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Intertainer Shutters the Show -- for Now

The video-on-demand firm wants to have a working model for its deal with movie studios.

October 18, 2002|Jon Healey | Times Staff Writer

Intertainer Inc., a pioneering Culver City video-on-demand company, won't be entertaining anyone for a while.

Chief Executive Jonathan Taplin announced Thursday that Intertainer would suspend its operations Oct. 23.

"We plan to take the site down until we can work out a fair business model" with the movie studios owned by AOL Time Warner, Sony and Vivendi Universal, which Intertainer has sued for antitrust violations, Taplin said in a message posted on Intertainer's Web site.

Financed by such corporate heavyweights as Sony, Intel Corp. and Comcast Corp., Intertainer developed one of the first services delivering entertainment on demand to TV sets and computers. Using technology from another investor -- Microsoft Corp. -- it transmitted copy-protected movies securely through digital cable systems or high-speed Internet services.

The company spent millions acquiring movies from leading studios, amassing the largest library of its kind on the Internet. But its relationships with Sony Pictures, Warner Bros. and Universal Studios soured over the last two years, and the number of films in its library dropped precipitously.

Intertainer blames its Hollywood suppliers for its troubles. Some of its competitors, however, blame Intertainer for spending too much at a time when the potential market is small and demand is weak.

Last month, Intertainer filed an antitrust lawsuit against the three media firms and Movielink, an online movie service they created with two other major Hollywood studios, Paramount and MGM. It also has supported an antitrust investigation that the Justice Department has launched of Movielink and the studios' licensing practices.

Taplin said the company decided to suspend operations because "we realize that this lawsuit might take longer than we originally thought -- like, two or three years." He added, "The fact that the studios asked for a delay in their initial response to the [lawsuit] gives us some intimation that they're going to try to draw this out forever."

Intertainer had raised $120 million in six years, mainly from its corporate benefactors, Taplin said. It now has less than $1 million left in the bank.

The company plans to let go about 12 of its 18 workers.

The company boasted 147,000 registered users, but it lost money on every movie customers ordered. "The smartest thing to do," Taplin said, "is to try to get the business model right, then come back into business....

"Our backers are willing to back something that makes sense economically," he said. But the current deals, which require Intertainer to pay guarantees of $1 million or more to the major studios, serve mainly to keep Intertainer from competing with Movielink, Taplin contended.

A spokeswoman for the studios being sued by Intertainer declined to comment.

Intertainer's problems with several of the studios began when it tried to make its service widely available over the Internet, instead of limiting it to selected cable systems and high-speed phone lines. The studios claim that Intertainer's move violated its contracts, but Taplin said they were just stalling to help Movielink.

Robert Moskovits, co-founder of rival, said Intertainer was done in by its own ambition.

"They collapsed under the weight of these deals," said Moskovits, whose company has yet to strike any deals with major studios. "These deals were supposed to make them the biggest, the baddest, the best

In particular, Moskovits said, the shortage of high-speed Internet connections and the Net's technological shortcomings prevent companies from delivering a high-quality video-on-demand service to the masses. "It's going to get better some day," he said, "but it's not there yet."

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