Warner Home Entertainment unveiled plans to launch a peer-to-peer video download service in Germany beginning in March, using Bertelsmann-created file-swapping technology to sell movies online at the same time as they're released on DVD. The service is being launched in Germany first, in an attempt to address the country’s severe piracy problems.

Although the size of the market for movie downloads in the US is not clear, similar services are expected to emerge in the United States from online retailers. Warner has had "preliminary discussions" about selling movies by direct download over the Internet with all of its major retail customers, but has not yet signed any deals.

Studios have been wary of digital download services in the past for several reasons including concerns over content protection and falling DVD sales that, up to now, have provided Hollywood with a healthy revenue for several years. However, the enthusiastic support from consumers over the release of Apple's iTunes video sales service has encouraged the studios to act. TV shows are now widely and legally available online from Apple and Google, among others, and big-budget movies may be on the way.

The Bertelsmann technology will also allow the movies to be distributed in Microsoft's video format and digital rights management software, which indicates a growing level of acceptance in the format by studios. Warner are confident Microsoft has now shown that the strength of its rights management software is adequate for releasing films.

Several video-on-demand services exist that allow customers to download movies to watch for a short period of time, but there are no services in the United States that allow permanent purchase of films encoded in Microsoft's format.

But the emergence of Microsoft-allied services in the United States would almost certainly lead to another struggle between incompatible digital movie formats like the one that exists in the digital music business now, as Apple distributes its films in the MPEG 4 video format, but wrapped with its own proprietary copy protection software.
For its part, Amazon.com, the online retailer, is reportedly planning to offer its customers a new service from the Spring that will allow them to purchase and download full-length feature films. This will complement its recently opened HD DVD store which allows consumers to buy via pre-order the next-generation hi-def players.

However they are likely to link the download to the sale of the DVD of the film. They envisage customers streaming a digital version of the film for a fee and then offsetting it against the cost of the DVD. Alternatively, a customer would buy a DVD, and then while waiting for its arrival, they would be allowed to stream it over to their computer.

“What they are serving up is a direct companion to the DVD,” explained one senior Hollywood executive. “Everything is being leveraged to sell more DVDs. When you go to a product page on the site, it will say all the variations about how you’d purchase that video stream, buy or maybe a combination.”

Over the past several months, Amazon.com has been making available for download exclusive material tied to certain DVDs, for example bonus features from Seinfeld sets, but up to now this material has been relatively short compared to a full-length feature film.

The service is expected to launch with at least two major studios and Amazon is working to get independent studios such as Image Entertainment, Ardustry Home Entertainment and First Look Entertainment, on board too.

Story filed 05.02.06