eaders 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."
