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Hollywood vs. Silicon Valley, from National Journal Tech Daily


From: "Clark, Drew" <dclark@nationaljournal.com>
To: "Declan McCullagh (E-mail)" <declan@well.com>
Subject: For Politechbot
Date: Fri, 6 Sep 2002 10:31:46 -0400


Subscribers to Politech may appreciate reading our article recounting the
history and import of the battle between Hollywood and Silicon Valley.


Drew Clark
Senior Writer, National Journal's Technology Daily

National Journal's Technology Daily home:
Information about National Journal's Technology Daily:

tel 202-261-0357
fax 202-261-0361
cell 202-329-9517
e-mail dclark@nationaljournal.com
or       drew@drewclark.com

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Washington, DC 20005

Full story available to all at the following link:

Digital Divide
By Drew Clark and Bara Vaida, National Journal's Technology Daily
 National Journal Group Inc.
Friday, Sept. 6, 2002

With a cue from Walt Disney Chief Executive Michael Eisner, Senate Commerce
panel staffers dimmed the lights for a packed February 28 hearing in the
Russell Senate Office Building. A full house of lawmakers and lobbyists
settled back to watch an ABC Nightline segment on a 15-year-old named
Benjamin who used his personal computer to go online and download the movie
Men of Honor and an episode of Seinfeld, minus the ads. "You name any movie,
I can find it," Benjamin declared.

At the witness table moments later, Eisner repeated that boast, hoping to
hammer home Hollywood's message: Congress must act fast to protect the
motion picture industry from Internet pirates like Benjamin. And the Disney
chief also pointed a finger at big names in the technology industry --
Intel, Microsoft, Apple Computer, Dell Computer, and Hewlett-Packard --
accusing the tech giants of condoning a growing wave of digital thievery.


Then Silicon Valley had its turn. Representing this side was Les Vadasz,
executive vice president at Intel, who urged the senators to keep a level
head about the entertainment industry's complaints. The technology industry,
Vadasz said, is 20 times the size of Hollywood, fast moving, and highly
innovative. "Please don't tamper with the dynamics of the technology
industry," he warned. "It would do irreparable damage." Vadasz differed with
a draft legislative proposal by Sen. Ernest F. Hollings, D-S.C., chairman of
the Commerce, Science, and Transportation Committee; the Hollings draft,
which was circulating around Capitol Hill, would give tech firms just one
year to develop anti-copying "policeware." If they didn't act, the tech
companies could ultimately be subject to criminal penalties.

No sooner had Vadasz finished than Hollings launched a verbal counterattack.
The chairman reminded Vadasz that semiconductor manufacturers had benefited
from government assistance in the 1980s. "We 'tampered,' and we saved you,"
Hollings declared. "Where do you get all this 'irreparable damage'
nonsense?" Vadasz meekly replied, "That is a totally different issue."


Struggling For A Solution
Now almost forgotten, the first major battle of the digital age was born of
a 1996 agreement between the movie industry, through its trade group, the
MPAA, and consumer electronics manufacturers. Sony and Matsushita Electric
Industrial were among the companies that had developed a digital videotape
recorder they thought would replace conventional analog recorders. But the
manufacturers could not afford to alienate Hollywood, so they negotiated
specifications that would keep the recorders from making more than one copy
of a movie or TV program. The agreement was shopped around Washington in the
form of proposed federal legislation.

Because the proposal would have applied to computers too, the manufacturers
and their studio allies eventually sought the blessing of the Information
Technology Industry Council, a Washington-based association for the computer
industry. Foreshadowing the present battle, the ITI expressed outrage over
what it said the agreement would do to its member companies.

The proposal "was madness, because it wouldn't have done what the movie and
consumer electronics guys wanted," says Rhett Dawson, ITI's president. The
proposal would have required every computer to scan every digital file that
it processed -- whether a movie, a spreadsheet, or a personal e-mail -- and
look for a code on whether copying was permitted. Dawson says it would have
slowed computer performance by as much as 50 percent, with no apparent
benefit to the user.


Days after the September 11 terrorist attacks, MPAA's Valenti, Disney's
Padden, and Fox's Setos flew on Disney's corporate jet from Burbank to San
Jose, Calif. At a Silicon Valley hotel, they hooked up with representatives
from Vivendi and AOL Time Warner and went as a group to the TechNet meeting.
Valenti urged the tech folks to do more to stop online piracy. The MPAA
chief added that he wasn't backing the Hollings plan -- just yet. But
according to TechNet President Rick White, who had co-founded the
Congressional Internet Caucus when he was a House member from Seattle,
Valenti warned that the Hollings approach "might be what had to happen."

No, the tech executives said, a process to resolve differences between the
two industries was already in place: the technical working group formed in
1996. But Valenti wanted a CEO-level dialogue, not another meeting of the
engineers. White promised to get back to Valenti and then rebuffed the
request. Later, the tech executives changed their tune. On the eve of the
Commerce Committee hearing in February, Barrett and others promised the
studios a CEO-level dialogue, but a date is still being negotiated.


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