¶ … Movie Industry in Downloading Movies Practicality

The idea of providing movies for download over the Internet would be an extremely practical acquisition. In fact, Walt Disney Corporation and Sony Pictures have entertained the idea of allowing movies to be streamed and downloaded via the Internet. Both of these companies see a potential market with PC users. (Stump) Multichannel News reports,

Currently, Hollywood has put most of its streaming efforts into movie trailers. Any major motion picture now released by Hollywood carries with it its own trailer available for streaming. Most new movies sport their own promotional Web sites that include not only trailers, but cast and crew interviews, and other behind-the-scenes footage. Interactive games and promotional sweepstakes with audio and video elements also are common, as are links to music and soundtracks related to the movies." (Stump)

Though the movie industry believes that significant profits can be made from Internet downloading the industry does face several challenges. One of the major issues surrounding movie downloads is the amount of Broadband that is available to consumers. Multichannel News explains, "the flight to the Internet has been fraught with turbulence. While broadband growth has been steady, distribution isn't large enough to crack into Hollywood's lucrative sequential window distribution system." (Stump) To combat this challenge the movie industry has began to focus on caching, streaming and content delivery network issues that effect broadband technology.

Broadcasting & Cable reports that broadband technology is vital to the ability of consumers to download movies from the Internet. Not only does the technology provide fast and efficient downloads but the quality of the movies is excellent. The magazine explains, "broadband Internet pipelines -- with some additional network enhancements -- are capable of delivering sound and images virtually indistinguishable from a broadcast TV signal." ("Now Playing at Your Local Internet Portal: Movies on the Internet") However, the magazine concedes that the impact of millions of users downloading movies to the Internet's infrastructure is unknown. ("Now Playing at Your Local Internet Portal: Movies on the Internet")

Piracy Issues

Internet-based piracy remains a growing and substantial challenge for motion picture studios today, and continues to rob artists and producers of the right to reap rewards from their creative property." ("MediaForce Announces Top Ten Pirated Movies for July; Pirates Using Internet to Grow Personal Bootlegged Movie Collections") Piracy is a major issue facing the movie industry. It is estimated that the Movie industry looses $2.5 billion each to Internet piracy. The culprit that allows piracy to thrive on the Internet is peer-to-peer websites.

These websites permit users to download movies and music at no cost. It is very difficult for the movie industry to compete with these websites because they provide a free service. Many consumers are not willing to pay for something that they can acquire for free on a file sharing website.

A report entitled, "If You Cannot Protect What You Own, You Don't Own Anything," presented to the Senate Committee of Commerce on behalf of the Motion Picture Association of America details the impact of Piracy. The report was presented on February 28, 2002 by Jack Valenti, President and CEO of the MPAA. Te report explains the importance of the industry,

The facts are these: The Copyright Industries (movies, TV programs, home video music, books and computer software) are America's greatest trade export prize. They are responsible for some five percent of the GDP of the nation. They gather in more international revenues than automobiles and auto parts, more than aircraft, more than agriculture. They are creating NEW jobs at three times the rate of the rest of the national economy. The movie industry alone has a SURPLUS balance of trade with every single country in the world. No other American enterprise can make that statement. And all this at a time when the country is bleeding from a $400 Billion trade deficit." (Valenti)

The report explains the three goals of the MPAA in reference to eliminating piracy over the Internet. The first goal is "to create a "broadcast flag" which would prevent broadcast programs exhibited on over the air TV stations from being re-distributed on the Net, which is a form of thievery." (Valenti) The report contends that this goal can only be accomplished with the help and support of congress. The second goal is to destroy the analog hole. The analog hole is dangerous because it allows analog material to be turned into digital material that cannot be protected. The final goal of the association is to prevent movie theft on file sharing websites. The industry believes that third goal needs immediate attention. Valenti notes...

(Valenti)
In recent months the movie industry has taken drastic steps to ensure that it won't suffer the way that the music industry has from illegal downloads. An article published by The Associated Press entitled "Movie Industry Takes Active Role in Fighting Piracy" explains,

The Motion Picture Association of America uses a special search engine to scour the Web for copyright movies, which circulate on the same peer-to-peer software networks as MP3 music files. Since 2001, more than 100,000 customers have been ordered to stop their activities through cease-and-desist letters sent from their Internet service providers, the MPAA said... The MPAA uses special monitoring software from San Diego-based Ranger Online Inc. The automated software provides the Internet address of the file-swapper, which the MPAA forwards to the relevant Internet provider."(Avery)

It may be difficult for the Association to continue the practice of targeting file swappers because it requires the cooperation of Internet Service Providers. Many ISP's may abandon the idea of turning over their customers to the association.

However, some ISP's have developed their own methods of minimizing piracy. Some of the largest Internet Service Providers complain that their file swamping customers use a disproportionate amount of bandwidth. To combat this ISP's have decided to place a limit on the amount of bandwidth that customers are allowed to use each month. (Borland) The Internet Service Providers hope that this will reduce the amount bandwidth used while also decreasing the amount of illegal downloads. Even though this tactic does not eliminate piracy, it is one of the most effective ways of reducing piracy.

Some nations have taken the idea of reducing piracy to brand new heights. German officials have gone so far as to impose a tax on any equipment that may be used to download copyrighted materials. (Sprenger) The German officials believe that this will helped to curb some of the damage already done by Napster and other file sharing sites.

All in all, it will be extremely difficult for the movie industry to control piracy. The technology that Napster presented to the world let the cat out of the bag and now there are several file sharing sites that were created using Napster's technology. The movie industry may have to come to terms with the fact that if people can get something for free, they will indulge.

Economic Impact on Brick and Mortar Facilities

If the movie industry allows movies to be downloaded from the internet legally there may be a significant impact on the brick and mortar establishments that already exist. These facilities such as Blockbuster and Hollywood video would undoubtedly lose customers. Customers would opt to download movies directly from the Internet as opposed to driving to the nearest rental place. An article in Variety explains, "we are actively developing new ways of bringing movies directly to people's homes, including a range of alternatives from physical home delivery and near-video-on-demand to digital streaming."(Sweeting)

Though Blockbuster was attempting to present video on demand technology to consumers the plan was thwarted when the chief investor, Enron collapsed. The technology would have allowed customers to order movies in a fashion that is similar to pay per view. The chain was going to use this technology to offset some of the losses that can occur as a result of downloadable movies.

It is estimated that blockbuster's current revenues average about $5 billion a year and at least 15% of these revenues are gained from charging customers late fees. (Orenstein) Blockbuster and other brick and mortar companies can be greatly impacted by the movie industry's decision to make movies available online. Many consumers will find it more convenient to download movies off of the Internet.

Analysts do concede that Blockbuster will stand the test of time and will find a way to cope with the economic problems that will follow if the Movie industry allows Internet downloading. Blockbuster will survive because the company is not afraid to venture into other areas of entertainment. Diversification is crucial to the success of any firm and will certainly serve blockbuster well.

Conclusions

There are several conclusions that can be drawn through the research that has been provided. We can conclude that the movie industry genuinely desires to provide us with movies that can be downloaded over the Internet. It is also clear that this technology creates challenges that the movie industry must face. The first challenge involves broadband and the movie…