With high-speed internet connections on the upswing, piracy could hit the movie industry as hard as it has the music business, Hollywood actor Morgan Freeman has warned.

Freeman is telling movie-makers that they must wise up quickly to stay ahead of illegal downloaders and file sharers who are using new software and high-speed broadband connections.

His company Revelations Entertainment and chip maker Intel Corporation have set up a "virtual digital home" in a hotel suite to demonstrate the potential of new technology to industry movers and shakers in town for the annual Cannes Film Festival.

Downloading films on to a PC and playing them in different rooms through an integrated system is one of many benefits digital technology can bring. The downside is that file sharing could cost studios and actors dearly in the future.

"One of the things that is terrifying the industry about digital content is that once it gets into the home, what happens to it?" Freeman said in an interview last week.

"Some government entities say that if it's on the internet and accessible, then how can we call it piracy?"

Intel's Kevin Corbett said that an electronic key system could prevent films being accessed by unauthorised users. But it would offer the unauthorised user the opportunity to pay for the movie and watch it legally.

"This technology can help us to stop the same chaos as in the music industry," Freeman said.

"It is too late when the public is two or three steps ahead of you, and then you are playing catch-up," he said.

Citing the example of Sweden, where he said illegal peer-to-peer file sharing was a growing problem, he warned that the spread of broadband would only make life harder for the movie industry.

Freeman believes smaller, independent companies will develop the technology to protect new films, while major studios appear relatively unconcerned about their movie libraries, as opposed to new releases, being shared.

Freeman recalled how the music industry failed to adapt to the peer-to-peer networks that allowed users to share MP3 music files. The industry estimates that piracy has cost it hundreds of millions of dollars in lost revenue over the past few years.

While a movie involves a far larger file, broadband and increasingly popular file-sharing programs such as BitTorrent are making it increasingly easy to handle the information.