Reports say 52 million homes will be ready by 2007

NEW YORK — John Sie, chairman and CEO of John Malone’s Starz Encore, says the major studios are neglecting what could turn out to be a $6 billion-per-year revenue stream.

During an interview in which Sie took off from a speech he delivered at an on-demand conference here last week, Sie said he’s getting the word out to the movie companies that SVOD (subscription video-on-demand) for new theatrical movies could be “the killer app” that would propel their earnings on digital television and cable modems into outer space.

What’s controversial about Sie’s proposal is his contention that, over the next five years, the studios would have to start funneling their movies to SVOD a month before they reach the videostores.

“The studios would be unlikely to budge on this point,” said Larry Gerbrandt, chief content officer at Kagan World Media. Fresh theatricals generate about $8 billion per year from videocassettes and DVDs, which “comes to about 55% of the total movie revenues of the major studios,” according to Gerbrandt.

No taping of pics

Gerbrandt and Sie both stressed that the distributor of these fresh-out-of-the-theater movies would have to guarantee that SVOD subscribers could not tape the pics off the screen. Easy taping of new movies before they go into DVDs or cassettes could do irreparable damage to the videostore business.

But Sie said SVOD will not supersede the sale and rental of movies on DVD, which will still continue to thrive for the tens of millions of households that don’t have the technology in their home for SVOD.

Using the reports of various forecasters, Sie said that by 2007, as many as 52 million cable and satellite homes will be SVOD-ready. If the studios can entice many of these homes to pony up, say, $10 per month to gain instant access to a menu of movies that made their debut in the multiplexes only four months earlier, it wouldn’t take long for the revenues to soar into the billions. For their $10, subscribers would be able to watch a movie at their leisure, pausing and rewinding it in real time, just as with a pre-recorded cassette in a VCR.

SVOD access

And cable and satellite wouldn’t be the only ways for people to become SVOD customers. They could use cable modems or telephone DSLs, which would pour even more money into the studios’ coffers.

Although vidstores would still stay in business, Sie said the traditional pay-per-view model, in which people pay $3.95 every time they call up a movie, would probably end up on the scrap heap.

Jim Stroud, a media analyst and head of Blackbird Communications, agreed with Sie that cable viewers have become more comfortable with paying a monthly fee for movies on various networks rather than forking over a tariff for each PPV movie.

But video-on-demand is still in its early stages, and companies haven’t published any figures on current VOD experiments that would allow analysts to determine how well they’re doing.

“VOD still looks like a technology in search of a business plan,” said Tom Wolzien, a media maven at Sanford Bernstein & Co.

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