The Internet has transformed the music industry. Sales of CDs in retail music stores have been declining while sales of songs downloaded through the Internet to iPods and other portable music players are skyrocketing.
And the music industry is still contending with millions of people illegally downloading songs for free.
Will the motion picture industry have a similar fate?
Increased levels of high-speed Internet access, powerful PCs with DVD readers and writers, portable video devices, and leading-edge file sharing services have made downloading of video content faster and easier than ever. Free and often illegal video downloads are currently outpacing paid video downloads by four to one. But the Internet is also providing new ways for movie and television studios to distribute and sell their content, and they are trying to take advantage of that opportunity.
In early 2006, major movie studios reached agreements with sites such as Cinema Now and Movielink, which has since been acquired by Blockbuster, to sell movies online via download. Until that time, those sites had offered movie downloads as rentals, which, like the video-on-demand model, the customer could watch for only 24 hours. Warner Brothers also expanded its presence by entering into relationships with video-downloading services Guba.com and BitTorrent. The studios moved to build on the momentum created by the success of the iTunes music store, which demonstrated that consumers were very willing to pay for legal digital downloads of copyrighted material. At the same time, they hoped that entering the download sales market would enable them to preemptively confront the piracy issue in their industry to avoid the fate of the music industry.
What remained a question was whether the studios could replicate the success of iTunes. The initial pricing schemes certainly did not offer the same appeal as Apple's $0.99 per song or $9.99 per CD. Movielink set the price for new movies at $20 to $30. Older movies were discounted to $10. Movielink was counting on the fact that customers would pay more for the immediacy of downloading a movie in their homes, as opposed to visiting a bricks-and-mortar store such as Circuit City or an online store such as Amazon.com, both of which sell new DVDs for less than $15.
However, even if customers were willing to pay a little extra, they were getting less for their money.
Most movie downloads did not come with the extra features that are common with DVD releases.
Moreover, the downloaded movies were programmed for convenient viewing on computer screens, but transporting them from the computer to the TV screen involved a more complicated process than most consumers were willing to tackle. Neither Movielink nor Cinema Now offered a movie format that could be burned to a DVD and played on a regular DVD player.
Right around the time that the studios were making their foray into Web distribution, a new challenge emerged. YouTube, which started up in February 2005, quickly became the most popular video-sharing Web site in the world. Even though YouTube's original mission was to provide an outlet for amateur filmmaker digital rights management issues immediately emerged.
Sure enough, video clips of copyrighted Hollywood movies and television shows soon proliferated on YouTube right alongside the video. Diaries created by teenagers with webcams and the amateur films created by film students. YouTube measures to discourage its users from posting illegal clips included limiting the length of videos to 10 minutes and removing videos at the request of the copyright owner. It was, however, a losing battle.
Clips from popular movies and shows were often posted by multiple users, and they could be reposted as quickly as they were removed. And watching a two-hour movie in twelve 10-minute pieces proved to be a small price to pay to view the movie for free.