Perilous times indeed. Thousands of dotcoms have crashed and burned. Big companies have shed jobs by the truckload and the smug, self-satisfied grin has been wiped off the face of many an aspiring Internet entrepreneur.
It's a time of transition in our networked world, and as our relationship with the Internet matures, there's more upheaval to come. The practical application of technology is about to combine with increases in bandwidth and connectivity to radically transform many big industries. Successful for decades, the next few years will see a fundamental change in how we go about business.
Don't believe me? Consider this. Until a few years ago, digital music was protected by its size. Each song needed about 50 megabytes - more than twice as big as a hard drive of 10 years ago - which made copying and transmitting music a waste of time and effort.
Then some clever clogs noticed that you could use MPEG, a compression technology used for video, to make music files smaller. Suddenly, the files came down to a far more manageable four megabytes or so, losing some quality but remaining perfectly listenable and becoming far more practical.
Then a 19-year-old Boston college kid who liked to have the occasional afternoon snooze changed everything. Shawn Fanning invented the Napster file-sharing system, allowing people to move MP3 music files over the Internet. Napster went ballistic. The music industry was rocked to its core. All the music in the world, for free. Share and share alike.
But hang on. All this music flowing between machines was great for the customer, not so good for the artist and disastrous for the music industry, which called its lawyers and went into overdrive. Threats, writs and lawsuits flew. With nowhere to run, Napster compromised and has now been more or less gagged.
Round one to the music industry, you might have thought. But what surprised a lot of people was the number of musicians who came out in support of Napster, claiming the technology helped to bring the artist and the audience closer together.
And there's the rub. People are perfectly aware that a huge chunk of the £15 they spend on a CD goes not to the struggling artist but to the industry, which then spends millions peddling the next Atomic Kitten single to the feeble-minded. Were there a way to compensate artists directly - by sending them your hard-earned pounds, for example - the music business would be rendered obsolete.
And that's why the industry is feeling so threatened. You no longer need huge budgets to make and distribute music. Build loyalty over the Web, deliver your product and earn your money on tour, with merchandise and with e-single royalties.
The next big battleground is the moving image. Video has always been a tough technical nut to crack, principally because of the large size of the files involved - those 50 megabyte music files could hold barely four seconds of uncompressed video.
We're talking about shifting a lot of data quickly. That's why any video you might have seen on the Web has probably been a blurred image the size of a postage stamp: hardly anyone's idea of a night's entertainment. But that may be about to change.
The film studios have a long-established, carefully orchestrated system for wringing every cent from their product. They stagger a film's release around the world, for example, to maximise publicity and exploit word of mouth. They also defend their position tenaciously, seeing every technological development as a threat.
When DVDs arrived, for example, they insisted that films be encrypted using the Content Scrambling System. They then watched in horror as it took a whole afternoon for the Linux people, left out of the loop and unwilling to license the code, to reverse-engineer the encryption algorithm, write a descrambling program and post the source code on the Internet, along with every possible decryption key that would play existing DVD disks. So much for industry authority.
But that's what happens when you try to step on the technological liberty of the Internet community. There is always somebody out there who is smarter than you. Trying to hold back technology is as foolish as it is futile.
The shutting down of Napster has only led to peer-to-peer technologies such as Gnutella, with surfers contentedly sharing music just out of reach of the law. And just as Shawn Fanning upset the music-business apple cart with Napster, so a gang of disaffected techies is doing the same with the moving image.
Based on a hack of Microsoft's Windows Media Player, DivX compression technology squeezes film files to a fraction of their original size but maintains reasonable levels of quality. The average Hollywood film of just under two hours now comes in as a DivX file of an impressive, if unwieldy, 600 megabytes or so.
What this means if you have a fast Internet connection - which, if you're in the Republic, you almost certainly don't - is that it's suddenly possible to download a movie.
The original DivX authors - Frenchmen, by all accounts - go by the gratifyingly shadowy aliases of "MaxMorice" and "Gej". They have been succeeded by teams of experts working together to refine the code. The technology is still a work in progress and difficult to use - it's definitely not for the novice - but it's getting there.
If you thought the Napster battle was hard fought, watch how quickly the gloves come off once movies start getting swapped in numbers: the film industry is even more powerful, even more influential and has even deeper pockets than the music business. Just like MP3, DivX has the potential to render useless a distribution business.
As bandwidth increases and technology becomes more sophisticated, it's going to become increasingly difficult for copyright holders to maintain any kind of control over their product. Intellectual property in the form of audio or video is rapidly becoming a paradox: priceless yet valueless.
Talent will always be worth paying for, but for an industry such as Hollywood to survive, it will need to reinvent itself by learning to roll with the punches and look to technology as an opportunity rather than as a threat.
None of this is set in stone, but we eagerly await the next instalment of this adventure, coming soon to an LCD screen near you. It's too early to predict what will happen, but the pace of change is getting faster, and with it will come opportunities. All it takes for something big to happen is for a leap in technology to collide with a good idea.
The film people can take some comfort in the fact that worst-case scenarios rarely play out. Television and home video were both supposed to be the final nail in the coffin of cinema. Instead, they became new revenue streams for the industry.
You can be sure of one thing, though. Any industry based on acting as a middleman, be it banking or selling books, is going to be in big trouble over the next few years. The big word for it is "disintermediation". Simply put, if it can be done cheaper and more conveniently over the Web, it will be. Middlemen, beware.
felton@eircom.net