Movie and music moguls are hopping mad over the new technologies that are transforming digital entertainment. Washington is listening. What’s at risk? Your ability to enjoy DVDs and CDs you’ve bought, your privacy–even your control over your PC.

Dylan F. Tweney

Some PCs crashed. Macs locked up and were impossible to reboot, in some cases requiring dealer repairs, according to Apple.

A nefarious new virus? Guess again. The culprit was the European release of the latest Celine Dion CD, which used copy protection to render the disc unplayable on anything but a stereo.

Meanwhile, stateside PC users who like a little background music have been stymied by recent CDs from Charley Pride, ‘NSync, and others. Few PCs crashed, but the copy protection on the discs sometimes prevented CD players or car stereos from playing them, as well.

And Hollywood’s recent campaign against digital copyright infringement is not limited to music CDs; it affects the way you use your PC as well as the devices that talk to it.

Videotapes, DVDs, and many set-top cable boxes already have copy protection. New bills backed by the $68 billion movie and music industry would extend that and put copy protection hardware on all new PCs and consumer electronics devices, such as stereos and personal video recorders like TiVo (see ” Following the Money Trail,”). Also in the works: new laws targeting peer-to-peer file sharing networks like Kazaa, and possible prosecution of individual file sharers.

“All we’re trying to do is protect our investment in the digital landscape,” says Jack Valenti, president and CEO of the Motion Picture Association of America. “This is the first time we’ve faced this landscape, where a 12-year-old can copy a movie and send it around the world with a click of the mouse.”

But consumers may not be interested in new, high-tech products that do less than the equipment they already own. That fear partially fuels the $150 billion tech industry’s opposition to legislated copy controls. It has just gained a powerful ally in the fight: the $350 billion telecommunications industry, which should get lots of broadband business when digital content on the Net is mainstream.

Few people advocate rampant piracy, or dispute content owners’ right to fair payment for their works. Still, “The industries that own content need to shift their perspective from viewing consumers as potential pirates to dealing with consumers as potential customers,” says Alex Alben, vice president of public policy for streaming media pioneer RealNetworks. He believes most users will opt for legitimate digital content if services offer a big, reasonably priced selection with sufficiently flexible distribution controls to make buying more convenient than illegal copying.

But few such services exist today, and some new ones have been scrapped.

The stakes are high all around: your ability to make copies of (and to use freely) the music, movies, and hardware you’ve paid for, and tens of billions of dollars in revenue for each industry–not to mention the future direction of digital media and PC and Internet technologies. (See ” What Can You Do With Digital Media?” for a rundown on what’s allowed today.)

Farewell, Napster

For the entertainment industry, Napster was a loud wake-up call. The online file-sharing service demonstrated that people using readily available equipment could easily download and distribute digital music and movies en masse, regardless of copyright.

Not surprisingly, that sent the entertainment industry into a panic. After all, one theory goes, if you can get digital files for free, why would you ever pay for a movie ticket or a CD?

A lawsuit led by the Recording Industry Association of America shut down Napster, stranding its 70 million users. But other peer-to-peer (P2P) networks, such as Kazaa and Gnutella, quickly took its place. Kazaa alone has been downloaded over 113 million times, according to CNet’s Download.com.

The RIAA blames 5.3 and 7 percent drops in the number of CDs sold in 2001 and 2002, respectively, in part on online file trading. To guard its content and avoid further losses, the entertainment industry has hastened to employ copy protection and digital rights management (DRM) technology.

Unfortunately, such technology doesn’t affect only pirated distribution on P2P networks–it can prevent users from making any copies at all, even ones that formerly would have qualified as fair use. (“Fair use” allows consumers to make copies for personal or scholarly use as long as the copying doesn’t affect the work’s commercial value.)

“With the possibilities of digital technology, what we’re seeing is copyright owners taking the opportunity to try to extend their control,” says Jessica Litman, professor of law at Wayne State University and author of the book Digital Copyright.

One of the most powerful weapons in the entertainment industry’s arsenal is 1998’s Digital Millennium Copyright Act, which makes circumventing copy-protection technologies placed on digital media a federal crime, punishable by up to five years in prison plus a $500,000 fine. “In the old days, the law said you have a fair use to what you’ve bought–go ahead and do it,” says attorney Jonathan Bick, author of 101 Things You Need to Know About Internet Law. “Now it says you have a fair use as long as you don’t employ certain technologies.”

After its Napster experience, though, the entertainment industry has concluded it needs more than the DMCA to battle digital copyright violations.

The Consumer Broadband and Digital Television Promotion Act, sponsored by Senator Ernest Hollings (D-South Carolina) could strengthen its arsenal. This bill would require vendors to put copy-protection chips in all future PCs and consumer electronics devices. By preventing copying through hardware, it could keep files from getting onto P2P networks in the first place. Combined with the DMCA, it would give companies a nearly ironclad legal and technological defense of their content–but could also let them restrict fair use further.

The tech industry thinks such requirements are too broad and would hobble innovation by tying it to government specifications. “For the government to mandate how the IT industry designs and develops chips–or to try and force agreement for design features–would be ludicrous,” Intel executive vice president Leslie Vadasz said in congressional testimony earlier this year. “Irreparable economic damage would result” from such intervention, he added.

Intel has its own solution, code-named LaGrande, due in Pentium chips in 2003. Both it and Microsoft’s Palladium security scheme, intended for future Windows versions, are meant to protect PCs against threats like viruses and to make tasks like online banking more secure. But they can also work with DRM to restrict copying or playback.

The entertainment industry is also targeting P2P networks via lawsuits and “spoofing”: posting corrupt or misleading files to discredit P2P network files. A bill proposed by Representative Howard L. Berman (D-California) would legalize spoofing and other P2P network attacks and would shield attackers from liability for resulting network damage.

The telecom industry opposes both pending bills. “We’re against any kind of government-mandated standards,” says Verizon’s vice president and associate general counsel Sarah Deutsch. Furthermore, she says, both of the bills run roughshod over carefully constructed compromises in the DMCA that balance content owners’ and service providers’ responsibilities. The next congressional session’s bills need to be negotiated with all stakeholders present, she adds.

Finally, prosecution of P2P file-traders may be in the works. The 1997 No Electronic Theft Act lets copyright holders press charges against those who share copyrighted products valued at over $1000–even if the sharing is done only with family and friends. Guilty parties face a maximum of one year in prison–five years if the traded files are worth more than $2500. Prosecutions have yet to occur, but the Justice Department has said it will use this law against file traders.

While acknowledging that piracy is a serious problem, some vendors feel that the entertainment industry’s legal approach is misguided. “Hollywood is focusing all its efforts on complaining to Washington instead of making a sincere effort to compete,” says Chris Gorog, CEO of Roxio, maker of the popular Easy CD Creator recording software.

Though legitimate sites with major-release movies are scarce, several fee-based sites–such as MusicNet, Pressplay, and Listen.com–offer music. But these services have flopped commercially, hobbled by much smaller selections than P2P networks offer, and by restrictions on the number of songs users can download and whether users can burn them to a CD. Only in 2006 will paid music services begin to take off, predicts the Yankee Group.

Tracking Your Habits?

Even if legitimate digital media becomes available, the technology has a downside that worries some consumer advocates: It lets vendors track what you watch and listen to.

DRM technologies must be able to identify devices such as PCs and portable players that comply with its rules, and must ensure that you don’t misuse the content you’ve purchased. Does this raise privacy issues? If content owners keep track of their customers’ devices and viewing habits, then yes. Most do not, but “there’s no magical limit to what could be put into a DRM system,” says Steve Canepa, vice president of IBM’s global media and entertainment group. (IBM’s DRM system tracks keys used to unlock content, not content itself or customers’ habits, he says.)

DRM aside, digital media’s connected nature makes consumer tracking possible to a degree unmatched in the analog world. Take the case of Sonicblue, maker of the networkable ReplayTV personal video recorder. As part of a suit over ReplayTV’s “send to a friend” feature (which lets users send stored TV shows to other local or Internet-connected ReplayTV sets), a magistrate ordered Sonicblue to monitor its users’ viewing habits. (This is possible because Sonicblue remains connected to ReplayTV sets to update TV listings or software, and more.) A U.S. District judge overturned that order after consumers and privacy advocates complained. What you watch is your business–for now.

Total control over digital media isn’t the only option for content owners. And no copy-protection scheme will be perfect, as even the MPAA’s Valenti acknowledges. The content industry’s best option may be to compete with P2P networks on their own terms, offering for-fee services with comparable selection but consistent, high quality.

According to Electronic Frontier Foundation (EFF) attorney Fred von Lohmann, the movie industry is already starting to do that by lowering DVD prices. “Why spend hours downloading a crappy version of a movie when you can buy the full version for $9.99 at the supermarket?” he says.

Copyright holders might also have to learn to tolerate some file sharing. Already, some independent labels (and many up-and-coming bands) distribute MP3 files online as a marketing tool. Folk icon Janis Ian credits the availability of MP3s online for her recent comeback tour’s success.

And it might even be good for the entertainment industry. “Over 100 years, every single new technology that copyright owners have protested has turned out to make them more money, not less,” says von Lohmann. ( Here is PC World‘s take on one possible compromise.)

But that outcome is far from assured. Groups like the EFF and DigitalConsumer.org have lobbied for fair-use rights, but with limited success.

Ultimately, it’s up to content publishers to decide what restrictions they want DRM schemes to enforce, and up to consumers to decide whether they will buy content with those restrictions. One thing is clear: PC users must speak up or risk losing control over their PCs and the media they buy.

Dylan F. Tweney is a freelance writer and editor in San Mateo, California.

What Can You Do With Digital Media?

In the days of vinyl records and cassette tapes, you could copy your albums to your heart’s content. Same with videotape, VCRs, and TV shows today. But digital media imposes new restrictions–some technical, and some legal–on what you can do with blank discs and digital content.

Congress: Following the Money Trail

The entertainment industry has contributed $25 million to congressional campaigns this year, according to Opensecrets.org, and it shows: Some key players in recent and pending copyright laws have strong ties to entertainment groups; one opponent does not. (The tech industry has only recently become a serious player in Washington, moving from 53rd in contributions in 1990, to 8th this year with $16 million donated.)

Sen. Ernest Hollings (D-SC): He proposed the Consumer Broadband and Digital Television Promotion Act, a bill to outlaw the sale of PCs or consumer electronics devices lacking copy protection.

Money trail: $282,534 from TV/music/movie contributors since 1997–his second-biggest supporting industry (after lawyers and law firms, who gave $1,213,475).

Rep. Howard L. Berman (D-CA): The Berman P2P bill gives copyright holders legal immunity to attack P2P networks to hinder file-sharing, if the U.S. Attorney General has been notified. Files on users’ PCs can’t be damaged.

Money trail: $570,000 from TV/music/movie donors since 1993. He is the leading recipient of entertainment industry money in the House.

Rep. Howard Coble (R-NC): Coble was the original sponsor of the 1998 DMCA and is cosponsoring Berman’s proposed P2P bill.

Money trail: $151,021 from TV/movie/music donors since 1993. Since 2000, law firms are his top contributors, with the entertainment industry a close second. He is the number two recipient of music industry funds in the House.

Rep. Rick Boucher (D-VA): Boucher has been an outspoken critic of the DMCA since its passage in 1998. He has been trying to rally support within Congress to amend the DMCA to explicitly affirm fair use.

Money trail: $26,125 from computer industry donors in the current election cycle. Even bigger contributors to his war chest, however, are utilities ($57,902) and law firms ($31,250).

Copyright Chronicles

Anne guards the books: Publishers are up in arms and hint at author strikes. The problem: fast (well, sort of) and loose replication and sale of books without proper compensation to the owner. To remedy that, England’s Queen Anne accepts the first Parliamentary copyright law, the Statute of Anne. It gives copyright holders (defined as authors or another authority with proprietary rights to a written work) exclusive rights to distribution and copying for a period of 20 years.

Play it again, Sam: Player pianos are all the rage, and publishers of player-piano rolls are making a killing selling these recordings of popular tunes–without paying composers a dime. (Sound familiar, Napster fans?) Sheet music publishers file suit, claiming copyright infringement. The Supreme Court rejects their claim, reasoning that the law doesn’t cover player-piano rolls. The next year, Congress amends the law to include licensing fees for player-piano rolls, phonograph records, and public performances. Decades later, composers get over $500 million in royalties from recordings and performances of their music.

Video saves the movie star: The U.S. Supreme Court rejects Universal Studios’ lawsuit against Sony, which had contended that Sony’s VCRs allow rampant copyright infringement by giving ordinary Joes and Janes the ability to make copies of their own movies. The ruling upholds citizens’ fair-use right to make home recordings, and it supports Sony’s right to make and sell VCRs. (Sony’s Betamax format loses the VCR war to rival VHS anyway.) Two decades later, while box office receipts add up to about $8.4 billion, video sales and rentals are a $16.9 billion market for the movie studios–not bad for the lawsuit’s losers.

Link: Hollywood vs. Your PC

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