• by Wayne Friedman , Staff Writer, October 25, 2005

For the big picture of the video-on-demand business, Rainbow Media Holdings is thinking small-time entertainment.

Rainbow wants to create a business by releasing independent and small art-house films in theaters on the same day that they premiere on VOD services. Wedging into the business with the small independent and art-house films makes sense with VOD. That's because bigger movies--like that of big network TV shows--are still off limits in VOD land.

Independent films are fast becoming the orphans of the film business, along with art-house movie theaters. Joshua Sapan, president and CEO of Rainbow Media, believes VOD is the key to indies' survival.

To pave the way, Rainbow hopes to release 18 to 24 films a year by initially launching them in Rainbow's own new IFC Center film complex in New York, and on its parent company's own VOD service. Rainbow is owned by cable operator Cablevision System Corp.

Others have tried this before--in one-off film deals. Mark Cuban and Todd Wagner's Magnolia Pictures had a VOD showing of "Enron: The Smartest Guys in the Room" through its HD Net programming service. But theatrical exhibitors, for the most part, declined to air the film, knowing it would also get a VOD same release date, which they believed would hurt their box-office business. The film did run on Cuban and Wagner's Landmark Theatre screens.

Rainbow is counting on a niche audience, hungry for specific art-house movies, to buy the VOD service. The company will have no trouble convincing struggling indie producers this is the right way to go. But the main effort will be to encourage existing art-house exhibitors that they should share their window with VOD, and possibly even DVD. Rainbow's argument for those exhibitors seems to be that same-day-and-date releasing will allow more independent movies to survive and get produced.

Perhaps a tougher sell is in convincing other cable operators to make room for a niche movie VOD service--not a service for wide-release movies that, according to pay-per-view histories, reap the biggest financial rewards for cable operators.

As with broadcast networks--who won't be giving up their big-time network TV shows as yet for VOD--movie companies are also holding on to their big film prize possessions. Both theatrical and broadcast network companies aren't ready for massive changes in the traditional ways they do business.

But small niche entertainment can become a current staple of the VOD business.