Seeing Starz on the Internet

Premium movie service Starz Entertainment Group jumped on the mobile-video bandwagon last week with the launch of Vongo, a subscription service that will deliver both live streaming video and on-demand downloads through the Internet.

The video content is suitable for viewing on portable media players, computers and, with proper connections, even TVs. Vongo is partnering with Microsoft, which is supplying its Media Player streaming technology, and Sony, which will feature the service when it launches video on its Connect music-download service later this year.

Vongo will offer more than 1,000 movies and other programs in downloadable form, as well as a live 700-kilobit-per-second streaming feed of Starz’s primary East Coast network, for $9.99 per month. The service will also make pay-per-view movies available for $3.99 apiece, in the same window as video-on-demand movies. Vongo can be received by PC and laptops with Windows Media Player software, which can then port the video to handheld devices equipped with Microsoft Portable Media Center software. These devices, made by such companies as Samsung, Toshiba and LG Electronics, cost $250-$500 and can store up to 50 two-hour movies.

Starz played up Vongo at the Consumer Electronics Show (CES) in Las Vegas last week. TVs large and small dominated the show. Vendors unveiled products from massive high-def sets with 1080-line–progressive display technology to cellphones with stamp-size screens.

Most of the new services give consumers more flexibility in where and when they watch content. FX announced that DirecTV customers will be able to download such shows as The Shield to their digital video recorders before the air date, and Sling Media’s new mobile feature allows owners of a Slingbox streaming device to watch and control their home TV from a cellphone or handheld computer. (For more CES coverage, see story in Fast Track.)

And Starz got its share of buzz with Vongo. While Internet-based video threatens to cut into cable operators’ business by eliminating them as middleman, Starz is counting on cable to market Vongo as a valuable addition to their high-speed data services. “They can say, 'Here’s a new platform, here’s a new product,’ and bundle it in and sell it with their high-speed data product,” says Bob Greene, senior VP of advanced services for Starz Entertainment Group.

Vongo is not Starz’s first shot at offering premium content online. In 2004, it teamed with RealNetworks to deliver Starz Ticket, a subscription service that costs $12.95 a month for 300 movies. Although it picked up fewer than 20,000 subscribers, Greene says the project provided a learning opportunity about online content delivery. With mobile- video devices growing in popularity, Starz decided the time was right to make a bigger online push.

Starz doesn’t believe Vongo will negatively impact its Starz and Encore cable networks by shifting viewers from the TV to the PC. That’s because research on the Starz Ticket subscriber base showed that roughly 70% didn’t have Starz’ cable service and 50% didn’t have any premium programming service.

Greene acknowledges that the statistics could be skewed to PC-focused “early adopters,” but he believes the findings still have merit: “We think this expands the pie to a different viewing device.”

Starz has kept cable operators informed of its Vongo plans “all along the way,” says spokesman Tom Southwick, and has discussed several marketing models, including packaging Vongo with cable-modem sales, offering it as an add-on to Starz subscribers, and even letting operators resell the service and manage the entire customer relationship. While Vongo could technically allow Starz to bypass cable operators entirely, the programmer is depending on their cooperation. “One of the problems is, we don’t know who the Starz customers are,” says Southwick; operators hold the keys to that information through their billing relationships.

A Mixed Reaction From Cable

The cablers have mixed reactions to Vongo. Cox Communications and Insight Communications declined to comment, citing a lack of familiarity. RCN Executive VP and Chief Technology Officer Timothy Dunne calls the Vongo service “very intriguing,” adding, “We are constantly looking for new services that enhance our customers’ experience, both on the TV and the PC.”

Noting that it’s too early to know for sure, Comcast spokeswoman Jenni Moyer believes Comcast might be interested in helping market Vongo, which would fit with Comcast’s goal of providing additional value through its cable pipes. “What we are focused on is trying to deliver value to customers by making content available when they want it and how they want it,” says Moyer.

Starz has marketing avenues other than cable. It will tease Vongo on its linear networks and is planning an online campaign. Vongo also expects a big push from Microsoft and the manufacturers of portable media devices. Computers supplied with Media Center software might come with icons linking them to Vongo, or Portable Media Centers might be sold with preloaded Vongo content. “The single most important thing for us, outside of cable operators, is the consumer-electronics folks,” says Southwick.

Vongo is also talking to Apple about working with its video iPods. A stumbling block is that Apple has a transactional model with iTunes, while Starz has a subscription model. Vongo hopes to sell Apple on its belief that subscriptions are a better way to sell video long-term.

“We are talking to Apple about how to modify their system to handle subscriptions,” says Southwick. “It’s not just about the business model; it’s also a digital-rights–management issue. We have to make sure our copyrights are protected. That is critical to our whole business.”