Even if the legal and technical barriers are overcome, however, the market for online pay-per-view movies may be tiny. Robert Moskovits, owner of film site MovieFlix.com, said that while the launch of Movielink indicates rising momentum for such services, the venture will likely lose money, at least initially. MovieFlix itself serves only 6,500 monthly subscribers, an audience size that Moskovits says keeps the bandwidth costs down. "They can publicise themselves all they want, but if there isn't the market out there or people who know how to watch videos online, this isn't going to be a real revenue stream," he said. Moskovitz pointed to Intertainer as the perfect example of too much, too soon. In October, Intertainer, with nearly 150,000 broadband subscribers, closed its service, citing litigation with the movie studios. A month earlier, it had filed a federal antitrust suit against AOL Time Warner, Sony, Universal and Movielink, charging the studios with engaging in a conspiracy to inhibit its business by withholding licensing deals. Intertainer does not plan to reopen until the litigation is resolved. Intertainer did not attribute its closure to a lack of funds. But Moskovits speculates that it's the end of the story for the company, which he said spent a large chunk of its $120m (£77m) in investments to secure licensing deals with the movie studios but failed to draw enough subscribers to make money on the material. Josh Bernoff, an analyst with Forrester Research, argues that there is a market for video on demand, but not over the Internet. "It's on cable boxes," Bernoff said. "The desire to deliver movies down to the computer is targeting a niche market, and it's the just the wrong place to watch TV." By introducing an Internet service of their own, he said, the major movie studios are aiming to circumvent third-party distributors such as cable companies and go directly to consumers to get a larger cut of the profits. But because the cable companies have a lock on consumers, the studios have also signed at least one video-on-demand deal with a cable company to hedge their bets, Bernoff said. For example, Fox reached an agreement with In Demand, a top provider of cable pay-per-view entertainment, to license current releases for video-on-demand distribution. Others contend that on-demand entertainment on the Internet has a bright future -- once consumers can download films and beam them to a television set through home-networking gear. Movielink's Ramos said that the company is helping to prime that pump. "One of Movielink's roles is to be an application that helps grow broadband in general, and the 'entertainment on broadband' category in particular, to get more users," he said in an email. "There is a minimum critical mass of homes to launch, but there has to be the development of consumer behavior to view paid-for (downloadable) movies over (Internet Protocol) and that takes infrastructure and marketing investment, (as well as) a large penetration of the existing broadband market." It could also help to keep people's expectations low. According to Scott Sander, chief executive of digital distribution company Sightsound, the major movie studios have generally placed Internet video distributors in the same marketing window as cable television pay-per-view offerings. As a result, he said, such services face powerful and entrenched competition that will keep Internet video on demand a niche offering for the foreseeable future. "MovieLink is going to be a yawn," said Sander. "Internet-based video distribution can't compete with cable in the pay-per-view window."
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