Mouse and Viacom will try Web VOD

Movies.com to be used as delivery vehicle

Disney chairman Michael Eisner and Viacom chairman Sumner Redstone confirmed Thursday that their companies are working together on an Internet-based video-on-demand service.

Although it had been rumored for months that the two companies and possibly News Corp. were in discussions on a service that would rival one being prepped by Sony with partners including Warner Bros., none of the first three studios had officially announced or confirmed their plans. Disney had said only that it would use its Movies.com site as a vehicle for delivering movies on demand.

Eisner and Redstone confirmed during a panel discussion at a Credit Suisse First Boston media conference in New York that they have been working together to explore ways to send movies securely over the Internet. Redstone said the companies are working with a third party but would not disclose the name of the other company.

Eisner said the service would charge a monthly subscription or pay-per-view fee and would bypass the middleman in current movie distribution. Although he wasn’t specific and declined to elaborate on whether the service would bypass movie theaters, videostores or cable and satellite providers, most planned services are designed to offer movies in the traditional PPV window following homevideo. Since the delivery of movies on PPV in any form has never come close to generating the revenue of theatrical exhibition or homevideo, studios are reluctant to introduce a new technology or strategy that could eat into those businesses.

“It’s an extremely exciting potential use of the Internet,” Eisner said, noting that the company has been studying the possibility for a couple of years.

Viacom’s Blockbuster Video retailer recently broke off its partnership with Enron Corp. that was to deliver movies on demand through a closed high-speed DSL (digital subscriber line) phone line system. Redstone was as cryptic as Eisner about the service being discussed, saying after the panel, “Of course, Blockbuster does have a different point of view” from this group.

(Bloomberg Business News contributed to this report.)