HOLLYWOOD SHOULD USE TECHNOLOGY TO CREATIVELY SOLVE LICENSE FIGHT

By Thomas E. Weber

Hollywood moguls, your worst fears are well founded. You are, in fact, about to get Napsterized. But when that happens, you will have no one to blame but yourselves.

Your anxiety about the future of movies and TV shows is understandable given the music industry's experience. Napster and its successors turned the Web into a gigantic free jukebox. Worse, they created distressing battle lines, pitting the recording companies against their customers.

So, Hollywood, you can follow the music industry's path and attempt to stop the inevitable. That's certainly where you're headed when you endorse misguided ideas like Sen. Ernest Hollings's plan for federally mandated copy-protection systems for all PCs.

Or you can choose the other path now, embracing digital technology and figuring out what consumers want and giving it to them. Here's a road map:

GET REAL: Hollywood must give up its fantasy of absolute control over content. That dream sent Disney CEO Michael Eisner to Congress recently to argue for government control of personal-computer technology to block PCs from displaying movies or TV shows without the copyright owner's approval.

But that's a foolish pursuit. No matter how good the copy-protection systems get, someone out there will figure out a workaround. Meanwhile, heavy-handed copy protection risks blocking legitimate consumer activities and creating a backlash. That's what has happened in the music world, with the introduction of copy-protected CDs that won't play on PCs. If I purchase a Disney video, I expect to play it wherever and whenever I want.

Hollywood wants Congress and the public to believe that it can't offer new services unless it gets this kind of total control. But that simply isn't true. I've been using a service called Intertainer that lets me pay to view movies and TV shows on my PC. It took only a few mouse clicks -- and $3.99 for a 24-hour pass -- to call up Woody Allen's "Curse of the Jade Scorpion." Within seconds, I was happily watching Helen Hunt. You can find the service at www.intertainer.com.

Jonathan Taplin, Intertainer's CEO and a former movie producer, thinks Hollywood's call for federal intervention is absurd. The tools to protect content already exist, he says, and they are being used to prevent misuse of Intertainer. He doesn't argue that the system is foolproof -- just that it's very good, getting better, and good enough to prevent Intertainer's fare from getting Napstered.

MORE CARROTS, FEWER STICKS: Hollywood needs to find ways to reward consumers, not punish them. It can do that by offering incentives for using technology and services that respect copyrights.

It shouldn't be tough to find the right carrots. Consumers like choice, and they like convenience. With Internet services like Intertainer, movie studios and TV networks can offer vast libraries of programs at any time, instead of whatever is showing at the moment on cable TV -- no trips to Blockbuster necessary.

Hollywood should also finally get behind digital video recorders like TiVo and SONICblue's ReplayTV that let consumers save favorite TV shows easily. TV networks don't like the technology because it makes it easy for viewers to skip commercials. In the latest version of ReplayTV, you can even beam a taped show to a friend who missed it.

A technology that makes sure TV fans never miss their favorite shows? Hollywood's fear of copying has blinded it to the potential for viewer loyalty here, leading the networks to gang up on SONICblue in court. After all, viewers have always had a way to skip commercials. It's called "walking to the kitchen."

One more carrot: low, flat-rate pricing that tempts consumers to try out digital services -- and acknowledges how much money content companies will save by distributing movies online instead of shipping them. If viewers believe they are getting ripped off -- a widespread notion among music fans who see CDs marked at $16.99 -- they will be more receptive to free, Napster-style systems.

THINK OUTSIDE THE BOX: This is the most important -- and the most difficult -- strategy of all. Hollywood can't let its current business models constrain the development of digital services.

Perhaps commercial-skip systems will make 30-second TV ads obsolete. If that's the case, networks need to devise alternatives. One possibility: product placement within TV programs. I'm not a fan of this approach, but it is routine in the movie industry. If "Friends" was set at a Starbucks instead of the show's fictional Central Perk, you would have a commercial no viewer could fast-forward past.

Another, more palatable approach would use digital technology to target consumers more precisely. When a new parent signs on, beam a diaper commercial into the show. Some may skip it, but others won't, and those viewers may actually be interested in knowing about the product being advertised.

Finally, Hollywood must ensure it can offer reasonable prices. TV producer Dick Wolf has proved with his "Law & Order" franchise that viewers care more about great stories than expensive stars. Sure, it's a lot harder to write great films than to promote mediocre films with high-priced stars. But nobody ever said show business was easy.