Net Gain.

IN the film "The Jerk," Steve Martin rushes giddily through his front yard screaming with unabated glee as a delivery truck rolls away, "The new phone books are here! The new phone books are here!"

Over the past half-decade, hordes of entrepreneurs have gushed onto the Internet with much the same enthusiasm, selling everything from scrub brushes to stock tips and promising to use the Web to "revolutionize" their respective industries.

But as promises of profitability cede to shareholder demands for solid returns, the self-proclaimed industry cognoscenti have begun to shy away from their bold Nasdaq ventures back to their I-told-you-so, brick-and-mortar Dow Jones blue chips.

Nowhere is this shuffle more evident than in the entertainment industry, where the much-ballyhooed recent dot-comming" of the Cannes Market has created as much skepticism as optimism, as the market struggles to cope with a new host of technological and economic challenges.

How not to go digital

At the behest of the Recording Industry Association of America (RIAA), a U.S. federal judge's ruling to prohibit Napster from allowing users to download and swap songs from its site could likely force that company to close its doors.

That ruling, however, has created a groundswell of grassroots backlash and a flurry of site traffic for Napster.

While an appeals court has awarded Napster a stay of execution, the RIAA now finds itself with the unenviable question, "What now? Do we spend the next 12 months hunting down Napster substitutes and teaching them the current copyright restrictions? Can we litigate against every site?"

The global film industry has much to learn from the RIAA's thumb-in-the-dam victory by addressing the challenges of a digital future, exploiting the opportunities and resisting the ostrich-in-the sand, don't-play-with-my-toys business model as the world gets wired.

Lawsuits are not the answer. The digital age is here, and as technology tears down time zones and eliminates distribution barriers, there will be enough room for everyone -- most notably content owners, distributors and producers -- to make money as the Internet helps open untapped markets for new and old films.

Look at what the Web has done for the short film -- essentially an art form relegated to Beta tapes and showcases at trade-show booths. for the last few decades. The Internet has given this format a life it has not seen since Walt Disney introduced moviegoers to "Steamboat willy."

As the Internet expands, the digital distribution of film creates real challenges that must be solved. Issues such. as distribution rights, establishing online distribution fees, defining Internet property rights, creating film revenue allocation guidelines, calculating Internet revenues and gross receipts and establishing consumer subscription packages are among the most immediate.

But rather than welding the door shut before it opens, the film industry should first take a peek at the equally impressive economic opportunities the Internet and digital technology have spawned.

First, fears that the Internet will suddenly dissuade moviegoers from the 100-year-pop corn-and-Raisinette theater ambiance are unfounded. Movie theater attendance jumped over 7 percent to almost $7.5 billion between 1998 and 1999 -- a more than 55 percent hike from 1990 Friday night at the movies is alive and well and always will be.

The issue of piracy is a real one, but technologies that can prevent films downloaded on the Web from being re-transmitted, that limit user access and can "freeze" distribution and user rights, are available, and more advanced solutions are being introduced almost hourly.

Why not distribute online?

Digital distribution is faster and cheaper than the phone, fax and messenger-network that has governed this industry for decades -- a particularly acute bottom-line figure for international distributors -- and enables studios and sales agents to blow the dust off, and find homes for, older films in-new markets.

The Chinese governments commitment to roughly double the number of foreign films it allows to be distributed there each year, the partial cost of its entry into the World Trade Organization, only reinforces the need to embrace the digital distribution of film.

Perhaps the-tastiest digital morsel is financial. The Internet can give birth to a not-too-distant "digital living room" where films can be downloaded with a phone call from the couch and delivered -- for a fee -- to the television across the room.

Digital delivery also means direct consumer contact. Studios and distributors can push films to consumers based on their favorite actor or genre or cinematographer and simultaneously collect the ultimate gold mine of consumer purchasing information, which could open the floodgates for "push" advertisements based on personal preferences or the sale of autographed Tom Cruise 5-by-7s.

Instead of handing the game over to a gaggle of lawyers huddled around a polished marble table in an air-conditioned conference room, let's let the future be decided by consumer demand and common sense. Consumers should be the ultimate audience.

Jeremy Kehoe is vice president and director of communications for filmbazaar.com, a downtown LA.-based online company catering to the independent film market.