Dark Days at DreamWorks

That said, it's hard to ignore the experience of the music industry, which saw sales plunge as Internet file-sharing emerged. Asked if issues such as piracy factored in, Katzenberg did not comment, saying that the issues surrounding DVDs were complex.

It seems that any time piracy comes up, one of the studio chiefs responds by saying that it is complex. They don't comment for fear, it seems, of being tarred by the same brush as the music industry has been. As with any theft, there is more desirability for a premium item than there is for a dud. Car thiefs, one might surmise, would rather get their hands on a Porsche than a Pinto.

With so much bad product coming out of Hollywood, it would make sense that piracy would eat into the sales of popular DVDs.

Granted, movies take a lot longer to download online, but if anyone believes that online feature film piracy is not on the rise -- or that you can't find a copy of Revenge of the Sith in Outer Mongolia the day of its theatrical release -- they are living in a fantasy world that even Dreamworks and Pixar couldn't conjure.

According to Eric Garland, CEO of BigChampagne, which tracks online use, the major problem is not that individuals are sharing movies like they have music from person to person -- it's that physical piracy is being driven by Internet-based distributors.

"The Internet is supercharging the distribution of pirated files from the source," says Garland. In other words, a copy of the latest hit comes out from someone who has "touched" the film, either through a screening or in postproduction. In either case, the movie is downloaded by an illegal distributor in a far-flung land and then 100,000 copies are made and put out on the street for $5 apiece. The movie hits the streets in huge numbers just as it is being released on theater screens.

A major dilemma for the studios has surfaced in terms of how to limit piracy. One thought has been to try narrow release windows, but it's hard to keep people in theaters when they know they can buy the DVD eight weeks later -- or get a grainy pirated version the same week.