Jack Valenti's Piracy Nightmare

By David Pierotti

Jack Valenti, head of the Motion Picture Association of America, has a reoccurring nightmare, one shared by executives at every movie studio, that goes something like this. Studio spends over $100 million to produce huge, summer, 'tentpole' blockbuster. Add another $50 million in marketing costs and in some cases the fate of the entire studio, not to mention said executive's career, is at stake. However, when the opening weekend arrives, all the commercials, billboards and ubiquitous quotes from mysteriously obscure critics has been for naught. The theaters are empty. No one shows up because everyone's downloaded the movie and watched it at home weeks ago. When you consider the staggering rewards for this high-stakes gambling (Spider Man cost around $130 million and grossed over $400 million domestically), factor in global receipts, merchandise, DVDs and videos, and the inevitable sequels, and it's easy to understand the cold sweats of Mr. Valenti and the people he represents.

The movie industry is not going quietly into the night, however. Unlike the recording industry, which ignored the emerging technological threat of file sharing until Napster and its offspring had infiltrated even the most computer illiterate music listeners, the MPAA is attempting to preemptively quash the threat. Right now most piracy comes from illegal recordings of screened films using simple camcorders. But the quality is predictably bad and unacceptable for most moviegoers. The real storm is still on the horizon in the form of universal broadband and advanced video compression systems.

Broadband suffers from a chicken-and-egg dilemma. The future of the telecommunications industry is dependent upon the spread and acceptance of broadband. In fact, one of the FCC's stated goals is to encourage the growth of broadband, but consumers have little incentive to upgrade to the more expensive service. The biggest attraction of broadband is its ability to quickly download music and video - the very content the entertainment industry is loath to make available for fear of losing control of its dissemination. This puts the government in an awkward position as it tries on one hand to increase copyright protections and on the other to foster the growth of telecommunications and the high-tech sector.

Video compression essentially eliminates redundancies, enabling a video to be efficiently squeezed into a manageable size for uploading and downloading. Right now video clips may or may not play on a particular computer's media player. Unlike music, which quickly adopted the MP3 format, video is still searching for a standardized compression format. There are several competing technologies and it may take some time for this to happen.

Time is running out for the movie industry though, as both high-speed access and standardization are considered to be inevitable. The MPAA's response has been a mixed strategy of legislation and lawsuits. The industry has many powerful allies in Washington, such as Senator Orrin Hatch (R-Utah), Chairman of the Senate Judiciary, who in a hearing June 17 actually suggested that a technique be devised to 'destroy' the computers of downloaders. With this level of virulence, it's not surprising that efforts to amplify the 1998 Digital Millennium Copyright Act are proceeding.

Industry advocates have not confined their legislative efforts to the federal level. The MPAA has been aggressively filing legislation, known as 'Super-DMCAs, in numerous states. The exact wording varies from state to state but these efforts would essentially open the possession, distribution, and development of a wide variety of communications devices, and devices that preserve anonymous communication, to civil lawsuits.

Lawsuits are already proceeding in a number of forums, with mixed results. In April, U.S. District Court Judge Stephen Wilson ruled that Grokster and StreamCast were not responsible for the activities of their customers. Both resemble Napster but with the crucial difference that they do not host directories of their users' files, meaning they are not aware of the content their software is being used to transfer. Both the MPAA and the RIAA will appeal, but law expects believe Judge Wilson was on firm legal ground. However, in early June, Verizon acceded to the demands of the record industry to turn over the names of four of its Internet subscribers. This will also be appealed, ensuring only that corporate lawyers will be kept busy for years before anything is resolved definitively.

Part of the movie industry's response is in the area of public relations. Even though they are advocating more arrests and stiff penalties for file sharing, they are concerned that a parade of clean cut college students being led away in handcuffs for 'stealing' a White Stripes song may not help their cause. Coming soon to a theatre near you will be an industry service announcement to educate the public about piracy. The trailer will attempt to link the loss of studio revenue to the poor stagehands and technicians who may face unemployment because of widespread file sharing. The value of this reasoning is dubious at best since aware moviegoers all know that Arnold Schwarzanegger earned $25 million for Terminator 3. It is also reminiscent of the clumsy attempts of the Anti-drug coalition to link 9/11 to marijuana use.

In fact, Jack Valenti and Hilary Rosen, former head of the Recording Industry of America, already linked piracy to terrorism at a Congressional Hearing on February 12. Rosen even invoked Martin Luther King to defend her crusade. Such irresponsible and offensive reasoning may play well before a committee of politicians fed on the campaign contributions of the two industries (the MPAA gave $3.4 million in the past election cycle, while Rep. Howard Berman received over $200,000 from the entertainment industry), but it engenders counterattacks such as www.boycott-riaa.com and a spirited riposte from singer/songwriter Janis Ian. Ian's article was particularly damning to the RIAA because, like the MPAA, they claim to be acting in the best interests of artists, but according to Ian, artists benefit from the increased exposure of file sharing. One can be forgiven for being skeptical of Valenti's and Rosen's Doomdsay predictions since these are the same industries that tried to ban VCRs and blank cassettes.

The MPAA's struggle is complicated because of their treading on profitable territory of another giant industry: Silicon Valley. Almost all new computers come with CD burners already installed and several computer companies have marketed their products towards downloaders. For instance, Gateway boasts a system that can record an entire season of your favorite TV show directly to your hard drive. This, of course, obviates the need to purchase DVDs of shows like The Sopranos, Sex and the City, and 24. But the growing synergy between media and technology conglomerates may bode well for copyright protection. Sony must try to find a delicate line where they can sell their electronic merchandise without jeopardizing their vast media holdings. To this end, Sony and Microsoft are working towards media that expires after a certain time period or usage. They are also expected to get better at encrypting DVDs in order to prevent uploads.

Whether or not they can keep a step ahead of brilliant and subversive collegiate computer experts is another matter. Just recently, Justin Frankel, a notorious gadfly of the industry and founder of the AOL-owned Nullsoft, released a program onto the Internet to allow small groups of people to set up their own secure and private file sharing networks. AOL quickly removed the program, which prompted young Frankel's resignation. But in all likelihood, it was downloaded enough times to spawn a brand new nightmare for Jack Valenti.

Read an article on music piracy from the May 5 issue of Larta VOX
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Despite battles in and out of the courtroom, the Internet music industry has made little progress since the time of Napster.

See information on Larta's Hollywood Unstrung 2 report, which covered digital technologies, piracy, and the entertainment industry.

Read an article on media and software content delivery from the May 26 issue of Larta VOX
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Read an article on the merger of the interactive gaming and entertainment industries from the April 28 issue of Larta VOX
The Big Merger
As software competition increases, Hollywood and the gaming industry are becoming more enmeshed, and it is likely that video games will emerge as the most lucrative form of entertainment in the future.

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