Imagining Hollywood's postdigital future

Hollywood faces an addiction problem it refuses to admit. While DVDs represent a huge source of profits, they also represent a huge long-term risk to the financial health of the studios. But even if they're not talking about the looming problem in public, studio execs are thinking about it in private.

The entertainment conglomerates that create most of the films and television shows in the U.S. are clearly worried about the prospect of the industry being "Napster-ized." DVDs have as much protection against mass copying as CD--which is none at all. Growing numbers of people are starting to share movies just as they did songs, though at nowhere near the same frequency.

But the studios shouldn't be lulled into complacency. Indeed, the only reason video file-sharing hasn't yet become as widespread as song-swapping in the U.S. is because of the second-world broadband infrastructure our communications industry is so curiously proud of.

In fact, the obsolete technology that the telephone and cable companies deploy is so slow that it could take hours to download a movie on a computer, while tying up the connection for even longer periods. But Hollywood shouldn't count on the incompetence of American broadband providers forever. They will eventually catch up to technology superpowers such as Korea and Singapore. And when consumers do actually have fiber connections running at 100 megabits per second, then even a high-definition movie will take only minutes to download, and at that point nobody is going to care whether it's in Blu-Ray or DVD-HD format.

I can envision a future that doesn't include movie-sharing, but it requires a different distribution system for entertainment. It's a future that involves using copper wire and fiber optics instead of plastic discs with trucks and stores to deliver the product to customers.

The technology to economically deliver everything on demand, which involves all video content, including movies, is available now. It also includes making network TV series, news, sports, and other live events available to viewers whenever they want to watch it. Though this so-called EOD model has been around for many years and generally discarded because it hasn't been economically feasible, the equipment is now very viable. The gear needed to store and deliver a year's worth of 24-7 content from 300 channels to consumers could be paid for with a few months of revenues.

Even if entertainment providers and retailers don't want to provide EOD, there are digital delivery systems that are far more attractive to consumers than DVDs. Apple Computer has revolutionized the digital music world with the iPod and iTunes, and similar products and services could be (and have been) offered for movies and TV shows.

Both delivery systems are superior to DVDs and current cable TV and would result in consumers voluntarily abandoning the plastic discs (like they have with vinyl records, VHS tapes and film cameras). And when DVDs aren't available, file-traders won't be able to rent a movie and then share it with the world.

Since the technology to give us instant video gratification is ready now and is cheap, does this mean you should expect to start seeing video catalogs on your TV screen instead of electronic program guides?

If the studios are any smarter than the music industry, then maybe they won't wait until we all have fiber connections and can swap HD movies in a few minutes before they leap into the 21st century. But don't delay that PVR purchase while you wait for EOD, because the entertainment industry, just like the rest of corporate America, doesn't like to make changes to their business model until after the model has failed miserably. Most likely, they'll depend on the courts and politicians to protect their cash flow at the expense of the rest of society.

Rather than fight with consumers and technology partners, Hollywood can make them both happy (cutting distribution costs and increasing revenues at the same time.) Instant availability, access to entire libraries, and portability will resonate with consumers, who will gladly trade their stack of DVDs for a couple of disk drives or a new set-top box. Higher profits, wider availability, and the elimination of inventory (no 7 million unwanted copies of Shrek 2) make retailers and content owners happy. Technology vendors get to sell a new generation of equipment.

All in all, it has the making of a Hollywood ending to a bad drug problem.