Sony hopes to scupper the internet pirates by launching website to download movies

The movie mogul Sam Goldwyn once remarked: "I don't care if it doesn't make a nickel. I just want every man, woman and child in America to see it."

Unfortunately for Hollywood, the former glove salesman's altruistic wish has been on the verge of coming painfully true for Tinseltown's big studios. It is estimated that file swappers, who exchange up to 600,000 films every day on the internet, are threatening to choke off the industry's annual $17.5bn (£9.3bn) from DVD sales, and carve a large slice off its earnings from new releases.

After the record companies were forced to accept the downloading of music on the internet, many said it was only a matter of time before Hollywood was forced to bow to the inevitable.

The accommodation will come a significant step closer this week, following Sony Corporation's announcement that it plans to do for downloading films over the internet what iTunes has done for music.

Michael Arrieta, the senior vice-president of Sony Pictures, told the Digital Hollywood conference in the US that the company wants to develop a digital download service for films and hopes to make its top 500 movies available over the internet in the next year. Sony's huge catalogue, ranging from classics such as Lawrence of Arabia and Dr Strangelove to the current hit Hitch, comprises more than 2,500 titles. According to Mr Arrieta, Sony wants to see how it can exploit this resource while playing the file sharers at their own game.

"We want to set business models, pricing models, distribution models like [Apple chief Steve] Jobs did for music, but for the film industry," he said. Sony also plans to make the films viewable on mobile phones.

While there has been an explosion in music download sites, such as Apple's iTunes and Napster, the film industry has been slow to adopt the new technology. Microsoft warned film makers last month they faced a repeat of the painful experience of the music industry unless they adapted. Television networks are also facing the dilemma, with top-rated programmes such as Kiefer Sutherland's 24 available worldwide on the internet free of charge, hours after transmission.

The growth of internet piracy of film and television shows is made possible by rapid file-sharing technology such as BitTorrent and the rise of broadband internet access. Downloading the massive film files can now be done in a couple of hours. The concern is such that The Motion Picture Association of America has started a campaign of legal action against the unauthorised sites, whose architects argue that copyright infringement was never their aim.

There are at present only a handful of official film download sites, such as Movielink, a partnership between five Hollywood studios. In France, the music and electronic internet store Fnac provides feature film downloads - digital quality costs€8 (£5.50) and DVD quality is €13.

Shelley Taylor, who has produced a major study of digital download sites, believes the film industry must adapt quickly and imaginatively to combat piracy. But she added: "I don't think they [film downloads] are going to replace DVDs, just like music downloading hasn't replaced CDs. People have a lot more control with a physical item they can carry around."

Consumers can pay for film downloads in three main ways - buying a permanent file, paying a subscription fee and pay-per-view. One of the problems identified in Ms Taylor's report, Click Here Commerce, is that no single website offers more than one payment option.

Sony's music download site, like iTunes, works only with compatible devices - a strategy Ms Taylor believes is a mistake. "Where Sony continues to misjudge consumers, and iTunes and others as well, is in the area of format handcuffs," she said. Though there may be short-term advantages to locking customers into particular devices, customers will eventually revolt as they want personal control over their purchases."