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Intel, studio form movie download venture

Actor Morgan Freeman, chipmaker seek to break Hollywood traditions by selling movies online while they're still in theaters.

Intel and actor Morgan Freeman's movie production company, Revelations Entertainment, said Wednesday that they have formed a new venture aimed at distributing first-run movies over the Internet.

The new company, called ClickStar, is taking on an unfamiliar and potentially controversial role in Hollywood circles that have viewed online distribution as a potentially destabilizing force on DVD sales. Most online movie ventures, such as Movielink and CinemaNow, are allowed to distribute films only after they have been in home video circulation for up to several months.

However, Intel and Revelations said that consumers have shown they want to download films earlier and that traditional DVD releases aren't meeting that demand.

"Our view is that making content available on the Internet is not an option--it is an imperative for the industry, given piracy and consumer demands for flexibility," said ClickStar's new chief executive officer, Nizar Allibhoy, a former Sony Pictures executive. "Our motto is, 'Anytime, anyplace, on any device.'"

The move highlights the growing role that Internet movie distribution is likely to play in the wake of successes such as Apple Computer's iTunes in the music business.

A handful of technological and cultural factors are coming together to make the movie business--and the role of movies online--look very much like the music business in the years just before the release of iTunes in 2003.

Online piracy of films is up, although quality of the downloads is far inferior to DVDs. Box-office revenues are down, even as overall Hollywood profits have remained buoyed by DVD sales. That sales growth may finally be slowing, with relatively anemic sales of recent films including "Shrek 2" and "The Incredibles," however.

Meanwhile, the speed of many broadband connections has reached the point where it is feasible to download or stream a near-DVD quality movie to the home. A new generation of Wi-Fi home networking technology expected to hit the market later this year will make streaming movies from a PC to a television more practical.

Revelations and Intel have been working together since the beginning of the year, creating a model digital home in Los Angeles stocked with the latest in advanced digital home entertainment devices. The model home is designed to educate studio executives about the promise of the technology.

Intel sees the work as part of a broader push to reassure Hollywood that the digital release of films, particularly in a format that can be streamed around a home network, is safe and potentially profitable.

The new service is expected to launch in early 2006, using Microsoft Windows Media technology and digital rights management. The venture is not yet announcing any studio content that will be available through the service, but participants said other studios have been receptive to the idea in early discussions.

Allibhoy said the service would allow movie rentals as well as sales. Movies would not initially be able to be burned to DVDs, but later generations of the service would likely allow that feature, he said.

Freeman announced the ClickStar venture along with Intel Chief Executive Officer Paul Otellini at the Allen & Co. Sun Valley Conference on Wednesday.