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Vudu Internet Movie Service Launches

9/05/2007 11:00:00 PM Eastern

Denver — CEDIA Expo is the launching pad today for a new TV-centric video download service that promises to bring thousands of standard-definition and up-scaled enhanced-definition movies to broadband-connected set-top boxes.

The service, called Vudu, is described as “a blend of internet movie services with direct delivery to the TV.”

The company said it has agreements with virtually every major studio and 17 independent and international distributors to deliver many hot library and new release titles, the company said. New releases will be offered in the same release window as DVD releases.

Vudu is a venture-backed private company based in Santa Clara, Calif.

The service has been in development in stealth mode for the past 2.5 years, and was based on the notion that American home movie watchers by-in-large “aren’t watching what they want to watch, they are watching what is available to watch.”

It requires the user to have a 2Mbps or faster broadband internet connection with which its set-top box can network to access video downloads. The set-top box is equipped with 250GB hard drive, capable of storing 100 hours of movies at a time. Storage capacity will be increased in future iterations, the company said.

Currently, the system is designed only for the delivery and playback of movies available through the service. It was designed only for connection to TV sets, but future versions of the system might lead to the ability to transfer titles to handheld players and similar devices.

The service will not require a subscription fee. Movies will be available both to purchase and to rent.

To speed the delivery of titles to users, Vudu has developed a “distributed network” system that functions in a similar way to peer-to-peer file sharing networks.

Movies are delivered in parts from other users set-top boxes on the network as well as from Vudu’s servers. To accelerate the service, Vudu is pre-positioning select titles on new set-top boxes to get started.

The system will enable virtually instant playback of any title in the network, without waiting for buffering.

“We don’t require that many people to be on the network to operate. What isn’t available from other peers will come from our central servers. What matters more is that we keep adding new people so that our cost of distribution goes down on a per customer basis,” said Patrick Cosson, Vudu sales and marketing VP.

In a recent study of 100 users, approximately 50 percent of the bits of title came from other people’s boxes on the network and 50 percent came from Vudu’s central server, the company said.

“Already we are seeing efficiencies, because as it turns out, we are bunch of sheep. We are all watching the same thing,” said. Cosson.

Most movies on the system are encoded in the 480i format, and the system up-scales that content to enhanced formats including 480p, 720p, 1080i and 1080p. Boxes are equipped with two USB ports that will be used in the future for additional storage capacity, and possibly DVD for HD optical disc storage or portable media players, although that is not currently part of Vudu’s contracts with studios.

Outputs on the box will include HDMI, component, S-video and composite video. Sound outputs will include optical digital output and RCA analog stereo output.

Audio is encoded in Dolby Digital Plus in the box, which outputs stereo or 5.1 multichannel surround sound (via optical or HDMI) depending on the movie.

At launch the service will not carry any native enhanced-definition or high-definition content, although the box was designed to handle it. Native high-definition deliver is currently being tested for future distribution.

Vudu’s “output deals” with studios for content vary from studio to studio. All studios will be supplying key catalog titles, and others will add new releases. Vudu expects half of its catalog to come from major studios with the remainder coming from independent and international distributors.

Content will include a wide selection subjects from early classic silent films to Bollywood titles to gay and lesbian content.

Vudu will be selling its hardware and service both online through its Web site and Amazon.com and through key brick-and-mortar A/V specialty retailers including Tweeter.

Retailer will benefit from the margin on the sale of the Vudu BX100 box, which carries a $399 suggested retail, will vary from dealer to dealer.

Unlike other companies that have offered video-on-demand TV services over the Internet, Vudu said it will succeed because “this market needs a full answer. You need the box, the service and the content all under one brand name that the consumer can understand and get into the house. If you say, ‘You sell the box, and I’ll sell the service, and you do this, and you do that,’ it becomes too confusing for the consumer to de-aggregate. Later, when consumers understand it, we may be able to add a de-aggregated model, but for now if you launch a box without the right content, you aren’t going to get a lot of demand for it,” said Cosson.

To promote the brand, Vudu will be doing “a lot of online, a lot of PR” to generate an “evangelistic community.” It will also be working with retail partners on promoting the brand and positioning the product. Cosson said Vudu is also looking at placing Vudu kiosks in key shopping malls to generate buzz as well as sales.

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