Top Studios to Sell, Not Just Rent, Movies Over Internet

LOS ANGELES – Hollywood studios will start selling digital versions of films such as "Brokeback Mountain" and "King Kong" on the Internet this week, the first time major movies have been available online to own.

The films can't be burned onto a disc for viewing on a DVD player. Still, the move is seen as a step toward full digital distribution of movies over the Internet.

Six studios said they would announce Monday that sales will begin through the download Web site Movielink. The site is jointly owned by five of the seven major studios.

Warner Bros., Universal Pictures, Sony Pictures, Paramount Pictures, Twentieth Century Fox and MGM will offer some first-run and older titles on Movielink.

[MGM is itself now run by a joint venture of Sony (SNE) and the cable-TV company Comcast (CMCSA). Movielink is owned by MGM, Paramount, Sony, Warner Bros. and Universal.]

New films will be priced similar to DVDs — between $20 and $30 — while older titles will sell for $10 to $20.

In a separate announcement, Sony and Lions Gate said they will sell films through the CinemaNow site.

Only films from The Walt Disney Co. (DIS) will not be available, although both services say talks are ongoing.

"Digital delivery hasn't arrived until the major studios allow home ownership, and now they have and now digital delivery is very real," said Jim Ramo, Movielink's chief executive.

Studios will sell some new films online the same day they become available on DVD. Most films will be made available within 45 days.

Studios began renting films online several years ago as a way to combat illegal downloading. Movies have been available through the Internet 30 to 45 days after hitting video stores, with rentals lasting just 24 hours for viewing primarily on computer screens.

Digital delivery of video grew rapidly after Apple Computer Inc. (AAPL) began selling episodes of TV shows through its iTunes online store last October.

This year, devices powered by new Intel (INTC) computer chips and TV service delivered over the Internet will allow more consumers to watch Web video on their TVs instead of their computer screens, a key factor in downloading to own, analysts said.

Studios are being cautious about selling films online in part because DVD sales produce more profit than box office receipts.

But studios are also preparing for the day when major retailers such as Wal-Mart (WMT) and Amazon.com (AMZN) begin offering their own movie download services.

"The important thing is to embrace the future, respect the economics of DVD but move forward into digital delivery," said Ben Feingold, president of Worldwide Home Entertainment at Sony Pictures.

The films available on Movielink can be stored indefinitely on a computer hard drive or transferred to as many as two other computers. The movies can be played on a TV if the computer is part of a home network.

A copy can be burned to a DVD as a backup. Discs can be played on up three PCs authorized by Movielink but cannot be viewed on a standard DVD player because of special security coding.

Consumers will not be able to transfer the films from a PC or laptop to a handheld portable viewing device. But that capability should be available sometime within the next year, Ramo said.

Films on CinemaNow will be playable on just one computer. The company said it eventually expects studios to allow consumers to burn movies on DVD and transfer them to portable devices.

[Paramount Pictures is a division of Viacom (VIA). Twentieth Century Fox is a division of News Corporation (NWS). Universal Pictures is controlled by General Electric (GE). Warner Bros. is a division of Time Warner (TWX).]

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