HOLLYWOOD URGED TO LOG ON EMBRACE INTERNET, SPEAKER TELLS INDUSTRY.

Byline: Greg Hernandez Staff Writer

BEVERLY HILLS - Will the average computer-user be able to download popular movies off the Web easily and quickly in the near future with the blessing of the movie industry? Or is a long and drawn-out battle in store similar to that between the recording industry and the Internet song-swapping service Napster?

Luke McDonough, co-founder of the online entertainment company IFILM, contends that there are more benefits than drawbacks for Hollywood's major players to take advantage of the latest technologies such as the Internet and broadband to distribute their product.

``There will still be piracy but the net effect is going to be incremental to your business as it was with VCR, as it was with DVD, as it was with pay-per-view,'' he said. ``Every time they have made it easier for more people to consume it and more convenient in the way that they use it, it is so huge for their businesses.''

McDonough made his points during an economic summit Wednesday at the Beverly Hills Hotel that brought together players from various sectors of the entertainment industry to discuss entertainment and new technology.

With digital and Internet technologies getting more advanced by the day, speakers at the event, sponsored by the Beverly Hills Chamber of Commerce, said the film industry is faced with the challenge of retaining intellectual property rights over its movies while at the same time exploiting new technologies to distribute its content.

``Film is a 19th century invention and now we're in the 21st century,'' said Mike Medavoy, co-founder of Phoenix Pictures. ``The issues of encryption are obvious. Movie studios built up their libraries and that is what makes these companies so valuable. The question is: Who controls the pipeline to this product? The studios have to protect their properties or be put out of business.''

McDonough said that the film industry should focus more on ways to get their product out there legally as technologies will surely continue to evolve and become more sophisticated beyond the current ability to download a movie on a computer over the course of a day and only being able to watch it on your computer screen.

``No amount of regulation or hesitation about these new technologies will change the fact that the genie is already way out of the bottle,'' he said. ``But there are solutions. You provide the value legitimately to users so they have a legal option. If I cannot get it legally, I have the greatest incentive of all to get it illegally.''

Brian Compton, chief financial officer for Universal Studios Hollywood, said the studios do recognize the potential benefits of additional high-tech distribution methods.

``It's about optimizing your investment and what's the smartest way to do that,'' he said. ``When you look back over the years, the industry always ends up embracing technology, it's just developing an understanding of the optimal way to structure that.''

Compton said deciding on the best course is different for each studio, particularly in the age of media conglomerates like AOL Time Warner, Vivendi Universal and Viacom.

``The entertainment business is an industry that's made up of five, 10 real key players that don't all have the same board of directors and don't have all precisely the same asset bases,'' he said. ``How do you balance all that and, by the way, marry together with the tech industry? There are a lot of constituencies to balance.''

J. Scott Dinsdale, executive vice president of digital strategy for the Motion Picture Association of America, said that in this new technological frontier, collaboration with the tech industry is key.

``The basic formula has always basically been the same, which is produce a great product and then find avenues for that product to be distributed and exploit those avenues as best you can,'' Dinsdale said. ``When you look at the offline world and ignore the Internet entirely, that's what the industry does through all these different windows.

``What I think the industry is trying to do is create an environment on the Internet that's as rich in consumer choice for its products as the environment that's offline. I don't think anyone expects that to happen overnight but that's the expectation.''

Dinsdale said that in order for the marketplace to move forward, it will take both the entertainment companies and the information technology companies to come up with new innovations for subscription services, purchases and rentals.

``All the kinds of things that happen in the offline world need to find their way onto the online world,'' he said. ``There are going to be new opportunities we haven't even thought of yet.''