A 'Mistake' Hollywood Had Better Start Making

Apple's Steve Jobs introduces the new set-top box that will let viewers watch downloaded movies on TV.
Apple's Steve Jobs introduces the new set-top box that will let viewers watch downloaded movies on TV. (By Kimberly White -- Bloomberg News)
By Rob Pegoraro
Wednesday, September 13, 2006

For several years now, the refrain in the movie industry has been: "We don't want to make the same mistake as the music industry." Hollywood studios, having ventured billions of dollars on their titles, say they can't afford to let customers get used to finding movies via black-market file-sharing.

So what have the boldface names of the business spent the past few years doing? Ensuring that the most effective way to download a movie is via a peer-to-peer network that won't pay a dime to any studio.

Even as programs such as BitTorrent and its offshoots have made it increasingly easy to find flicks online, legitimate movie-download services have remained a joke.

The two best-known ones so far, Movielink and CinemaNow, might as well have tumbleweeds blowing through their aisles. They offer laughably small selections at prices offering little or no savings over the DVD and under insultingly limited conditions. Most movies can't even be burned to DVD -- something that people have been able to do with their own camcorder footage at least since 2001.

Now two companies that actually know a thing or two about selling entertainment online -- Amazon.com and Apple -- are making their own attempts to drag movie downloads into this millennium.

Apple made its official entry into the movie-download business yesterday at a splashy event in San Francisco, which included the introduction of new iPods and a preview of a set-top box, iTV, that will let viewers watch downloaded flicks on their TVs. Amazon's Unbox service launched last week.

The Amazon and Apple efforts show a lot more promise than earlier stores, with noteworthy improvements in the shopping and downloading experience. (I'll review those two online stores in Sunday's column.)

But at least at the start, they're still stuck with the same old problem: The studios continue to show an amazing proficiency for finding reasons not to sell or rent digital downloads in ways that customers might value, all for the sake of protecting their existing retail channels.

Hollywood's attitude has been "movie downloads on our terms." First it will take care of the stores that sell and rent DVDs today -- along with every other outlet it furnishes movies to, from pay-per-view to cable movie channels to airlines -- then it will see if it can start a digital channel on the side.

So, for instance, many studios don't want to price a movie download below what Wal-Mart charges for a DVD, lest the retail giant rebel at the impertinence. And movies offered for download can suddenly become unavailable when it's time for them to move on to the next stage in the industry's "chain of value," whether it's cable's TBS or the clearance rack at Blockbuster.

That's understandable, but unsustainable, behavior. It's a fundamental misunderstanding of how things work in a market where anybody can become a distributor, authorized or not, of digital content.

Essentially, the Internet at large determines how movies reach customers, and studios need to figure out how to fit a cash register into that pattern -- that is, by charging for quality and convenience that you can't get with a peer-to-peer service's random selection.

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