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Vudu and Entone team up for online video on demand

May 5, 2009 |  5:01 am

Entone, Vudu, online VOD, streaming movies, Netflix, Amazon, Apple, Movielink CinemaNow The market for online video on demand is like a fogged-in runway -- lots of planes have pulled out of the gates, but none have taken off. Movielink, CinemaNow, MovieBeam, Apple, Amazon and Netflix have added and dropped partners, gone defunct, changed owners, altered business models and/or shifted technologies, all searching in vain for the kind of success Apple has enjoyed with its downloadable music sales. Today, another online movie service, Vudu, shifts its strategy significantly by partnering with Entone, a leading supplier of customer equipment for IPTV operators. The move puts Vudu in a better position to compete with the other online VOD services, although it won't necessarily lift the company high off the tarmac.

Vudu brands itself as a "video store in a box." That's another way of saying that its movie streams and downloads are available only to consumers who buy a special set top, which costs about $160. The deal with Entone will make Vudu service available through Entone's next-generation home gateways, helping each of the companies to surmount a notable hurdle. Entone gives Vudu a way to attract customers who can't afford or don't want a specialized set-top box. And Vudu gives Entone's customers -- more than 50 small- to mid-sized local phone companies in the U.S. alone -- a well-stocked VOD service they can bundle with their pay-TV and DVR offerings, providing a more comprehensive alternative to cable and satellite TV.

Executives at both companies say the deal is the first in what they hope will be a series of partnerships that expand their businesses. Edward Lichty, Vudu's executive vice president of content and strategy, said his company wants to sell a movie service, not hardware. Its set-top boxes play a vital role today in decrypting, decoding and caching Vudu's movie streams, but Lichty said those functions can all be performed by a variety of Internet-enabled TV sets and Blu-ray disc players being shipped today. In other words, it's looking to follow Amazon's and Netflix's lead, not Apple's. And in Lichty's view, Vudu has three important advantages: It has more high-definition programming, it can deliver better picture quality with less bandwidth, and it has a better user interface. That may be true, but Vudu has some serious catching up to do -- Netflix and/or Amazon already have their VOD services integrated into devices by Microsoft (the Xbox 360), TiVo, Roku, LG and Samsung. 

Entone, for its part, is looking for ways to combine more online video outlets (a.k.a. "over the top" services) with its telephone-company customers' pay-TV offerings. Imagine how much more compelling a pay-TV service would be if it included social media channels, user-generated video and interactive content from the Internet. Companies are offering pieces of this package today, but no one's putting it all together for consumers. Entone could, with the help of a few more partners. It could also develop less expensive multi-channel tiers, supplementing a selection of cable networks with free online outlets such as Hulu, pay-per-view sources such as Vudu and subscription sites such as Major League Baseball's MLB.com.

Entone CEO Steve McKay said the "killer opportunity" is in providing an inexpensive upgrade for basic-cable subscribers -- particularly if it's sold as a better version of high-speed Internet access, rather than a competitor to satellite or cable TV. "There is this irrational jump from $10 or $15 a month for basic cable to $70 for digital cable," McKay said. "And all I get for that extra $40 or $50 a month is, maybe I get high definition, which I can get over the air anyway. Oh, and if I want DVR, that's more.... So all I get is kind of the ability to add HD and these other add-on services. That, to me, is a real diseconomy of cable TV."

-- Jon Healey

Healey writes editorials for The Times' Opinion Manufacturing Division.

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