Three major movie studios are about to try an interesting experiment. They are launching a new TV network called Epix that will show their own recent films in HD, but they're going a step beyond by bundling it with an online, on-demand service that offers HD streaming of the same films over the Internet. Think of it like Hulu for movies that aren't yet out on DVD. Oh—and did we mention that the service will have no advertising and won't appear on your cable bill?

A new business model



The music industry was never much good at being a digital retailer—anyone remember MusicNet and Pressplay?—but TV networks and movie studios now seem to think they have learned the lessons of the past.

Like Hulu, the Epix movie service is a joint venture formed by the content owners; in this case, the service is powered by the movie studios Lionsgate, Paramount, and MGM. The Epix TV network will air movies that are in the "pay-TV" window, those weeks before a film appears on DVD in which it is available on pay-per-view or HBO, among others.

That doesn't sound so new, but Epix will be bundled directly into cable packages; under the current business model, it will never appear as a separate charge on the bill and will never have to be added to a package. If Epix can convince enough cable operators to sign on (it isn't yet announcing partners), the service will have an immediate competitive advantage over pay-TV channels with an additional monthly fee.

But the best part is that Epix viewers can access the same material online, on demand, at Epixhd.com. Ars spoke with Emil Rensing, chief digital office at Epix, who says that watching films online will be a two-click experience with full support for 720p streaming.

The video is offered through Flash and is multi-bitrate enabled; the player checks the available bandwidth every ten seconds to see if a larger or smaller stream is required. Epix currently creates six different encodings of each film which range from full HD support all the way down to 500Kbps (cell phone quality). In our own test preview of Iron Man, video was the best we have ever seen in a mainstream streaming service.

Pushing out that sort of data is bandwidth-intensive, and Epix would love to avoid streaming HD content across the public Internet wherever possible. One way to make that happen, which the company is currently pursuing, is to install caching servers directly in the data centers of ISPs with whom Epix has a relationship. (Rensing says that Epix does not require any sort of quality of service guarantees or bandwidth prioritization from ISPs.)

These "relationships" are one of the unique points about Epix. The company currently has no plans to offer content directly to consumers; it only wants to sign deals with TV distributors. These distributors certainly include the cable companies, but now also include Verizon's FiOS, AT&T's U-verse, and satellite services.

Epixhd.com will only be available to people who subscribe to one provider's TV offering and also subscribe to that same provider's Internet offering. That is, if Comcast were to offer Epix, users would need to pay for both Comcast cable and Comcast Internet in order to access the streaming, on-demand service. That's good for Comcast, and it helps them cover the cost of the service.

Do you Hulu?

Given that services like Hulu and Netflix On Demand work well and are increasingly popular, the real question is why the studios would launch their own distribution network instead of just offloading the films to partners already equipped to handle them?

Rensing insists that the services are just too different. While Hulu does offer some films, it's focused almost exclusively on TV at the moment and is ad-supported. Netflix On Demand doesn't have access to the same super-recent hit titles.

Left unsaid is the fact that controlling distribution is also a chance to make more money, if it's done right. Epix is pursuing a strategy that has similarities with ESPN's streaming service, ESPN 360, which is also sold directly to ISPs and not available to end users directly. Again, the charge for the service never shows up on a customer's bill but instead looks like a nice added bonus that ISPs can use to differentiate their service from rivals.

The downside is that those who like the Epixhd.com site (which looks fairly slick at the moment, even though development continues) and would gladly pay some monthly fee for access—well, they're out of luck.

An invite-only beta of Epixhd.com begins today, with a sign-up form for rolling admission over the next few months.