The Terrors of Tinseltown

Think the VCR scared the motion picture industry? Peer-to-peer file-sharing, which enables users to swap digital content, could cut the major studios out of the distribution loop. Here's a look at the CFOs behind the Napsterization of Hollywood.

Managers at Viacom Inc., parent of Paramount Pictures (www.paramount.com), likely have mixed feelings about online movies. In bypassing video rental retailers, Paramount would net bigger profit margins for its films. But Viacom owns one of those middlemen, Blockbuster Inc. (www.blockbuster.com). —R.B.

Affiliates Attack!

Cable modems, digital subscriber lines, and other high-speed highways aren’t the only routes to the local Internet drive-in. iBlast (www.iblast.com), a Los Angeles-based network representing 246 local television stations around the country, wants to bring movies to PCs the old-fashioned way: through the airwaves.

This wireless data broadcasting network beams to more than 93 percent of the continental US, with transmission towers aimed at PCs, set-top digital boxes, PowerVR platforms, and other receiving devices. Although the company is still testing the technology, iBlast’s management hopes the major studios will tap it as another virtual distribution channel. “We can send their stuff at the speed of lightning, with the same quality as network TV,” says Michael Lambert, iBlast cofounder and CEO.

Lambert, former president of domestic television at 20th Century Fox and one-time head of HBO’s home video distribution company, says iBlast is 200 times faster than the standard dial-up Internet connection. It can transmit up to 26,000 songs or 30 full-length movies a day, albeit just one way. “We distribute what we distribute — you can’t decide [which movie you want to see],” he explains. Lambert believes iBlast will also help soothe industry worries over piracy. The service will be so cheap, he claims, there will be little incentive for pirates to copy and circulate movies. “We make it more efficient for us to send a film to you than for you to send it to your neighbor.”

No content providers have jumped on board yet, although Lambert is in talks about the project with several movie studios. Working capital shouldn’t be a problem, though — he’s raised $40 million from major broadcast groups, including Tribune Co., Gannett, and Cox Communications. Crows Lambert: “We’re in the right place at the right time.” —R.B.

Future Shock

For proof of the growing corporate interest in peer-to-peer networking, consider the conference conducted in late February and early March. The symposium was sponsored by Intel (www.intel.com) — a chip maker, mind you, not a software vendor. The topic of the meeting? Developing standards for P2P networking.

Obviously, it’s not likely Intel is interested in peer-to-peer exchange because the company wants a piece of the Limp Bizkit MP3 action. No, observers say that managers at Intel see what other managers at other technology giants see: With industry standards for security and privacy in place, P2P networking will be ready for the big time.

Wide-scale corporate adoption may be only a few years off. At the moment, experts say P2P software simply is not robust enough to handle complicated business transactions. But the infrastructure is finally being put into place — and the potential for true disintermediation is absolutely mind-boggling. Some champions of peer-to-peer networking believe the switch to serverless computing will radically transform supply-chain management, procurement, billing, and scores of back-office functions.

At the very least, P2P B2B probably sounds the death knell for scores of electronic trading hubs. While some online exchanges will survive, many will serve no purpose once companies can conduct secure, private transactions over P2P sites called peering portals. In a recent article in the Harvard Business Review, Andrew McAfee, an assistant professor at Harvard Business School, wrote: “Together, the peering portals of all the companies on a network will create a universal catalogue of product and service offerings.” —John Goff

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