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The Premium Movie Channel Paradigm Could Soon Face Extinction
The article sent shockwaves throughout Wall Street, as the stock prices for both TiVo and Netflix shot up. Last September, a Newsweek article reported that TiVo and Netflix might be getting together to produce a true form of video-on-demand (VOD). Last week, a Netflix official fueled this speculation by dropping hints about a potential joint venture. TiVo, the original and premier provider of digital video recorders (DVRs) in the U.S., would eventually provide instantaneous online access to the entire DVD library (currently more than 35,000 films) of Netflix, the nation's number one mail order video rental service. This would be accomplished via a broadband internet connection to specially equipped TiVo DVRs.

This development could also spell the beginning of the end for premium movie services like HBO, Showtime, and Starz. First, let's put all of this into perspective with a little history of the premium services. Home Box Office (HBO) was the first premium service, debuting in 1975. It was one of the first channels beamed from a satellite and carried by cable operators across the country. As its popularity grew in the late 1970's, several other premium services like Showtime, Cinemax, The Movie Channel, as well as some lesser known premium services came into existence.

The industry started consolidating in the early 1980's as HBO bought Cinemax, Showtime bought The Movie Channel, and those lesser know services went belly-up. In the early 1990's, the Starz-Encore networks debuted to compete with the HBO and Showtime networks.During the mid-1990's, as satellite services such as Directv and Dish Network debuted, the premium services began offering "multiplexed" channels, i.e., multiple channels of HBO, Showtime, Cinemax, The Movie Channel, and Starz-Encore for the price of one. Unfortunately, the number of movie choices didn't increase. Those services just began to air their same libraries of at different times on their various multiplexed channels. There are hundreds of at local video stores that have never played (and will never play) on the premium channels while there are a comparatively small number of others that have played on these channels thousands of times.

That has always been the major weakness of the premium services. Multiplexing did not fix this problem.Several market tests of VOD were conducted during the 1980's and the early 1990's but, because the technology was rather primitive, it did not catch on with consumers. By the late 1990's, it finally seemed ready and lots of promises were made about the brave new world of VOD. The cable companies were talking about veritable online video stores, which were going to put Blockbuster, et al, out of business. Unfortunately, the reality of VOD has never lived up to its hype.

The stuff the cable companies are currently passing off as VOD is nothing more than a glorified version of pay-per-view or a DVR. For the most part, their VOD offerings aren't any different from the stuff currently playing on the premium channels and/or on pay-per-view. This is what I call "faux VOD." How lame!Fortunately, led by the apparent impending TiVo-Netflix undertaking, the landscape is about to change and a new era of genuine VOD is about to be ushered in. PC-based broadband VOD services like Cinemanow (www.cinemanow.com) and Movielink (

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