Microsoft adds video-on-demand to MSN

Microsoft Corp. announced Wednesday a deal with a provider of video-on-demand to bring movies to broadband Internet subscribers from its MSN Web site, just two days after the company announced a broader high-speed Internet initiative with MSN.

Culver City, California-based Intertainer Inc. will promote its video-on-demand services to PC users on a cobranded MSN Web site the two companies plan to launch next week. Microsoft, which is an investor in Intertainer, will feature the entertainment company's service exclusively in the entertainment section of its MSN portal.

Intertainer also launched video-on-demand offerings Wednesday in 35 major U.S. markets, enabling PC users to subscribe to the service and stream movies over the Web. That's up from six markets already offering streaming movies, the company said.

After signing deals with most of the top Hollywood studios to distribute their movies through a video-on-demand service, Intertainer's latest plans point to new interest in distributing digital content on the Internet. The company offers content from Universal Studios Inc., Warner Brothers Inc., Dreamworks SKG, Artisan Entertainment Inc. and New Line Productions Inc., as well as television and music videos.

Intertainer has used the model of cable television's pay-per-view service to fit the Internet, which is also being applied by movie studios and leading Internet content providers. For U.S.$7.99 per month high-speed Internet users can subscribe to Intertainer's basic service, which give users access to television shows, music videos and other digital content. On demand movies cost $3.99 each for new feature films and $2.99 for older movies, and users have 24 hours to stream the video as many times as they want.

AOL Time Warner Inc. and RealNetworks Inc. have pointed to plans of their own to create similar offerings through their media players. Major Hollywood studios, including The Walt Disney Co., have also said that they will launch video-on-demand services in the next year.

"I think we're seeing that some of the content owners are starting to warm up to new business models," said P.J. McNealy, an analyst with Gartner Inc.'s GartnerG2 research group. "As a result, content aggregators like MSN and AOL are taking advantage of it."

Other than a video-on-demand initiative from RealNetworks, McNealy said Microsoft and Intertainer's efforts are the latest offerings to gain widespread adoption.

"I think it's a step in the direction of establishing a second subscription service to have real potential," he said. "A lot of these business models for distribution are still yet to be proven."

Intertainer delivers its content to broadband users in Windows Media 8 format, and is optimized for Microsoft's new Windows Media Player. It began developing its service to mesh with the Windows Media Player in September 1999. Now it is set to put that technology to work.

Microsoft announced Version 7.0 of its MSN Web portal Monday and said that it would offer broadband access with its MSN Internet service. It will launch new software and services next week, the same day it widely releases the Windows XP operating system, which comes with the latest Windows Media Player and Internet Explorer software.

The market for these services is also gaining ground, according to research from Jupiter Media Metrix Inc. Forty-one percent of online households in the U.S., or 35.1 million households, will subscribe to broadband Internet service by 2006 -- up from 9 percent last year, the company found in research released Wednesday.

Intertainer is also testing its video-on-demand service on television set-top boxes and with cable provider Comcast Corp., another of its early investors. The service is also built to run on Microsoft's interactive television software and on hardware from a variety of set-top box makers.

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