For most of the century or so that film has existed, this is the way that films have been watched. But not any more.

This week Vivid Entertainment, one of the largest producers of adult entertainment in the US, announced that it would let its customers burn DVDs off the web. “It’s about making it easier for the customer,” Bill Asher, its co-chairman, said. “Whether you’re running a restaurant or selling adult content, the experience needs to be as enjoyable as possible.”

Digital technology is rewriting the script for film and television at astonishing speed.

There are now many ways to watch. We can watch on DVD, computer, video iPod or mobile phone. We can watch whatever we want whenever we want, however we want. We can pause, repeat, skip, freeze and fast forward; we can go the lavatory and not miss a frame and increasingly (though technically illegally) we can take the digital footage and make a “mashup”, a remixed film of our own.

Digital music has transformed the music industry; blogs and online news have forced newspapers to adapt. The internet is poised to do the same to the film industry.

For the old barons of Hollywood, the looming digital invasion is exhilarating and terrifying. James Cameron, producer of Titanic, the most successful film made, put it in suitably sink-or-swim terms during a speech to film-makers: “We are in a fight for survival here.”

As always, to measure the health of film, the vital statistics are American. In 1946 the average American watched 28 films a year, with four billion tickets sold annually. Today the average American goes to the cinema five times a year. Box-office receipts worldwide have been in steady decline for three years, dropping 8 per cent last year. North American ticket sales made $8.8 billion (£4.7 billion), while DVD sales totalled $15.7 billion.

American viewers are now twice as likely to watch a DVD as a film in the cinema. But perhaps the most telling statistic is that young Americans now spend more time online than watching television.

Yet film is thriving as an entertainment medium. The audience is vast and growing but instead of trooping to the cinema at a time designated by the cinema owner, film-watchers “time-shift” to find the footage when they want.

Studios have been wary of putting films on the internet for fear of piracy and undermining DVD sales. But last month six Hollywood studios began selling online. King Kong became the first significant Hollywood DVD release to offer a download option in Britain.

In January Bubble became the first film to be released almost simultaneously in the cinema, on DVD and on television. Its director, Steven Soderbergh, argued that, as blockbuster movies such as Spiderman 2 are finding their way on to the internet before their release anyway, drastic action is required. “I’m sure it’s a scary idea for the studios. But you can’t run away from it,” he said.

Hollywood has been spurred on by the success of online sales of television programmes. Once again, the US is ahead in this, with Google Video, Apple iTunes and Vongo all offering paid-for downloading. The way television and the internet are merging offers fascinating clues to the future of film.

Broadcasters are offering shows online — BBC Three put whole series of its comedies online — while some are making programmes aimed at web-users, as well as “mobisodes”, series episodes intended to be viewed via mobile phone.

Online viewers not only have wider choices, but they are also increasingly part of the creative process: television producers pay attention to message boards and fan sites, to the way that internet users respond to characters and storylines. More than that, fans are setting up their own tribute sites, with repackaged snippets.

The legal issues surrounding “user-generated content” are unclear. Mash-ups may infringe copyright, but producers and distributors know that they can be worth a fortune in free advertising. What is certain is that with the digital camcorder and cheap editing software, DIY films are booming: 40 million mini-films a day are watched on the website youtube.com.

The advertisers are not far behind. In the online version of Desperate Housewives, viewers are offered a choice of advertising: a traditional advert, stills of the product or a link to the advertiser’s website. Cannier still, cutting-edge web-TV showcases products. See an outfit you like on a character? Click on the item and buy it online, before getting back to the show.

What has happened to television will come to film, forming an extraordinary nexus of three central leisure activities: viewing, buying and gossiping.

Analysts are divided over the effects of such changes. Chris Anderson, the editor of Wired, argues in a new book that the future of film will involve niche films rather than monster hits. In the same way that Amazon.com has widened book-buying choice, so filmgoers will make their own choices, at home, based less on advertising than word of mouth.

Others insist that the film industry will always be powered by big hits, the larger issue being the gap between the cinema premiere and the moment the film arrives online.

Here, then, is a possible future night at the flicks. You download Pirates of the Caribbean VIII as the Prince of Wales shakes hands with the stars in Leicester Square; you watch it in the bath on your wireless screen, and again on your mobile on the way to work. You buy Johnny Depp’s new hat. Then, at lunchtime (having consulted your lawyer), you mash together bits of the film with footage from your holiday and put it on the web.

With the digital revolution, there will be an almost infinite variety of ways for film-makers to connect with an audience.

Even so, every technology has limits. Some cinematic experiences demand a cinema. A movie theatre is a theatre: a social, shared moment. A funny film is funnier in company; a scary film, scarier. The crowded cinemas of Cannes are proof that there is nothing to compare with a packed cinema, a huge screen, an intimate friend and a bucket of fresh popcorn.

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