THAT'S INTERTAINMENT
Can Intertainer make Web-based VOD succeed where so many have failed?

By Michael Grebb, Cablevision

Intertainer's bid to unleash a video-on-demand subscription service in the 35 top broadband markets is nothing if not gutsy. But anyone who has been tracking Internet video services (or the lack thereof) for the last few years knows that many companies have tried—and failed miserably—to make a business out of getting people to watch movies and TV shows over the Web. Corpses include the likes of Pop.com, Pixelon and many others whose names are as forgettable as those of hundreds of automobile companies that came and went at the turn of the last century.

But Intertainer says this time is different. And Jonathan Taplin, the company's ever blunt and charismatic CEO, says past attempts had common failings. "None of those ever passed the who-cares test in terms of content," he says. "I don't want to spend money to look at some dumb short film…If I'm interested in biographies, why not see the biography from A&E, a brand name? It's real content, and that makes a huge difference."

Intertainer has struggled as cable operators have delayed high-end set-top boxes in favor of more basic wares. Taplin hopes that Web-based video-on-demand will encourage more operators to deploy boxes with cable-modem functionality. "I would love to entice them," he says.

So should cable operators worry about VOD competition on the Internet? "I don't want to scare them too much," he says. "I want them to see that this can be faster, cheaper and simpler."

Taplin says reactions so far are impressive, although he won't give any early subscriber numbers yet. He estimates some eight million broadband customers in the top 35 markets, not including at least six million high-speed connections in dorm rooms. But despite recent broadband growth, his plan is still risky. After all, he wants Web surfers to actually pay for content—$7.99 per month for a select library of about 400 hours of TV shows. First-run Hollywood movies and library titles are each an additional $3.99 and $2.99, respectively.

Taplin also must take on Real Networks, which already has a base of more than 400,000 customers of its "Gold Pass" streaming subscription service and just launched its "RealOne" service to create an even more robust media platform with e-commerce and interactive features. Interestingly enough, Intertainer uses Microsoft's Windows Media Player, the main rival to Real Networks' software. It also can handle streams up to 500 kilobits per second, which Taplin says enables full-screen viewing and better-than-VHS quality. Intertainer has also undercut Real Networks' $9.95 flat fee by two bucks.

But while partnering with Microsoft (the service will be promoted on the MSN network) and beating prices are laudable, Intertainer faces a number of other challenges going forward. For one thing, there's the potential for streams to degrade along the last mile as more and more people subscribe to the service and clog networks. And the major studios from which Intertainer licenses much of its content are planning their own subscription VOD services. Will they leave Intertainer in the cold if it becomes a competitive threat?

"They've all said very clearly to the Justice Department that they plan to license this content to third parties such as ourselves," Taplin says. "Now, will they keep their word? I don't know."

He better hope so. Intertainer's future may be riding on it.