Does Starz Have the Broadband Blueprint?

Starz says it's smarter to deliver movies over the Internet now--the $ will come.

By Shirley Brady

Starz Encore Group is putting its neck on the line as a broadband pioneer. In June it launched Starz! Ticket, a Web-based movie download service developed with RealNetworks, and in so doing has bet that movies eventually will be the same driver on the Internet that they are for linear and on-demand premium TV.

However, the fact that not one cable operator has signed up for the service leads skeptics like Showtime's Matt Blank to question the viability of the market.

"We don't think there's any business there yet," says Blank. "Let's talk when there's a business model. I highly doubt you'll see Starz with $30 million in revenues this year from their deal with RealNetworks. We're very happy with the revenue streams we're getting from our cable affiliates and DBS."

Starz president and COO Robert Clasen agrees that there's no business for broadband delivery of movies--yet. But in the next five to 10 years, as cable operators move to an Internet protocol environment, he feels Starz will be better positioned for that market.

"We have the opportunity, with the support of our studio partners, to talk to our affiliates about how they might use this product in their own mix," he says. "It's reasonably clear that over time there will be some migration [by Starz affiliates] to Internet protocol. We'll probably be the most experienced of the programmers as we learn the best ways to market, and also have an opportunity to see how the product plays on these new platforms as they are developed."

So why no interest from operators yet?

"The [Ticket] announcement came in such a way that they are either thinking about what to do, or wondering what it means," Clasen says. "Frankly none of them yet would have the infrastructure to deliver the product themselves. [Operators would] need websites dedicated to this, and servers, and digital rights management that's blessed by our studio partners. Some of them will be ready to do that in the next 12 to 18 months. We think from our most recent discussions that we'll have cable operators affiliating with...Starz! Ticket, over the next 90 to 120 days."

Clasen suggests that cable operators should start using Starz! Ticket in order to TiVo/Netflix-proof their businesses.

"The Internet lends itself to a variety of products because you are direct to the consumer," he says. "We view ourselves at this point as an aggregator of movies... I always joke that Cowboys.com [not a Starz site] should be delivering 10 Westerns a month, and there are ways that we can go about doing that. That's quite different from having a broad-based movie service, like Starz."

Bringing this specialized approach to its on-demand business will help cable operators attract younger demos, a major focus at Starz. Case in point: the network's James Bond package.

"In January, when we launch 17 James Bond films as Bond on Demand, this will be the first time they will all be together on a premium service," Clasen says. "Together with on demand, this will be just incredible. We're doing some fun things to promote it. We're putting together a collage so you can see in 15 minutes clips of all the Bond girls and all the gadgets."

As the wireless generation looks to access movies anywhere, from dorm rooms to coffee shops (can "Starzbucks" be far behind?), Clasen wants Starz to be ready and able.

"We believe with our IP product that there's going to be all kinds of ways to cross-promote what happens at the video and what happens at the cable modem and what happens with content," he says. "The more the operators have experience with voice over IP, then the more comfortable they may be with our kinds of products on their networks. It all works together."