For entertainment industry, resistance is usually futile
It has balked before, at the player piano and the VCR. Now its target is file sharing. Will the entertainment industry again fail at its efforts to thwart a new technology it feels threatened by?
By DAVE GUSSOW
Published September 15, 2003
Michael Weiss knows all about fighting the entertainment industry. It challenged him and others when they opened the first video rental stores in the 1970s, and lost.
Now Weiss, chief executive of the Morpheus.com Web site, is in the cross hairs again as the music and movie industries go after file sharing on the Internet.
"Technology in the end always wins," Weiss said. "But we have to go through pain and suffering to make it happen."
It's a fight that has gone on for generations. Some of the most popular devices of the 20th century incurred the wrath of the entertainment industry, from the player piano to the VCR to MP3 digital music players.
"The VCR is to the American film industry what the Boston strangler is to a woman alone," said Jack Valenti, the powerful president and chief executive of the Motion Picture Association of America - in 1984.
The VCR, and its newer cousin the DVD player, turned out to be a gold mine for the movie industry. More than 90 percent of U.S. homes have a VCR, and video rental and sales make up more than 40 percent of the industry's revenue.
In almost every case, the challenges failed, the devices thrived and the entertainment industry learned to live and prosper with them.
But today, on legislative and legal fronts, the music and movie industries are fighting similar battles against Internet file sharing and piracy of copyrighted material. This time, history may not be a guide on the outcome.
While the arguments have a familiar ring, the tactics and technology have changed. In addition to industries squaring off in court, consumers are getting drawn into the battle. And the talk is tough.
The Recording Industry Association of America has gone to court to force Internet service providers to supply names and addresses of people who download music illegally. Last week, the association went beyond issuing hundreds of subpoenas to individuals, from teens to grandparents, by filing lawsuits against 261 people it says violated copyrights by sharing music online.
"We're targeting anybody who's offering the illegal files," association president Cary Sherman said in an interview with CNBC. "It doesn't matter what the age is. There's no exception for theft for people who are young or old. The law is the same and ought to be applied equally."
Valenti, still on the job at age 81, said in a statement: "It is our most sincere desire to identify a technological solution to the plague of piracy. Until that day, however, I do not believe in dismissing any option to defend creative works online."
After the recording industry first threatened lawsuits, visits to file-sharing sites such as Kazaa and Morpheus dropped in early July, according to Nielsen/NetRatings. But it didn't faze all file sharers: Two-thirds of those who download music don't care if it's copyrighted, according to a survey by the Pew Internet and American Life Project. And anecdotal evidence from reports across the country indicate that many of those who download will continue to do so.
For now, the movie and music groups appear to be working separately. The recording industry has been far more active and aggressive because it's far easier to share music online than movies. One of its latest arguments: The same technology used to share music also makes pornography available. A hearing on the issue was held last week before a U.S. Senate committee.
In fact, some members of Congress and state legislatures have been vocal in their support of the industries, which are major campaign contributors. Proposed congressional legislation would make sharing a single copyrighted file online a felony and require gadgets to have technology to prevent copying files. One senator suggested zapping violators' computers.
Since the now-defunct Napster popularized music file sharing in 1999, it's estimated that more than 60-million people participate in the activity. And sites such as Morpheus, Kazaa and others have multiplied.
"File sharing is here to stay," said Jason Schultz, a staff attorney for the Electronic Frontier Foundation (www.eff.org) an advocacy group for digital rights. "Until the recording industry wakes up and works out a solution, as they have every time in the past, you'll see an ebb and flow of lawsuits and legal battles."
A fear of new technology
Looking back, some of the lawsuits involving the entertainment industry and new technology may seem quaint. In 1908, the U.S. Supreme Court ruled that the Apollo Co., which made player pianos, did not violate the copyright of the songs Little Cotton Dolly and Kentucky Babe, held by the White-Smith Music Publishing Co., by putting the music on piano rolls.
In 1976, Universal Studios and Walt Disney Productions sued to block Sony's Betamax video cassette recorder, saying they wanted surcharges added to the cost of the machines and blank tapes to make up for the loss of copyright royalties.
It took eight years, but the Supreme Court ultimately decided in Sony's favor, with the majority finding that people taping TV programs "is legitimate fair use." The Betamax eventually died, with the VHS format becoming dominant, but the precedent stood.
One of the first real tests of the digital age came in 1998. The Recording Industry Association of America sued to stop the sale of the Diamond Rio, the first MP3 digital music player, saying it would encourage piracy. The association lost.
Last year, 5.5-million portable music players were sold in the United States, according to market research company IDC, a number predicted to grow to 19.3-million units by 2007.
In 1999, the recording industry went after Napster, eventually forcing the Web site to shut down in 2001. But Napster had made its mark with music fans. Its index of songs offered by users was huge, and people downloaded millions of songs from each other - all free.
As online file sharing became more popular, CD sales began to slide, down about 30 percent over the past three years.
That makes stopping file sharing a priority, says Sherman of the recording association. He says music stores are closing, studios are dropping artists and royalties are being cut. He praised recent online offerings, led by Apple's iTunes Music Stores, which sells songs for 99 cents each and most albums for $9.99.
"You can't expect music to continue to be created if people won't pay for it," he told CNBC. "We have to create a level playing field so that they can compete with each other instead of pirate services that give away other people's copyrighted music for free."
Weiss of Morpheus says the recording industry is wrong to blame file sharing for its slump, noting the slow economy, the lack of must-have new artists and the industry's failure to boost singles over albums.
Even 99-cent downloads are not a bargain, Weiss says, because the price doesn't reflect the recording industry's lower costs of distribution and sales. In a major move this month, Universal Music Group cut the price of its music CDs by about 30 percent.
Weiss thinks some kind of licensing fee to reimburse the entertainment industry for file sharing may be necessary, perhaps through taxes on Internet access or surcharges on blank discs.
"You don't criminalize 60-million Americans," Weiss said. "I've been in marketing all my life. Marketing 101 is that you get your customers to like your product. You don't get them to hate you."
Next up: movie file sharing
Music has drawn most of the attention so far because the technology has not evolved to make movie downloads fast and easy - yet.
Even on a fast digital subscriber line connection, downloading a 136-minute movie can take 75 minutes. (A faster connection can accomplish the task in about 15 minutes.) In fact, the movie industry's main nemesis at the moment is illegal copying of DVDs, mostly in Asia.
But the industry expects file sharing to become an issue as technology advances and more people use high-speed Internet connections, said Fritz Attaway, executive vice president of the movie group. "We don't have a clear idea of how to solve the problem. It is probably a combination of technology, education and legislation."
In fact, the TV industry already has forced one technological change in digital video recorders: ReplayTV has agreed to eliminate functions from new models that allowed users to skip commercials at the touch of a button and to share shows over the Internet.
The movie industry has been active with state legislatures, including Florida's, where it has backed bills dealing with cable theft. Vans Stevenson, the group's senior vice president of state legislative affairs, describes it as an extension of the group's traditional efforts to prevent bootlegging of videos.
But language in the Florida legislation passed this spring gives a broad definition of a communications device that critics say goes beyond mere cable theft. They say it can be interpreted to include devices used for legal and everyday activities, from recording TV shows to Internet downloads.
Hogwash, says Stevenson, who uses this metaphor: If you hit someone over the head with a Louisville Slugger baseball bat, you're in trouble, not the bat.
"We're not in the business of inhibiting technology," he said. "We're in the business of giving consumers the most choices."
If that's the case, asks Andrew Greenberg, an expert on technology law at the Carlton Fields law firm in Tampa and a critic of the Florida legislation, what was wrong with existing copyright laws?
"If the issue was only cable theft, why are the content people so excited about it?" Greenberg said. "The language is expansive. If he is correct, no harm, no foul. But we will only know when we see what happens."
Schultz, the attorney with the Electronic Frontier Foundation, says the industries' tactics are turning off consumers, and they should be wary of the consequences.
"You should be worried about your privacy being invaded and your family being bankrupted by the RIAA," Schultz said. "They're going to sue, sue, sue as long as it takes. And I believe them."
- Times news researchers Caryn Baird, Smitha Ballal and Kitty Bennett contributed to this report, which includes information from Times wires and files and Business Week Online. Dave Gussow can be reached at gussow@sptimes.com or 727 771-4328.
