WSJ: Has Jobs Gone Hollywood?
By PUI-WING TAM and SARAH MCBRIDE
Staff Reporters of THE WALL STREET JOURNAL
June 14, 2004; Page B1
Steve Jobs stirred controversy a few years ago with his "Rip, Mix, Burn" advertising campaign, which encouraged consumers to use their computers to copy music. But when it comes to the consumer's ability to copy future generations of the DVD movie format, Mr. Jobs is sending a very different message.
At a recent private meeting with Hollywood studio heads and tech czars like Microsoft Corp.'s Steve Ballmer and Hewlett-Packard Co.'s Carly Fiorina, Mr. Jobs argued that studios shouldn't license their movies for use in the planned "high-definition DVD" format until Hollywood is assured by the tech industry that the discs can't be copied by new DVD burners that will come along. High-definition DVDs are being developed as a successor to the current digital-video-disc format and are expected to be on the market by next year, along with high-definition DVD burners.
Mr. Jobs even suggested that high-definition DVD burners not be bundled with computers at all -- a scenario he said in an interview was "extreme" and one that "I hope we don't have to get to, but it helps to put the issue in perspective." He said it is up to the tech industry to prove to Hollywood that high-definition content can be adequately protected.
In making his argument, Mr. Jobs -- chief executive of both Apple Computer Inc. and film studio Pixar Animation Studios -- signaled that he is for now siding with Hollywood, rather than Silicon Valley, when it comes to protecting movie content from pirates. By choosing to wear his self-described "Pixar hat," he is underlining the tricky position he must navigate as the head of companies in both industries.
His stance also touches on a possible shift in the debate over movie piracy. The Hollywood studios, eager to spare themselves from the online piracy that has contributed to a steep decline in music sales, have said repeatedly in recent years that they won't let the same thing happen to them.
But some film-industry leaders believe that the threat of online movie piracy is still fairly remote because the size of a movie file is too big and most home computers aren't yet hooked up to televisions, where consumers prefer to watch movies. Further, to defeat the encryption used to protect DVDs, it's often necessary to download all kinds of code-breakers from the Internet. Meanwhile, the threat of physical piracy made possible by professional DVD burners appears to be a more real near-term problem.
Today's key culprit "is the guy in Guangdong, or the guy in Uzbekistan, who is making, printing copies of DVDs," says Yair Landau, vice chairman of Sony Corp.'s Sony Pictures Entertainment and president of Sony Pictures Digital.
That's not the way it looked to many Hollywood executives just two years ago, when five studios jointly launched online movie-download service Movielink to give consumers an alternative to illegally downloading movies. The idea of the venture -- jointly owned by Sony Pictures Digital Entertainment, Time Warner Inc.'s Warner Bros., General Electric Co.'s Universal Pictures, Viacom Inc.'s Paramount Pictures and Metro-Goldwyn-Mayer Inc. -- was to fend off online piracy before it could even take hold.
But today, Movielink remains in its infancy. It overcame an initial problem of slow downloading, but people close to the venture say some studios don't place the same priority on it that they once did. For starters, the partners are weary of arguing among themselves over how the service should be run. Several executives close to Movielink say there has been talk of selling it or bringing in an outside partner to run it. "Each of the studios has its own position, and Movielink is always considering growth options," says Jim Ramo, Movielink's chief executive officer.
The movie industry has also not yet followed the music industry's lead in suing individuals who allegedly engage in illegal online file-sharing. But movie makers recently have been doing a lot to thwart physical piracy, calling attention to big raids on alleged DVD bootlegging operations that have been conducted in places like Atlanta, where authorities recently seized thousands of movie and music discs.
This week, Motion Picture Association of America Chief Executive Jack Valenti warned the Senate Foreign Relations Committee that burning copies of movies is epidemic in places like China, Russia and Brazil. In the U.S., the movie industry has been filing lawsuits against the makers of a popular DVD-copying software.
Most Hollywood leaders see the next generation of DVDs as an exciting opportunity for the expansion of their business once the market has been saturated with the current generation of movie discs. The industry is working with two leading consortiums that are developing next-generation DVDs, hoping to ensure robust digital copyright protection.
"Bootlegging is a manageable issue," says Jeff Bewkes, chairman of Time Warner's Entertainment and Networks Group. "It has always been with us, and will always be with us, and will be managed as it has been."
Studios figure it's too late to thwart piracy of today's DVDs, but they still have a chance to protect their high-definition output. That's why Mr. Jobs spoke up at the recent summit, the latest in a series of meetings at which leaders in the two industries exchange views.
H-P and Microsoft have invested in high-def DVDs -- H-P as part of a consortium developing a high-def DVD format known as "Blu-ray," while Microsoft is working to license its technology for use in another high-def DVD format (though Microsoft says it's willing to work with Blu-ray too).
Microsoft's CEO, Mr. Ballmer, declined to comment on the meeting. But Jason Reindorp, a Microsoft group manager who is involved in high-definition DVD formats, says Mr. Jobs's stand displayed a "lack of understanding" about the format and showed how he was "trying to muddy the waters." Mr. Reindorp says protection of Hollywood content is a high priority.
Mr. Jobs acknowledges that his stance was "not a popular position" with the technology-industry leaders in attendance.
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