During the past decade, the Hollywood studios have broadly sought to subdue, rather than explore, the technological possibilities of the Internet. Specifically, the studios have used their ownership of creative works to control the speed and direction of innovation in an emerging digitally networked social and economic environment, which is built upon the Internet and an ecology of hardware and software technologies. In this paper, I use a relational perspective to examine two critical aspects of this case study. The first concerns the cognitive and discursive dimensions of firm strategy. The second concerns the formation and enactment of firm strategy within networks of social relations. The argument is therefore twofold. On the one hand, I argue that the Hollywood studios are seeking to create a ‘‘closed’’ sphere of innovation on a global scale, which enables the absolute defence of property rights. However, this has alienated a broad spectrum of new creative freedoms, causing a ‘‘bifurcation’’ of the networked environment. On the other hand, I argue that this strategic response must be understood in relational terms. The closed sphere has been legitimated, enacted and performed within relational networks at a regional scale in Los Angeles. The paper is based on unprecedented access to the Hollywood studios, combined with interviews across the media, entertainment and technology industries. The overall goal of the paper is to construct an ‘‘economic geography’’ of disruptive innovation under conditions of oligopoly.