Piracy, or Innovation? It's Hollywood vs. High Tech

[JackSpratts]

By Amy Harmon, New York Times, March 14, 2002

Leaders of two of the nation's most prominent industries, entertainment and technology, have begun publicly sniping at each other over how to stop consumers from illegally copying digital movies, music and television programs.

The feud grows out of Hollywood's frustration with the illicit flow of copyrighted works over the Internet. Despite courtroom victories against Napster and others deemed to contribute to Internet piracy, millions of people continue to download free digital copies of everything from Jennifer Lopez's latest hit single to the Disney movie "Monsters, Inc."

Hollywood studios and record companies are now putting pressure on the makers of personal computers, DVD players and portable music players to come up with technology to prevent the machines themselves from playing copyrighted material if someone illegally downloads it or copies it to a blank compact disc.

The technology industry is resisting, saying the proposal would slow innovation, hobble its products — PC's might work more slowly, for instance — and potentially stop consumers from making legal copies of CD's and other products they own. Besides, technology executives say, what Hollywood is asking for is not technologically feasible: no one has yet invented practical copy protection that could not be cracked.

Michael D. Eisner, the Walt Disney Company (news/quote) chairman, told the Senate Commerce Committee on Feb. 28 that he was tired of being "finessed." Citing leading technology companies including Apple Computer (news/quote), Dell Computer (news/quote), Microsoft (news/quote) and Intel (news/quote), he suggested that they had failed to develop adequate protection for digital media because piracy helps sell computers.

That brought an angry retort from Andrew S. Grove, the chairman of Intel. "Is it the responsibility of the world at large to protect an industry whose business model is facing a strategic challenge?" he said in an interview. "Or is it up to the entertainment industry to adapt to a new technical reality and a new set of consumers who want to take advantage of it?"

The question of whose role it is to stop illegal copying has captured the attention of Congress. Lobbying by Disney and other entertainment companies is fueling support for legislation that would require computer and consumer electronics makers to develop a standard for copyright-protection technology, or adopt one imposed by the government.

"I believe if you say to these people, `You get us a system by Dec. 31 or we'll do it for you,' you'll be surprised at how innovative they'll become," Mr. Eisner told the lawmakers at last month's hearing.

Senator Ernest F. Hollings, Democrat of South Carolina and chairman of the Commerce Committee, says that without technological safeguards Hollywood may never offer the kind of high-quality programming for digital television and broadband Internet services that would generate consumer interest and, in turn, economic growth.

Today, the Senate Judiciary Committee plans to explore the disadvantages to consumers of locking up digital media more securely. Richard D. Parsons, the chief executive of AOL Time Warner (news/quote), and Craig R. Barrett, the chief executive of Intel, are scheduled to testify in what will be the third Congressional hearing on copyright piracy in a month.

Peter Chernin, president of the News Corporation (news/quote), which owns 20th Century Fox, said in an interview that "without copyright protection we will change our business models and the loser will be the public," adding: "We may be stupid but we're not idiotic. We're not going to offer ways for people to go and loot our content."

The clash between Hollywood and Silicon Valley underscores a new tension between what have long been high national priorities: protecting intellectual property and promoting technological innovation. With the two in conflict, lawmakers are grappling to strike a balance.

But many veterans of Silicon Valley say it is not the responsibility of technology to enforce copyright law. Telling technology companies to build devices that prevent copyright infringement, they contend, is like telling automakers to build cars that cannot exceed the speed limit.

Other technology executives draw a parallel between Hollywood's complaints about Internet piracy and its attempts in the late 1970's and early 80's to outlaw the VCR — before videocassette sales and rentals dwarfed box-office receipts. Critics say entertainment companies would be able to make money from digital media if they started offering it to consumers in the way the consumers want it, and stop focusing on how to control current forms of distribution.

That might mean changing long- entrenched ways of doing business, like selling individual songs instead of an entire CD, or releasing movies simultaneously over the Internet and in theaters. It might also mean accepting lower profit margins, and seeking to compensate for that by building bigger markets.

"Unfortunately in many cases, fear is paralyzing Hollywood's ability to seize what I believe is an incredible opportunity," said Steven P. Jobs, chief executive of Apple Computer. "We at Apple believe most people want to be honest, and if offered reasonable choices, most people will choose to buy their content."

But Mr. Eisner said in an interview that it was "easy to encourage us to overlook the pirates when you're making the sword." He said he doubted that any new business model could compete with digital copies that were free, flawless and accessible from the comfort of his prospective customers' living rooms.

"If someone figured out how to unlock the gas in the gas station, people would be outraged," Mr. Eisner added. "They wouldn't say to the oil industry, `You need a different business model.' "

Indeed, he points to an Apple marketing slogan, "Rip, Mix, Burn," as inciting the kind of illegal behavior that Mr. Jobs says would be easy to extinguish with smart new strategies. But Mr. Jobs said it was perfectly legal for consumers to "rip," or copy, their own music to a computer and "burn," or record, a custom mix of the songs to blank CD's for their own use.

Several technology producers already offer copy-protection systems that media companies can use when they sell their content in a digital form. What the companies are looking for, in essence, is a second line of defense for material posted on the Internet by someone who breaks the original security system, or records a movie in a theater with a camcorder, or steals a copy from the studio.

One proposal calls for a digital "watermark" — a kind of label undetectable to the human eye or ear — to be embedded in every piece of digital media, carrying instructions about whether it can be played or copied. Every computer and electronic media player would be designed to obey those instructions, and to refuse to play anything that did not contain a watermark. That would mean that even camcorders would have to be redesigned to imprint watermarks on home videos.

The draft of the bill that Senator Hollings plans to propose prohibits creating, selling or distributing "any interactive digital device that does not include and utilize certified security technologies." If industry groups cannot agree on a security standard after 18 months, the Commerce Department would step in.

Most media companies have been less vocal than Disney in their responses to the problem. AOL Time Warner is more concerned about obtaining technology that would protect digital television programs from being copied than about Internet downloads. A spokesman for Sony (news/quote), which has both entertainment and consumer electronics divisions, said the company was "studying the subject." But most other major media companies, including Vivendi Universal (news/quote) and Viacom (news/quote), agree that government intervention might be necessary if private negotiations failed.

Ultimately, technology executives say, the problem is a pragmatic one: it may simply be impossible to devise a copy-protection system that cannot be cracked.

"This would impose a huge cost on both consumers and the combined technology and content industries," said Will Poole, corporate vice president for Microsoft's Windows New Media division, "in an attempt to do something that would not ultimately solve their problems."

But Mr. Chernin of the News Corporation suggested that matters might be different if the tables were turned. "Let's say I decide to broadcast on my network the code for how to make Intel chips or Microsoft software," he said. "I think they'd find a way to stop it."

http://www.nytimes.com/2002/03/14/te...gy/14PROT.html

[fogelbise]

These were the parts i found most telling:

"Is it the responsibility of the world at large to protect an industry whose business model is facing a strategic challenge?" he said in an interview. "Or is it up to the entertainment industry to adapt to a new technical reality and a new set of consumers who want to take advantage of it?"

right on!

Peter Chernin, president of the News Corporation (news/quote), which owns 20th Century Fox, said in an interview that "without copyright protection we will change our business models and the loser will be the public,"

that would make you and your business model the eventual loser!

As always, an excellent article! Thanks JS

[BuzzB2K]

"This would impose a huge cost on both consumers and the combined technology and content industries," said Will Poole, corporate vice president for Microsoft's Windows New Media division, "in an attempt to do something that would not ultimately solve their problems."

Look, Micro$oft really does care about the little guy

But Mr. Chernin of the News Corporation suggested that matters might be different if the tables were turned. "Let's say I decide to broadcast on my network the code for how to make Intel chips or Microsoft software," he said. "I think they'd find a way to stop it."

Yeah do it. I'll just whip up a batch of chips in my kitchen.

<- Michael D. Eisner

[Mazer]

Microsoft already figured out how to stop piracy, just make it so you have to call and ask for permission to use their software. That's the road we're heading down with movies and CD's if Disney has it's way.

[fogelbise]

Aren't people running hacked copies of windows xp?

[Mazer]

Not nearly as many as before. Microsoft has made hacking XP such a hassle that most people don't try. The goal of security systems is not to completly stop hacking (since that would be impossible) but to make it so difficult that 999 out of 1000 hackers don't succeed and give up trying. Microsoft used to have a thousand lawyers prosecuting pirates, but now you don't hear a lot about that anymore.

[pod]

This, BTW, is the same Amy Harmon as the one on the old MusicCity Forums.