Is Hollywood Failing to See the Big Picture?

In 2000, Offspring decided to give away its new album on its Web site, offering fans who left their e-mail addresses an opportunity to win a $1-million MTV giveaway. According to Guerinot, the band's manager, the group believed the Web site traffic would not only boost record sales but provide an invaluable e-mail database. But the group's record company, Sony Music, a Big Media company, saw the giveaway as an invitation to piracy. Sony threatened to sue, forcing the band to scale back and offer one song, not the entire record.

"Of course, by the next day, the entire album was available everywhere but offspring.com," Guerinot says. "It shows how different our goal -- which was to build a long-term online business -- was from their goal, which was to control their manufacturing and distribution machine and show a profit to Wall Street and their stockholders."

This piracy-versus-promotion divide was a key ingredient in the recent Oscar-screener showdown, which found studio art-house divisions arguing that academy members should have unlimited access to DVDs, while their parent companies fought against any widespread distribution.

And no wonder: The Oscars have almost zero box-office impact on a Big Media blockbuster such as "The Lord of the Rings," which is a prime piracy target. But the Oscars mean everything to art-house films such as "American Splendor" or "In America," which are largely ignored by pirates but depend on Oscar nominations to reach a broader audience.

Even within the same studio, there are often conflicting strategies.

Fox was a big proponent of the Oscar-screener ban, worried that DVDs of its big holiday release, "Master and Commander," would fall into the hands of pirates. But when Fox TV's new teen drama "The O.C." needed to make a splash with young viewers, the network sent out 15,000 DVDs of an early cut of the show's first episode to readers of Teen People and Teen Vogue. No one worried about piracy because the promotional value of seeing a new show outweighed the loss of control in how the program was passed around by fans.

Soon it will be the movie business' turn to cope with wrenching change.

"We're always thinking about how to deal with the pace of technological development," Gianopulos says. "One day there was Napster, the next day it was everywhere. You need to change your established ways of thinking, but you have to consider its impact on your established business."