Hollywood Slow to Embrace New Media

Hollywood seems stuck in first gear when it comes to the race to embrace the Digital Revolution.

After more than a decade of dithering over how to release film and TV content over the Internet and other new-media platforms — and how aggressively to do so — the industry remains tentative in its approach to digital distribution.

“Studios are feeling their way through,” says Rick Bolton, CEO of digital downloads company Film Fresh. “On the one hand, they have the cautionary tale of the music industry before them, and on the other, they have the relatively positive example of the TV side’s relationship with iTunes. But the consumer is going to decide where this all is going, not the corporate side.”

With that in mind, the brave few continue to pop up with bright ideas they hope will capture public fancy and studio support.

Take Digiboo, a business startup by home entertainment veteran Richard Cohen. Digiboo would place digital touch-screen kiosks in airports and other heavily trafficked public spaces where consumers can plug in a flash drive and instantly download movies and other content.

Discussions are under way with studios and retailers ahead of a proposed market-by-market rollout nationwide. The concept’s premise is simple: Downloading movies would be more popular if the downloads didn’t take so long.

Digiboo gets around that problem by storing films onsite, so the transmission is almost instantaneous.

“Digiboo’s technology has taken portability and convenience to another level entirely,” Cohen says. “We think this is exactly what the consumer wants and exactly what’s been missing from other models.”

Indeed, horror stories abound of inordinate wait times on many film downloads, and the download time for season sets of TV series can be measured in days, not hours. Meanwhile, wireless remains the key means for connecting computers to television screens when viewing downloaded content, but studios remain squeamish about security concerns.

The combination of business challenges and wary consumers has exacerbated studio executives’ natural hesitancy about pushing too hard for digital schemes that could undermine traditional distribution and existing revenue models.

“Digital sucks,” one industryite says. “Of all the companies doing digital distribution, only Apple is making money. The volume of business is too low, and the main reason for it is that the consumer experience is so bad.”

Consumers demand lower pricing on digital content, so studios make significantly less profit per consumer transaction despite higher cost efficiencies compared with packaged-goods releasing. “So whenever I switch to digital, I better get twice the volume to stay even,” the digital skeptic says.

Bolton’s Film Fresh shares the downloads terrain with Apple’s iTunes and CinemaNow. Film Fresh uses a DivX, iTunes a proprietary player and CinemaNow the Windows Media platform, with a possible addition of DivX capabilities in the offing.

Then there is digital streaming.

Essentially the digital equivalent of traditional home entertainment’s rental market, there are two approaches to offering films and TV shows online: subscription- and fee-based models available from Blockbuster, Netflix, Vudu and others, and ad-supported sites including Hulu and YouTube. YouTube still offers mostly clips of films and shows but has been negotiating for a possible move into feature content.

“There are all sorts of buzz about digital and downloading and all these things, but it’s still in reality a small portion of the overall business,” says Bruce Anderson, the Los Angeles-based gm of Blockbuster On Demand, which incorporates the former Movielink service acquired by the DVD-rentals giant in 2007. “From our perspective, that’s a great thing. It tells us there is a great opportunity for business growth.”

Digital entertainment in all forms contributes $2 billion in industry revenue, according to consensus estimates. That compares with an estimated $22 billion in rental and sales revenue of DVDs and Blu-ray discs.

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