Now Playing: Digital Disarray

Hollywood's piracy fears are stifling online video expansion


Imagine a bookstore that sells only works published by Random House. If you want a HarperCollins (NWS ) title, you have to go to the store down the street. In this world, you're permitted to read Penguin (PSO ) books either on the train or lying in bed, but Vintage books can only be read on the couch. It's absurd—but no more so than the world of video downloads as they exist today.

The problem is that the quickly growing stock of movies and shows available for download is scattered among an assortment of stores including Movielink, CinemaNow, Google (GOOG ) Video, and (AMZN ) Unbox, as well as Apple's (AAPL ) iTunes Store. And while there's a lot of overlap, there's also a significant amount of content exclusive to one or another service.

This has happened because the digital-download business isn't like any other sort of retailing. Any bookstore can order any book in print from its publisher. And once customers buy it, they can do whatever they wish with it. But download services must negotiate their rights studio by studio, sometimes title by title. And the deals cover not only which movies and TV shows are available but also what sort of video quality can be offered at what price, and, in excruciating detail, just what consumers can do with the video they have bought or rented.

CONSIDER THE RULES covering movies purchased from Movielink, typically for $13.99 (different rules cover rentals). You can watch your movie as often as you want, but only on a Windows PC. Some films can be watched on up to three different PCs; others can't. You can make a backup copy to DVD, but you must copy it back to a pc to view it; you can't watch it on a standard DVD player. And there's no way to watch on a handheld device. Rival CinemaNow has a service that lets you burn a movie to a standard DVD—but it only offers 112 titles. Unbox lets you watch movies on up to two Windows pcs or some TiVo (TIVO ) video recorders (selected titles only), and you can copy the film to a handheld, but only if it runs Microsoft (MSFT ) Windows Mobile Media Center software.

This is insanity. It's no wonder none of these download services has developed any real traction in the market. (The tech-savvy will point out there are ways to obtain content online without the fuss of restrictions, or paying. Yes, but these downloads are illegal, as is extracting video from copy-protected DVDs that you own.)

However you do it, downloading movies is a picnic compared with trying to watch them on a big-screen TV in your living room. Apple TV, which does a fine job with the limited content available from the iTunes Store, is the best product yet for getting downloaded content to your TV. That's because Apple, unlike its competitors, negotiated with studios to let customers store copies of videos on their systems' hard drives. Such stored video looks much better than video streamed to a TV over a network.

Problems like these usually improve with time. But it's actually becoming harder to get films and programs to the tv, even with a direct connection to a computer. At the behest of film studios, Microsoft added a "feature" to Vista that degrades the quality of copyrighted HDTV content on your PC unless you view it in a copy-guarded way approved by the studios. So far, no Blu-ray or HD-DVD disk has encoded this feature, but it is available.

The common thread linking these issues is a Hollywood fear of piracy so overwhelming that the studios are forgoing big revenue opportunities. Sooner or later they will come to their senses and deliver all of their content online in ways that are actually convenient for consumers. Until that happens, the downloaded entertainment revolution is going to remain on pause.

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By Stephen H. Wildstrom

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