SAN FRANCISCO (05/02/2002) - You might want to stock up on CD and DVD burners now, before both are considered contraband.
That's no joke: Hollywood wants to put hardware-based copy protection into everything from PCs to MP3 players. And Congress is giving the idea serious consideration.
In late March, Senate Commerce Committee chair Ernest Hollings (D-SC) introduced legislation that requires the entertainment industry and Silicon Valley to work together on technology to protect copyrighted material that is for use in any digital media devices, including PCs.
If enacted, the law would severely restrict your ability to enjoy and transfer content you already own -- but its impact may not end there. Some believe this proposal would cripple the utility of PCs and other digital products, reducing demand and lowering incentives for tech firms to develop innovative products.
"We need to be very careful powerful industries don't veto the future," says economist W. Brian Arthur, a professor at the Santa Fe Institute.
The fight is getting nasty. The entertainment industry, led by Michael Eisner, The Walt Disney Co. chief executive officer, takes the position that tech firms rely on piracy of Hollywood's products to sell their PCs and recording devices. In a recent congressional hearing, Eisner said, "It's very hard to negotiate with an industry that thinks its short-term growth is dependent on theft." Hollywood claims that piracy losses hit US$3.6 billion in 2001.
Such accusations anger tech companies, many of which have been working quietly with the entertainment industry to find a compromise solution. At the same hearing, Intel executive vice president Leslie Vadasz accused Disney and others of trying to "neuter" PCs into little more than an "expensive version of a dumb DVD player."
Government regulation of system designs would pose a "threat to [the] usefulness of computers and stifle Intel's ability to innovate," said Donald Whiteside, an Intel Corp. vice president and director of its broadband and content program office. Dell Computer Corp., AOL Time Warner Inc., and the Consumer Electronics Association trade group have roundly blasted the proposal. They liken mandatory copy cops inside PCs to ordering Detroit to build cars that stall when they break the speed limit. And in April, Gateway Inc. launched an advertising campaign promoting digital music and warning consumers about the Hollings bill.
It's not that tech companies are unsympathetic. Software piracy is estimated to cost the industry $12 billion yearly worldwide. But software firms learned a decade ago that imposing onerous copy protection angered legitimate customers more than it deterred pirates. To some extent, they have come to consider piracy a cost of doing business.
"We don't condone, permit, or support illegal copying of content," says Michael Alford, director of product marketing at Philips Consumer Electronics. "But consumers have fair-use rights to make personal copies of CDs they own." (Sales of Philips's CD-RW drives have climbed with the popularity of digital music.)Fair use was the argument in the VCR debate, when Disney and Universal lost a 1984 lawsuit to force Sony Corp. to stop producing the Betamax. The Supreme Court upheld consumers' rights to tape for time-shifting and personal use. Moreover, videos are now a highly profitable revenue stream for Hollywood.
But some experts say Hollywood won't accept a fair-use compromise simply because it doesn't believe people have fair-use rights to its intellectual property. "A critical part of Hollywood's market power is the control over distribution and production," says Lawrence Lessig, a Stanford University law professor. By limiting fair use, Hollywood can prevent new markets and new competitors, he says.
Lobbying for customer rights are organizations like DigitalConsumer.org, which says you should be able to save, copy, and move movies and music you own. "We really want to clarify the legal rights of the consumer before it is too late," says cofounder Graham Spencer. Another outspoken watchdog is the Electronic Frontier Foundation, which opposes both the Hollings legislation and the private peace talks between the two industries.
In the absence of a policy, some entertainment companies have already acted, with PC firms catching the fallout. Dell's technical support staff reports increasing complaints of CD-ROM drives that won't play music CDs. Dell's staff must explain that the drive isn't broken, but rather, the music discs contain copy protection that makes them unplayable on any PC.
Music CDs are the canary in the coal mine of antipiracy technology. Although music labels have received a firestorm of criticism for introducing even a few CDs that won't play on computers, they say it's the easiest way to keep music from ending up on file-swapping services like BearShare and Kazaa.
"What we need is something mutually beneficial," says Jeff Joseph, Consumer Electronics Association vice president. That is, of course, the charge facing Hollywood and Silicon Valley. But can any compromise play -- or record -- in Peoria?