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Studios scramble to prevent Net piracy

Hollywood is scrambling to find a way to keep big-budget movies from the fate of music in the wake of MP3. But do they have enough time?

If you thought the fuss over downloading music was big, just wait until multimillion-dollar Hollywood films make their way onto the Internet.

Hollywood is scrambling to find a way to keep big-budget movies from the fate music has faced because of the proliferation of MP3--a music download format that allows for the easy but un-secure distribution of songs on the Net.

The film industry so far has been relatively shielded from online piracy, as the sheer size of full-length films has kept them from being easily exchanged over typical dial-up Internet connections. But cable and telephone companies are finally speeding up deployments of high-speed Internet connections, making online video piracy a looming problem for movie studios.

"Obviously we can't stop it," said Eva Miranda, senior vice president for strategic development at Sony Pictures. "It's headed that way. The bigger question is how we best respond to it."

That is still up in the air, film industry insiders say. The big studios, along with the Motion Picture Association of America (MPAA) and a group of high-tech firms, are exploring ways to make it difficult to copy and distribute digital films. Some studios, such as Sony Pictures, already have policies underway aimed at revamping business practices to allow for e-commerce.

Already the industry has created barriers to copying and distributing home videos that executives hope can be translated to digital movies online. Movie executives also are closely watching how recording companies are responding to the widespread use of MP3 files, hoping to learn from any successful strategies.

"I think the lessons of MP3 have helped studios get out ahead of the issue instead of behind it," said Jonathan Taplin, cofounder of Intertainer.com, an online distributor of movies and other Hollywood content.

From Star Wars to MP3
Movie piracy--often films recorded by camcorder in a theater then distributed on videotape or compact disc--is already a nagging problem for film companies. Some online distribution does exist, but industry antipiracy forces say it is minimal, with the number of individuals involved still numbering in the "low thousands."

Yet Hollywood got a wake-up call last summer when an unauthorized copy of Star Wars: The Phantom Menace showed up online despite unprecedented security measures. The intense media interest in the film--combined with a target audience similar to the online demographic--let many people to seek illegal copies online, highlighting the potential of Net-based distribution.

The Star Wars incident gave the studios a taste of what the record companies have faced for several years, following the proliferation of MP3.

The MP3 format allows easy copying and distribution of songs across the Net--easy enough that millions of unauthorized copies of songs have quickly found their way onto the Web and users' hard drives. Record companies initially fought the technology, but the widespread use recently has driven some music executives to join the game on the condition that some protections against illegal copying are created.

The film and video industry hasn't yet faced the same problem. A typical song can be downloaded in just a few minutes over a dial-up modem--in fact, it was the development of the 56 kilobit-per-second (kbps) dial-up modem that helped spur MP3's popularity, analysts say.

By contrast, a short video file can take hours to download over a dial-up connection, and a full movie could potentially take an entire day to download.

"We're fortunate that [video] file sizes are so much bigger," said Mika Salmi, president of online film distributor Atom Films. "The studios have the luxury of a little more time. [The issue] is not going to blindside them."

Broadband video on the horizon
But that technological safeguard is disappearing, as telephone and cable companies rapidly deploy high-speed Internet connections. The broadband consumer market is expected to reach more than 11 million households by 2002, according to research firm Jupiter Communications.

US West and SBC Communications plan to offer their high-speed Internet customers video-on-demand services--a kind of high-tech pay-per-view--and sources say Bell Atlantic and BellSouth are also talking to possible on-demand video providers.

At the same time, video compression techniques are improving, decreasing the potential size of video files. The combination of these trends has prompted studios to find a way to avoid being blindsided by an explosion of pirated, downloadable videos online.

"It is on our radar screens," said Brad Hunt, chief technical officer for the MPAA. "We know we need to focus in on developing strategies in that area."

The MPAA, studio executives, and computer and consumer electronic companies already meet once a month in Los Angeles to address home video piracy. This working group's recent focus has been blocking video copying through home networks--a technology that also will play into distribution over the Net, Hunt noted.

The studios are also in the early stages of developing a set of copy protection standards they hope Internet software and hardware companies will adopt, as has already happened in the home video business, Hunt said.

Even some big studio insiders privately say these technological fixes are unlikely to be successful, however. Distribution models will have to change, and studios likely will have to establish subscription models similar to HBO or America Online or find ways to win advertising dollars to support online efforts, some insiders predict.

Salmi's Atom Films, for example, allows its videos to be downloaded and distributed freely, but includes advertisements in the files that must be viewed before seeing the movie.

"We try to use piracy to our advantage, as a way to make money," Salmi said. "We're actually using piracy as a distribution model."

As a result of the piracy concerns, studios have been slow to license their products for distribution online, even though the companies have changed contracts to include digital distribution rights at about the same time as movies become available on pay-per-view television, analysts say.

Intertainer, a company aimed at releasing on-demand films over telephone companies' DSL and through set-top boxes like WebTV, is one of the few companies that has won distribution rights to Hollywood videos. It uses a streaming video format that contains strict copy protection. Additionally, the customers' rights to view any given movie expire after 24 hours.

WebTV and other companies are developing hardware that can hold many hours of video on a hard drive. But it will be some time before downloadable video will take advantage of this space, analysts say.

"The studios just aren't going to be comfortable with having lots of copies sitting around on a hard drive," said Jae Kim, a technology and entertainment analyst with Paul Kagen Associates.

The studios say they are preparing for a day when a video distribution technology makes online films as easy, or nearly as easy, to download as an MP3 music file, however.

"We're moving as quickly as possible," Sony Pictures' Miranda said. "Obviously we hope that day is much further out. Unfortunately, the market doesn't seem to be complying with us."