Apparently it’s more profitable for them to sue HMV than provide customers with what they want within a reasonable time for a reasonable price.

A Greek philosopher named Heraclitus said that the only constant is change. The pace of change continually accelerates but, 2,500 years later, most big corporations still haven’t quite figured this out. Corporations, with their massive hierarchical structures, bureaucracy and red tape, simply aren’t equipped to respond to rapid changes in markets and consumer demands.

Today’s case in point is Hollywood. The major American motion-picture studios, once independent, ruthless, family-run businesses are now divisions of multi-national corporations. And one thing they all have in common is the waste of millions of dollars each year in publicity campaigns and legal lobbying to try to hold back the rising tide of progress.

The movie industry tried to fight television. That didn’t work. Then it tried to fight cable television. That didn’t work either. It sued the electronics companies for making video-cassette recorders. It lost. Its track record isn’t exactly the best.

Just last month, the New York Times noted ‘Hollywood may at last be having its Napster moment’ – by which they meant that, with the combination of computer software and broadband penetration, digital video piracy numbers were rapidly reaching the same sort of level music piracy reached several years ago. This conclusion was based on statistics from monitoring tracks on various websites and peer-to-peer software usage. And it’s one thing to make a trip to Shenzhen to load up on five RMB pirate DVDs, quite another to sit in the comfort of your home and download everything you want for free.

Studio executives were well aware of what happened to the music business and said in meeting after meeting, ‘We’re not going to let that happen to us.’ But then they never did anything about it so, hello Napster moment!

These executives have known for years that they need to get their movies to consumers in ways the consumers want to get them. They needed to “broaden the distribution channel”, to use the parlance of the trade. But they didn’t. For years, they fought and argued over Digital Rights Management (DRM) standards. So they had the chance to get their products out there on the web, downloadable, digitally distributed at fair prices. Most people are okay paying for legitimate product if it is good quality, fairly priced and easily available. But by delaying the process for years, the studios allowed people to get into the habit of going to Pirate Bay or Megavideo or any one of hundreds of other pirate sources, and now it’s too late. Once you take the 50-ft genie out of the 12-in bottle, it’s pretty freaking hard to stuff him back in there again.

“Oh, we can’t put the jewels in our crowns out there unprotected, we must encrypt them,” the studios exclaim. Apparently no one bothered to tell them there has yet to be an encryption system that can’t be decrypted, that DRM doesn’t deter pirates, it only hurts the poor schlubs in their living rooms trying to get a movie they legally bought onto their phone.

One problem for movie studios is that it’s not just difficult to open a film in theatres in every country in the world; it’s pretty close to impossible. Even if they have the technology or the deep pockets to attempt it, the theatre owners won’t cooperate. Hong Kong is a great example of that. While it may seem that we have a large number of cinemas per capita, the number of films that can be shown at any one time is restricted due to the notion that if there are 50 multiplexes, each title in release should be shown in every mall at the same time. Hollywood films compete for screens with local productions, which can often mean a delay of several months before a window opens to screen any particular title. That was fine when theatrical revenues accounted for the majority of a film’s gross but that hasn’t been the case in more than a decade.

Gran Torino and Milk are just two recent examples of films opening in Hong Kong months after they screened in the US. So if you’re a Clint Eastwood or Sean Penn fan, you know the movie has played in 3,000 theaters in the US and you’ve read all the reviews on Rotten Tomatoes, what is your incentive to wait until March for it to appear when pristine copies were available for free download via BitTorrent back in December? And let’s face it, most of the so-called “movie theatres” in Hong Kong are nothing more than pitiful little shoeboxes, which gives the consumer even less reason to wait.

This staggered release schedule screws up the global DVD business as well. The studio promises the movie theatre a “window” – a fixed period from the time the movie shows in theatres until it appears on DVD. The result is that the movie screens in the US in December and the DVD comes out in the US at the same time the movie finally appears here. And if it doesn’t screen here until March, we probably won’t get a local DVD until at least June. So stores import the US DVD to sell here – because people who just want to see the movie couldn’t give a rat’s ass about who the distributor is – and the retailers get sued because the local company with distribution rights loses out on revenue.

Doesn’t anyone see how seriously flawed this model is? Yet no one is doing anything about it. The funny thing is that so far in 2009, theatrical distribution of feature films is having a record year. The box-office take is up – on garbage films like Paul Blart Mall Cop, Madea Goes to Jail and a remake of Friday the 13th – yet DVD sales continue to spiral downwards around the world.

TV is in a similar situation. Shows in the US and the UK stream legally on the internet hours after they’re aired, on sites like the BBC’s iPlayer and NBC’s Hulu.com. But you can’t watch these in Hong Kong (unless you’re willing to twiddle around with proxy servers or browser add-ons). That’s because the shows are licensed out to local broadcasters and then, with few exceptions, don’t air here until a year or more after they’re shown in their country of origin. Very often DVDs are available in the home country before the show has aired here.

If you’re a fan of 24 or Lost or Prison Break, why wait a year if you can find an illegal download mere hours after the programme has screened in the US? Maybe you’d like to go to ABC.com or Fox.com and watch it legally, complete with commercials, but you’re not given that choice. There’s really no reason to buy pirate product if everything’s freely available in the cloud – except if you can’t get to the cloud thanks to geo-tagging.

Some countries around the world are practically teeming with delivery choices now. In the US, cable companies provide you with a thousand channels, including recent films on demand, for no more than the cost of a rental. Or you can get that $99 box from Netflix that will let you stream unlimited movies on demand for around $10 a month.

We don’t have these kinds of options in Hong Kong. We don’t have an iTunes store. MOOV? Please. It is to laugh. NOW-TV isn’t offering streaming movie rentals’ day and date with the DVD release – why not? Hong Kong seems to be too small a market for foreign companies to come in and spend the money to clear the rights and get this set up – and none of the local distributors want to spend the money either. Apparently it’s more profitable for them to sue HMV than provide customers with what they want within a reasonable time for a reasonable price.

But until the companies, Hollywood studios and local distributors alike wake up to the fact that the paradigm has drastically changed, they can look forward to a future of increasing internet piracy and decreasing profits.