MGM, Blockbuster Star in Net Distribution Pact

With the stroke of a pen, Metro Goldwyn Mayer gave the right to distribute selections from its library of 4,100 feature-length films on the Internet to Wednesday. That was the easy part. Now they have to figure out a way to get those films into people's homes.

"The technicalities of the deal have not been worked out yet," says MGM spokeswoman Lea Porteneuve. "We want to be at the forefront of technology, and to propel it."

Ultimately, people may be able to rent movies online and stream them directly onto their desktops. But that assumes access to a broadband Internet connection, which for most households is years away.

"The bandwidth isn't there yet to deliver television-like quality to consumers," says Jay Wampold of streaming giant RealNetworks. Wampold believes widespread access to cable modems and DSL lines is three to five years away.

Porteneuve says MGM and Blockbuster will focus on streaming technology, which would allow a consumer to view a movie once for a fee, much like pay-per-view television.

For Blockbuster, the deal is the most recent in a series of alliances geared to position it to distribute movies online. In November, Blockbuster took a $30 million investment from AOL to develop broadband content and delivery. As a part of that deal, Blockbuster became the "premier home video provider" on AOL's Entertainment Channel, and Blockbuster agreed to distribute free CD-ROMs of AOL 5.0 at its 4,000 store locations in the U.S. In January, Blockbuster signed a deal with Las Vegas-based TiVo to develop a "video-on-demand" service through TiVo set-top receivers.

MGM boasts the "largest modern film library in the world." Modern, by their definition, means any movie made after 1949. MGM was founded in 1924.

The move to license part of its library for the Internet was exciting for Dan Miller, CEO of, a broadband streaming company developing technology for streaming feature films.

"I think it just shows that media companies are taking the Internet seriously," he says. "It's clear that electronic distribution is the future. It's not a question of if, it's a question of when and who's going to get paid."

Miller estimates that broadband users will grow from about 2 million today to 4 million by year's end. Miller began developing his technology back in 1995, when only a handful of people had access to broadband. "People thought we were smoking crack," he says.

While he believes the MGM-Blockbuster deal is a validation of's business model, Miller acknowledges that broadband isn't the only obstacle.

Most PCs connected to the Internet are able to accomplish rudimentary video streaming today, but will people want to watch movies on their computers? Not likely, Miller says. "We do see it migrating to set-top boxes."

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