Another Business that doesn’t ‘get’ the internet: Hollywood

There are plenty of websites that offers films for download to personal computers, iPods or other hand-held devices, or to burn to DVD. They look professional, with easy to use features, detailed descriptions of each movie, editors’ picks, customer reviews and screen stills. Even the prices are reasonable. The catch is – they’re illegal.

What is Hollywood’s problem? On one hand, there is the huge problem of piracy. Online piracy costs Hollywood less than the physical variety, ripping off DVDs, but the gap is closing. Some in Hollywood believe that internet theft could even be the death of America’s film industry.

But on the other hand, the internet offers Hollywood a great opportunity—which it has so far been slow to exploit. There is every reason to think that people will want online access to films, just as they do for music, newspapers, television and radio. Even the pirate websites show that people will pay to download films to see at home when it suits them. And once people can buy or rent films on demand, the chances are that they will watch more of them.

There are other ways to make money too: every year Hollywood studios send thousands of heavy, expensive reels of film to cinemas by road. Only in the past year or so has it started an effort to move towards digital distribution.

Consumer-electronics firms are longing to supply Hollywood films, with gadgets such as Apple’s iPod or Microsoft’s Xbox 360 already in people’s homes – waiting for movies to run on them. What is taking the industry so long?

One observation is that the business hates risk. It’s enough of a problem waiting to see which movies will flop, never mind coming up with a new business model. Other industry insiders think that it has lost sight of the goal of profitability and has become a business about egos and ‘art’. And although the DVD business is slowing, it’s still a handsome cash cow. The DVD business is huge, bringing in $23.4 billion in America last year, against $9.6 billion from the box office. Retailers like Wal-Mart love them.

Not all the technical hassles have been ironed out either. Internet speeds in the US tend to be slower than in Europe or Japan, so downloading takes longer. In time, that will change. And the industry has started to use the web more effectively for marketing – and identifying the tastes and preferences of its audiences.

It took the movie business years to get used to the idea of television, so perhaps we shouldn’t be surprised if it takes Tinsletown a while to get used to the web too.

This blog was inspired by The Economist, which has an interesting briefing on the subject. You can read their introduction at Hollywood and the Internet