Movies via Net still to come

Major studios are seriously stalling on online efforts

Movies are getting released right and left this summer, allowing easy access. Someday, it'll be even easier, when you can pluck a flick off the Internet.

Just don't ask when you'll be able to do that. For the most part, the major studios are seriously stalling on their online movie initiatives. Sony, in fact, has delayed the launch of its Movie Fly project (with Warner Bros. a rumored partner) about four times.

But it supposedly will be ready to roll by this fall; a Sony spokesman in Tokyo said last week that the movie studio will begin offering as many as 100 movie titles via the Internet this fall, at the cost of a cassette at video stores. That could affect television's nascent video-on-demand business.

So far, though, not many studios have discovered the Internet. Executives at Disney and its thought-to-be-teammate News Corp. haven't done much more than publicly brainstorm about, which like Movie Fly, would let people download films from participating studios' libraries for a fee. Sources say Microsoft and RealNetworks are working to create technical expertise for that service.

Right now, SightSound Technologies, which is committed to creating a secure downloading environment, is helping Miramax, a Disney unit, sell a selection of its films online (for about $4 per title). These include art-house films Guinivere
and Eye of the Beholder, starring Ashley Judd.

Comedy Central, also via SightSound, has posted several South Park
episodes for downloading. On a high-speed Internet connection (a phone line won't cut it), a movie can get through to your PC in about 30 minutes; a TV episode will be quicker.

Miramax is a step ahead of the major studios simply because of "the difference between turning a boat and turning a super-tanker," says SightSound chief Scott Sander, referring to how an independent studio can often cut the red tape more quickly than the majors.

So what else is tripping up the studios? Insiders say people will listen to music from their computers but would much rather lie back on their living room couch for a film or TV show. However, a source close to Sony says future models of Sony's PlayStation 2 will be enabled for movie downloading. That's the potential, sources say, that Microsoft's X-Box game console will have.

"Downloading movies to the PC is a fringe business," says Larry Gerbrandt, chief content officer at research firm Kagan World Media. But studios see how consumers flocked to Napster for music and know they'd be foolish to ignore the opportunities.

It's estimated that studios "can walk away with 70% of the gross sale price of a film. That's a very provocative business for them. And that type of deal is not possible using the traditional channels," says Sander. "Eventually, it will be attractive for studios to have a direct consumer channel they control."

Studios can possibly save money cutting out the middlemen, such as home-video stores or cable operators' pay-per-view services, but "you don't want to cannibalize those businesses either," says Gerbrandt.

Film companies have been raking in profits from their DVD divisions that are doing great business at video-rental stores. According to Adams Media Research, consumers spent $3.5 billion on DVDs in 2000, up 12% from 1999, so "they need the Blockbusters," says Gerbrandt.

Plus, digital rights are still a big issue, admits SightSound's Sander, noting, "That's what we work on every day." But what's worse, he says, "is to refuse to sell the movies, which will guarantee that 100% of the Internet 'transactions' will be piracy."

That thinking fits well with a study by digital-rights consulting firm, Viant, which reported that 300,000 to 500,000 films are secretly traded across Internet channels every day, often before some of the films' theatrical release. Studios can stem that, Viant said, by actively putting something together that would let people download their product legitimately.

Still, at this point, few people are paying to download Miramax's films; the company does not release figures. But Sander is optimistic that the ball will get rolling once the giants like Sony, Warner Bros. and Disney get into the game, creating buzz for online film distribution.

"You'll see our sales numbers go through the roof," Sander predicts, once these studios realize "that people can buy Tomb Raider
rather than steal it. Right now, you are seeing hundreds of thousands of stolen copies of it in the first couple of weeks."