'SPOTIFY FOR MOVIES' PARTNERS WITH BREDBANDSBOLAGET

UNCLAS STOCKHOLM 000676

STATE FOR JOELLEN URBAN
STATE PASS TO USTR FOR DAVID WEINER

SIPDIS

TAGS: KIPR ETRD ECON PREL SW
SUBJECT: 'SPOTIFY FOR MOVIES' PARTNERS WITH BREDBANDSBOLAGET


1. Summary: Voddler, also known as 'the Spotify of Movies,' was
launched Tuesday Oct. 27. The service which offers access to movies
online using streaming instead of downloads is expected to be a
great success. End summary.


2. Voddler and Bredbandsbolaget, the second largest broadband
provider in Sweden, joined forces Oct. 27 when they announced that
they would offer Voddler services for free to Bredbandsbolaget's
customers.


3. A test version of the service was made available during the
summer and had 30,000 users. The CEO of Voddler, Marcus Backlund
expects half of Bredbandsbolaget's customers to use the service.
That would make 250,000 users. He adds that an additional 250,000
users are currently waiting in line in Voddler's own queue. The
service is presently offered exclusively to Bredbandbolaget's
customers, but queuing users will be invited to the free service
over the coming months.


4. The announcement comes as Nordic contracts have now been drawn
up with the movie giants Paramount (who in turn has contracts with
Dreamworks) and Disney (who owns Touchstone Pictures and Miramax).
Voddler officials say they are close to an agreement with Sony
Pictures and believe that all major movie studios will be on board
by the end of the year.


5. Voddler's plan is to offer a great number of movies, TV-shows
and music for free over the internet. To avoid property rights
problems the movies are not downloaded but streamed across the
internet. Voddler derives its revenue from advertisements, which
are added to the beginning of the movies. Costs are kept low by
using the customers' computers in the distribution network. This
makes Voddler a controlled and legal provider of the peer-to-peer
technology that is used by file-sharing sights such as the illegal
file-sharing site The Pirate Bay. The measures reduce costs by 95
percent. Every single stream is profitable, Backlund told
reporters. He even believes that the corporation will have a
positive net result by this summer.


6. The business model is similar to the Swedish music service
Spotify. So far there are not many movies available however, barely
1000 movies, which is fewer than the competition (SF Anytime and
Film2Home). Moreover most of the "new" movies have already been
released on DVD. The goal is that Voddler will be available across
the Nordic Countries by this summer, followed by the UK. While the
service area grows, the supply is intended to grow. "Our goal is to
become a global Swedish corporation. We will do everything we can
to reach that goal," Backlund said.


7. In a meeting with Bredbandsbolaget on Tuesday Oct. 27, Embassy
officials were informed that the partnership is part of
Bredbandsbolaget's wider plans and efforts to partner up with
entertainment providers to offer additional services to their
customers. In what they perceive as a difficult market to compete
in (due to the incumbent Telia Sonera's control over the dark fiber
over which broadband is delivered),Bredbandsbolaget is now gearing
its efforts towards providing additional and exclusive entertainment
features.


8. Comment: The Voddler service will offer a legal alternative to
illegal sites such as The Pirate Bay and might well diminish demand
for similar illegal sites. The Spotify service, which offers access
to streamed music for free with advertisements or for a fee without,
has been a huge success in Sweden. End comment.


BARZUN