Feds Examining Video on Demand Partnerships

LOS ANGELES – The Department of Justice is investigating two movie studio video-on-demand joint ventures for possible antitrust violations.

The department's antitrust division has sent a Civil Investigation Demand letter to the studios involved in the two companies inquiring into the arrangements and requesting documents.

The DOJ had been expected to closely examine the efforts of the studios to distribute their films over high-speed Internet connections.

"The antitrust division is investigating the potential competitive effects of joint ventures on the digital distribution of movies directly to consumers," DOJ spokeswoman Gina Talamona said Friday.

A spokeswoman for The Walt Disney Co. said the studio has been notified of the DOJ inquiry and considers it to be routine and ordinary.

"Obviously we'll cooperate and are confident the joint venture will pass muster," Disney spokeswoman Christine Castro said.

A joint venture owned equally by Sony Pictures Entertainment, Universal Studios, Paramount Pictures, Metro-Goldwyn-Mayer and Warner Bros. plans to offer movies that can be downloaded and viewed on computers. The new company is tentatively called MovieFly.

A rival service, called Movies.com, formed by Disney and News Corp.'s Twentieth Century Fox, plans a cable television service along with an Internet option.

Both ventures are expected to launch sometime next year.

Both efforts say they will have non-exclusive agreement with studios for their films. Studios will be free to pursue other arrangements with Internet or cable television companies.

That arrangement is considered crucial to avoid the kind of antitrust concerns that might arise from such an unusual cooperation.