In South Korea (among other places), film piracy is commonplace. It was widely reportedly recently that Warner Brothers has decided on a new tactic to counter illegal copies of new release movies; they are releasing movies online two weeks ahead of the DVD release date. The company chose South Korea for this experiment because it has more than a 90% penetration rate for broadband Internet connections, and studies indicate that nearly half of the population has downloaded one or more movies from online sources.
A number of factors go into this decision. First, DVDs have been a major part of the movie studios’ revenue streams in recent years, but this has started to decline. Digital rights management (copy protection) is much more robust for online content than it is for DVDs, and digital watermarking can help track the source of illegal copies that do get made. And the movie studio’s share of an online rental can be as much as three times that of a DVD rental. If online movie rentals take off, not only could it help combat illegal copying, but it could also help the studio recoup lost DVD revenues.
The financial forces are aligning to favor digital distribution of movie and video content, and I expect to see the switch over to Internet distribution to reach a tipping point soon.