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DAILY NEWS: Studios Band Together for Online Film Site and Indies Ponder the Impact

DAILY NEWS: Studios Band Together for Online Film Site and Indies Ponder the Impact

DAILY NEWS: Studios Band Together for Online Film Site and Indies Ponder the Impact

by Maud Kersnowski/indieWIRE

(indieWIRE/08.31.01) — The online feature distribution company recently
formed by five major studios could offer indies a new delivery platform and
online film a much needed dose of glory. But historically when the studios
deliver their product directly to consumers, filmmakers working outside the
system suffer. Nobody knows exactly how this new consortium will affect the
landscape of film or the Internet. But the level of excitement among those
who could be affected is in direct proportion to the individual or company’s
level of connection to the studios.

Two weeks ago, the partners, Sony, MGM, Warner Brothers, Universal and Paramount made front-page news when they announced their new digital fraternity that still lacks a CEO and a name. Many sites already involved in
online film delivery, like CinemaNow and IFILM, are welcoming Hollywood’s expansion into the web distribution as confirmation that their faith in the
possibilities of the net was warranted. “When 5 of the 7 majors get together
and say that they’ve got to do this, It’s saying what we [at CinemaNow] are
doing is real,” explained Bruce Eisen, executive vice president of the
two-year old online feature distributor backed by Lions Gate. But David
founder of one of the oldest online streaming sites
and least studio entangled responded, “I question who’s bestowing the honor
of legitimacy. Sometimes accolades aren’t worth having.”

By loading movies on the web themselves, the studios are hoping to chop the
virtual head off any movie version of Napster that may be lurking around the
corner. With a launch targeted for the first half of 2002, “Sooner rather
than later,” is turning into the unnamed company’s slogan. “We’re not saying
that this is going to be the ultimate distribution platform, but it’s
definitely one of the first, and one that we felt was worth supporting,” MGM
spokesperson Lea Porteneuve told indieWIRE.

To succeed the new company needs to achieve something few people, other than
strippers, have pulled off, that is selling video content online. Most sites
draw revenues from advertising and corporate partnerships brought in by the
desirability of the user demographics. CinemaNow charges per-film or
per-month fees, but with the low penetration of broadband they’re seeing
600,000 people a month. “If they succeed it could change consumer behavior
around [paying for content],” commented Mika Salmi founder and CEO of
AtomShockwave. “This could help craft some new business models.”

David Coleman offered a less enthusiastic assessment. “Since the current
Hollywood films are so bad, how could the impact of Hollywood on the
emerging culture be anything but negative? What could they offer but what is
already prevalent in their own industry: rampant spending, lack of vision
and bad product,” he observed. “Hollywood is always slow on innovation, but
fast to control distribution,” explained Coleman, whose site’s slogan is
“Independent and damn proud of it.”

Hollywood dollars could both construct a delivery platform and market online
film to mainstream viewers, opening small movies with limited theatrical
releases to anyone with a broadband connection. “Digital distribution will
give independents a fair shake. This platform will be available to any sort
of film. The distribution barrier could go away,” explained Frank Voci,
executive vice-president of IFILM Network.

“The studios biggest concerns are security and how they are going to make
money. They don’t necessarily need to lock anybody out to have those two
things come true. In fact, the more people they get to adopt the platform
the more it’s validated and the more widely accepted,” explained Voci.

IFILM is tightly entwined with the studios, it receives advertising, content
and board members from the majors, including Yair Landau, President of Sony
Pictures Digital Entertainment
, who is credited with pulling together the
five-studio consortium.

Non-studio filmmakers will be allowed to submit their features to the
yet-to-be-named site and the partners will be able to release their films
online through other companies because the deal is based on a non-exclusive
agreement. “We’re leaving it completely open so that the service can grow
and we can get a myriad of titles to provide consumers with.
[Non-partnership film delivery] is going to be decided on a case by case
basis,” Porteneuve commented.

By not locking either the partners or the new venture into an exclusivity
contract, the studios are angling to avoid complications with the Federal
Communications Commission
over monopoly charges. Every time the studios
have established distribution outlets in the past they have ended up losing
an antitrust suit. The Feds stripped them both of their pay-per-view cable
company in the 1980’s and their hold on theatre ownership in the 1940’s.
“Everybody has definitely addressed all antitrust concerns and we think that
we’ve proceeded very cautiously and in line with all Department of Justice
criteria,” explained Porteneuve.

“This site is going to get a humongous amount of traffic. That’s good,”
pronounced Eisen. “The market place is certainly big enough, I have no fear
that this is going to demolish us or anybody else that comes along.”

Monopoly concerns arise not just from capturing a large market share, but
controlling the entire chain of a product from creation through to point of
sale. When the studios were divested of their theater chains they owned only
16% of the market, but they controlled over three-quarters of the nation’s
major, first-run houses. “This is the start of the next generation of big
companies getting bigger. It’s obviously not in place to give freedom to
independent producers, but to further enhance the market power of already
big companies,” observed Matt Davis editor and associate researcher of the
book “Hollywood Renegades: The Society of Independent Motion Picture
.” Davis is also a studio manager for Dreamworks SKG, which along
with Disney and Fox, is notably absent from the consortium.

Hollywood is due for its once every 25-years purge through antitrust suits,
according to Davis. As monopolies are broken up by the courts new voices
come to prominence.

The marketing dollars and resources focused on digital delivery by Hollywood
could shed light on smaller features also distributing online. “Granted most
people are lazy. They’ll get the marketing message from the studios. They’ll
swallow it whole and go for those movies, but I think there will be a
significant proportion who will go for the other stuff,” commented Salmi.

“Historically there’s always a backlash when there are a few dominant
players. That’s the best time for nimble, smart upstarts to try to get a
piece of the action,” observed Salmi. [Maud Kersnowski]

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