Portfolio recently published the best article I’ve read to date on the state of Hollywood’s nascent war with digital pirating. It looks like it’s 1996 all over again. Only this time it’s not the music industry versus Napster. Instead it’s Sony, Universal, Activision, Disney, Warner Brothers, You Name It against the world.

While a lot has changed in ten years, the more things change the more they stay the same. Eerily reminiscent of 1996 speak is this quote from the article attributed to movie mogul Harvey Weinstein:

“Online piracy has got to be stopped. The biggest spear in the neck of the pirates will be (a) being vigilant, (b) prosecuting, and (c) in a way, making fun of them, finding a way to say, ‘That’s not cool—that’s anything but cool.’ If you had people who the young people respect in this industry—Brad Pitt, George Clooney, Shia LaBeouf—if these guys did public service announcements that said, ‘Don’t steal, stealing’s not cool,’ I think you can go a long way toward stopping this.”

I can just see it now: multi-millionaire George Clooney telling me not to steal his yacht money because it’s “not cool.” Maybe this would work better if the actual working class stiffs of Hollywood plead their case on camera. If the grips, the gaffers, the best boys, the PA’s, the continuity cupcakes– if those people looked into the lens and asked people not to to take food off their table– well maybe that could work. But probably not.

Spearing the pirates will prove a difficult if not impossible task. The rhetoric sounds ironically reminiscent of the sabre rattling you might have seen in the news over the past few years stemming from the Bush White House. All we have to do is incinerate every single one of the enemy combatants, er, piraters and hit them where they live.

But you take one out and twenty spring up to take his/her place. And this is a stateless enemy: an international network of pirate cells, if you will (Pirate Bay’s efforts to buy a state not withstanding). And then there are rogue states like Sweden giving these godless hackers safe haven. I feel a surge coming on. Maybe we could carpet bomb them with herring.

So is there a solution? Has the Entertainment Industry learned a single thing from the R.I.A.A? Has the R.I.A.A. learned a single thing that anyone can learn from?

I think this is where the omniscient hand of Adam Smith steps in and slaps the Entertainment Industry in the face. Media is moving inexorably towards one fire sale price — and that’s free. Hollywood won’t go down without a fight, though. I’m bracing myself for two decades of quagmire.

Uh oh! Gulp. Here they come.

An article in the LA Times describes efforts by several striking WGA writers to form their own web production companies and circumvent the Hollywood machine for the creation and distribution of online content. We all knew this was coming. It was only a matter of time. The web production companies are rising.

At the end of the day the only true asset traditional Hollywood brings to the table is distribution. Oh, and there’s that whole economies of scale thing. Well now, scale aside, the gates to the distribution kingdom have been torn assunder. Guess what, Hollywood? We don’t need you anymore!

We think?

We only have to turn to Jerry Maguire if we want to read the tea leaves: Show me the money! Unfortunately there isn’t any. At least not any in the Hollywood sense.

If these new web production companies are to survive, they’re going to have to go to the currency exchange and trade in their Hollywood bullion for web pesos. That’s the key to our survival here at Sebastian’s Factory.

Now we’re not saying our clients pay us nothing, but we are saying that they’re paying us a miniscual fraction of what Hollywood would even comprehend as a number. To make that work we have to do more with less. Like the idea of specialization? Sorry writers. In this biz you won’t make it unless you can write, direct, edit, act, mix the sound, pull the keys, animate the spaceship and oh yes, clean the toilets. We could call that guild the WDEAMPAT GA. And no, they’re not on strike.

Of course all this may change. But I highly doubt it.

Maybe Sarah Connor can save us? But if the straight-from-Hollywood Sarah Connor Chronicles are any indication, we’ve met the future and it’s ugly.

A survey conducted by the Pew Internet & American Life Project reports that daily traffic to video sharing sites like YouTube has doubled in the past year.  15% of respondents to the survey said they had used a video-sharing site “yesterday.”  Last year that number was 8%.

It’s fun as an internet content creator to be living in times when we can actually say ‘oh yeah, last year our potential audience doubled.’  And moreover, I honestly don’t think anyone would be surprised if that audience doubled again the following year.  It’s clear that online video, while still in its infancy, is not just any ordinary toddler.  It’s more like that kid you might have heard of who just a few months out of the womb was doing Olympic-style iron crosses and sporting ripped abs.

This is obviously not to say that online video traffic growth is limitless.  But the wave is building right now.  Good news for surfers.

So what does this imply for internet content producers?  Not only is the number of eyeballs growing exponentially, but the amount of sheer stuff being uploaded on a daily basis is skyrocketing as well.  How will producers get their content noticed in the vast ocean of internet noise?  As both bandwith and audiences increase, will advertising dollars increase enough to support higher quality and longer length programming like we currently see on television?

It will be interesting to watch and see whether there’s enough money to go around and where it ends up.  Steve Rubel wrote a call to action for online advertisers last October which is still relevant.   In his article he cautions that “the harsh reality is that there will not be enough ad dollars to go around for everyone.”

Who will be the winners and who will be the losers?  And will we all lose out if the internet marketplace can’t support the Hollywood budgets we’ve grown accustomed to consuming through old world media?

So here’s my fanciful prediction for the future of entertainment:

As media moves online, old world Hollywood goes the way of the airline industry.  A glut of consumers and producers drives prices for content through the floor.  No more flight attendants with white gloves.  In the future you’ll have to bring a bag lunch to the movies.

For more on Pew Internet’s report, see paidcontent.org.