A growing number of services let viewers pick what they want to watch, when they want to watch it

By Martin Peers

When Christopher Lindsell wants to watch a movie nowadays, the 29-year-old Cincinnati research scientist plops down on his couch with his wife and son and checks out Intertainer.TV ( ), a new entertainment service available via computer.

With Intertainer, Mr. Lindsell can order a movie in advance, watch it when he wants and even pause it while he gets more snacks -- all with a click of the mouse.

"We really like the convenience," says Mr. Lindsell. "We like the ability to click a few buttons, see a preview, see a brief description. We have children in the household, so we like to see whether it contains adult content. We can then sit down as a family. [We] don't have to plan ahead."

Mr. Lindsell is one of about 2,400 people in the Cincinnati area able to order movies or television shows from Intertainer, which delivers programming via souped-up telephone lines or digital cable through the computer to the TV set. Viewers can order everything from editions of "Meet the Press" or "NBC Nightly News" an hour after they're aired to recently released movies such as "Gladiator" and older films, for prices ranging from 75 cents to $3.99. The programs run like they're in a videocassette recorder: Viewers can stop, start and rewind them as much as they want within 24 hours of the initial order.

Intertainer is one of a number of emerging electronic-entertainment services that allow consumers to order movies and TV shows and watch them at their leisure. But Intertainer Inc.'s service has a head start in getting programming. The Culver City, Calif., company has signed long-term supply deals with several Hollywood studios, such as the Warner Brothers unit of AOL Time Warner Inc. and Vivendi Universal SA's Universal Pictures, while its rivals are still in negotiations on such deals. Intertainer also has deals for TV programming from General Electric Co.'s NBC, as well as several cable networks such as Discovery Channel and A&E Television Networks, which includes the History Channel and the Biography Channel.

Intertainer is a closely held company whose investors include its founders, Chairman Richard Baskin and Chief Executive Jonathan Taplin, as well as big companies like Microsoft Corp., Intel Corp., Comcast Corp. and NBC.

Right now, Intertainer is available only to a small number of people in Cincinnati, through Internet-access company ( ), a unit of Broadwing Inc., a telecommunications concern based in Cincinnati. But Intertainer expects the service to be available in many more major markets over the next few months.

Movies When You Want

The service is similar in some ways to the pay-per-view options offered on cable or satellite-TV systems, giving consumers the ability to pick a movie they want to watch for a fee. Pay-per-view, however, offers only a few movies at fixed times, whereas Intertainer allows consumers to scroll through a list of several hundred movies or TV shows and order one immediately.

Intertainer isn't offered over the Internet, like many of the other services such as ( ) from SightSound Technologies of Mount Lebanon, Pa. The company decided against making its service available on the Internet largely to ensure its movies and TV shows had the best picture quality and because of concerns from the major Hollywood studios over rampant illegal copying on the Web.

Instead, the company sends its signals over private computer networks, connecting to homes either by high-speed phone lines known as digital subscriber lines or by digital cable. Consumers can buy a device that switches the signal from their computer to their TV set. Intertainer has a Web site that offers music videos and movie trailers to promote the main service, and allows for some e-commerce opportunities, like selling albums.

Customers getting Intertainer through DSL, currently the most common way to get the service, usually would log onto Intertainer through their computer, clicking on an Intertainer icon on the DSL provider's home Web page that gets them into a private computer network. After typing in a password, customers first choose a movie genre (comedies, dramas, action) and then pick a film in that genre. Consumers find the movie they want to watch, order with a click of a mouse and get billed either through their credit card or their DSL provider. (Cable operators would likely make Intertainer available as an added feature of digital cable, available through a set-top box with remote control.)

For encrypting and playing programming, Intertainer is using Microsoft's Windows Media software. The software giant also will integrate the service in its Microsoft TV software, which is being put in set-top boxes for interactive-TV services of some cable and satellite-TV operators. That integration makes it easier for these companies to offer Intertainer.

Supplementing revenue from movie and TV orders, Intertainer aims to generate one-third of its revenue from advertising and e-commerce. The Web site allows consumers to play a music video and then click onto a site selling the related album. Intertainer also has interactive features built into some of its advertising, enabling viewers to get information and make a purchase.

Overcoming Hurdles

While consumers who have used Intertainer or other movies-on-demand services are enthusiastic, there are still big hurdles to overcome before the services are widely available.

Intertainer is facing plenty of competition, both on and off the Web. Cable operators like AOL Time Warner and Cox Communications Inc. are planning to offer their own service. Some of the Hollywood studios are planning to launch their own Web-based services, while some independent Web concerns are offering movies on demand, although with a very limited number of movies.

But Intertainer is ahead of most of its rivals when it comes to programming. Most cable operators are still negotiating long-term deals. And the independent Web-based services are finding it difficult to get movies from major studios because of worries about illegal copying. Programming's importance was highlighted earlier this month when another potential rival, a joint venture of Blockbuster Inc. and Enron Corp., abandoned its efforts because of Blockbuster's difficulty in negotiating movie-supply deals.

Meanwhile, Intertainer currently offers about 300 movies and 25 different types of TV shows at any one time, though its programming deals give it access to between 8,000 and 10,000 movies. However, making all the movies available simultaneously would be prohibitively expensive. Intertainer expects new computer-network designs and the declining cost of data storage will enable it to increase the number of movies offered at the same time within a couple of years.

Content Constraints

Also putting a crimp on movies-on-demand services' offerings are major Hollywood studios. Because of concerns of illegal copying, the studios have been reluctant to provide movies and shows. Avoiding the Internet altogether has helped Intertainer get more programming, but it has forced the company to rely on phone companies or cable operators to offer its service. And most of the programming available on Intertainer is at least several months old, reflecting Hollywood's desire not to threaten the mountains of revenue they get from video rental chains by giving Intertainer movies before they're offered on video.

As a result, Intertainer -- like other movies-on-demand services -- doesn't offer movies until after they've been in the video stores. That is likely to reduce the number of orders for Intertainer, which gives an undisclosed share of its program fee to its entertainment providers. Mr. Lindsell, for instance, says his family also rents movies from video-rental stores but would use Intertainer as his "primary source" once the service has "more diverse product" available.

Agreements with cable networks licensing their shows to Intertainer come with similar caveats. When A&E Television Networks agreed in January to provide programming to Intertainer, David Zagin, senior vice president of affiliate sales, says the deal was limited to older titles in the company's library -- which could be anywhere from a few months to a few years old. Offering newly aired programs for Intertainer's on-demand service could reduce the need for consumers to watch the networks on cable.

"We never want to give people the impression you don't have to have A&E and History" on cable, Mr. Zagin says. A&E is owned by Walt Disney Co., Hearst Corp. and NBC.

Discovery Networks has a similar stance. Discovery, a unit of Discovery Communications Inc. of Bethesda, Md., supplies "library" products, shows roughly six months old, from its networks, which include Discovery Channel, the Learning Channel, Animal Planet and the Travel Channel. These shows include Discovery Channel's "Ultimate Guide," a travel-adventure series focusing on exotic destinations like the Amazon. David Karp, a senior vice president of interactive television for Discovery Networks U.S., says the on-demand offering is a "companion" business to the primary business of running its cable networks.

"We are not going to do anything that will detract from our programming networks," he says.

NBC's deal does give Intertainer the right to offer slightly delayed editions of "NBC Nightly News" and "Meet the Press." But the agreement also gives Intertainer programming from NBC's library, including episodes of "Saturday Night Live," movies of the week, comedies and dramas. The shows could date as far back as 20 years. Indeed, NBC doesn't want to threaten the value of newer shows in the hugely profitable television syndication market, where independent TV stations buy programming, says a person close to the network.

Expansion Hopes

But even with the content constraints, Intertainer's Mr. Taplin believes the company can build a commercial service from the programming it has. Mr. Taplin says the company needs about half a million subscribers ordering at least one movie every three months to break even. It now has about $30 million in the bank, enough to keep the service running until the end of 2002, though Mr. Taplin hopes to raise more money from existing and new investors.

Reaching that half-a-million target will largely depend on Intertainer's ability to get into homes as well as beat the competition. Lydia Loizides, an analyst in the digital-TV group of New York-based Jupiter Research, says Intertainer is "very solid on the content-partnership side" and had a better than 50-50 chance of meeting its target. She notes, however, that cable operators and telephone companies are planning to "go after the same dollars that are in consumers' wallets, so who gets there first is something to be determined."

So far, most cable operators are opting to offer their own version of movies on demand, licensing the movies through an industry-owned consortium or through other services. The only cable operator to be actively working with Intertainer is Comcast, one of the nation's biggest cable operators. Comcast is currently testing just the movies-on-demand part of Intertainer's service as an additional feature on its digital-cable service. It's unclear whether Comcast will offer Intertainer once it has completed the test, say people familiar with the situation.

All that means is that Intertainer will likely have to rely mostly on telephone companies' DSL services in order for the service to grow. In Cincinnati, Zoomtown President Michael O'Brien says he plans to expand the offering to all Zoomtown's 40,000 DSL customers in the first half of this year. Qwest Communications International Inc. of Denver also is testing Intertainer's service on its DSL lines and plans to introduce it in half a dozen markets, including Seattle, Portland, Ore., Denver and Phoenix. Mr. Taplin hopes Qwest will roll it out commercially by April, although a Qwest spokeswoman wouldn't confirm the timing of the rollout.

Mr. Taplin also hopes Intertainer will be available in major markets like New York "by the end of the summer" through telephone companies like Verizon Communications Inc.'s DSL service. A Verizon spokesman says the company was doing technical trials -- offering "many" video-on-demand services, including Intertainer, free to some of its customers. The spokesman says Verizon "won't speculate" on when these services would be commercially available.

A major rollout of Intertainer would help persuade studios and networks to give up more timely content. Mr. Taplin says getting newer movies and TV shows will require "a large market of people" ordering movies so those in Hollywood can see they can make money from Intertainer and services like it. "It's an evolutionary process," he says.

-- Mr. Peers is a staff reporter in The Wall Street Journal's New York bureau.