"The delivery of entertainment digitally to the home on demand is here right now," said Jonathan Taplin, co-chief executive of Intertainer. "We're ready now to roll this out nationally."

It recently completed test marketing of its subscription-based service in Denver; Boulder, Colo.; New York City; and Willow Grove, Pa.

"We've been working for a long time to create the marketplace for enhanced and interactive TV. This deal fits nicely with our Windows TV platform," said Jon DeVaan, senior vice president for Microsoft's consumer group.

Intertainer will begin selling its programming within a month in Cincinnati and Baltimore, Taplin said, and will add markets as it reaches agreements with other major cable and phone companies.

Intertainer is betting that Microsoft's alliance with various cable companies will make it easier to add Intertainer to their lineups because they will use the same software system, Taplin said.

Access to broadband distribution is critical to Intertainer. To offer interactive video content, it needs the power that only cable modems or DSL lines can provide.

"This kind of interactivity is very crucial," Taplin said. "We call it enhanced television. Our notion is that they can be married into a beautiful and seamless whole."

For Microsoft, the deal is clear-cut. It is about selling software. "To the degree we can make enhanced TV and the broadband marketplace possible, consumers will demand more digital set-top boxes that run our software and demand access to our services," DeVaan said.