Studios eye Internet as they look to avoid music industry's travails

Hollywood studios, having watched the music industry hitch its wagon to Internet delivery as the market for CDs eroded rapidly, are preparing for their own move to digital downloads and online streaming, reports Reuters. Analysts say Hollywood could--within five years--see a market of some $753 million, three times what it is today.

Studios have seen the sales of DVDs--a major money maker for them that makes up more than half of a movie's viewership--slide nearly 14 percent in the first half of 2009; they're scrambling to make up the loss. Analysts say a $753 million market by 2014 would represent just  5 percent of last year's revenue, but they say it's only a matter of time until Internet delivery booms.

Among the benefits Reuters suggests as reasons Hollywood will continue its move to the Internet: big margins and the ability to gather more data about users.

While DVDs aren't likely to become as rare as vinyl LPs anytime soon, studios--like Disney, which is working to set up its own portal, and others, like Lion's Gate, Sony and Warner Bros., which are talking with YouTube--likely see the transition as a sure thing.

"I don't think that studios are looking at online to save the home entertainment business, but I think they want to avoid what happened to the music business and try to come up with alternative modes of distribution before physical media goes away," Stephen Prough, founder of Salem Partners, which advises investors in the film business, told Reuters.

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See this Reuters story

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