It's the Holy Grail of the movie download business. Movies straight from the Internet to your TV, none of that watching the flick in your straight-back chair while peering at your computer monitor. Now, for those who want to watch movies the way they should be enjoyed—that is, while curled up on your couch—comes the first downloadable movie that can be burned onto a DVD. On July 19, CinemaNow, a movie download site backed by independent film studio Lionsgate Entertainment (LGF), Microsoft (MSN), Blockbuster (BBI), and others, announced it will be the first to provide that service.
But don't warm up your Barcalounger just yet. CinemaNow is starting by offering 100 or so flicks for download, with such headliners as MGM's Barbershop, Sony's (SNE) Charlie's Angels: Full Throttle, and others. Newer films aren't yet available, despite software provided by German digital-rights management company ACE GmbH that CinemaNow says is secure. The German software was secure enough to win over some of Hollywood's leading studios, including Disney (DIS), Universal, and Sony, but not others like Warner Brothers, Fox, and Paramount. And even those who signed on seemed leery of tempting pirates with their newer—and more lucrative—DVDs for what is essentially a beta test. One studio, Universal (GE), yanked its film King Kong at the last minute.
PIRACY WORRIES. Still, this is the wave of the future, according to Benjamin Feingold, president of Sony's Columbia TriStar Home Entertainment. "If you fast-forward a number of years, consumers will be embracing the concept of being able to download their own movie, be it at home or in a retail store." That, he says, will help generate hefty revenues for films into the future, even as physical DVD sales begin to slow. This year, according to PricewaterhouseCoopers, consumers will spend $17.3 billion on DVD or video cassettes, a 3.6% hike from 2005 but far from the double-digit growth rate of the early '90s. "We see this as a way to get a whole new generation of movie users to buy DVDs," says Rick Finkelstein, Universal Pictures' vice-chairman. "Computer users now have a way to buy movies, and do it legally."
The CinemaNow offering is far from the final product that studios want. But it does have one key ingredient. "It gets movies onto the TV set where people want to see them," says CinemaNow CEO Curt Marvis, who notes the movie downloads will still take as much as three hours, even with the fastest broadband wires. The compressed movies will contain all the bells and whistles of a DVD, including directors' comments and cuts, and will even allow for printing of jewel box covers with images provided for the DVDs. The movies, he says, will be playable in just about all but the oldest DVD players and other consumer electronic devices.
Not everyone in Hollywood is giving CinemaNow a standing ovation, however. There is more than a little concern among some studio executives that CinemaNow is leaping too far ahead of the curve. Some don't like the fact that it is using software from a German company rather than going through the methodical process of having studios and consumer electronic devices agree on a common standard to guard against piracy. [The industry-backed DVD Copy Control Association is currently reviewing proposals to extend current DVD antipiracy software, called the Content Scramble Systems (or CSS), to DVDs with movies burned from the Internet.]
WAIT AND SEE. Even with the apparent rift within the film community, Marvis says participating studios tested and approved the German-imported DRM software CinemaNow is using. He predicts that other studios will soon sign on as well, and says he is far along in discussions with two of the three holdouts so far. And when and if the industry-backed CSS standard is approved, it would likely be added on top of the antipiracy software CinemaNow will get from its German software supplier ACE Gmbh. According to Marvis, ACE's antipiracy software has worked perfectly so far for the adult-entertainment DVDs that CinemaNow has been downloading and burning since June.
Even so, most Hollywood flicks will remain on the sidelines while studio execs watch to see whether CinemaNow can offer clunk-proof downloads that don't end up littering the nation's piracy sites. Concerns about piracy are one reason that Movielink, backed by five of the largest Hollywood studios, has so far decided to wait until the industry's DVD group extends the current CSS safeguards to include burned DVDs. Movielink said it has licensed download technology from Sonic Solutions for downloading and burning flicks, but that it will wait for the expanded CSS to begin covering movies.
According to Movielink CEO Jim Ramo, he's expecting that approval to come by the final quarter of the year. Then, he says, "we're going to start offering consumers the experience that they've wanted all along, the freedom to download movies and watch them wherever they want."
Grover is Los Angeles bureau chief for BusinessWeek
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