A reluctant romance: Web woos Hollywood

Hollywood is still wary of becoming HollyWeb-despite its growing romance with the Internet. That is, in essence, the mixed message Jack Valenti, president and CEO of the Motion Picture Association of America, delivered last week at Webnoize 2000, a three-day conference on media convergence and the future of the entertainment industry.

Hammering out the relationship between traditional media like radio, television and audio recordings, and the new media related to the Internet has leapt to the forefront of concerns in recent months.

"The future is blurred and murky," Valenti said during a state-of-the-industry panel discussion, stressing that not even Microsoft guru Bill Gates or investment wizard Warren Buffett has a clear view ahead.

Joining Valenti were moderator Charlie Rose,
60 Minutes II

correspondent and PBS talk-show host, and Hilary Rosen, president and CEO of the Recording Industry Association of America and a veteran of the recent war with online company Napster over free downloading of copyrighted music.

Together, the trio served up a heated session, fueled by concern over online product piracy and how to strategize mass entertainment for the niche-y, individualistic Web.

Still, "the idea of withholding products is fiscally stupid," Valenti said of Hollywood's coming marriage of fiscal necessity with the Internet. He sees a pressing need for Hollywood's seven major movie studios to go cyber with direct-to-consumer delivery: "We have to move out of the theater."

With the average cost of a major theatrical release topping $80 million for production and promotion, he estimates, only two of 10 major releases return their investment. Consequently, the studios must seek new online distribution platforms to supplement their life-sustaining cable and foreign revenue streams.

But "being able to deliver [movies to homes] in a safe and secure environment is a top priority," Valenti said, with a nod to the music industry's on-going Napster war. "We won't be ambushed and mugged on the way," he said, calling free downloading of copyrighted content "stealing. It has to stop whether it's music or movies. The idea that the public has a right to the fruits of somebody's creative work for free is palpably absurd."

Pushed by Rose, who chided Hollywood for fearing to climb on the online train after a recent rash of dotcom failures, Valenti and Rosen waffled on future online business models for their entertainment sectors.

Rosen acknowledged that she hasn't yet found an economic model for music on the Web, citing a "tough balance" between fan desires and the industry's bottom line. "The only thing you can do is get up early and give consumers a lot of different things to try. The consumer is in the driver's seat," she said, adding that consumers perceive movies to have more value than songs, that they are used to paying for films in multiple marketplaces.

Valenti fretted over potential Napster-styled file-sharing of DVDs on the Internet and hedged about models for online subscription delivery of feature films. And he waxed nostalgic about "the epic viewing experience" of the movie theater that online services cannot yet deliver. "I can ride a dogsled from here to Seattle in the time it takes to bring a movie downline" he said of the Internet's irritatingly slow video streaming. "In order to bring a movie down in real time, you have to be on broadband access."

That could happen widely in about 18 months, he added.

Still, the Internet cannot yet simulate the social experience or dynamic sound quality of a conventional theater. "Quality is in the eye of the beholder," he added. Digital models "must deliver a better way to watch a movie than [the home viewer] has ever seen."

And Valenti had another quibble: The Internet's movie-marketing value seems iffy at best. Take the cyber-buzz that boosted indie film
The Blair Witch Project

to dark-horse hitdom. It didn't happen with sequel
Blair Witch II,

which was less successful.

Despite his reservations, Valenti is holding on-going meetings with advisers to discuss content encryption, digital rights management, and negotiation of "surveillance on the Internet," he said.

Cloudy crystal ball aside, the panel's trio agreed on the next wave of media mutation.

Broadcasting's coming convergence with online services is "inevitable," Rose said after the session.

Proclaimed Valenti, "The future is in digital, and everyone understands that."