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Enron, Blockbuster end pact to deliver movies to TV via Net

LOS ANGELES (AP) — A once-promising partnership to deliver movies to television over high-speed Internet connections has ended with finger-pointing from both sides at a time when the near-term viability of such services is being questioned.

Blockbuster Inc., the giant video rental chain, and Enron Broadband Services had announced what was supposed to be a 20-year deal just last July. Late Friday they issued statements confirming they were terminating the agreement and planned to seek similar deals with other partners.

Houston-based Enron said the deal was not working because Blockbuster was too slow in persuading major studios to license their movies for the new system.

"The exclusive relationship has not yielded the quantity and quality of movies needed to drive demand," said Kenneth D. Rice, chairman and chief executive officer of Enron Broadband Services.

Dallas-based Blockbuster had signed deals with only two studios — Universal and Metro-Goldwyn-Mayer — which covered a handful of movies from each. Several films from Artisan and other independent distributors were also being carried.

Blockbuster officials said they were hampered in their efforts to recruit studios because of security concerns.

"It wasn't about content," Karen Raskopf, a Blockbuster spokeswoman, said Monday. "It was Blockbuster's lack of confidence in Enron that killed this deal."

To be sure, technology, especially protecting the movie studio's copyrights, remains a critical issue. But more complex issues, including finding the elusive formula to make such schemes profitable, will hinder the development of video-on-demand services for several years, analysts say.

"I don't think these companies have taken into consideration the impact on the consumer," Lydia Loizides, an analyst at Jupiter Media Metrix, said. "Consumers now have the cost of basic cable, premium cable or satellite, telephone costs, outside entertainment costs, VHS rental costs, etc. It's very difficult to assume a household is just going to tack another $10 or $20 per month to their media consumption budget."

Movie studios are also experimenting with various delivery formats. Miramax, for instance, recently released a full-length feature for download to a computer. The Walt Disney Co., which owns Miramax, also recently said it would begin offering films for download from its Movies.com Web site.

Companies such as Intertainer and Blockbuster, on the other hand, are looking to deliver movies over a cable connection to a television set.

"Video-on-demand is going to be much more successful over cable and satellite connections than over the Internet," Eric Scheirer, an analyst with the research firm Forrester, said.

In fact, Scheirer said Blockbuster was smart to terminate the deal with Enron in order to pursue a partner in the cable or satellite industry for its system.