Adelphia Communications Corp., the nation's sixth-largest cable TV operator, has chosen TVN Entertainment Corp. as a key supplier for its on-demand movies and premium television shows.
The deal, expected to be announced today, comes six months after Burbank-based TVN went through a major restructuring, bringing in new management and converting junk-bond financing to equity. Adelphia made an undisclosed investment in TVN as part of the deal, which is the first involving TVN's new generation of digital services.
TVN's specialty is packaging and delivering video programming, using satellites to transmit material electronically to local cable operators. For Adelphia, TVN will collect programs from several sources--most notably Intertainer, an entertainment-on-demand service based in Culver City--and deliver them electronically to cable systems across the country.
Founded in 1987, TVN began as a programming service for home satellite dishes, then evolved into a distributor of pay-per-view movies, special events and infomercials. It's now trying to capitalize on the cable industry's shift to digital networks, which open the door to video-on-demand services.
Such services store movies and TV programs on large computers at the local cable system's headquarters. Consumers choose which program they want to watch from a menu on their TV screens, then control the playback the same way they control a videotape--starting, pausing, rewinding and fast-forwarding with their remote control.
Typically, cable operators receive the programs on tapes that they feed manually into their computers, said Jim Brown, vice president of finance for Adelphia. TVN eliminates that time-consuming and expensive process by transmitting programs directly and securely to each computer, enabling cable companies to manage their on-demand systems electronically, Brown said.
Adelphia has deployed the system in Cleveland, and is expected to launch it on the Westside of Los Angeles this year. It can't bring the service to all its customers in Los Angeles, however, until it finishes upgrading the cable systems to permit two-way communications.
Because TVN has a limited number of deals with Hollywood studios for on-demand services, it will rely on Intertainer and Adelphia for much of the programming on the service. For example, Adelphia has deals with HBO, Showtime and Starz/Encore to offer all of their programs on demand for a flat monthly fee.
"This is a neat, tidy solution," Brown said of TVN's distribution system. The main challenge for TVN is to line up more customers, he added, because satellite delivery is too expensive if done on a small scale.
TVN's majority investor is Morgan Stanley Dean Witter & Co., and its new leadership includes veterans of the satellite, cable and motion picture industries.