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Starz Encore, Diva Reach SVOD Deal

5/28/2000 8:00 PM Eastern

Starz Encore Media Group LLC has announced a strategic alliance with Diva Systems Corp. for the programmer's subscription-video-on-demand service, and it has taken a $5 million equity stake in Diva.

According to the agreement, Diva will enhance its SVOD functionality for the commercial deployment of Starz Encore's SVOD service on the Diva platform. Diva's SVOD platform allows customers to view a group or a package of programs for one monthly subscription fee with anytime start and pause, rewind and fast-forward functionality.

"We are very pleased to enter into a strategic relationship with Starz Encore," Diva president and CEO David Zucker said in a prepared statement.

"Starz Encore's established and innovative position in the cable industry-together with that of its parent company, Liberty Media [Group], and their relationships with the major MSOs-should assist us in positioning Diva's video-on-demand solution as a leading two-way digital platform for cable television," he added.

"In addition, the intuitive appeal of Starz Encore's SVOD service will assist both companies' efforts in accelerating acceptance of VOD technology and its benefits of value and convenience for the consumer," Zucker said.

The Starz Encore equity purchase comes on the heels of a $10 million investment in Diva from Liberate Technologies and British media company NTL Inc. Middleware vendor Liberate made a $4 million equity investment in the company, and NTL made a $6 million equity investment.

On May 9, Diva filed documents with the Securities and Exchange Commission for a $75 million initial public offering.

Diva has already landed deals with five MSOs for its service, including MediaOne Group Inc., Chambers Communications Corp. and NTL. Most recently Diva reached an agreement to provide service to Charter Communications Inc.'s Los Angeles system.

Insight Communications Co. Inc. already launched the Diva product in its Rockford, Ill.; Columbus, Ohio; and Evansville, Ind., systems, and it said the service is extremely popular with customers.

Earlier this month, Time Warner Cable signed an agreement with Diva regarding the design, development, testing and integration of VOD hardware and software for the "Pegasus" platform, the MSO's interactive-services architecture.

Although Diva claims to be the only company currently deploying a VOD service, most large MSOs are believed to be working on their own VOD solutions. However, Diva plans to counteract that by offering more flexibility and control to MSOs that opt for its products.

Instead of owning, installing and operating its VOD equipment at the customer headend, Diva sells the equipment and licenses its VOD software to the operator, providing content-acquisition and management services at the discretion of the MSO.

The new model anticipates that the operator's VOD service will be part of an entry-level digital tier. And as operators scramble to upgrade their systems to digital capability, VOD will be one of the more lucrative new services allowed by the new technology.

According to Paul Kagan Associates Inc., services enabled by digital set-top boxes and two-way upgraded cable plant will generate $10.8 billion of revenue in 2004 over the next 10 years, with VOD services generating 39 percent of that revenue.

September