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Disney Sues VideoPipeline.com over Movie Trailers

Video Pipeline (www.videopipeline.com) announced last week that it is being sued by Disney to stop streaming previews of its movies. New Jersey-based Video Pipeline is a small company, specializing in encoding, streaming and distributing movie previews to offline and online companies selling home videos and DVDs.

According to Jed Horovitz, president of Video Pipeline, Disney (www.disney.com) is suing the company for $87 million in damages. Video Pipline customers that want access to Disney previews, must now directly link to Disney's servers.

The company had been busily providing previews to video stores for 15 years before this action was taken. As the Internet starting becoming popular, Video Pipeline started supplying previews to its customers online. "We started following our clients onto the Internet, providing streaming previews for point of sales for e-commerce sites," said Horovitz.

He stressed that the company is using previews as a point of sale tool, which should cover the company in terms of fair use. Horovitz said that retailers are entitled to promote what they sell. "We let people try before they buy. We're well within constraints," he said.

Horovitz said that Buena Vista (the distribution arm for all Disney films) is no longer sending them videotapes. But that's still no stopping Horovitz. "We haven't stopped showing the ones they've sent to us," he said. "We acquire new ones as they come in." Horovitz said it now takes Disney previews from videotapes that its customers sell. "It's our content, anyone can do this," he said.

So why is Disney doing this? Horovitz believes that Disney wants to eliminate the middleman for showing movies online. "And the first step," he said, "is getting access to customers and controlling the market."

Calls to Disney seeking comment were not returned as of press time.

First Look's Previews

Other companies providing movie previews online have not been targeted. Justine Lassoff, VP of content and marketing for First Look (www.firstlook.com), said it works the same way as Video Pipeline. First Look provides previews to customers like WindowsMedia.com and Tribune Media (L.A. Times). It too gets the content for free, directly from the studios, to help promote its films. But First Look does more than movies, providing previews of TV shows, video games, and even music.

"We have good relationships with all the studios," said Lassoff, "even Disney." When asked if Disney was tough to deal with, or had harsher limitations on how to use its trailers, Lassoff said no. "They're not really different [to deal with]. All the studios are careful in how their stuff is presented on the Internet. It's a new area for them."

Lassoff said she was familiar with the Video Pipeline/Disney case, but wasn't sure why Video Pipeline was being targeted. "It's probably because [Video Pipeline] was not going through the proper channels," she speculated.

FirstLook was founded in September 1999 and has offices in Los Angeles, New York and London. The company was incubated by Idealab! and has since received funding from Kleiner Perkins Caufield & Byers, Cox Communications, Goldman Sachs, and Intel Capital.

Free Previews, (Not) Free Streaming

The business models of movie previews are interesting. Movie studios are happy to give away tapes that contain the trailers, and the preview companies simply have to capture, encode and stream the videos. The companies then turn around and sell the content to e-commerce, news, and other Web sites that want to add streaming previews.

Lassoff said that although the goal is profitability, FirstLook isn't there yet. Still, she's confident that the growth of broadband and entertainment online will begin to show some real revenue. According to the FirstLook Web site, it has 4 million previews, and has streamed over 35 million total previews since September 1999.

According to Lassoff, FirstLook charges a monthly subscription fee based on a "mark up" for streaming. It also provides tools for quick integration, an extranet, and even custom players for its customers.

Video Pipeline, meanwhile, is doing just under a million dollars gross, admitted Horovitz. "It's not a gold mine," he said, "we're a small service provider, but we expect it to grow."

Among Video Pipeline's customers are NetFlix, MovieGallery.com and Best Buy. It provides previews for customers and charges them for each video streamed. Although he wouldn't give exact prices, Horovitz said that costs are in the "pennies" per movie.

The company is moving forward despite the Disney setback. It recently announced that it made a deal with Lion's Gate to distribute the entire home video library online via the Lion’s Gate Web site and via Video Pipeline’s network.

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