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It is simply a matter of time until you get an IP address on that TV set.

If you have got a broadband pipe coming in -- and more than half the people online are on at high speed -- then it doesn't take a genius to think, "Hey! let's address that TV set directly."

Doing so enables quite a bit. With an IP address, the content owner can download or stream content to an individual television set. You don't need the aggregator of a network -- broadcast, cable or satellite.

If I am Universal Pictures, and I am releasing "King Kong" in all windows, I don't need to go through Comcast, or DIRECTV, if enough people have addressable television sets.

Give me your IP address, and I will stream it to you. If you have a fat enough pipe, I will take the movie directly into your television set. No distribution costs. No middlemen. No manufacturing cost. The route goes from NBC Universal directly to Peter Sealey's house in Los Altos Hills.

And when this happens, the media world changes.

Movielink: broadband talks to the TV

Movielink is a consortium of four Hollywood studios: Sony, NBC-Universal, Warner Bros. and Paramount -- MGM was a founding studio before it got absorbed by Sony this year. Movielink streams movies to laptops, it's a way of getting movies to viewers legitimately, rather than through piracy and peer-to-peer networks like BitTorrent, and it's an attempt by the studios to recoup some of the income lost to piracy. The Movielink CEO is Jim Ramo, and he recently chatted with the Forbes.com Video Network. You can click here to view the interview, or read the following transcript. Pay particular attention to what Ramo says about streaming directly to the television set -- it's a good indication of what is going to happen:

Annalisa Burgos of Forbes.com: Slumping box office sales, competition from on-demand services, internet piracy. The movie industry is facing real problems. Welcome back, I'm Annalisa Burgos. The popularity of video on-demand and illegal movie downloads has hit box office sales hard, but the movie industry is coming up with ways to make up for it. In 2001, Sony, MGM, Paramount, Universal Studios, and Warner Brothers created Movielink -- a video downloading service -- proving that if you cannot beat them, you have to join them. Joining us now is the CEO of Movielink, Jim Ramo. Thanks for being here, Jim.

Jim Ramo of Movielink: Thank you.

Burgos: So, why do you think box office attendance is down?

Ramo: Well, I think there are a couple of reasons for it. One, I think some of the movies weren't as successful as people predicted. And that is, I think, always the number one reason. People want to go to good movies. In addition, I think that we are beginning to see home theatres now, in the home, begin to come close to replicating the theater experience. And, so we tend to find people wanting to stay home a little more than they did before.

Burgos: How important was it for the studios to create Movielink?

Ramo: Well, Movielink is the beginning of opening the internet as a legitimate channel of distribution for movies, and, in particular, we are using a -- creating a video on-demand business so that consumers can -- in their homes -- begin to get movies when they want and get what they want.

Burgos: And, DVDs are still very successful though. A lot of customers prefer them because they have special features: they have promotions attached to them. How are you getting audiences to come to Movielink as opposed to going to DVDs? And, how many people are actually using your service?

Ramo: Well, Movielink is, I think, about an impulsive buy, at this stage. We have about twelve hundred titles in our library. So, people can really search for any genre that they want: hit movies, library movies, kids, international movies, whatever… People come to us because they really get choice, and then they get it when they want it.

Burgos: And, is there any indication about how many people log on and use the service?

Ramo: Well, because we are a private company, we don't really give out that information. But, generally, it is a service that is delivered over broadband and so, probably the display is on a PC. And, about a third of our customers are downloading movies on their laptops and using them when they travel for business, or for vacation.

Burgos: People are downloading movies for free. BitTorrent is very popular. Why would anyone pay?

Ramo: Well, it is hard to compete with free. There is no question about it. So, what we try to do is make sure that we have high quality, reliable, good customer service, ease of use -- things that will make people decide that, you know, it is just worth it to pay four dollars for a rental instead of having to go through a very geeky process to be a pirate. And, so far, I think we are being successful, but there is a long way to go. Piracy, particularly delivered to PCs, is still a big deal.

Burgos: And cable companies are also offering more on-demand choices.

Ramo: Right.

Burgos: And, are you planning any partnerships, perhaps, with cable or satellite providers? Or, how are you trying to work with that segment?

Ramo: Well, today we have distribution agreements with the cable operators and the telcos -- now remember, we deliver over broadband -- and so we are dealing with the broadband side of the house, not the video side of the house. So, with respect to cable companies and telcos, we are providing them a value add that they wouldn't otherwise get. It is beyond access. We are now giving them content that they can use to promote their services.

Burgos: The music industry faced similar problems, but now music download services from Apple, Microsoft, and Napster are pretty successful. Do you expect Movielink to get to that level?

Ramo: I think it will. I think, today, when you deliver over broadband to a PC, that is a pretty nichey audience of early-adopter types. What is coming is the beginning of broadband talking to TV sets. People want to watch movies in front of a couch or in bed at night. And so, we want to get Movielink onto TV sets and big display screens. So we are starting to see home networking. We are starting to see set-top boxes. Basically, broadband is about to begin to talk to the TV. And, that is when our business really takes off.

Ramo's last statement nails the future of IPTV. Movielink doesn't want to give some money to DIRECTV, Comcast, or Adelphia. Why should he? When consumers has addressable TV sets, the content it is going to come directly into the house over broadband.

Disney has a slightly different approach. Their service is called MoonBeam, and it works by downloading and storing at your home a hundred movies, all of which are updated regularly.

This is a forward and store model: it allows the viewer to select from that big body of content whenever he or she wants to do so.

But whether a company pursues a Movielink strategy or a MoonBeam strategy simply doesn't matter: when the pipe gets fat enough, it is going to go directly from the studio to the home.

And just think of the difference now with a high definition, forty-two inch Plasma TV sets and surround sound. That is darn good visualization with darn good sound. Go back ten/twenty years: the movie experience was so profoundly superior to the television experience that the high quality of image and sound were often sufficient reasons by themselves for people to haul themselves to the local theater. But boy are home theaters getting close these days.

All of these factors combine to argue for entertainment being made available to that powerful consumer --anyway they want to consume it, exactly when they want to consume it.

It is coming.

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