- The Washington Times - Thursday, February 28, 2002

In a world where consumers are empowered by new digital technologies, protecting intellectual property is a top priority. Fearing consumers' newfound ability to digitally reproduce and redistribute songs and films, movie studios and music labels are seeking ways to not only protect their intellectual property but also exert greater control over marketing it.

Fortunately for the creative community, the marketplace has responded to those concerns with technology solutions commonly known as Digital Rights Management (DRM) programs. Dozens of companies offer DRM solutions that are currently used by creators and content owners, large and small, across the world. For example, DRM solutions protect video and music currently distributed through companies such as AOL, MSN, Yahoo, RealNetworks and Listen.com.

Indeed, the marketplace for DRM solutions is hot. Technology companies are investing hundreds of millions of dollars sometimes working individually, sometimes in collaboration to develop all kinds of DRM platforms that suit the plethora of different e-commerce models for digital entertainment. Is there a problem here?

The Walt Disney Co. and 20th Century Fox seem to think so.

Executives from both companies are scheduled to testify today before the Senate Commerce Committee and claim that without federally mandated use of copy-protection technologies, digital versions of movies and music will be pirated over the Internet. A federal mandate is needed, the thinking goes, so that consumer electronics, computer and e-commerce firms will have no choice but to insert copy-protection technology in their products and services that play and display audio and video. This effort is misguided, and it draws attention away from the real issues surrounding the transmission of digital content.

First, several powerful privately developed technology solutions exist out there. The two major motion picture companies simply prefer not to invest their own money on them. They would prefer a government mandate because it is cheaper for them and would take longer to implement. This additional delay requested by companies that own two of the four largest television networks, more than 50 cable networks, and one of the world's largest satellite television distributor only will further slow the adoption of broadband technology and harm consumer interests.

Second, a federally mandated one-size-fits-all approach fails to recognize the reality of a complex and differentiated marketplace. It would impose a single solution on very different media that appeal to very different market segments. This is not, as some would like you to believe, similar to the VHS vs. Betamax standard. DRM is software, not hardware. And DRM software easily accommodates different formats and is easily upgraded. Competitive marketplace-driven efforts are already at work to create interoperable DRM standards. And so far the industry's progress on that front has been quite good. Interoperability will allow innovation to continue and the marketplace not the government decide which DRM is used and when it should be changed.

Third, a federal mandate would politicize what is, after all, a private-sector business and engineering process, and would inevitably cause delays as players haggle over what standards to use and how they are implemented. Delays in rolling out digital content suit Disney and like-minded companies just fine. Many content companies generate good profits from the non-digital and non-Internet world. Rather than trying to fight piracy (which current DRM technologies already address) this legislation would fight the innovation that benefits consumers. Since the introduction of the VCR, these companies, along with the record labels, have fought technologies that give consumers greater choice over their schedules and entertainment habits.

Finally, it should be clear from history that federally imposed technology standards don't work. The government has a poor track record picking winners and losers in technology. It is a business government should not be in.

If Disney and Fox get their way, the big winner will be surprise Disney and Fox. They will continue to use the digital broadcast spectrum that the government provided to them for free (which is worth tens of billions of dollars) for just about everything but transmitting high definition digital television content. The technology is there for the studios to use and to customize. They simply don't want to pay for it until they have squeezed all the profits out of the current market.

The big loser in all this would be the consumer. Consumers have shown by their actions and their pocketbooks that they want and will pay for the benefits of digital media. But first, they have to be offered compelling content, with sensible and flexible rules on what they can do with that content, at reasonable, affordable prices. Unfortunately, the type of government mandate that Disney and Fox have in mind will not bring consumers an inch closer to that goal.

We do not need a federal standard. What we need is for the studios to get in the game, and let the marketplace work.


Jonathan Potter is the executive director of Digital Media Association.

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