Internet video may be coming to your TV

By TOM FOWLER

July 20, 2000 Web posted at: 4:05 PM EDT (2005 GMT)

In this story: Can they deliver? Copyright concerns RELATED STORIES

HOUSTON, Texas (The Houston Chronicle) -- A couch potato's nirvana may soon be at hand -- the day when he can rent any movie from Blockbuster Video without stirring from his perch.

Houston-based Enron is teaming with Dallas' Blockbuster to provide video-on-demand service to the home through the Internet. Under a deal announced Wednesday, the two companies will combine film industry clout with high-tech savvy to let consumers browse, buy and view thousands of movies on their television any time of day without leaving home.

The system has VCR-like controls, so the movie can be paused, rewound and stopped like a video. Viewers will be able to select from a video library that will begin with the latest releases and later expand, all without the wait in line at the store or the disappointment of finding all the copies of a hot movie have been checked out.

Enron, Blockbuster and several high-speed Internet access providers are expected to launch the service in certain unnamed U.S. cities by the end of this year. Texas-based Southwestern Bell expects to start testing the service by the first quarter of 2001.

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Video games will be offered through the service shortly after initial launch.

While the idea has long been talked about, it's taken a while to develop the network to move the movies and to swing the deals with the studios for rights to rent the films over the Internet. Analysts say the deal could fulfill the promise of the Internet as the ultimate home entertainment medium.

"In the past there hasn't been any content to put over the broadband networks," said Maribel Lopez, a senior analyst with Cambridge, Mass.-based Forrester Research. "It's been like the chicken and the egg, but finally there's outside people to put pressure on DSL providers to get the networks in and make them work."

Blockbuster, the largest video rental company in the nation with 35 percent of the market, will obtain the rights to the movies.

Enron Broadband Services will store the films in digital form and send them over its own secure high-speed network to local Internet service providers, including Southwestern Bell, Covad and Verizon. Viewers will need to subscribe to their high-speed service, called DSL, to receive the videos-on-demand.

The movies will be stored on the hard drive of a box similar to a cable box, which allows viewers to play it like a video. The movie will most likely have a time limit so viewers will not have unlimited access to the film.

Analysts remain skeptical over parts of the Enron/Blockbuster deal, however. There's little doubt the two companies can deliver on the front of the loop, but there's doubt about DSL providers being able to get it into the homes of customers.

"It's a great vision, but the service will still be choked by the last mile of wire deployed to the home," said Forrester's Lopez.

"To guarantee the 1.5 megabits service needed consistently is a very steep upgrade, and we just don't think all the DSL providers will be caught up to that for at least a year."

It's also unlikely consumers will want to wire yet another box into their television alongside their VCRs, cable boxes, DVD players and game consoles.

"It would make more sense to work with a company that would incorporate the box into another device, like a cable box or DVD player, or even a Sony Playstation box, which will soon have the processing power to do that," said Eric Scheirer, a media analyst with Forrester.

The cost for the new service will most likely be competitive with renting a movie from a video store, company officials said, but would probably be based on a monthly subscription model.

"Consumers have told us they'd be willing to pay a premium because of the added functionality," said Blockbuster President John Antioco.

Shares of Enron closed at $79.56 on Wednesday, up 6 cents. Blockbuster was down 6 cents at $9.94.

Enron will make money on the deal through the data traffic that goes over its network, a 20,000-mile-and-growing fiber-optic network backed by the company's huge investment muscles.

"Our broadband network was developed with this kind of service in mind," said Ken Lay, chairman and CEO of Enron Corp. "It's a secure network with a very large capacity for this kind of traffic."

Enron's choice of Blockbuster as a partner is generally viewed as a good one. With 65 million customer accounts, 3 million in-store visitors per day, and more than $200 million in annual marketing, the company should be able to draw in large number of customers they need.

The move to the Internet worries the film industry, said Forrester's Scheirer, because of fears that movies can be pirated more easily online. The potential copyright issues are similar to the ones faced by the music business, which is fighting online music services that allow users to swap songs, such as Napster.

If it weren't for the clout that Blockbuster has with the industry -- its video rentals account for 16 to 18 percent of all movie studio revenues -- it's unlikely such a move could be made.

"They may be convincing the movie studios to work with them with a stick as much as it is a carrot," Scheirer said.

Consumers are not stamping their feet demanding video-on-demand services, however, he said.

"That's just because they really don't know about it," he said. "If you were to ask them what it was they would say it sounds like cable and what they have is good enough for them. But if this really works like Blockbuster, they'll be interested."

The Enron/Blockbuster deal will, at the very least, push cable television companies to look into providing a similar service, which will lead to greater competition in the field, Scheirer said.

"It will give a good kick in the butt to an industry that's been slow to investigate video-on-demand," he said.

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