Invasion of the Movie Snatchers

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Download speed is just one reason file sharing may not be as immediate a threat to the movie business as it may seem. "There were very beautiful copies of Shrek 2 available on the Internet when it was released," says Ted Sarandos, chief content officer for Netflix. "That didn't seem to hurt [Shrek's] ticket sales any." When DVDs are packed with special features and available to rent for $2 or to buy for $15, who wants to waste a day downloading a movie? "I've frequently suggested they give up on all this copy protection because it doesn't make a bit of difference," says Fred von Lohmann, a lawyer for the Electronic Freedom Foundation who defended Grokster against the movie industry's lawsuit. "It's not all the fancy locks that protect the industry. It's a great product at a great price."

In today's fast-paced websphere, any attempt to restrict content is probably doomed to failure anyway. Exhibit A: The MPAA sued the company 321 Studios into bankruptcy last year for producing a piece of DVD-copying software called DVD X Copy. So what happened? DVD Shrink, a free product that does the same job, started popping up on the Internet. Exhibit B: Even before the launch of TiVoToGo, the online cognoscenti have latched on to BitTorrent software for swapping TV shows. Privately, some movie bosses admit the industry is on the wrong track. "Studios can only bitch so much before they provide a viable, competitive alternative," says one Walt Disney executive.

Intellectual-property experts are trying to come up with new models that will allow the film industry to survive downloading. UCLA law professor Neil Netanel has proposed more product placement in movies (since advertisers care only about how many people see their products) and allowing unrestricted file sharing in return for a "noncommercial-use levy" of 4%, regulated by the Copyright Office and imposed on the price of new computers and other copying devices. Netanel's estimate of the resulting profit for the studios: $2 billion a year.

For the moment, though, the movie industry's main thrust is the Induce Act (which is unlikely to get a full hearing before Congress this session, although Senate Judiciary chairman Orrin Hatch will probably bring it back next year). A public relations campaign to try to sway people from downloading movies illegally is also under way. Theatrical trailers show stuntmen, set builders and special-effects experts claiming they are the ones hurt by illegal downloads. And the industry has raised concerns over security dangers and privacy issues endemic to file sharing.

But time and technology are not on the studios' side. Just as the Napster phenomenon appeared to come out of nowhere, the next generation of file-sharing software is already in utero. Last month computer scientists at Caltech set a new data-transmission record: they achieved the equivalent of downloading a full-length feature film in 4 sec. It's a bumpy road to acceptance for any disruptive entertainment technology, from piano rolls to the VCR. "One thing you can count on in Hollywood is fear of change," says Warren Lieberfarb, the man who launched the DVD. But as Lieberfarb's profit-rich baby continues to prove, consumers are still hungry for faster, easier entertainment and there's always another fortune waiting to be discovered.