Invasion of the Movie Snatchers

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The answer has to do with the film industry's business model, which is founded on a tightly controlled schedule of when and where the public sees movies. That schedule is broken up into windows. The box-office window is followed by the pay-per-view window, and then the DVD window opens, followed by the premium-cable window. The studios maximize their profit by selling licenses for each phase. If peer-to-peer networks can offer movies while the films are still in theaters, the whole revenue stream could be undermined. "We have less issues with technology overall than the lack of the ability to enact business rules around that technology," says Darcy Antonellis, a senior vice president at Warner Bros. Entertainment (a sister company of TIME) responsible for its worldwide antipiracy operations.

Not everyone in Silicon Valley is unsympathetic even those promoting downloading technology. "Studios will not support downloading of new releases for the same reason book publishers don't go direct to paperback," says Reed Hastings, CEO of Netflix, the hugely successful online movie-rental company. Hastings has his own version of an iTunes-like solution to the movie-download problem. Right now his 2 million customers rent DVDs online and receive them through the mail, but he says he has always intended to make the transition to movie downloads. Nothing is likely to be launched in the next year, but Hastings has been brainstorming the idea with Michael Ramsay, a Netflix board member and the CEO of TiVo, whose time-shifting digital video recorder has spooked Hollywood. Recently Ramsay, who has been struggling to expand the TiVo business, won FCC approval for TiVoToGo, a service that would allow people to share TV shows, movies and other TiVo recordings with as many as nine other TiVo boxes and computers via the Internet. (Not surprisingly, the MPAA bitterly opposed TiVoToGo.) "Downloading any movie ever made that's possible on a TiVo box today," says Ramsay. "The problem is in the copyright management, not the technology." Hastings, meanwhile, takes pains to stress that any future downloading business would work out a profit-sharing framework with movie studios.

So far, copyright management has hamstrung the movie industry's attempts to make a business out of file-sharing technology. Two years ago, major studios launched a service called Movielink, which offers movies for downloading to your computer at about the same time they hit the pay-per-view window. Not only do the movies take hours to download, but they also disappear from Movielink's catalog altogether 90 days later, when they enter the premium-cable window. Because channels like HBO and Starz! offer lucrative licensing deals, Movielink has not been able to compete in the latter window. "We'll see this business become a true mass market," says Jim Ramo, CEO of Movielink. "It's just a matter of time."

How much time is open to debate. Ramsay says the industry has five years to figure out how to work file sharing into its business; Hastings thinks it's more like 10. (Both caution that contrary to some reports, we're not likely to see a full-fledged Netflix-TiVo deal in the immediate future.) The delay in incorporating file sharing has a lot to do with the slow speed of most Americans' Internet access. Even with cable and DSL connections that average 2 megabits per second, it can take 16 hours to download a movie with just a third of the quality of a DVD. Not to mention that most of us prefer watching a movie on our TV to watching it on a computer screen. "This isn't going to be a tidal wave of change," says Hastings. "More like global warming."