DRM DEBATERS AGREE ON NEED FOR COOPERATION, BUT CONTENTION CONTINUES

Much of Chernin’s keynote address was devoted to decrying piracy while putting out commandments such as “thou shalt not steal.” In response to question, however, he offered broader perspective on debate: “Online content protection is a complex, difficult problem. It does not lend itself to a silver bullet solution. Trust me, if it did, I'd be firing it.” He said copyright industry needed digital rights management technology and planned to work “closely with Congress and the FCC,” but “we're going to need a judicial and legal approach.” He also advocated consumer education, saying “I have daily arguments [with his children] about downloading music.” Finally, he said multi-industry cooperation was critical. Mehlman later said that answer was “right on the money.” Addressing Chernin’s contention that he couldn’t “compete with free,” Mehlman said “they're going to have to.” As for Bush Administration, he said “I think we can play an accelerator role,” in part by helping all parties seek “new technologies more than silver bullet policies.”

In defending his call for vigorous online protection of News Corp. content, Chernin said there was great deal of content online, but “the enormous amount of that content is substandard. It undermines the Internet.” In particular, he decried amount of pornography online, although CEA Pres. Gary Shapiro faulted him for that later by saying News Corp. put “naked women” in newspapers. Mehlman took more measured approach in criticizing Chernin’s assessment of Internet and broadband. “Broadband goes far beyond piracy and purveyors of pornography,” he said, and more fair description of Internet would be comparing it with Hollywood movies in 1920s, “with no sound, they weren’t in color, and the reels sometimes fell off the projectors.”

Vadasz agreed with Chernin that Internet couldn’t become purveyor of free content -- “things don’t work that way” -- but bemoaned Washington’s involvement in issue. Referring to MPAA, he said there was “a very effective Washington organization” that had brought Congress into debate among engineers. He called MPAA “probably the best organization that any industry has, certainly compared to our industry, because we are pretty naive babes in the woods when it comes to Washington, and I think sometimes we get lost in the rhetoric.” (MPAA Pres. Jack Valenti later returned compliment by saying that Vadasz and Andy Grove “deserve to be called legends.") Vadasz said efforts by Hollywood to seek govt. mandates “creates hard lines” and hampers interindustry negotiation. He said consumer education about piracy called for by Chernin “will only work if there is a meaningful market attempt” to sell content at reasonable price. “If the choice is free for a song for $16 for a song with other songs embedded on the CD, there has to be better slicing,” he said. He insisted there was “silver lining to the cloud of piracy” in “potentially hundreds of millions of people who could do business on the Internet. That’s an enormous channel to mine.”

Time demands had PFF Pres. Jeffrey Eisenach attempting to whisk Valenti offstage without fielding questions, but Valenti insisted. Valenti said his industry had been negotiating in good faith for some time but little progress had been made. Defending involvement of Congress, Valenti said “we've been meeting now for over a year. What do you do at the end of 6 months, at a year, what do you do if there’s an irreconcilable impasse?” Vadasz replied “I wish I had the answer for 6 months from now” but consumers expected all parties to continue to negotiate.

Mehlman said content providers would have to compete with free content, even though it was being distributed illegally, but one panelist argued Tues. that Hollywood wasn’t trying. Chris Gorog, CEO of CD recording software manufacturer Roxio, took strong stance against piracy: “Government should do whatever it can to destroy illegal file-sharing services… Theft of intellectual property cannot be tolerated, this is IP terrorism.” He applauded efforts of fellow panelist John Malcolm, Dept. of Justice Deputy Asst. Attorney Gen., to crack down on piracy rings. But as for Hollywood’s cry to Congress that it would be destroyed if piracy weren’t stopped, he said “it’s easy to be destroyed if you don’t even show up for battle.” Record industry services MusicNet and pressplay offer little content and what is there is tethered to the PC, meaning “a cynic could say they have no intention of making online distribution successful.” Before Hollywood seeks congressional intervention, Gorog said, it should “get to work” on distribution solutions that he felt would be simple to achieve: “What is the problem? Why are we even here?”

“The record industry is very excited about Internet opportunities,” Sherman insisted: “Just because it’s not all being done in public doesn’t mean it isn’t being done.” He called online distribution his industry’s highest priority, but said “the record industry cannot simply snap a finger” and get content online because artists, music publishers and songwriters also had rights that must be negotiated. “This is a very complex project,” Sherman said, but “doing it the illegal way is a piece of cake.” Gorog replied that perhaps some govt. or other 3rd-party intervention was necessary to force all of components of music industry to reach compromise before seeking to impose solutions on other industries, adding: “If this [Internet distribution] is their highest priority it doesn’t show a tremendous amount of leadership.”

Chernin defended movie industry’s efforts in distributing content through multiple business models. “Where piracy thrives is where content isn’t easily available or where the pricing scenario is out of whack,” he said, while noting that movies could be obtained at multiple price points in movie theaters, through purchase on DVD or VHS, by rental, on pay-per-view, premium cable channels, etc. “I'll slice that salami any way I can and I'll continue to make money, but I can’t compete with free,” he said: “One of the smokescreens from people who want to steal content is that we haven’t changed our business models.”

CEA’s Shapiro frequently has found himself under fire at this conference, in particular for his concern over repeated use of word “piracy” for what he contends in some cases could be merely execution of fair use. He also decried tone of debate, and said that while Chernin had called for cooperation, bulk of his speech was directed at faulting file copying and distribution. Speech “wasn’t exactly an olive branch,” he said. Shapiro said many participants in debate here were using arguments meant for real property or personal property, which don’t expire, while U.S. Constitution makes clear that intellectual property rights do expire and don’t have same far-reaching protections. “The copyright lobby has defined the debate,” Shapiro said, by “trying to go into the real and personal property world, and I don’t think that’s the way to go.” Referring to both govt. intervention and new technology solutions, Shapiro said all industries should borrow from doctors and remember: “First, do no harm.”

Chernin also took issue with way debate had been framed but from far different perspective. He said “any objections of this looting have been met with preposterous charges of technophobia. Movie studios are not Luddites.” He said “anyone unwilling to condemn outright theft… is either strangely amoral or self-serving” because they are profiting from piracy. Shapiro later said “I guess I'm amoral then.” - - Patrick Ross

Aspen Summit Notebook…

Bush Administration’s telecom legacy will be “restored stability, rationality, and growth,” promised Commerce Dept. Asst. Secy. for Technology Policy Bruce Mehlman, but he said “I'm not sure of the specifics and timing of the regulatory issues.” Still, he said, “we're going to leave the telecom sector a lot healthier and a lot stronger than we found it.” Excess capacity, huge debt overhang and “zero consumer confidence” are short-term problems for telecom, he said, but “broadband has a robust future,” not just with entertainment content but with telework, e-learning and other services. He also applauded statements Mon. by FCC Comrs. Kathleen Abernathy and Kevin Martin that they would like to see agency conclude its broadband rulemakings by year-end. “I share the 2 commissioners’ hope… We need to move from rulemakings that took several months so that we can move to the legal challenges that will take many years.”

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“Wi-Fi is one of the success stories we have in broadband,” Intel Exec. Vp Leslie Vadasz said: “Nothing has been this exciting since perhaps the original innovation of the Internet.” He did point out huge advantage that Wi-Fi had over 3G, showing slide depicting $96 billion 3G licensees hade paid for spectrum compared with zero for Wi-Fi operators, and dramatically higher bandwidth, speed and applications available for Wi-Fi. Vadasz said govt. leaders needed to expand available spectrum for all wireless Internet services, harmonize worldwide frequencies and “protect free space.” He said several countries in Europe were restricting creation of Wi-Fi open nodes and said in U.S. recently wireless carrier “purchased a struggling hot spot carrier and created essentially a walled garden.”