Majors hold back channeling movies to cable systems

NEW YORK — It sounds so enticing: Sprawled on the living-room couch, you can call up “The Mummy Returns” on TV at the push of a button on the remote and, in real time, pause the movie or rewind it as though it were a videocassette unspooling on your VCR.

The technology has existed for years now to plant this service — called video on demand (VOD) — in every household with a cable hookup. But only about 500,000 homes are currently luxuriating in it.

The biggest reason for the failure of VOD to find a market in the U.S. is that the major studios have held back from channeling their movies to the cable systems that would offer it.

Not being able to get their hands on Hollywood movies in a sequence that’s at least as fresh as the pay-per-view window deprives cable operators of their best promotional tool to get masses of people to order the set-top boxes.

The VOD issue vaulted back into the news last week when Universal Pictures signed a contract to sell its theatricals to In Demand, the dominant pay-per-view distributor in the country, for use in a separate window for VOD.

Five days after the announcement of the Universal/In Demand deal, Rob Jacobson, executive VP of In Demand, was buoyant with confidence, saying, “We’ve generated some momentum among the other studios” and predicting that he’d sign a VOD agreement with a second movie company in the next couple of weeks.

Larry Gerbrandt, senior analyst for Kagan World Media, is not as sanguine as Jacobson. “I won’t deny that signing Universal is an important first step for VOD,” Gerbrandt says. “But does it mean that all of the other studio dominos are going to start falling, in short order?”

“No” is the answer he’s looking for, and David Bishop, just appointed to the post of president of the MGM Home Entertainment Group, enunciates one reason for the skepticism. “Homevideo is the largest source of revenue for MGM’s movies,” Bishop says. “We have to be careful that we don’t cannibalize that revenue stream.”

Conventional wisdom states that if you can call up a movie on TV with the flick of a thumb — a movie sanctified with full VCR functionality — then why would you ever again want to subject yourself to the videostore experience, which involves annoyances like having to rewind the tape, drag it back to the store and, at least some of the time, to shell out extra bucks in late fees?

Another movie exec, who requested anonymity, says the Universal contract is not likely to presage a deal-signing orgy among the other majors — even at the favorable 60% of the subscriber dollar that Universal has wangled from In Demand for some of its movies.

The reason: A sluggish economy has curbed the buying habits of a large segment of the American people, whose enthusiasm for gorging themselves on VOD will start to taper off when they recover from the shock of their monthly bill.

Follow @Variety on Twitter for breaking news, reviews and more