The announcement that Warner will sell not only TV but film content via BitTorrent is really quite remarkable.  BitTorrent technology is currently the number one way that Hollywood content is pirated online, which makes it both an obvious threat but also a long-term opportunity. 

It's a different strategy than the other current Hollywood efforts, Movielink and CinemaNow, which initially looked like a somewhat half-hearted effort to say "See, we offer legal downloading, so do the right thing."  Both sites have improved their technology and usability this year, but still involve changing the habits of an audience that's already downloading feature-length content someplace else.  Working with BitTorrent is a gutsy but logical step: go where the potential customers already are.  While some commentators contend that Warner has still set its pricing and DRM restrictions too high, I think that's inevitable: lowering prices and reducing restrictions, once you have your feet wet, is much easier than trying to go the other direction.  (Just ask the print world how well they're doing charging for newspaper and magazine content on the Web.)

What's in it for Hollywood?  First, they've learned from the recording industry: if you don't get in front of illegal downloading, you'll face a really, really tough catchup game.  Legal music downloads are growing fast, but they're still nowhere near the volume of the illegal file-sharing that had years to gain momentum before legal alternatives appeared. 

But past that, selling direct to the consumer could ultimately cut out all the other folks who take a slice of the profits in film distribution: theater owners, Blockbuster, Netflix, cable, satellite.  The metric to watch here is the theatrical window: what's the time period before movies appear on DVD, pay-per-view and soon, the Internet?  The window is getting shorter and shorter, and some producers suggest it will ultimately become no more than thirty days, even for the biggest titles. 

None of this will happen overnight, of course, but fitting nicely into this pattern is the fact that older moviegoers are increasingly building their own theaters at home.  I've spent time recently with some of the mass-market homebuilders--the people who build more than a thousand homes a year--and many feel that the media room will soon become a standard expectation in new homes.  It will be years before the Internet can easily deliver a top-quality home theater experience, but it's none too soon for Hollywood to explore the best and cheapest way to reach that audience.