Hollywood Weighs Copyright Protections

Forces in Music Industry Close In
On Filmmakers Amid Online Piracy
By SARAH MCBRIDE
February 16, 2007

Apple Inc. Chief Executive Steve Jobs's recent open letter urging that digital music be distributed free of copyright protections was aimed at the recording industry. But it made waves in another key constituency Mr. Jobs does business with: movie makers.

Executives at Hollywood studios believe it is only a matter of time before the debate over removing copyright protections spreads to movies from music. Until now, the studios have steadfastly asserted that copy protections -- known as digital rights management -- are essential to preventing piracy of films.



The studios are increasingly engaged in internal debate over the right course for the future. According to people familiar with the matter, the studios' technology executives and engineers have been calling for Hollywood to at least re-examine the issue. They are meeting with stiff resistance, especially from the "home entertainment" units that distribute films on DVD -- and are adamant about the need for digital rights management.

Nonetheless, the same forces pressuring the music industry to consider removing such coding are closing in on Hollywood. Pirated copies of movies circulate freely online, without any restrictions on how they are traded or copied. While the damage hasn't been nearly as great as in the music industry, many fear it will grow worse in the near future.

Consequently, the studios "need to experiment a little bit" on digital rights management, says Sameer Mithal, who heads the content and media practice at Business Edge, a consultancy in East Brunswick, N.J. Without more give and take, "they'll be in much the same position as the music business," he says, referring to declining music sales, which the industry blames on piracy. "And that's the situation they need to avoid at all costs."

Hollywood starts from a different position from the music companies. Unlike most compact discs, DVDs come with restrictions that prevent consumers from easily copying movies -- although ways around the restrictions are well-known. Even the next-generation discs known as Blu-ray and HD DVD have flaws in their copyright protections, although they are much harder to crack. Legal online copies of movies come wrapped in digital rights management.

While most people simply want to listen to a song over and over, movie watchers want different things. Some want to see it only once; some want to have a copy forever; some want to watch it in different places. Digital rights management is what makes the tailored purchase possible.
Many movie executives agree that physical DVDs still need copy protection, but some are starting to discuss whether the heavy-duty digital rights management now on electronic copies is the right route. While movies sold on Apple's iTunes can be played on as many as five computers and an unlimited number of iPods, most online movie stores offer far less flexibility.
"Consumers can find ways to get our content anytime they want to," says a Hollywood technology executive. "They get it from a friend, [or] the Internet. By putting on an onerous DRM, it's making an honest person want to go to the illegitimate side."

The studios also are cautious because they have high hopes for selling movies digitally. Many executives believe online distribution will boost the rental category, which was vibrant in VHS days but flagged when consumers switched to buying inexpensive DVDs rather than renting them. A movie purchased online for single-use viewing, or for multiple viewings in a 48-hour period, costs considerably less than a movie purchased to keep. Without digital rights management on the cheaper movie, consumers would essentially be on an honor system to delete it after one viewing or whatever terms they had agreed to.

"Most people won't break the rules if it's made clear what is OK and what isn't," says Chris Cookson, chief technology officer at Warner Bros. "Without DRM, it becomes very difficult" to lay out the boundaries for consumers.

A hot topic: how DRM should deal with consumers who upgrade their computers or video players. Some studios favor finding a way to let consumers move their previously purchased movie from device to device. Others believe each upgrade represents a sales opportunity for the same content that was on the older device.

Studios already are tweaking digital rights management to see if allowing more flexibility boosts sales. Last year, several studios decided to let customers of CinemaNow Inc., an online movie service, burn one copy of various titles onto DVD. General Electric Co.'s Universal Pictures was the first to make a new release, "The Fast and the Furious: Tokyo Drift," available for DVD burning. A person familiar with the situation said it didn't boost sales as much as expected.
Rival Movielink -- owned by a consortium of studios -- lets consumers burn one copy of each electronic movie purchased onto computer-readable DVDs, with an eye to soon extending the program to DVDs that will play in standard DVD players. Movielink Chief Executive Jim Ramo says he believes the program is popular among heavy users who don't want to clutter hard-drive space with movies.

Mr. Mithal of Business Edge says the studios should go one step further: allowing consumers unlimited burns with an electronic copy. He says that wouldn't exacerbate streetside pirated DVD sales -- because pirates are likely to have the movie by the time it comes out on DVD anyway, via copies made illegally with camcorders in movie theaters.