Using the aptly titled film "What's the Worst That Could Happen?" Metro-Goldwyn-Mayer Inc. today becomes the first major Hollywood studio to offer downloadable movies over the Internet.
The studio, working with CinemaNow Inc. of Marina del Rey, plans to test the market for online video-on-demand by offering both downloadable and "streamed" versions of the Martin Lawrence-Danny DeVito film and "The Man in the Iron Mask," a 1998 action flick starring Leonardo DiCaprio.
The major studios have not offered any downloadable movies to date, concerned about fueling piracy and disrupting other, profitable forms of distribution. But MGM decided to move ahead with tests, believing that the best way to fight unauthorized services is with authorized ones.
"Our intention in the next two years is to find out as much as we can about how consumers want VOD delivered, what they think about it, [and] how much they want to pay," said Blake Thomas, vice president of worldwide marketing at MGM Home Entertainment.
MGM had previously announced plans to offer downloadable movies through the "Movielink" joint venture with four other Hollywood powerhouses, but that effort has struggled to get started.
Unwilling to wait, MGM is breaking from the pack to conduct a wide variety of experiments with video-on-demand services on its own.
The market for online movies is limited today, given how long it takes to download them, the picture quality and the shortage of Internet-connected TV screens. Nevertheless, the movie industry faces a growing threat from online pirates and Web-based services that let consumers download unauthorized copies of movies for free.
The Motion Picture Assn. of America succeeded Tuesday in derailing a controversial Taiwanese Web site, Movie88.com, that let visitors download movies for $1 per day. But consumers continue to make at least 1 million free copies of movies each day through online file-sharing services and Internet chat sites, some experts estimate.
"They're already too late on trying to reel in digital piracy," said analyst P.J. McNealy of GartnerG2, a technology research and consulting firm. Their task now, McNealy said, is coming up with an offer "that's compelling enough to compete against free."
Another issue is providing video on demand without cutting into profits from video stores and other distributors.
"It is much more of a business-model question at this point" than a technology issue, said Richard Baskin, chairman of Intertainer, a Culver City-based video-on-demand company.
The studios created two video-on-demand ventures, Movielink and Movies.com, which could deliver their first movies later this year. But those ventures have drawn an antitrust probe by the Justice Department, pressuring the studios to strike deals with unaffiliated companies.
CinemaNow is one of a handful of Web-based movie companies still on its feet after the dot-com implosion. Aside from the MGM movies, its library of 1,500 feature films and 500 shorts comes entirely from independent studios.
Although the site attracts more than 1 million visitors a month, Chief Executive Curt Marvis said the company still needs "the locomotive content that drives people in." That means movies from the seven major Hollywood studios, which own the vast majority of widely popular films.
Three of those studios, including MGM, have deals with Intertainer to stream movies, which allows viewers to watch films on demand but not store them for later viewing. But Intertainer's online service is available only to customers of selected Internet providers with very high speed connections.
CinemaNow's test with MGM is broader, enabling any consumer with a high-speed Internet connection and a Windows-based computer to watch streamed versions of the two films.
The movies will be available at two speeds: 300 kilobits per second, which Marvis said delivered a near-VHS-quality picture, and 700 Kbps, which he described as between VHS and DVD quality.
The real departure, though, is that the films also will be available for downloading. To prevent piracy and preserve the market for DVD and VHS sales, the movies will come with electronic locks designed to prevent copying and stop playback 24 hours after the films are fully downloaded.
The main advantage to downloading is that it delivers a high-quality picture with none of the interruptions related to Internet congestion. The big disadvantage, though, is the amount of time it takes to obtain a movie--more than a day through a dial-up modem.
"What's the Worst That Could Happen" will go for $3.99 to $5.99, depending on location and Internet connection. "The Man in the Iron Mask" will rent for $2.99, or $1.99 if rented in combination with the other movie.