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File Sharing's Close-Up

Music execs wish they'd embraced online business models sooner. Hollywood had better be quick to learn that lesson.
Only two services have made an earnest effort to distribute feature films thus far--Movielink and CinemaNow, which is backed by independent studio Lions Gate Entertainment--and both can be buggy for users who don't have the latest equipment. Recent attempts to view films using both services on a Dell laptop running Windows 98 and connected via residential DSL were largely unsuccessful. "I'm the first person on the planet to say there are still technical issues around watching movies on the Internet that can be problematic for the average consumer," says Curt Marvis, CEO of CinemaNow. The bandwidth barrier is falling with greater consumer adoption of broadband, crucial for downloading movie files that typically are larger than 500 Mbytes. But compatibility problems continue to confront users who find that all the video formats, media players, and PC operating systems often don't work harmoniously. Client-side hardware issues such as the limited storage of older PCs and the sometimes off-kilter configurations of video cards create further challenges. And then there's the matter of enabling consumers to transfer the movies they buy online from their PCs to their televisions--no easy feat today. That problem is expected to lessen as home networking grows as an area of focus for the tech industry.

Still, the movie industry shows lukewarm interest in embracing E-business models until it gets better copy protection. The equation is simple: The ability of pirates to upload films to file-sharing services makes it extremely difficult for subscription services and pay-per-download stores to succeed. But the biggest worry isn't those bootlegging moviegoers using video cameras to make sketchy copies of first-run movies. Most of Hollywood's concern and energy are devoted to copy protection in the home.

That's where the relationship between moviemakers and tech companies takes center stage. Intel is sympathetic to the entertainment industry's plight--to a point, says Don Whiteside, who, as VP of legal and government affairs, manages the chipmaker's relationships with the movie and music industries. "All of our industries have a strong foundation in intellectual property, and we all have a fundamental interest in making sure our intellectual property is protected," he says. "Where we diverge is in what role one industry has in protecting the other's interests." Hollywood has accused IT manufacturers of capitalizing on the production of piracy tools, but the business obligation is to deliver capabilities consumers want, Whiteside says. "It's not generally our role as an IT company to be enforcing control of consumer behavior on the Internet."

IBM promotes "content enablement," in which algorithms embedded in content would detect network characteristics to determine what users can do with the content, rather than what they can't do. Bottom line: All digital-entertainment stakeholders will have to make compromises in order to get technologies to market in time to capitalize on the opportunity facing Hollywood, says Steve Canepa, VP of IBM's global media and entertainment business. "Witness what's happened in the music industry," he says. "Billions of dollars have been lost from a commercial model into a noncommercial model."


Brad Hunt, chief technology officer for the Motion Picture Association of America

Studios will do whatever is needed to protect their content, says Hunt, chief technology officer at the Motion Picture Association of America.

Photo by Diana Koenigsberg
But the movie industry isn't about to back off its efforts to stamp out piracy, says Brad Hunt, chief technology officer for the Motion Picture Association of America. "The studios will do what they need to do to protect their content," he says. "It's their livelihood."

Agreements between these groups are needed before we'll enter a new era in which the Internet, advanced PCs, home-entertainment networks, and digital devices provide a level of convenience that's technically feasible today but science fiction from a business-model standpoint. "The sense of urgency at the moment seems to be about controlling the computing rather than just getting out there and seeing how [digital-distribution models] work," says Jim Burger, an attorney with the law firm of Dow Lohnes & Albertson, who represents technology vendors.

It's a plot waiting for a Hollywood ending: The seemingly impossible pair finds a way to live happily ever after. But for now, both sides are still waiting.