VIDEOS ON DEMAND ARE NEXT
Blockbuster and 2 other companies team up to provide 'no-return' movies on broadband

By Marni Leff
Seattle Post-Intelligencer Reporter

First came video rental stores, then came pay per view, and most recently, along came services like Kozmo.com, offering movies at your door in under an hour.

But a handful of companies and movie studios -- including Blockbuster Inc, and Intertainer, a Los Angles-based Web entertainment provider -- are working on something even better: video on demand.

Seattleites are among the first to have access to the new services.

About 40 people in one Seattle apartment building are currently participating in Blockbuster's trial program, testing out the technology that delivers movies via broadband Internet connections. Intertainer plans to make a similar service available to Seattle area Qwest DSL subscribers this spring.

The Blockbuster trial is an effort that involves three companies: Blockbuster, Houston-based Enron Broadband Services and Seattle's ReFlex Communications. Blockbuster secures the films and then Enron turns them into digital files, stores them on servers in Texas and sends them out over broadband lines to Seattle. ReFlex provides the last mile and last foot -- streaming for any of more than 150 movies into set-top television boxes in customers' apartments.

"Our mission fundamentally is to provide entertainment at home, however people want it, over whatever technology is viable," said Steven Pantelick, chief operating officer for Blockbuster New Media. "The way Blockbuster looks at it, we provide the core aspects of the business proposition and rely on tech providers to fill in the gaps that exist."

So far, the only Seattle customers participating in the Blockbuster trial are confined to one downtown apartment complex. ReFlex is looking to expand the program to other buildings and says it will start offering the video on demand service to the Centennial, a Belltown building, by the end of March. More than 100 Portland ReFlex customers are also participating in the trial.

"Bandwidth is the reason that applications like video on demand are possible," said Dennis Muse, president and chief executive of ReFlex. "Bigger and bigger pipes have enabled applications that have not worked well in the past."

ReFlex's system, Muse explained, allows viewers to watch movies much the same way that they would on a VCR. Unlike with pay per view or other forms of cable movies, viewers can stop, fast forward, rewind and even replay the films.

"If the phone rings or you want to stop the movie for whatever reason, you can," said Jim Nichols, a participant in the trial. "The difference is you don't have to deal with renting the movie and you don't have to return it and you don't have any late fees."

Through the Blockbuster trial, Nichols gets two free movies a week. After that it costs $4.99 per movie. Nichols said he usually watches about four movies a week. He has access to each film for about a day after he orders it.

"I had Direct TV and I've tried pay per view," Nichols said. "But the problem with those services is the schedule. With this system you do it on your own schedule."

But executives at Intertainer say that their company offers a better selection of films -- 400 titles on any given day, rotated from a library with more than 10,000 titles -- that can be viewed using less bandwidth than the Blockbuster service requires.

The company, which already offers its service in markets in New Jersey, Pennsylvania and Ohio, expects to begin delivering content in Seattle by April.

"We had the system that Blockbuster is using three years ago," said Jonathan Taplin, Intertainer president and chief executive. "We abandoned it because it's impractical for mass distribution. What they have is a nice little trial. It's not a deployable system."

Taplin said that the Blockbuster system requires specialized companies, such as ReFlex, because standard DSL and cable connections don't have enough bandwidth to accommodate the large files that contain those films.

Blockbuster said, however, that the higher bandwidth allows them to deliver films with higher quality resolution films.

Several movie studios also are looking to begin providing their films directly to customers through their own video-on-demand services.

Sony Pictures Digital Entertainment has already completed DSL and cable trials, as has been widely reported. A source close to the project said that Sony hopes to begin deploying the service in the spring, but was unable to say when specific markets, including Seattle, would gain access to the movies.

Yet, Blockbuster said that it would have unique advantages because its name is so widely associated with home entertainment.

"We have nearly 100 percent brand recognition and are the obvious leader in the rental space," Pantelick said. "We believe that we are either leading the pack or at the lead in providing video on demand. Fundamentally, the most important asset, and one that none of these other companies have, is a brand. Everybody associates Blockbuster with consuming entertainment at home."