Intel Joins Morgan Freeman for Online Movie Downloads

In a move that could dramatically accelerate the adoption of streaming movies online, Intel has said it would invest in a new company established by actor Morgan Freeman that seeks to make first-run films available for downloads even before they reach stores on DVD.

Intel made an unspecified investment in ClickStar, which is striving to offer movie downloads and other entertainment customized for broadband Internet delivery long before they would typically reach the corner movie store.

The presence of Intel, the world’s largest computer chip maker, instantly lends additional credibility to ClickStar, which already has the backing of Freeman and will be led by CEO Nizar Allibhoy, a former Sony Pictures executive.

Digital Home Entertainment Push

Intel announced the investment at the annual Sun Valley conference drawing CEOs from across the entertainment and technology worlds.

The move fits well with Intel’s larger push to become part of the digital home entertainment world, with PCs powered by its chips managing a host of entertainment options, including digital pictures, music and movies. Intel hopes to become a key cog in the wheel that will drive digital entertainment, taking its place alongside hardware and software makers, many of whom, such as Microsoft and Hewlett-Packard, have made clear their intention to be players in the same emerging market.

Analysts believe that the right combination of technology and content will unlock pent-up demand for video-on-demand services, especially with other ingredients, including millions of broadband connections and consumer confidence in buying online, already in place.

Other studios are expected to join the fray before the end of this year, with some analysts expressing concern that a fractured marketplace will develop with each studio wanting to control its own content distribution and technology.

Slow Start

No launch date for ClickStar has been set, though speculation was that it would be live by early 2006.

There was also no immediate reaction or endorsement from the rest of the entertainment world, which might be leery of a plan to make movies available to consumers before they are even out of theaters. Studios are struggling with declining revenues from box offices around the country this summer.

In fact, the main thrust of the service might end up being to provide an option for movie makers who cannot get the backing of major studios to release and distribute their pictures, making the outlet an independent film alternative. ClickStar was set up by a production company, Revelations Entertainment, that Oscar-winner Freeman set up with a Hollywood producer several years ago to help get films made.

In addition to guarding their box office income, studios are likely to be at least as careful about protecting their DVD revenue stream, which in the case of many films is seen as nearly as important as how many people pay to see the movies in a theater — and is the format most likely to be cannibalized by downloads. The Yankee Group estimates that DVD sales are worth around US$14 billion annually to the studios, with rentals bringing in another $8 billion.

Matter of Time

Many analysts believe that eventually, video-on-demand services that utilize broadband connections to deliver high-quality video to users will eventually replace the current methods of in-store and by-mail DVD rentals, offering numerous advantages including cost savings for distributors.

The major hurdle has long been concerns among studio executives about piracy, and many major companies, including Microsoft and Apple, have attempted to prove that their digital rights management (DRM) technology can protect studios’ intellectual property by ensuring that movies delivered online are only used by those who buy them and are not copied without permission.

Forrester Research analyst Josh Bernoff said consumers are increasingly willing to buy content online, their comfort levels raised by the arrival of legitimate music download sites. A recent survey by Forrester found that one in every five online consumers had purchased online content in the last month while more than 60 percent watched video or listened to streaming audio online.

“Consumers are more willing to pay for conventionally downloaded music and movies,” Bernoff said. “The stage is set for the players who can figure out the answers to distribution questions.”

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