Following the pattern of Akimbo and Video Without Boundaries, newcomer VCinema plans to bring a broadband-enabled home entertainment service to the market in mid-2005. The subscriber-based service will allow consumers to legally download and assemble their own video libraries from an array of content - films, TV shows, children’s programming and a large variety of other video entertainment. Its appeal will be that one box downloads content, provides DVR functions and plays CDs and DVDs – all on the TV set.

VCinema’s Set-top Box

- Legal purchase & download of movies, TV shows & children’s programs directly to the TV

- Digital video recorder with 14-day programming guide

- Play existing DVD & CD collection

- One set-top box and service to manage it all

The company has its own Digital Theater multifunction set-top box that integrates a high-speed broadband connection, a DVD/CD player, a digital video recorder (DVR) and the ability to download digital video content to rent or own. VCinema’s claim to uniqueness is that it marries the functions consumers want in their living room TVs - the ability to sit in their living room and, with a single remote, access the high-quality movies, TV shows, children’s programs and other content they love - and watch it whenever they want. VCinema says it removes the hassle of looking for discs, downloading videos to a PC located in another room from the TV, tuning in to a program after it has already begun, running out to the video store, or waiting days for online rentals to show up in the mail.

The Digital Theater stores about 320 hours of movies and entertainment, around 160 two-hour movies. Users have the ability to select how much disk space gets allocated to Record TV, the DVR function, and how much for downloaded programs.

With VCinema’s My Library function, once a user reaches the limit of the storage capacity in the Digital Theater set-top box, he can take a movie or TV show that was purchased through VCinema and “put it back in a virtual bookshelf” for download anytime at a later date – at no additional charge! In effect, it gives users the ability to maintain an unlimited storage capability for rented or purchased content from the VCinema service without worrying about having to permanently delete or automatically lose access to content. Access to the My Library function is either directly from the Digital Theater or from the user’s account on the VCinema Web site.

The VCinema service and DVR is compatible with all cable or satellite services.

Pricing

A monthly subscription fee provide subscribers with a variety of free video content updated every month, a 14-day integrated TV program guide and access to the user’s video library that offers unlimited storage for downloaded content. Software helps users store, manage and track home video activity.

The price of an individual video program varies based on whether it’s being rented or purchased, whether it’s a recently released full-length movie or three-minute music video. VCinema says the payment scheme, as yet unannounced, is no different than what consumers currently pay to rent or buy a movie from the local video store, video-on-demand or pay-per-view service.

Convenience, Choice, Control

“The demand for immediate access to high-quality, mainstream content is at the heart of the rapid evolution of the digital home entertainment experience. It is clear that consumers are challenging service providers to deliver on three key premises - greater convenience, choice and control,” said VCinema president and CEO Adam Zeitsiff. He says that the company has converged digital media functionality with a secure download service into a single box – a single entertainment service and that it is prepared to emerge as a leader in the video-over-broadband home entertainment market.

The company quotes numbers from Parks Associates projecting that by 2008 more than 15% of US homes will purchase on-demand movies and other video content. That digital entertainment market, Zeitsiff says, is the market that VCinema is aiming for.

VCinema has to get appealing content in order to attract subscribers. It says that content developers want to increase their existing home entertainment revenue opportunities. VCinema’s pitch to content providers is that it’ll provide a new and secure distribution channel for their products. The start-up believes its service will appeal to large and small content developers because it will have security and digital rights management for their intellectual property. It says that its DRM will help content providers combat illegal distribution and build a base of legal - and paying - online customers.

VCinema will encode content using an industry-standard Advanced Video Compression algorithm (AVC), which it say provides significantly higher video quality (full D-1, 720 x 480 resolution or better) compared to other services. VCinema also has what it calls “progressive play” technology that allows a customer with an average broadband connection to begin watching a full-length feature film less then one minute after choosing to download the program.

VCinema will encrypt video content with its patent-pending DRM and revolving licensing technology, as well as provide a secure, conditional-access communications path from its storage servers to its Digital Theater set-top box in the home.

The company says it’s in the final stages of developing its products and licensing a large variety of content from major US film studios, television and cable networks, children’s content providers, major sports leagues and various other content providers around the world. VCinema will be launching its service on a limited test basis early next summer with a full-scale national launch currently planned for September 2005.

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Internet-based Entertainment Services

Service Delivered by Viewed on STB

Akimbo Internet TV yes

Atzio Internet PC

CinemaNow, Internet PC/TV*

Movielink

MovieBeam Over-the-air TV yes

signals

TiVo Satellite, TV yes

cable TV

TiVo/Netflix** Internet TV yes

VCinema Internet, TV yes

DVD, CD

Wavexpress Internet PC

Windows Media PCs Internet,

DVD, CDPC

* Both Movielink and CinemaNow movies can be downloaded to a PC and viewed on a TV set if the devices have the proper connections, cables and set-up.

** TiVo and Netflix have not announced exact details of their service.