e.Digital Corporation (fka EDIG)

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How to Achieve Digital Nirvana
Downloaders and the entertainment industry will both have to bend a bit on copyright


How can we get to a world where online music, movies, and video are widely available, not just tentative experiments? This tantalizing vision is largely stalled, though not because of inadequate technology. Instead progress is held up by warfare among the entertainment, computer, and consumer-electronics industries with lawsuits and lobbying their weapons of choice. To get to the digital future that will benefit everyone, this has to end. But progress will require some important concessions on all sides.

Consumers, including the folks who've enjoyed free music from Napster and its successors, will have to realize that unless the owners of content get paid, there won't be any content. In the future, digital-rights management, a fancy term for copy protection, will limit what you can do with downloaded music and video--specifically, how many and what sort of copies you can make.

The entertainment industry, for its part, must realize that it cannot use new technology to take away rights that customers have long taken for granted, such as the ability to make copies for personal use. And the leading technology and consumer electronics companies, which have mostly sat on the sidelines afraid to offend either the entertainment industry or their customers, must play an active role in developing new standards. For starters, I think everyone should subscribe to some basic principles for a new digital world.

First, the right of fair use must be preserved. Consumers who buy music or videos should be able to watch or listen where they want, using the player of their choice. That includes the right to copy downloaded music into MP3 players or a TV show into SonicBLUE's (SBLU ) upcoming Personal Video Player. But consumers must realize that fair-use rights are limited. For example, there is no right to give copies of copyrighted material away--Napster-style sharing is just plain wrong, as is making a copy of a CD for a friend.

Second, the entertainment industry has to realize that copy protection can never be perfect. As retailers know, a certain amount of pilferage is a cost of doing business. The trick is to keep the losses manageable. By demanding perfection, the entertainment industry is just throwing up roadblocks to digital delivery. "Hollywood isn't willing to budge even an inch," complains L. Gregory Ballard, CEO of SonicBLUE, which is fighting a lawsuit in which TV studios claim its ReplayTV video recorders violate copyrights by letting consumers delete commercials and transfer recorded shows to other Replay machines.

Making digital-rights management work for everyone is a technical challenge. It is hard to develop a system that allows the downloading of content to different devices but limits the ability to create copies of songs or movies for others. But I'm sure that the smart people working on it can design an effective system.

The best way for this to happen is for everyone to support open standards, openly arrived at. The entertainment industry's attempts to develop proprietary schemes have been disasters. Both the Secure Digital Music Initiative and the Content Scrambling System for DVDs failed when the encryption schemes were quickly broken.

A big question is: Who can lead the effort to develop a sensible approach to digital rights? Consumer-electronics companies have no history of cooperative standards efforts and a long tradition of format wars. Microsoft (MSFT ) clearly wants to lead, but too many others fear the colossus of Redmond's real goal is to extend its Windows monopoly to rights management. The best candidate might be chipmaker Intel (INTC ), which has taken a strong public stand against the entertainment industry's more extreme positions while working alongside it, particularly with AOL Time Warner (AOL ), to develop hardware solutions.

In the end, both consumers and industry will have to give up something to get a lot. Consumers will lose some freedom to make copies, but will gain much richer online choices. Industry will give up some control and will have to accept some losses to piracy, but could gain vast new markets--as it did after the Supreme Court rejected its attempt to bar the sale of VCRs. It will take some time and a lot of goodwill, but the result could be a win-win outcome.

By Stephen H. Wildstrom
http://www.businessweek.com/magazine/content/02_44/b3806034.htm
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