VOD on the PC
Rival companies vie to lock up a lucrative market

By Kevin Zimmerman

Video-on-demand is coming to a computer near you, thanks to broadband technology, but who will get it there? The two main competitors in the high-stakes race to get a jump on high-speed VOD are Intertainer, a small Los Angeles-based privately held company backed by such powerhouses as Microsoft, Intel and Comcast; and the unusual combination of Enron, the Houston-based utility giant, and Blockbuster.

While Intertainer, founded four years ago by president and CEO Jonathan Taplin and chairman Richard Baskin for a reported $47 million, has a head start, no one is discounting the potent alliance of Enron and Blockbuster.

Taplin, who has had a long and storied career in the entertainment business (see page 43), says Intertainer was conceived when he was looking to segue out of the movie business in the early 1990s. "Some friends of mine said that streaming video was going to change the world, and at that point I was looking at Netshow, which ran on 28.8, with a postage stamp-size screen and bad sound," he recalls with a laugh. "I told them I thought they were wrong, that people were not going to migrate to something like that. My friends ended up spending $350 million on MSN trying to become an entertainment service."

Instead, Taplin linked up with Baskin--himself a noted songwriter and record and TV producer--to develop Intertainer, which in the early days focused on broadband. "We recognized that if we could get one megabit through the pipeline we'd be on the right track," Taplin says. "So we did a prototype, and Brian Roberts at Comcast and Andy Grove at Intel invested." Within six months NBC, U S West and Sony also invested, and 18 months later Microsoft came aboard.

"Our challenge was: Can we pull together the best of American pop culture in one place, get it all on board?" Taplin adds. To meet that challenge, Intertainer has lined up licensing rights to entertainment programming from over 60 media companies, including DreamWorks, Sony Music, Warner Bros., The Disney Channel, ESPN and Fox--as well as from its investors--to build a library of 50,000 hours, 500 hours of which are available at any one time to consumers.

Intertainer's latest alliance is with Akamai Technologies; by using its distribution technology and services, the plan is to quickly move into markets nationwide. "We didn't want to run a network, quite frankly," Taplin explains. "We have great relationships with the major content companies, and we didn't want to have 150 servers in every city to maintain. Akamai does this very well; we looked at all the other companies out there and felt that they were the best."

The Intertainer service is currently available in the Cincinnati and Denver markets, with more to roll out during this winter.

In July, meanwhile, EnronBroadband Services, a wholly owned subsidiary of oil giant Enron and Blockbuster, announced a 20-year exclusive agreement to deliver a VOD service via the Enron Intelligent Network. Initial distribution providers SBC Communications, Verizon, Telus and ReFlex will offer a secure infrastructure for the service through digital subscriber line (DSL) transmissions.

Enron and Blockbuster plan to introduce the service in at least two U.S. cities by year-end, and to expand both domestically and internationally in 2001, according to Shelly Mansfield, director of media relations for Enron Broadband Services.

"We needed, in order to establish an effective business model, and, frankly, to create revenues, to get good content on a large scale that customers would want and be willing to pay for," she explains. "Enron was seeking out a partner like Blockbuster with that type of content and customer relations.

"For their part Blockbuster was looking to extend their business through technology," she adds. "It made a lot of sense to them to partner with us since we already had an infrastructure which they would otherwise have had to build from scratch."

Under the terms of the deal, Enron is providing its broadband network as the backbone for the service--handling the encoding and streaming of the video on its network, and delivering that to its "last mile" partners, which will initially be DSL supporters such as Verizon. Blockbuster will provide the content.

"We are not strictly married to DSL," Mansfield is quick to point out. "We are in talks with cable providers and other wireless companies, seeking alternative methods of delivery."

Pricing for movie content varies. For Intertainer, a first-run movie is available at $3.95 for unlimited viewing over 24 hours, with older movies going for $1.95 and TV programs costing 25 cents. The Enron service will charge $5 a movie for a period of up to 48 hours, with older movies to be offered for less. She adds that when the service is initially made available, incentives will be offered to encourage customer sign-ups.

Enron and Intertainer view each other--as well as additional competitors--a bit uneasily. "There are a lot of different companies coming out with various video-on-demand services, but so far there doesn't appear to be anyone who is achieving large scale success," says Mansfield. "Certainly we think things are lining up--the timing is right, the technology is there, and the cost of the technology has come down to make it economically feasible."

"In the next nine to 12 months, Blockbuster and Enron will be competitive, but it's going to take that long, optimistically, to build," states Taplin. "It took us that long to build our content-management systems, our digital-rights-management system and so on."

Enron doesn't seem particularly worried. "We feel our strength comes from the credibility of the companies involved," says Mansfield. "Blockbuster has a lot of brand strength and is Hollywood's number-one customer, and people know that Blockbuster has content that they want to watch. And the Enron network was created for these types of applications; it's highly scalable and can handle this kind of content."

In the meantime, Intertainer is working with both SeaChange International and Concurrent Computer. The former specializes in digital-video systems, serving video for hundreds of TV operators, and creating server and software systems that manage, store and distribute professional-quality digital video.

Concurrent will unveil its new MediaHawk 2000 video server and demonstrate its end-to-end MediaHawk VOD solution on digital platforms from both Scientific-Atlanta and Motorola at the Western Show. The MediaHawk promises improved performance, size and value to cable operators.

As might be expected, security and encryption issues are crucial to the entire VOD business. "All we think about is security--60 percent of our software-development time is spent building digital-rights management into the system," Taplin says.

The key is not to repeat the mistakes of the music industry, which was slow to react to music file-sharing services like Napster and MP3.com. While those services are currently facing possible shutdowns by the courts, the technologies they use--as well as newer, harder-to-trace ones--are already widely available on the Internet.

"If the movie business lets the horse out of the barn like the music business did, it's screwed," Taplin declares. "There is probably no way to get that horse back in the barn for the music industry--even if they do kill Napster, there will be hundreds of other servers to take its place. The movie business doesn't have to go down that road. We are fortunate that Microsoft is providing us with some really big digital-rights-management tools."

The companies are already looking beyond simple on-demand entertainment services. Intertainer, in particular, plans to advance the interactivity concept by connecting the user's TV and Internet server, allowing a viewer to, for example, watch a cooking show on-demand, and then buy the ingredients needed for the recipe.

"It's all about much more than movies-on-demand," says Taplin. "We are at a place where the customer is discontent with television as it stands today, and I think the popularity of Replay TV and TiVo has something to do with that.

"But it goes farther than that," he continues. "We're taking the attitude of the Web--'I want to see something when I want it'--back to the world of all media. If you want to see a video by some obscure band, you can also listen to song samples and even buy the record. We want to organize your media life in a way that makes sense to you."

Enron also plans to expand its service to other entertainment choices, including games and Internet services, which can be accessed through either the TV or PC, according to Mansfield.

And what about kids seeing content that their parents would rather they didn't? VOD suppliers believe they have that problem--an especially sensitive one in the wake of the highly publicized congressional hearings on objectionable material in the media--solved as well.

"We will offer a parental-control feature, which comes with the service," Mansfield says. "It's password-protected, and allows parents to program around any R-rated material." She adds that Blockbuster does not offer any content with a harder rating than an R.

With Intertainer, each family member can maintain his own separate account. "We can create a safe place in the client-server world," Taplin declares. "Kids can watch Nickelodeon or Sesame Street on demand, and parents know they're not going to start flipping through the channels and see Jerry Springer on their way to something else.

"Parents need to take responsibility, but they need to be given the tools to do so," he adds. "This is a world that's controllable and safe, and it's a world where it's you who's doing the controlling, not some government official. This whole issue can only be good for us."