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CinemaNow burns Universal, in a good way

Logo_cinemanowUniversal and CinemaNow are finally selling a downloadable movie on terms that begin to make sense for consumers. Today, CinemaNow began offering a downloadable version of the, umm, less-than-highbrow Universal street-racing flick "The Fast and the Furious: Tokyo Drift" in a format that can be watched on a TV set with relative ease. Notably, the download became available the same day the DVD version was released. This toe-in-the-water move culminates three slow-moving shifts in online movie distribution: adding permanent downloads (sales) to temporary ones (rentals); enabling movies to be moved from a computer hard drive to a TV set, either via a home network or a homemade DVD; and releasing downloadable versions earlier, so they become available as soon as the DVD comes out.

None of these shifts are complete. Studio executives are still hamstrung by their fear that downloads will cannibalize DVD sales, which have become the industry's profit center. Never mind that selling a downloadable version of the movie can produce margins as big as or bigger than packaged DVDs. There's also a fear of piracy so intense that it leads to irrational precautions.  The biggest breakthrough came in July, when CinemaNow persuaded Universal, Sony, Disney's Buena Vista, MGM and a few indie studios to sell downloadable movies that could be burned onto a DVD and played on conventional disc players. This move was the first effort to bridge the gap between the computer and the TV set in a mass-market way. To meet the studios' demand for security, CinemaNow's disc-burning software uses an anti-piracy technique similar to the ones used on many copy-resistant CD. Naturally, the studios weren't willing to test the technology on new releases; instead, DVD burning was limited to about 100 library titles (that is, movies that had been offered on DVD in previous years, and had few potential sales left). But the test was successful enough, despite some complaints about compatibility with older DVD players, to persuade Universal to take the next leap forward and offer one -- count 'em, 1 -- new release with DVD burning. (Insert appropriate Homer Simpsons sound here.)

Within a few more months, DVD burning should get another boost when the anti-piracy technology used on packaged DVDs becomes available for home burning. Even if more studios take the plunge and offer downloadable new releases that can be burned, however, one more question lingers: when will studios make the price of downloads competitive with the DVDs sold at stores? CinemaNow is offering "Tokyo Drift" for $10, which is a nice discount, considering the absence of special features and packaging. But the other recent, burnable Universal feature that CinemaNow offers, "Inside Man," sells for $20 -- the same price as Wal-Mart. The latter has famously threatened to retaliate against studios that make downloads available for a lower wholesale price than packaged DVDs, and Hollywood executives have been reluctant to alienate their biggest sales outlet for the sake of a nascent and unproven one. Unless the price of downloads drops, they'll remain attractive only to those willing to pay a premium for the "convenience" of spending two hours or longer downloading a film that they have to convert to disc themselves. That may not be a deal-killer, but it certainly doesn't help. The studios have to realize that downloadable movies aren't like downloadable songs. The shift to online music sales offered consumers several tangible benefits, not the least of which being the ability to buy individual tracks in lieu of whole CDs. Except for travelers caught without a DVD player, downloadable movies typically offer less value, not more, than their packaged counterparts -- fewer pixels, less flexibility, no extras in most cases, and less spontaneity (unless you're willing to watch the film on your computer, in which case the show can begin in about half the time it would take to run to Blockbuster and back). At least Universal and CinemaNow have put something on the table that's close enough in value to a DVD to be worth considering. It's obviously meant to be a test; here's hoping the rest of the studios pass it.

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Times editorial writer Jon Healey pens opinion pieces about a variety of business issues, and blogs about technologies that are changing the entertainment industry's business model.

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