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Published: Aug 27, 2003 in Knowledge@Emory

Though many industries are struggling, Hollywood is having another great year. Summer movies are doing well at the box office. DVD sales are skyrocketing. And industry spokesmen claim that their business is the only U.S. sector currently running a trade surplus with every country in the world. But are the credits about to roll on this picture?

“The thing that Hollywood is terrified of right now is unregulated access to their product on the Internet, and the fear that films will soon be swapped, as indeed they will be, like MP3 files,” says David A. Cook, a professor of film studies at Emory. Or as Jack Valenti, president of the Motion Picture Association of America colorfully put it to a Congressional committee last April, they fear “the mysterious magic of being able, with a simple click of a mouse, to send a full-length movie hurtling with the speed of light (186,000 miles per second) to any part of this wracked and weary old planet.”

>Already, the MPAA estimates that more than 350,000 movies are downloaded illegally every day. Valenti estimates that this number will rise to 1 million by year’s end. In January 2002, a survey by the Yankee Group found that 23% of the nation’s 21 million broadband households had downloaded movies in the prior six months.

The industry is trying to fight back. Last October, for example, the trade group and the Recording Industry of America sent a letter to 2000 colleges asking that they make a “substantial effort” to cut down on the trading of digital files of movies and music among their students. Court battles against Napster-clones continue. And perhaps most significantly, the studios recently launched their own online film service.

MovieLink.com, a joint venture between Metro-Goldwyn-Mayer Studios, Paramount Pictures, Sony Pictures Entertainment, Universal and Warner Brothers, enables users to legally download copies of new and old movies to their computer for one-day use for $2 to $5. But it’s still definitely in the experimental stage. Downloading a film from MovieLink takes two to three hours on a DSL connection. And the pain doesn’t end there: if you’re a consumer with middling technical skills you’re likely to find yourself watching the movie on a largish postage stamp, while sitting in front of your computer. Wenli Wang, a professor of decision and information analysis at Emory’s Goizueta Business School, is critical of the service. Wang, who has written a paper with Cook on the need for the film industry to learn to work with the new technology, says that MovieLink doesn’t go nearly far enough in giving consumers a warm welcome. In her view, a friendlier online service is essential if the industry is going to maintain its market share of entertainment dollars. At a time when it’s already fairly easy for DVD renters to make their own perfect copies of films at home and share them with friends and family, Wang says, the industry needs to provide a reliable, legal, and cost-effective alternative to illegal copying.

As for the industry’s lobbying efforts, Cook is skeptical that court battles will ultimately stem the tide. “As bandwidth increases and as other technological barriers fall, as [download] time goes down, then it’s going to become, I think, unstoppable unless they can somehow legislate a solution,” he says.

The good news for the film industry, however, is that if the past is any guide, the end of the world as they know it won’t really hurt them all that much, according to Cook. Case in point: In the 1970s, the film studios fought home video recorders all the way to the Supreme Court. The studio chiefs were trapped in an old industry practice against selling their films. The old studio heads believed you “never sell a movie outright. And that’s the block they had against the VCR,” Cook explains. “It didn’t take them very long to figure out that video represented a huge new revenue stream for their movies. They just couldn’t see it because of this fixed idea they had about outright sales.”

Almost immediately after the Supreme Court’s ruling against the industry in 1983, Hollywood got into the video business, according to Cook. “They were all ready to roll with prerecorded videos as soon as the Supreme Court decision was rendered. Within weeks of it, Fox for example had 150 titles in the market, and was charging $150 each for them, and then of course over time prices dropped. They realized that volume was the answer here,” he says.

And what happened the day after the end of the world? “By 1984, something like 60% of all Hollywood revenues were coming from video. It had flip-flopped in half a decade.”

Over time, Cook is confident that movie executives will find or stumble on a business model that can co-exist with file-sharing. He points out that media has a history of innovative business models. It’s worth keeping in mind that in the 1920s, the advertising broadcast model for radio was a very innovative idea, Cook says. “It’s a very strange concept to get to, the one that ultimately came to support broadcasting, which is that what you do is `give away’ free entertainment and then you sell those listeners, you sell the demographic profile of those listeners to the advertiser,” he adds.

Goizueta marketing professor Jagdish Sheth is skeptical that Internet delivery will become a widely used mode of distributing film anytime soon. Instead, he sees personal content, such as photos or videos of grandchildren, becoming the most popular content.

Sheth predicts that digital technology will create other kinds of opportunities for the industry. One idea: Why not release the DVD version and the movie version of a film within a few weeks of each other, since most box office sales begin to sag after the first few weeks anyway? This would make marketing more cost-effective, he says, and reduce the incentives for piracy created by the current long lag times between a film’s release in a theater and its release for the home market.

But one thing probably won’t change. Even when we all have wall-sized plasma screens at home, Cook predicts that people will still want to go out to the movies. “People are always going to want to go out and have the experience of sitting in a theater with other people,” he said. “Its part of the thing, being surrounded by other people and hearing them laugh and sharing a common experience.”

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