Business Week reports on the sad state of MovieLink, the music-download service created by major Hollywood studios that’s been getting a less-than-stellar reception from consumers. It seems that the studios want out of the download business, but they can’t find anyone to buy the thing:
Last year, Movielink brought in Salem Partners LLC, a Santa Monica-based investment banking firm to find buyers. It was Salem Partners that brought Blockbuster to the table, according to a source close to Movielink, although the deal was vetoed by one of the five Movielink studio board members. Salem Partners would not comment.
Another potential buyer early on was former Warner Bros. (TWX) home video chief Warren Lieberfarb, who put together a group of investors but couldn’t get the studio’s approval. The key roadblock: The studios’ refusal to change the terms of existing agreements to offer films for download, including an insistence that the films not be “burned” onto discs that could be played in DVD players.
Studios have long since resisted allowing burning, for fear that large DVD retailers like Wal-Mart Stores (WMT) and Blockbuster would rebel, threatening the huge sums studios now get from them. And for those movies that the studios would allow Movielink to sell, Hollywood would only offer a short-term, one-year deal to Movielink’s buyer. That frustrated buyers who worried that the studios would change their mind down the road.
Not surprisingly, potential buyers of the site want a service that consumers will actually want to use. And not surprisingly, consumers don’t seem too excited about buying movies they can only watch on their computers screens, not on their TVs or DVD players.
We sometimes hear that without digital rights management technology, Internet-based music and movie services wouldn’t be possible. Yet this appears to be a case where DRM is the primary obstacle to the creation of a successful movie-download business: Business Week says that MovieLink only has enough cash in the bank to last about another year.
(Hat tip: TechDirt)
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