Media companies are awakening to the merits of turning users of file-sharing networks into legitimate paying customers, and they're increasingly realizing that such sites are a great place to showcase their content. The proof? Another batch of movie studios have recently signed on with the BitTorrent and Guba services, in agreements that signify the major changes taking place throughout the media industry.
Time Warner's (NYSE:TWX) Warner Bros. was a fearless trailblazer, announcing back in May that it would try selling movies through BitTorrent. Meanwhile, the newest four movie studios to sign on with BitTorrent are relatively obscure names -- Hart Sharp Video, Koch Entertainment, The Orchard, and Egami Media, a unit of Image Entertainment (NASDAQ:DISK). These studios, all described as independent outfits, plan to offer subscriptions to BitTorrent users, as opposed to Warner Bros.' pay-per-title plan.
Warner Bros.' agreement with Guba last month had a similar spirit to the one it made with BitTorrent, but it struck me as far less impressive, considering that video-sharing site Guba doesn't have nearly the audience that BitTorrent -- much less fellow video-sharing site YouTube -- possesses. However, it's worthwhile to note that Sony (NYSE:SNE) Pictures has now signed on with Guba as well. (And one might also wonder: Where's Apple (NASDAQ:AAPL) through all of this? We know it's talking to movie studios about distribution through iTunes, but nothing has materialized yet.)
Clearly, the movie studios are increasingly interested in trying to monetize the file-sharing sites they once opposed. Compare that to the music industry, with its well-known mistrust of anything that brings "piracy" to mind.
However, the independents' deal with BitTorrent also exhibits the spirit of the "long tail" theory that Wired magazine's Chris Anderson has examined at length -- the end of the "blockbuster" culture in media. Anderson has pointed out that there's demand for much more than just the "big hits," facilitated by the Internet's ease of distribution and the grassroots marketing generated by user recommendations. Netflix (NASDAQ:NFLX) is a good example of a company that has benefited from -- and in many ways, symbolizes -- the phenomenon. Its 55,000 titles trump the selection at any bricks-and-mortar Blockbuster (NYSE:BBI). Maybe in some ways it's a more intimidating trend for the major movie studios -- which have long relied on a culture of hits -- than piracy in itself. File-sharing and video-sharing sites may represent copyright violations and lost revenue, but they arguably also represent strong, grassroots word-of-mouth marketing.
The indie studios have more opportunity than ever before. Even though the names listed above sound obscure, Fools shouldn't underestimate the demand for some of the items in their catalogs. For example, Hart Sharp Video is the name behind Super Size Me, the much talked-about film in which filmmaker Morgan Spurlock took on McDonald's (NYSE:MCD). The Orchard, a music-distribution company that's delving into video, distributes Bollywood videos, concerts, and titles from cultish Troma Entertainment, known in some circles for its over-the-top B-grade horror-comedies.
Change is afoot in the media industry, and many companies will have to stay nimble, take some chances, and maybe even break with conventional wisdom if they want to stay ahead of the game.
Time Warner and Netflix are Motley Fool Stock Advisor selections. Take a 30-day free trial, and see what other chart-topping stocks Tom and David Gardner have recommended.
Alyce Lomax does not own shares of any of the companies mentioned.
