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Studio Sees Profit in What Was Piracy
By Chris Gaither, Times Staff Writer
May 9, 2006


Extending Hollywood's tradition of converting enemies to allies into the digital age, Warner Bros. today is expected to announce plans to use file-sharing technology to distribute movies and television shows online.

By the summer, BitTorrent Inc. will allow users to download and watch "Harry Potter and the Goblet of Fire," "Natural Born Killers," "Dog Day Afternoon," "The Dukes of Hazzard" and other Warner Bros. titles on their computers.

The agreement marks a shift in the entertainment industry's attitude toward online file sharing, which enables users to make the music, movies and TV shows stored on their hard drives available to millions of people worldwide.

Just last year, Warner Bros. and other studios won a bitter U.S. Supreme Court fight against file-sharing networks that had turned a blind eye to pirating. But as they did with home video a generation ago, the studios are embracing new forms of file sharing as a way to reach new audiences and boost revenue.

"The problem of piracy is getting worse, not better," said Kevin Tsujihara, president of Warner Bros. Home Entertainment Group, the unit working with BitTorrent. "The way we're positioning this within Warner Bros. is, let's take the problem and turn it into an opportunity. If we can convert 5, 10 or 15% of these users into legitimate customers, we think it can have a significant impact."

That's what Apple Computer Inc.'s iTunes store has done for the music industry. Its simple interface, 99-cents-a-song pricing and integration with the popular iPod player have helped transform many content-hungry computer users from pirates to paying customers, said Gartner Inc. analyst Allen Weiner. Apple is now bringing the same approach to TV shows at iTunes.

BitTorrent, in contrast, is still hard to use for nontechies.

"ITunes converted people who were doing downloads illegally into legal users," Weiner said. "It's got to be as simple as what Apple is doing. That's the standard that's being set."

The Motion Picture Assn. of America has sued users of BitTorrent's software who shared illegal film copies online. But the software's creators have long said they wanted to help, not hurt, the entertainment industry by delivering huge video files quickly and inexpensively.

Warner said Monday that the San Francisco software company had satisfied piracy concerns by removing links to illicit copies of the studio's content from the BitTorrent search engine and incorporating strong anti-copy protections.

"They've done everything we asked them to do in trying to become a legitimate service," Tsujihara said.

Analysts said the film industry appeared to have learned a valuable lesson: Blame the pirates, not the developers whose software they use to swap illegal copies.

"The real enemy is the massive global community of people who take things for free without permission," said Eric Garland, chief executive of BigChampagne Media Measurement in Beverly Hills. "Most innovators, most developers, are building technologies that can be used by Hollywood to their advantage, and not just against them by people who swipe stuff on the Internet."

Created by developer Bram Cohen in 2001, BitTorrent breaks digital video files into small pieces and scatters them across the network on the hard drives of its users. When someone requests a movie or TV show, the "peer-to-peer" software gathers those pieces from the nearest PCs on the network and doesn't assemble them until they reach their destination — making them download much more quickly than if the file had been sent whole from a central server.

That speed has made BitTorrent a popular delivery vehicle for pirated material. At any given moment last week, nearly 50,000 people on average were downloading pirated movies such as "The Chronicles of Narnia: The Lion, the Witch and the Wardrobe" and "Ice Age: The Meltdown," according to BigChampagne.

In November, BitTorrent tried to publicly distance its core technology from piracy by announcing the deal with the MPAA to remove links to illegal copies from its search engine.

Warner plans to use the speedy delivery system to offer downloads for rent or purchase. The studio's offerings will be available at BitTorrent.com. Executives said they were still working out other details, such as the pricing.

Warner Bros. is already experimenting with peer-to-peer delivery overseas. In2Movies, a joint venture with Bertelsmann, recently launched in Germany, Austria and Switzerland. The service features "Friends," "Batman Begins" and other Warner content dubbed in German.

But the BitTorrent-based service is the first U.S. collaboration between a Hollywood studio and a major file-sharing network. In November, NBC Universal announced plans to sell movies and TV shows in partnership with Peer Impact, a little-known service created by Wurld Media Inc. of Saratoga Springs, N.Y. The service is expected to launch this spring.

"What this [Warner] deal suggests is the studios and owners of video content are recognizing the importance of broadband television," said Adi Kishore, director of research firm Yankee Group's media and entertainment team. "They are starting to take some steps to figure out how it's all going to play out and hedge their bets across distribution channels — including ones that in the past they've shunned."

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