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A 'Mistake' Hollywood Had Better Start Making

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.

Nearly two years ago, Dan Glickman, president of the Motion Picture Association of America, told a roomful of Post reporters and editors that this had to change. "It's been slow," he confessed, but he said changes were coming. Apparently, they still are.

The music industry, meanwhile, has taken a different path. It's kicked and screamed as much as the movie industry about the evils of online file-sharing -- and has been just as much of a pest in demanding new laws that would force the makers of computers and other electronic devices to build in copy-control technologies.

But it took the music industry less than two years of floundering with such pitiful experiments as MusicNet and Pressplay before it accepted Apple's then-radical idea for the iTunes Music Store in 2003.

Now, music downloads are a thriving part of the recording industry. Apple says iTunes is the fifth-largest seller of music in the United States -- and is on the way to passing Amazon to claim the No. 4 spot. Meanwhile, subscription services such as Rhapsody and Napster to Go provide a rental option never before available.

(The second-largest music-download store in the United States, however, is eMusic, which sells a variety of independent-label songs in MP3 format without any copying restrictions at all.)

Many record stores may be hurting -- not always a good thing for the neighborhoods they do business in -- but the recording industry as a whole seems to have secured its future.

The record labels appear to have accepted that their job is to sell music, as opposed to selling plastic discs with music recorded on them. Most movie studios still appear confused on that point. They need to get on with making that same "mistake": It could be the most profitable blunder they've made in years.

Living with technology, or trying to? E-mail Rob Pegoraro atrobp@washpost.com.

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