DVD Pirates, Meet Morgan Freeman

The actor is part of an Intel venture that could change movie distribution -- and cut DVD piracy.
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It could be time for Hollywood to put the cart before the horse.

In the wake of home-video blowups at

DreamWorks

(DWA)

and

Pixar

(PIXR)

, all the studios' footmen are scrambling to put the DVD market back together again. Right now, no one seems to have a clear idea of how to react to apparent changes in the way filmed entertainment is consumed.

But an actor, of all things earthly, sauntered into Sun Valley a few weeks ago and vowed to help the process along.

Then again Morgan Freeman, of

Driving Miss Daisy

and

The Shawshank Redemption

fame, isn't just any actor. On July 6, he announced the formation of a new digital entertainment company called ClickStar. The company, launched amid Allen & Co.'s annual Sun Valley mogul dance, aims to distribute premium movies to consumers over the Internet.

The beauty of this idea is twofold. First, it would allow fans quicker access to the entertainment they want. Second, and perhaps more important, it could help combat movie piracy.

What exactly does the Internet have to do with DVDs and movie piracy? A lot, as it turns out.

"Consumers have a lot more authority" now because of changing technology,

Disney

CEO-elect Bob Iger said on his company's earnings call this week. When asked about DVD sales, Iger said that many things need to change in terms of how films are distributed and released.

Iger spoke of "compressing windows" for film releases -- that is, shortening the lapse between when a film plays in theaters and when it shows up on store shelves -- and went so far as to suggest that "all the old rules have been called into question." He also added that "it's not out of the question that DVDs could be released in the same windows as theatrical release."

Whoa, horsey! Has anyone asked the distributors, exhibitors and even the Teamsters how they feel about any of this?

Naturally such a shift would ruffle more than a few feathers, but you've got to hand it to Iger: He's not even the full-time CEO yet and already he is contemplating radical change. Iger went on to say that the marketing of films and television needs an overhaul with an eye to a fresh blend between traditional and new media.

Speaking of new media, here's what ClickStar wants to do. In conjunction with partner

Intel

(INTC) - Get Report

and Freeman's Revelations Entertainment, it aims to offer an online service in which consumers can pay for and download first-run, pre-DVD-release films. ClickStar aims to "enable new business models resulting in increased revenue opportunities for the film industry."

"ClickStar addresses the growing worldwide consumer demand for digital content -- especially filmed entertainment," Freeman said in a statement at the Idaho retreat earlier this summer. "Our goal is to deliver first-run premium entertainment to film fans around the world and to make film easier to buy than to pirate."

TV, VHS, DVD and satellite were all supposed to sound the death knell for theaters. None did. You can still shed a tear watching

Cinema Paradiso

while also embracing the fact that there's a huge market out there for Internet-driven film distribution -- which won't keep consumers from going to the local multiplex with the kiddies.

ClickStar, meanwhile, is led by a former Sony Pictures executive, Nizar Allibhoy, who worked in Sony's digital division. The company will market and distribute first-run films before they're released on DVD and deliver them directly to Intel's digital home entertainment devices.

Allibhoy, while admitting that there will be many others in the space, wants to "fully leverage the power of the Internet" for film distribution. "We view ourselves as pioneers," he says, adding that ClickStar's offering a different class of product that will help it define the business.

ClickStar rivals will include Movielink, which is co-owned by a number of studios, and CinemaNow, both of which are download services. ClickStar, however, will have exclusive artist-created content channels, Allibhoy notes. He says that given the flexibility that exists on the Internet, he sees his company working side by side with such enterprises.

Asked when ClickStar-distributed films will hit the market, the chief executive says they will be released "simultaneously or very soon after" movies' theatrical release.

Where pricing is concerned, Allibhoy says ClickStar has some strong ideas, but he likens the situation to the music industry, which has recently developed different ways to channel product to consumers and cut down on piracy.

Allibhoy declined to provide a specific launch date for the service beyond saying that it is expected sometime in 2006.

In the meantime, the irony of a movie star facilitating a revolution in Hollywood is too rich for words. Freeman and company may well have a million dollar baby on their hands with this idea. It will be interesting to see whether Iger and his peers have the horse sense to follow the trail.