Downloads enter Hollywood's mainstream

LOS ANGELES -- The set of ''10 Items or Less" looks like a typical movie location: Caterers brew coffee and man the grill, young people with radio headsets rush around purposefully, and a camera truck tows a yellow AMC Gremlin containing actors Morgan Freeman and Paz Vega repeatedly through a parking lot.

But ''10 Items" is being funded in part by the chipmaker Intel Corp., and shortly after it is released in theaters this year, it'll be made available as an Internet download. That sort of experimentation is good news for consumers, but it has studio executives and theater owners gnawing their cuticles. And this week, as the country's theater owners gather in Las Vegas for the annual ShoWest Convention, it'll be a central topic of debate: How will the movie business change as consumers can watch movies on all kinds of new devices, either while they're still on the big screen, or when the DVD comes out three or four months later?

For Lori McCreary, one of the producers of ''10 Items" and chairman of Clickstar Inc., the Santa Monica, Calif., company that will distribute the movie on the Net, the math is simple. ''Hopefully, the Internet release will let more people around the world see our movies," McCreary says.

But executives at studios worry whether sales of downloads will be as profitable as DVDs have been. ''The entertainment industry is steeped in a very strong business model that hasn't changed much," acknowledges McCreary.

She observes that encouraging legal Internet downloads is a far better strategy than simply chasing after consumers who're downloading movies illegally.

The idea of digital delivery is starting to gain momentum, as studios make more of their movies available to Internet download services like CinemaNow, Movielink, and Vongo. Two other big players could jump in, too. AppleInsider.com, says the company may be considering adding movies to its iTunes Music Store, and last week Amazon.com was reported to be in talks with Universal, Paramount, and Warner Bros. about offering their movies on the site. Moviebeam, a start-up funded by Disney, Cisco Systems, and Intel, started selling a set-top box earlier this year that can store 100 new releases, and will soon support delivery of movies over the Net.

Pricing is still an area for experimentation: CinemaNow charges $3.99 for a 24-hour digital rental of a new release, and Vongo charges $9.95 per month for unlimited movie viewing. Pricing to download a movie for your permanent collection isn't established yet, and it's possible that viewing a movie online while it's still in theaters could cost from $15 to $30.

Today's movie services are still smaller than the typical video store. Movielink offers 1,300 titles, for instance. ''This is still very early in the life of the Internet as a channel of distribution for movies," says Jim Ramo, Movielink's chief executive.

Ramo plans to continue adding titles, and hopes that the technology to link computers with television sets will be simplified. Only about 15 percent of Movielink users have the equipment to show the movies on a TV screen -- usually a PC running Windows Media Center software. (Another limitation of Movielink and the other major services is that they don't support Mac or Linux users.)

The theater owners who're gathering in Vegas this week to shop for new popcorn machines and get a sneak preview of Pixar's next movie, ''Cars," aren't agitated about Internet downloading in particular. They're more concerned with drawing a line in the sand, and dictating that movies shouldn't be released in other media until several months after their theatrical run has ended.

Theater owners worry that if an Internet, DVD, or video-on-demand release follows too quickly on the heels of their showings, people will simply sit on their wallets and wait. Many theaters have announced their intention to boycott movies like Steven Soderbergh's ''Bubble" that have nearly simultaneous releases on DVD. While Clickstar initially talked about making ''10 Items" available at the same time as its theatrical release, McCreary now says that the Internet version will follow ''a couple of weeks after."

One of the opening speakers at ShoWest will be Dan Glickman, chairman of the Motion Picture Association of America. A key focus for the MPAA, as movies morph from physical products to digital files, is combating piracy.

''Piracy is a constant battle," Glickman says. ''We'll never end it. We just need to contain it."

If you watched last Sunday's Academy Awards, you may have noticed that the few political speeches delivered from the stage weren't about the war in Iraq or the president's Supreme Court picks; they were admonishments about watching movies movie theaters. ''Brokeback Mountain" star Jake Gyllenhaal opined that Hollywood epics can't be appreciated on portable DVD players, and Academy president Sid Ganis sang the praises of the communal movie-going experience.

Of course, despite the speeches, even the Academy members who vote for the Oscars watch many of the nominated films on DVD ''screeners" sent to them for free. But the movie industry does need theaters to survive, mainly because the theatrical release period helps make consumers aware of new movies and build demand for them when they're eventually released on DVD, Vongo, Moviebeam, Movielink, etc.

And most of us, though we may gripe about the sticky floors or overpriced Milk Duds, probably want our neighborhood movie theaters to survive, too, so we'll have somewhere to go on a rainy Saturday afternoon.

But survival is far from certain, as we invest more in our home theaters and find it more convenient to buy movies as a bundle of digital bits. Have you noticed what happened to the population of street-corner pay phones once everyone started getting cellphones?

Scott Kirsner is a freelance writer in San Francisco who maintains a blog on entertainment and technology, cinematech.blogspot.com. He can be reached at kirsner@pobox.com.