Walt Disney and News Corporation have formed a video-on-demand joint venture.
Walt Disney and News Corporation have formed a joint venture, Movies.com, to distribute movies over cable TV and the Internet in the US, effectively offering a video-on-demand (VoD) service. The venture will initially offer movies from Disney and from News Corp’s Fox studio, although it will also be made available to other film companies.
It is a fairly predictable move. Sony, Warner, Universal, MGM and Paramount last month formed a similar Internet distribution network called Moviefly. Movie companies have seen how record labels were caught out by online song-swapping services such as Napster, and want to make sure that their own systems are in place by the time high-speed Internet access is popular enough for video equivalents to threaten their revenues.
Movies.com is wise to integrate its service directly with digital cable systems, since watching a movie on a PC screen just isn’t as good as watching it on your TV. However, while Moviefly hasn’t yet come up with cable distribution plans, with cable giant AOL TW as a partner it is certain to do so before long.
The new service won’t have an easy life. Moviefly has a wider range of content and is backed by Sony’s technology. And the existing cable operators, who already have strong relationships with their customers, will also put up strong competition.
However, the playing field will change if News Corp finally buys satellite provider DirecTV. Last month’s integration of DirecTV parent company Hughes’ DSL operations into the satellite firm improved its potential offering to the same levels of service that cable operators can provide. With the right set-top boxes, consumers will be able to watch scheduled and near-VoD services by satellite, and download true VoD offerings through DSL. Movies.com’s services would fit extremely well here.
It has long been clear that News Corp needs DirecTV if it is to be a truly global force in satellite. Now, the deal is also important to Movies.com’s success. News Corp needs to complete the DirecTV acquisition.
