BusinessWeek on Hollywood's digital future:

Can Hollywood avoid getting Napsterized? Right now, the pirates are only nibbling at the $65 billion-a-year film and TV business. Downloading a movie is still a clunky affair that can take a few hours, and only 27% of the country's 66 million online homes have the superfast broadband connections to do it.

Most of the piracy so far is through good old-fashioned counterfeiting. The ripping and burning of movies to DVDs is growing into a global underground industry that last year cost film studios an estimated $3 billion in lost DVD sales. It's prodding the guys in Guccis into action: Security folks outfitted with night goggles routinely patrol press screenings, searching for illicit camcorders. Former FBI agents are leading raids of illegal DVD copying plants in Thailand and Malaysia. Industry lawyers are flooding court dockets with lawsuits against all manner of thieves (page 82).

But the digital threat is looming as ominously as the thick flock of crows gathered on the jungle gym in Alfred Hitchcock's The Birds. Technology is coming on quickly that will make the prospect of copying movies and TV shows much more tantalizing — and far easier. Already, some 600,000 copies of films a day are being downloaded illegally, according to industry estimates, which could cost Hollywood hundreds of millions of dollars in lost video sales. A new crop of gizmos, from digital televisions to personal video recorders (PVRs), will soon make duplicating anything on the tube — from Fox (FOX ) Broadcasting Co.'s 24 to the latest Jennifer Lopez flick — a couch potato's dream. And within three years, half the online population will have broadband, making it easier to pass programs captured in digital form around on the Net.

The living room is center stage for all this new digital entertainment. But will it be a war zone or a thriving marketplace shared by the creators of content and the makers of the cool machines that deliver it? That's the urgent question facing studio execs. It's not that they can't envision a rosy scenario for convergence, where there's money to be made at every turn — from movies on demand to Sex and the City fans streaming their favorite episodes on the PC to teens watching videos on handhelds. "We would certainly like to be able to make our content [increasingly] available in a digital world," Comcast (CMCSK ) Corp. CEO Brian L. Roberts told the National Cable & Telecommunications Assn. convention in early June. "But we need to feel secure that we're going to get paid for [it]."

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