INTERTAINER FILES SUIT AGAINST AOL TIME WARNER, VIVENDI UNIVERSAL AND SONY FOR ANTI-COMPETITIVE ACTIONS

CULVER CITY, Calif., September 24, 2002 - Intertainer, the entertainment on demand broadband leader, filed a landmark anti-trust suit yesterday against three major entertainment companies, AOL Time Warner, Vivendi Universal and Sony, in the United States District Court for the Central District of California, Western Division, accusing them of conspiracy to fix prices in the digital distribution of entertainment. The three companies control 56% of the motion picture market and 63% of the music market.

A pioneer of video on demand technology with several patents, Intertainer's suit alleges that the three defendants have attempted to control the marketplace for entertainment content on demand, thereby hindering and delaying the emergence of the broadband content industry and Intertainer's video on demand services. Intertainer maintains that the defendants have deliberately caused the delay so that they may have the opportunity to deploy a service called Movielink, owned in material part by the named defendants and other studios, that would monopolize the Internet video on demand market.

Beyond preventing competition in the marketplace, the suit alleges that actions taken by the studios have purposely delayed negotiations to reach a reasonable agreement, depriving Intertainer of access to films that are essential to its service.

"Intertainer delivers video on demand to consumers in a manner that makes ordering and viewing film, television, and music simple and affordable," said Jonathan Taplin, Chief Executive Officer of Intertainer. "The actions taken by these leading studios will, in effect, eliminate consumer choice, produce higher prices, reduce output and lower quality services that would prevail in a competitive market."

Intertainer's legal complaint is built on grounds that allege specific actions taken by the studios both jointly and individually, including:

  • That the three defendants have conspired to fix prices in the VOD business by making "less than arms length" transactions with Moviefly, now named Movielink, a service that was launched to be competitive with Intertainer, but is owned in part by the defendants. The defendants moved the studio revenue share from 40% in the home video rental market up to 60% through this self-dealing transaction.
  • That the three defendants conspired to inhibit competition by engaging in a group boycott of intellectual property rights to Intertainer;
  • That AOL Time Warner induced its subsidiaries, Warner Bros. and New Line, to terminate existing Intertainer agreements in order to impede delivery of a broadband VOD service through rival Microsoft Network (MSN);
  • That SONY used its position as an investor and board observer with Intertainer to compile knowledge of Intertainer's business plans, architecture, and proprietary technology to build a business based on Intertainer's intellectual property;
  • That SONY induced former employees of Intertainer to violate their confidential knowledge of Intertainer's proprietary technology in order to help build Movielink;

"Over the last six years, Intertainer has committed itself to providing technology that is unrivaled in the industry. Given the intense race to provide VOD services to consumers, our business is apt to be crippled by these delays and the inability to provide the breadth of programming selections our customers expect," Taplin said. "At the same time, we have done everything possible to play within the rules by negotiating with the studios in good faith, paying them millions of dollars in advances for content that was never delivered, while assuring our partners that their content will not be misused. All along, we have sought to forge relationships with the studios that are beneficial to all parties. Only when they realized how much time, energy, money and know-how needed to go into a venture that could truly compete with Intertainer did the studios named in our suit begin treating us - and, by association, our customers - in an unfair manner."

Taplin said that all three defendants attempted to release themselves from agreements by claiming that Intertainer's security was flawed, while at the same time licensing their content to cable companies with no digital rights management or encryption on their video on demand systems. After adopting the same security method as Intertainer, they then claimed they had not cleared the music right to their films for Internet Protocol delivery.

Intertainer is currently available nationwide to consumers with connection speeds of 500kbps or higher. In addition, Comcast Cable and Adelphia Communications distribute Intertainer to digital cable television customers in select markets.

About Intertainer

A pioneer in video on demand, Intertainer provides two distinct services. One is a broadband entertainment on demand service, available at www.intertainer.tv, offering U.S. subscribers instant access to the largest selection of premium movies, music and television programming. The other is industry-leading video on demand content aggregation for cable operators. Intertainer features content from unprecedented partner relationships including Universal Pictures, Warner Bros., DreamWorks SKG, MGM, A&E Networks, NBC, PBS, Discovery, ESPN, Warner Music, EMI Music and many others. Strategic partners include Thomson, Comcast, Intel, Microsoft, NBC, Qwest and Sony.