In This War, Movie Studios Are Siding With Your Couch

Sometime in the next few months, there is likely to be an explosion in the movie business. The question is which studio will detonate the bomb.

Tension between studios and theater owners has been simmering a long time, but it intensified in May, when the Federal Communications Commission issued what appeared on the surface to be an arcane ruling. After two years of prodding from Hollywood, the FCC agreed to let movie studios activate technology to prevent films sold through video-on-demand systems from being copied. Ho-hum? Hardly. The ruling gave studios the ability to pursue a new business -- so-called premium VOD -- that may be the industry's best hope of restoring itself to health, now that the bottom has fallen out of the DVD market. Right now, theaters get an exclusive period -- 120 days, on average -- to serve up new movies. Then the releases appear on television video-on-demand services at a price of about $4.99. Armed with the new copy-blocking technology, studios want to offer new movies on video-on-demand services about 45 days after they arrive in theaters, for a premium price of $24.99. The business opportunity is multifold. With as much as 80 percent of that early VOD revenue going to the studio, movie executives see a new engine to compensate for the sputtering DVD. And for the studios, the need is urgent: DVD sales for the year are expected to total about $9.9 billion, down 30 percent from their peak in 2004, according to Adams Media Research.