Losers in the big court and a winner on the big screen colored in the week that was. Let's take a closer look.
You can't trade files, but you can trade file cabinets
In a landmark decision that rattled the digital-music industry, the Supreme Court sided against file-sharing software provider Grokster. Arguing that most of the exchanges taking place on peer-to-peer networks like Grokster were for illegal downloads, the court's ruling opens the way for record labels and movie studios to sue the developers.
Companies such as Napster (NASDAQ:NAPS) and RealNetworks (NASDAQ:RNWK) that specialize in selling legal downloads and monthly subscription plans could be sitting pretty after the intellectual-property owners unleash their litigious hounds. But this ruling is clearly not going to spell the end of piracy.
For starters, pursuing offshore developers is easier said than done. Beyond that, it would be naive to expect that the volume of freebie music tracks being swapped will be transformed into actual sales.
Times have changed, and customized listening experiences no longer require actual purchases. Satellite-radio providers Sirius (NASDAQ:SIRI) and XM (NASDAQ:XMSR) and legal Internet radio stations can now provide the niche-specific -- and commercial-free -- experiences that music fans just couldn't get on terrestrial radio. Yes, this may also result in more appetites being whetted, but it's more likely to result in a spurt in concert attendance, not necessarily CD and digital-download purchases.
The only reason Grokster thought it had a chance was that Sony's (NYSE:SNE) Betamax came under the same legal fire back in 1984 and won. Back then, movie studios claimed that consumers were using the videocassette recorders to duplicate televised film broadcasts, and the court ultimately held that Sony could not be held liable for providing the platform that the end users could abuse.
The kicker here is that the movie studios came around to embracing the technological change that has evolved into the lucrative home video and DVD market. It certainly would have been a higher hurdle to clear in terms of monetizing file-sharing by the content providers, but a little innovation could have probably gone a long way.
There's a new lion roaring in Hollywood
It's been a horrendous year so far for the movie-theater industry. Sure, War of the Worlds is hoping to fix the doldrums with a strong showing this holiday weekend, but, by and large, it's awfully quiet at the multiplex these days.
Is there a glut of mediocre celluloid out there? Are folks growing more content to just wait and rent the DVD a few months later? Did unhealthy popcorn and overpriced candy kill off the last of the matinee watchers? If you're a movie studio -- or worse, a theater operator -- you have every right to be worried. Perhaps that's why it's so refreshing to see Lions Gate Entertainment (NYSE:LGF) close off its fiscal 2005 in such stellar fashion.
The edgy producer and distributor of independent films posted a profit of $0.20 a share on the year, while revenues more than doubled. With so many studios striking out as they aim for the fences, Lions Gate has been able to master the art of the bunt single.
For investors, Lions Gate is proof that you can find pretty stocks in ugly places.
The headlines behind this week's stories:
Until next week, I remain,
Longtime Fool contributor Rick Munarriz would like to do his part to help the movie industry, but there is only so much popcorn and Twizzlers he is willing to eat. He does not own shares in any of the companies in this story. The Foo l has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
