Fortune Goes To The Movies
Talk about close encounters: Hollywood is morphing into an alien life form--but it's still making billions.

(FORTUNE Magazine) – IN HOLLYWOOD it's 1999 all over again. The entertainment giants are in a headlong rush to embrace all things digital. Almost daily, it seems, they unveil initiatives that will change the way movies and television shows are produced, distributed, and consumed.

At the turn of the last century, pundits predicted that by now mass media would be dead and buried by the digital revolution. It didn't turn out that way: Movie downloads in all of 2006 will generate about half as much revenue as the opening weekend of Mission: Impossible III. Peering ahead isn't any easier today, but the stories that follow set out to separate hype from reality. Following the money, they uncover characters and plot twists as intriguing as anything playing at the Multiplex--or on your iPod. So pop some corn. Settle back. Enjoy the show.