DIGITAL > Hollywood goes online with film downloads

FT.COM: Hollywood’s largest studios will on Monday offer consumers the ability to download and own films from the internet on the same day that they are released on DVD, marking a milestone in the industry’s embrace of digital distribution.

The service is being launched by Movielink, an online joint venture formed in 2002 by MGM Studios, Paramount Pictures, Sony Pictures Entertainment, Universal Studios and Warner Brothers. The company has been slow to gain momentum because it traditionally received films 30 to 60 days after they were released on DVD, and could only rent them to customers on a temporary basis.

The founding studios, along with 20th Century Fox, have agreed to adapt the service so that customers will be able to buy the films and store them on a hard-drive. The films, including such recent hits as King Kong and Harry Potter and The Goblet of Fire, can be transferred to two additional personal computers. They can also be copied on to a back-up disc, although it will not be compatible with DVD players.

“It’s an important milestone,” said Rick Finkelstein, president and chief operating officer of Universal Pictures, whose film Brokeback Mountain will be the first to appear on Movielink and in DVD format on Tuesday.

Digital distribution has long held appeal for Hollywood. It could supply higher margins than DVD sales since there is no cost of transport and stockpiling.

However, the studios have been reluctant to release their best products to on-demand services in a timely manner for fear of damaging relations with retail partners, such as Wal-Mart and Tesco, which they rely on to sell DVDs. There are also concerns about piracy.

That reluctance appears to have dropped amid the popularity of services such as Apple’s iTunes online music store and the emergence of new “digital rights management” software to hinder pirates. The new service represents a potential coup for Microsoft. Its Windows Media format will be the technical standard for Movielink.