SAN FRANCISCO (CNN/Money) -
The neighborhood video store doesn't need to close up shop quite yet. Sure, there has been plenty of news lately that suggests otherwise: CinemaNow, an online movie site in existence since 1999, just signed its first licensing arrangement with a major Hollywood studio -- in this case, Warner Bros. (a division of AOL Time Warner, the parent company of CNN/Money).
And MovieLink, a CinemaNow competitor scheduled to launch in the fourth quarter of this year, just announced that it has recruited IBM to handle the technology behind its site. That doesn't mean you'll be downloading first-run movies to your PC legally anytime soon.
Though it has yet to start up, MovieLink appears to have the advantage on paper, since five major studios -- MGM, Paramount, Sony, Universal, and Warner Bros. -- all back the service. With that kind of support, top-quality flicks should be available out of the gate, right?
Not necessarily. It took CinemaNow three years to get a major studio license, and the content it has isn't exactly blockbuster stuff. "We received rights to about 12 to 20 library [i.e., older] titles and the rights to offer all the Warner Bros. pay-per-view movies that the studio secured the Internet rights for," says Bruce Eisen, an executive vice president at CinemaNow. The initial license lasts only until the end of this year.
The sole "new" movie available on CinemaNow through the Warner deal is "Harry Potter and the Sorcerer's Stone." Some of the library titles include "Mars Attacks," "Curly Sue," and "Dial M for Murder." Not exactly line-around-the-block stuff.
Here's how the services work: A consumer pays anywhere from $2 to $5 for a film. After downloading it, the user is given a software "key" that unlocks the content. Once the user starts watching the film, a 24-hour timer starts ticking. After 24 hours, the movie disappears from the hard drive.
Of course, alternatives exist in the form of peer-to-peer sites such as Kazaa and Morpheus, where users can download a movie for free -- illegally -- and keep it as long as they want. Often the movies available on such sites haven't even hit the theaters yet. But the quality of the files can be suspect: It might be a tape from someone's handheld camera sneaked into the theater, or it could be an altogether different movie, mislabeled by the original owner.
The problems facing Hollywood regarding legitimate downloads are in some ways the same ones the music industry has faced. Unfortunately, the movie industry obviously hasn't learned from the mistakes made by the music business. Rather than launch with an all-you-can-eat offering -- the approach the industry's free competitors are winning with -- Hollywood is moving too cautiously and weighing down the few titles it makes available with too many hooks and time restrictions. "The initial usage rules are pretty restrictive," says Phil Leigh, a digital media analyst at Raymond James. "A good reason for downloading a movie is to take it on a business trip. The 24-hour limitation makes that a problem."
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I recently rented a new-release DVDs from Blockbuster, paid $4, and kept the film all week. Why would I -- or any consumer -- pay the same amount for a one-day rental that can be watched only on a PC monitor? This last detail has many believing that these latest offerings from Hollywood will be DOA. "Anything tied to the PC might work for the college crowd, but the majority of consumers want to watch movies on TV," says P.J. McNealy, an analyst at Gartner Group.
Unfortunately, what the movie industry most needs to do -- namely, fast-forward past the 1.0 version and launch with a compelling 2.0 product -- hasn't happened. How much patience consumers will have while the studios get their act together is anyone's guess. But history suggests that the studios should get a move on. As Leigh notes, "Even the village idiot can see that what happened in music [with illegal downloads] will happen in movies if they don't do something."
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