AOL, the internet company, is to launch a broadband film-rental service next year, offering a range of movies from its sister company Warner Bros.

The initial selection is likely to include Batman Begins and Harry Potter and the Philosopher’s Stone. AOL intends to expand the choice available steadily, eventually adding films from other studios.

The video-on-demand service is thought to be the first in Britain to offer legal downloads of mainstream movies. However, as much as 20% of all traffic on the internet is believed to be accounted for by illegal downloading of films and television programmes.

Josh Berger, UK managing director of Warner Bros, said: “If piracy shows anything, it shows there is a real consumer demand.”

The move is another indication of the extent to which telecoms companies are converging with media and entertainment businesses. BT has also announced plans to launch an internet television and video-on-demand service next year.

AOL has yet to decide pricing, but it is likely to be about the same as the charge for DVDs from rental firms such as Blockbuster. Films will become available a few months after the release of the DVD.

Customers would download a film to their computer and have seven days to watch it. Once they start playing it, they can watch it as often as they want, but only for 24 hours.

The restrictions reflect the fact that Warner and AOL are initially offering a rental service, not a purchase. Film downloads for purchase were planned for next year, Berger said. Downloading movies over the internet is becoming easier because of increasing broadband speeds.

AOL said a broadband connection of two megabits per second was fast enough to watch the film as it downloads. Over slower connections, customers would have to download in advance. More than half AOL’s customers in Britain have now switched to broadband.

Berger said Warner would make available at least 100 movies at launch.

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