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Video-on-Demand Service Expands into Japan
By Gretchen Hyman

January 30,2003

CinemaNOW, one of the few IP-based Video-on-Demand (VoD) subscription services still standing, made deep inroads into the Asian broadband market this week through a licensing agreement with Media Design Institute (MDI), a Japanese and American-based multi-media company.

CinemaNOW, a three-year-old company that is majority-owned by Lions Gate Entertainment, Microsoft, and Blockbuster, has managed to stay afloat against a tide of licensing restrictions imposed by some of the major Hollywood studios, while competitors like Intertainer.com, Movies.com, Digital Entertainment Network, and AOL Time Warner's Entertaindom have long since shuttered their doors, and newcomers like MovieFlix and Starz on Demand have not yet found their niche.

CinemaNOW's agreement with MDI is expected to give its film library significant distribution reach into the rapidly growing Japanese broadband subscriber pool.

As part of the agreement, CinemaNOW's movie content will be distributed through NTT-DATA, a Japan-based broadband content provider and its affiliate Solid Exchange, via ADSL, FTTH (Fiber To The Home), Broadband network PCs and set-top boxes, the company said.

NTT-DATA was formerly a part of Japan's Nippon Telegraph and Telephone Corporation, but became a separate entity in 1988.

According to CinemaNOW's CEO Curt Marvis, out of the company's 3,000-title film library, a subset of movies with international distribution rights will be translated with Japanese subtitles. MDI will start by distributing 250 titles, Marvis said.

CinemaNOW's deal with MDI is part of a larger strategy to tap into broadband markets in Europe and other parts of Asia through the licensing of its proprietary PatchBay technology, a complete platform based on Microsoft's Windows operating system for the secure pay-per-view delivery of movie content and the management of digital and territorial rights protection, as well as user profiling and report generation.

CinemaNOW has previously announced PatchBay licensing agreements with Singapore's Walker Asia, Chunghwa Telecom in Taiwan, British Telecom in the United Kingdom, Freeserve, the Wanadoo Group's ISP-Portal in the U.K., GOL Philippines, NextGentTel in Norway, Purocine in Latin America, and company representatives are in discussions with broadband providers in other international territories as well as the U.S.

"The growth of broadband in Europe and Asia is outstripping what is going on in the U.S," said Marvis. "Many movies are given the green light because of the foreign dollars that can be made and we feel that there is a huge opportunity to generate revenue out there."

One of the pioneers of IP-based VoD services, CinemaNOW boasts a customer base of one million users per month and gets the bulk of its movie content from licensing agreements with Universal Pictures, Warner Bros., Lions Gate Entertainment, Lot 47 Films, Vanguard Cinema, and Visionbox Media.

The company maintains a small staff of around 13 people, only two of whom are needed to maintain the CinemaNOW Website.

Unlike it's primary competitor Movielink, which has backing from the five major movie studios including Metro-Goldwyn-Mayer Studios, Paramount Pictures, Sony Pictures Entertainment, Universal and Warner Bros., CinemaNOW has been slow but steady in building its licensing portfolio. Although Marvis predicts that in the coming year, all the pieces of the licensing puzzle will finally come together.

"The studios have been cautious in terms of their entry into this market because of security of intellectual property issues and the quality of the way the movie is being delivered," said Marvis. "But we're now in negotiations with every single studio in Hollywood and I have high hopes that we are going to complete deals with most of them by the end of this year," said Marvis.

CinemaNOW makes its movie content available through either a pay-per-view system, which offers films at a variety of price points, or as a subscription service, which provides users with an unlimited number of movie viewings for a single monthly fee.

CinemaNow's VoD service allows for both movie streaming and downloads.