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Blockbuster, Enron clip Web movie pact

The companies break off an exclusive partnership to deliver movies over the Web, signaling new static over the highly anticipated creation of video-on-demand services.

Blockbuster and Enron Broadband Services said Friday that they have broken off an exclusive partnership to deliver movies over the Web, signaling new static over the highly anticipated creation of video-on-demand services.

The companies said they will go their separate ways after completing joint video-on-demand trials, which were launched just three months ago in four U.S. cities. That experiment, which allows consumers to pipe movies to a television through an Internet-connected set-top box, is scheduled to wrap up by March 31.

"We feel we're going to be more successful pursuing video-on-demand on our own," said Kelly Kimberly, senior vice president at Enron. "The quantity and quality of movies Blockbuster had are not of a standard to roll out the service."

The split comes as Hollywood studios are rushing to create video-on-demand services in response to a growing threat of Napster-like, online video piracy made possible by high-speed Internet connections.

Viacom-owned Blockbuster has hoped to stake out a prime position in this emerging marketplace, fearing online distribution could cut into its core video rental business. The company has won the right to distribute content from a variety of movie producers, including a deal last week with Vivendi Universal's Universal Pictures, its biggest content partner to date. The company also has broadband-distribution agreements with Metro-Goldwyn-Mayer, Artisan Entertainment, Trimark Pictures, and Lions Gate Entertainment.

Blockbuster is a valued partner, and we are confident that digital distribution will remain a priority in its future business plan," said David Bishop, president of MGM's Home Entertainment Group.

Nevertheless, movie studios have been slow to license their catalogs as they tinker with their own in-house digital distribution plans. Sony, for one, is close to launching its own video-on-demand service, MovieFly, which would allow customers to download movies for playback on a PC.

Enron, which is looking to develop broadband services to justify the costly construction of a 15,000 mile fiber-optic network, said it will seek new partners. Enron's Kimberly said the company is in talks with major Hollywood movie and TV studios to release a variety of entertainment--not just movies--in a pay-per-view style.

Blockbuster declined to discuss details of the split but said such a service is not yet ready for prime time.

"We believe video-on-demand will become a commercial reality," said Karen Raskopf, senior vice president of corporate communications at Blockbuster. "Just not right now."