The London firm (www.article27.com) has so far acquired rights to more than 230 films, documentaries and children's programs that fall outside of mainstream tastes.

The films in article27's collection come from Italy's RAI Trade (www.raitrade.it), Sweden's Svensk FilmIndustri AB and the U.S.'s Zeitgeist Films Ltd. (www.zeitgeistfilm.com), among others. The collection includes movies of special interest to particular communities and to film buffs, such as the Oscar-winning Spanish film "Belle Epoque" or "The Celluloid Closet," a documentary version of the book about the portrayal of gay characters in films.

Article27's two founders, Christian Strain and Rolfe Swinton, met at Yale University and are now the firm's co-chief executive officers. Mr Strain has an MBA from Harvard Business School and has worked at Cambridge Technology Partners. Mr Swinton has a master's degree from the University of Cambridge and has been a project manager at the international consulting firm Monitor Co.

Article27 has attracted heavy hitters from both the film and high-tech worlds. Mr Grahame Ball, article27's vice-president of operations, was previously a vice president at Microsoft Europe. Programming vice-president Shelia Whitaker used to be director of the London International Film Festival, while acquisitions vice-president Carol Brokaw was a vice president at Walt Disney Co.

Mr Jonathan Demme, who won the Academy Award for his direction of the film "Silence of the Lambs," is on the start-up's advisory board, along with casting director Juliet Taylor, who managed the casting for "Schindler's List" and many of Woody Allen's films.

The firm has attracted investors, too. Geocapital Partners led the company's first round of venture funding, which brought in $7 million last April. "The time is right for aggregating such a library of film rights," says Stephen Clearman, founding partner of the Fort Lee, N.J., venture-funding firm. "The Web provides for linking supply with unmet demand for this kind of material."

Exclusive Sales
To make money on the films, article27 is signing syndication deals with portals and video-on-demand, or VOD, providers for exclusive sales of DVDs and videocassettes and exclusive nontheatrical, direct-to-consumer viewing rights to its 400 hours of programming.

Consumers either buy the films at a portal's e-commerce section or watch them via a VOD provider. Ultimately, consumers may watch the films on the Net as well, as broadband access to the Net becomes more widespread.

Mr Strain expects there to be an uptake in both the US and European broadband use from 2002. Deutsche Bank in April predicted that Europe's digital-television households will increase to 200 million by the end of 2004, up from 26 million last year, and expects users of xDSL broadband-access services to grow to 40 million subscribers by the end of 2004, up from five million this year.

"When we get to a broadband world, sites will be hungry for content," says Mr Strain.

Some sites, like Chaitime.com (www.chaitime.com), a Philadelphia-based community site aimed at young expatriates from India and South Asia, have taken up article27's offer. With 150,000 registered users in the US and plans to launch its UK site this month, Chaitime needs content that appeals to its customer niche and has signed a deal to sell some of article27's films on its site.

Chaitime's subscribers are more likely to prefer independent films over mainstream movies, says Mr TJ Culbertson, Chaitime's strategic development director. "Original content is also what keeps users coming back. Quality content attracts more users," Mr Culbertson said. "Marketing partners are interested in original content, so (article27) is going to help us."

The fact that article27 manages film-sale details and stores digital copies of the films on its own servers has appealed to sites that may not have adequate technical resources of their own.

"They handle all the logistics and customer service, so it makes it easy for us," says Mr Mark Elderkin, president and chief operating officer of Online Partners.com Inc, the parent company to Gay.com (www.gay.com). According to Media Metrix figures from August, Gay.com is the most popular site for the gay and lesbian community in the US.

Article27 has a vested interest to see that its customers attract as many surfers as possible. The firm gets as much as an 85 per cent cut of movie-sale revenue and about 30 per cent of ad revenue related to the films.

Initially the start-up expects most sales to come from the US, but the US/Europe ratio should even out starting next year, the firm says.

Based on data from several consulting firms, article27 expects global sales and rental of film videos and DVDs to be worth nearly $56 billion this year, a 23 per cent climb from last year.

Mr Aram Sinnreich, a media analyst at Jupiter Communications Inc. in New York predicts that licensing fees for online digital content will grow to $1.5 billion world-wide by the end of 2004, up from $343 million this year.

DVD sales, likewise, are rising quickly. Merrill Lynch expects European DVD revenues, for example, to grow to $15.6 million by the end of 2005, ten times today's market.

Online Video
A share in the revenue of such sales should provide most of article27's income in the short term. But as broadband access to entertainment services and the Internet proliferates, revenues from online viewing of the films may increase as well.

Morgan Stanley Dean Witter & Co. estimates that cable subscribers capable of making VOD selections will grow to 27.5 million by December 2005 in the U.S. up from only 400,000 this year.

While the Internet has already sent a host of online film and video enterprises packing - last month alone, the Steven Spielberg-backed Pop.com closed before ever even launching and Pseudo Programs Inc closed after a six year run on the Net - start-ups that don't rely solely on the Internet for revenue have done well.

Article27 hopes to break even late next year or early in 2002, says Mr Strain, who oversees finance and business development for the firm. With fewer than 40 employees, funds from its first round of financing are expected to last beyond April 2001. "They are slightly ahead of the curve," said a London-based Intern et analyst who asked not to be named. "This (site) will let people filter movies themselves, rather than having to watch films filtered by the powers that be. The Net is perfect for this type of geographically separated customer base."

The Wall Street Journal