Movies hit the very small screen

The silver screen and the computer screen took another step closer together this week with the launch of Atom Films, a Web site devoted to screening exclusive independent movies.

Atom joins a growing list of companies offering movies over the Net. While you won't be piping the latest special-effects blockbuster in through your 56Kbps modem any time soon, analysts say entertainment-oriented Internet media are now worth paying attention to. "What's happened is that [online movies] have finally reached a minor critical-mass stage," said analyst Jae Kim with Paul Kagan Associates. "With the release of [RealNetworks'] G2 and Microsoft NetShow, the quality has moved beyond the barely tolerable to the passable."

Other sites offering full-length movies, as opposed to just clips, include Ifilm, and broadcast.com, which recently licensed the feature-length movies of Trimark Holdings for online distribution. Ifilm and Atom both focus on showcasing independent films, which is an automatic advantage, since the material can't be found elsewhere. Atom Films has bought exclusive rights to dozens of short films and animations and each week offers a different selection for viewing. "We want to get people in the habit of coming back to see what the new movie is," said Atom founder and president Mika Salmi, a former RealNetworks executive.

Atom boasts that two of the films it licensed include major stars (Matthew McConaughey and Neve Campbell) and that another has been nominated for an Oscar, but most feature unknown directors and actors. Atom models itself after movie distributors, and Salmi dreams the company could ultimately grow into the Miramax of short entertainment. The company already supplies shorts to airlines, portal site GO Network and cable companies such as HBO, and plans to sell videotape and DVD compilations through a partnership with Hollywood Video's Reel.com.

Other possible revenue streams include splicing ads at the beginning and end of the movies, and selling advertising on its own site. But Salmi concedes he is taking a Field of Dreams attitude toward finding revenue possibilities -- build the distribution network, and the money will come. But will Web movies take over Hollywood's turf? Not any time soon, experts say.

For one thing, there's the quality: For most people, watching a movie online can be a frustrating experience, with slow, far-from-perfect images and sound. "That's not the way I'd like to watch a movie," said analyst Rob Enderle with Giga Information Group. "These people are just getting started, they're getting a feel for what's required. [But] once the technology catches up to where the experience needs to be, they'll be in the right position to take advantage of it."

Despite the technological limits, though, online video entertainment has shown increasing popularity. On sites such as broadcast.com, which offer both audio and video, video receives 90 percent of the site's traffic, according to analyst Kim. "Rather than watch a whole movie online, people like to watch short clips," said analyst Ron Rappaport of Zona Research Inc. "If you've ever watched a 15-minute clip of South Park or even the Star Wars trailer online, then you were consuming Internet entertainment."

But rather than competing with real-world movies, entrepreneurs such as Salmi see online movies as complementing them. His immediate target audience is office workers, who usually have both a high-speed Internet connection and a few minutes to kill here and there.

Paul Kagan Associates' Kim predicts that sites showing short movies will come to provide valuable information about audience interests, and that the online-movie market as a whole will approach $1 bn in the next decade. The appeal of online movie distributors, he says, is similar to that of art-house movie theatres: They showcase independent voices that can't be heard anywhere else. "We're talking about short-form video," Kim said. "This is content that has heretofore fallen through the cracks."