MICROSOFT IN VIDEO-ON-DEMAND DEAL

By TIFFANY KARY
Staff Writer, CNET News.com

update Microsoft and an entertainment broadband company launched a video-on-demand service Wednesday, leapfrogging efforts by AOL Time Warner and Hollywood studios to launch extensive online distribution of films.

Culver City, Calif.-based Intertainer is offering 70,000 hours of content, including films and TV programs, through a video-on-demand subscription service in the top U.S. broadband markets. The service, which launched Wednesday at the privately held company's Web site (www.intertainer.tv), is available in markets including New York, Los Angeles, Chicago, Boston, San Francisco, Seattle and Washington, D.C.

AOL Time Warner in August said it was forming an Interactive Video division, a precursor to a video-on-demand service that would meld parts of its cable and Internet businesses.

Studios in Hollywood also are planning the launch of a Web-based video-on-demand project. Two groups of studios are backing different plans, with Walt Disney and News Corp.'s 20th Century Fox team pitted against Metro-Goldwyn-Mayer, Viacom's Paramount Pictures, Sony Pictures Entertainment, Vivendi Universal's Universal Studios and Warner Bros., a unit of AOL Time Warner.

But video-on-demand efforts have had a spotty record. In the past 20 years, cable companies, media conglomerates and even phone companies have tried to launch services to no avail.

Securing rights from the major studios has been the greatest obstacle for companies trying to make headway in the video-on-demand market. When Blockbuster unveiled its trial video-on-demand program late last year, it had movie rights from just a handful of companies including Artisan, Trimark, Lion's Gate and MGM. At that time, Blockbuster was still attempting to land deals with the major movie houses.

Analysts agree that for video-on-demand to be successful, consumers must have access to the same breadth of movies they do at their local video stores.

Meanwhile, companies like TiVo, which makes digital video recorders, are providing similar services through a different technology that requires consumers to purchase a set-top box.

Intertainer's services will be delivered using Windows Media, which will provide VCR-like functions, the companies said. Other technology for the service comes from Broadwing, which provides the tools to enhance capacity and performance.

Services will be available starting at $7.99 per month once customers sign up for a preliminary "FirstPass" service. Feature films can then be purchased on a pay-per-view basis for $3.99. Intertainer will feature content from a network of partners including Universal Pictures, Warner Bros., DreamWorks SKG, NBC, A&E Television Networks and numerous others.

Microsoft said it plans to promote Intertainer later this month through co-branded Web pages on MSN. The software giant has been working on video-on-demand technology for a while; last month it announced a technology dubbed PatchBay in conjunction with online film service CinemaNow that simplifies the creation of Web-based video-on-demand networks.