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Hollywood named in on-demand conspiracy suit

Intertainer files suit against AOL, Sony and Vivendi, charging them with hindering the on-demand movie company's business to boost their rival Movielink joint venture.

Digital on-demand movie service Intertainer Tuesday said it filed an antitrust lawsuit against three major Hollywood studios alleging conspiracy and price-fixing.

The lawsuit, filed in the U.S. District Court for the Central District of California, named entertainment giants AOL Time Warner, Vivendi Universal and Sony as the conspirators that have been hindering Intertainer's business of offering movies-on-demand. The suit further alleges that the studios engaged in a "group boycott" of licensing their movies to Intertainer to buy time in launching their rival Movielink joint venture.

"The actions taken by these leading studios will, in effect, eliminate consumer choice, produce higher prices, reduce output and lower quality services that would prevail in a competitive market," Jonathan Taplin, CEO of Intertainer, said in a statement.

Intertainer must strike licensing agreements with the studios to offer popular movie titles to their subscribers. The service sells movies on a per-view basis for people to watch over a broadband connection. The company has deals with cable providers such as Comcast and Adelphia as an add-on to their digital cable services.

The suit strikes at the heart of the controversy surrounding digital distribution. Both Hollywood and the technology industry have embraced the idea of selling movies digitally to consumers via on-demand cable and Internet services. However, a widening rift has developed between the two camps about who can sell the movies, and what types of security measures should be required to prevent piracy.

In essence, Hollywood is worried that its existing business will be irreparably corrupted by the coming digital age. Unless it exercises full control over its digital distribution schemes, Hollywood fears being held hostage by renegade technologies that allow Internet users to distribute and view their content for free.

The movie industry is already spooked by watching the record industry's never-ending legal battles against free file-sharing services such as Napster and Kazaa.

In response, Hollywood has tried to pre-empt the tide of technology by aggressively lobbying lawmakers. Members of Congress have already begun introducing bills that require hardware manufacturers to implement protection technologies that block any means to redistribute digital movies through the Internet, most notably one supported by Senator Ernest "Fritz" Hollings, D-S.C.

Still, Intertainer is attempting to wave its own flags to federal regulators with the language included in this suit. Beyond its most inflammatory charge of price-fixing, the suit alleges that AOL Time Warner forced its Warner Bros. and New Line Cinema subsidiaries to scrap deals with Intertainer to hamper Microsoft, an investor in the start-up.

The suit also alleges that Sony, an investor and board observer in the company, compiled insider knowledge of the company to build Movielink on Intertainer's intellectual property.