Downtown Pictures has become the latest UK distributor to tune into Video-on-Demand (VoD), striking an alliance with Video Networks, the UK VoD company planning a national roll-out next year.

Along with a multi-year output arrangement, the partnership will see Video Networks investing in Downtown if the distributor satisfactorily advances plans for a private equity raising of up to $5m this autumn. Downtown aims to follow the raising with a flotation based on its projected value as a VoD content supplier.

"There is a firm interest on our part [in investing]," said Hugh Williams, Video Networks' director of programmes and customer product. "We are looking for strategic partnerships rather than just licensing films."

Downtown has recently owed small sums of money to a number of creditors but said that all such problems would be resolved in a month.

While VoD revenues are still small-scale, Downtown has also been buoyed by alliances with Fox-Pathe for video rental and MGM for sell-through and DVD. The distributor expects the video deals to provide at least 50% of p&a costs on its releases. Video Networks will stagger payments to Downtown according to films' p&a spend.

Simon Clement-Davies, Downtown's head of finance and business affairs, argues that the distributor's strategy differs from that of filmgroup, the VoD-to-theatrical distributor that recently pulled its float.

"We do not need to acquire exclusive VoD rights to large-scale studio titles and we are not proposing the costly exercise of creating our own VoD broadcasting network," he said.