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Piracy Fears Limit Film Downloads

Studio-backed Movielink struggles, highlighting Hollywood's difficulty with digital delivery

March 07, 2004|Jon Healey | Times Staff Writer

When five Hollywood studios announced plans for the Movielink downloadable movie service, they heralded it as a revolution in home video.

Two-and-a-half years later, the revolution is still waiting to be televised.

Reviewers say Movielink offers more convenience to some movie lovers, enabling the ones with high-speed Internet connections to rent films without budging from their homes.

So far, however, it's no match for the local video store in one critical respect: You can play a movie from Blockbuster on any TV in your house that is connected to a VCR or DVD player, but a Movielink film can't be moved off the computer that downloaded it. That shortcoming has stunted the growth of the Santa Monica-based service, which charges $2 to $5 per rental. Movielink won't disclose how many customers it has, but people close to the service say it's struggling to find an audience.

Analysts and some of Movielink's founders say getting films off the PC and on to the TV is critical to the service's survival. "If they can't get it to the TV, they're hosed," said Josh Bernoff, a senior analyst at Forrester Research.

Movielink's difficulties highlight the challenge for Hollywood as it slowly migrates to an era of digitally delivered entertainment that can be consumed anywhere, anytime: how to balance the flexibility viewers want with the piracy protections that studios say they need.

Even Movielink's supporters acknowledge the service hasn't found the right balance. "Clearly, the usage level is not what we'd hoped it would be," said a Hollywood executive close to Movielink. "But frankly, the user experience is not what we'd hoped it would be."

The five studios -- Sony Corp.'s Sony Pictures Entertainment, Time Warner Inc.'s Warner Bros., Vivendi Universal's Universal Studios, Viacom Corp.'s Paramount Pictures, and Metro-Goldwyn-Mayer Inc.'s studio unit -- launched Movielink in November 2002, offering about 170 downloadable films from their collections.

Today, the service lets customers store digitally compressed movies in near-DVD quality for up to 30 days. They can watch a film multiple times, but it becomes unplayable 24 hours after the first viewing.

The technology developed for Movielink provided two ways to transfer movies to televisions. They could be beamed wirelessly to TV set-top boxes or burned onto a DVD or video CD. But the studios haven't incorporated those features into the service, mainly due to concerns about piracy.

At the heart of those concerns is a reluctance to take risks on a new technology that could wind up hurting the movie industry's biggest cash cow, DVD sales. Several of the studios behind Movielink are in no rush to change the service; in their view, the masses aren't ready for downloadable films, and Movielink is more of a test bed than a business.

In fact, one of the factors stalling Movielink is that some of its studio partners want more protection against illegal copying than they get from the home videos they sell today.

Said Yair Landau, vice chairman of Sony Pictures Entertainment and a leading advocate for the service: "The problem for Movielink is that the studios hold it to a higher standard than they hold themselves. We don't allow Movielink to do what we allow our [studios'] home-entertainment companies to do, and that's the challenge."

Movielink's main competitor in the field of downloadable films -- CinemaNow of Marina del Rey, which is controlled by independent studio Lion's Gate Entertainment -- faces the same restrictions on transfers and burning. But CinemaNow Chief Executive Curt Marvis said he thought it was just a matter of time before the studios gave customers more flexibility.

"These days, every studio is willing to be open to ideas and concepts that they weren't open to as recently as a year ago, and certainly not two years ago," Marvis said. "I think that's purely and simply a function of what they've seen happen in the music industry."

What they saw was a dramatic drop in music CD sales from 2000 to 2003, a slump that many label executives blame at least in part on the rise of Internet piracy.

The movie industry hasn't been hit by anything similar yet -- DVD sales have accelerated every year since 1997 -- but a growing number of films are being swapped online.

Reports about emerging online movie piracy helped persuade Sony in 1999 to develop a downloadable movie service, which it dubbed Moviefly. The idea was to nip piracy in the bud by offering a legitimate online outlet for movies, which would be wrapped in electronic locks to deter copying.

Rather than launch the service by itself, Sony held up the rollout until it recruited the four other major Hollywood players. They all committed to support the service for five years and to invest a total of more than $100 million. That's a tidy sum for a start-up, but not much more than the Hollywood average for producing a single film.

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