Movie moguls have not exactly been the most forward-thinking bunch when it comes to embracing new consumer technology.
After all, some of them in the 1970s waged an unsuccessful fight all the way to the Supreme Court to tax the now-ubiquitous videocassette tape.
But this year, Disney, Twentieth Century Fox, Universal, Sony, Paramount and Warner Bros. are forging new alliances to market video-on-demand technology that (like having a Blockbuster in your house, but without the tapes) will allow consumers to select from a library of thousands of movies and TV shows for instant viewing anytime they want.
Not since their effort in the 1940s to take over the movie theater business have the studios joined forces like this. Back then, their venture raised antitrust concerns, and the government prohibited studios from controlling the front end and back end of the movie business.
Yet even with the studios’ sizable investment in video-on-demand, these new ventures are far from a sure bet. Just like the old days, the new alliances are facing scrutiny from the Justice Department. And it’s an open question whether consumers will pay for this new technology when they can go under the table and get the programs for free from peer-to-peer, Napster-like services such as Morpheus.
Those burning issues — along with the debate over free access to creative material versus the desire to protect intellectual property — will be among the many topics explored by studio executives, TV programmers, music label representatives and technology experts Monday and Tuesday at a landmark Digital Media Summit in Los Angeles.
Whether they actually can resolve anything is anybody’s guess. The conference will offer a peek at the new services, technology and equipment that in the not-too-distant future could dramatically widen consumers’ entertainment options — and radically change the profiles of the companies providing them.
Taking a cue from music industry
The movie industry wants “to avoid the environment where you’re under siege by services uploading and downloading movies for free,” said Richard Taylor, a spokesman for the Motion Picture Association of America.
“We’ve seen what happened to the music community and the amount of damage done and we want to avoid that,” he added.
“It’s a pretty exciting time. A lot of things are going to change for the consumer,” said Michael Stroud, founder of the summit. “You’ll have the ability to call up any program you want and get it instantly. You’ll be able to watch it wherever you want it; you can download it on any device and take it with you,” he added. “That’s empowering.”
The development and overwhelming acceptance of digital technology — CDs, DVDs, broadband cable, DSL Internet lines, cell phones, digital cameras and recorders — is driving a host of changes in the entertainment, consumer electronics and computer industries.
Convergence is once again the buzz word, but this time it appears the technology is on stream to support it. Computers are being equipped right now to play music and video. TVs are being equipped to read and send e-mail and receive phone calls. Cell phones are being equipped with TVs and Web browsers. Camcorders are being outfitted with digital cameras.
Computer and software companies, such as Microsoft and Intel, are partnering with consumer electronics companies, such as Panasonic and Samsung, to develop the new products.
And the movie studios are forming alliances with the computer software companies, the electronics firms — and each other — to develop new ways to deliver their programming to consumers. The impetus for the studios is based on the fact that the new digital technology significantly increases the opportunities for duplicating, downloading, uploading, sharing — in their view, theft — of their properties. They are seeking to avoid the profit-siphoning scenario that occurred in the music industry when Napster developed technology that allowed computer users to share thousands of copyrighted songs with one another over the Internet without paying.
The studios are rolling out two new video-on-demand services this year. One, called Movies.com, is financed by The Walt Disney Co. and News Corp. The new service will offer customers access to new releases from Disney Studios, Miramax and Twentieth Century Fox; behind-the-scenes clips and interviews from upcoming movies; and thousands of films in the studios’ archives. Users will be able to access the films either through their digital cable set-top boxes or through a broadband Internet connection.
The other, called MovieFly, is sponsored by Sony, MGM, Paramount, Universal and Warner Bros., and will offer similar access to the five studios’ films.
Alliances raise eyebrows
But the collaboration of the studios is raising red flags for the government, which more than 50 years ago forbade the studios from buying movie theater chains.
If the Justice Department quashes the studios’ ventures, a Los Angeles-based company called Intertainer would be left as the major player in what the movie industry considers the legitimate video-on-demand market. The company, which began offering the service five years ago, has deals with Disney, Warner Bros., Universal, DreamWorks SKG, as well as several networks and cable channels to offer their programs to 350,000 subscribers.
The service, which is available only through the Comcast and Adelphia cable companies, could be offered in Chicago if Comcast’s proposed sale of AT&T Broadband goes through.
“It’s about convenience, choice and control,” said Stephen Ste. Marie, president and chief operating officer of Intertainer.
“This takes the best features of pay-per-view and home video and combines them with a better-quality picture,” he added. The users “don’t have to return a tape to the video store when they’re finished watching it. They don’t have to get out of their chair.”
Among the most controversial providers of video-on-demand services is a Nashville-based company called StreamCast Networks, which makes Morpheus. Like Napster, before it was purchased by media conglomerate Bertlesman and became legitimate, Morpheus operates without approval of movie studios and provides technology for computer users to share copies of programming over the Internet.
Another thorn in the side of the movie industry is Santa Clara, Calif.-based SONICblue, which manufactures the ReplayTV 4000. Known as a digital video recorder or a personal video recorder, the ReplayTV 4000 records TV programs on a computer hard drive and allows users to share video files with their friends.
A resistance to technology
Both companies are being sued by a plethora of movie and media companies.
“If you look at the history of the studios you’ll see that they’ve resisted all new technology,” said Anthony Wood, a senior vice president at SONICblue. “The studios are not happy with anything that gives more power to the consumer.”
As the studios reluctantly plunge into the digital era, they are intensifying efforts to develop new technologies to prevent their intellectual property from being stolen.
The Motion Picture Association of America has assembled a group of representatives from the movie and consumer products industries to explore the possibility of developing a new device that would be imbedded in digital TVs to prevent broadcast signals from being redistributed over the Internet.
And more and more studios are hiring companies like Vidius Inc. — the cyberspace equivalent of a detective agency — to scour the Internet for hackers and intellectual-property thieves.
Derek Broes, chairman and chief executive officer of the Los Angeles-based company, said that on average 4 million movies and 1.5 billion music files are traded a day, compared with 550,000 movies and 1 million music files two years ago. The cyber-sleuthing business, he said, is lucrative: Revenue at his company has grown 350 percent in the last year.
