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TechnologyDaily Mobile
Entertainment Life After MGM v. Grokster
by Sarah Lai Stirland
During a conference call about Supreme Court arguments his company filed last week, StreamCast Networks President and CEO Michael Weiss went on the offensive.
"The [entertainment industry] just wants you to believe that they just want to stop bad actors, that they just want to stop technologies with business plans built on piracy," he told a group of journalists covering the fight between the entertainment industry and the makers of file-sharing software. "Make no mistake, what is at stake here is whether Hollywood gets to control the development of new technologies for the sole purpose of protecting their own self-interest."
Weiss' statements were charged with the hyperbole that accompanies the experience of fighting a high-stakes battle that could map the future development of the technology industry. But the hyperbole does not mean that Weiss is not willing to negotiate with his nemesis, the entertainment industry. He emphasizes that once the litigation ends, he is ready to strike distribution deals with both Hollywood and the recording industry.
He is not the only one waiting for the case to be resolved so the deal-making can begin. Both big and small media companies have started looking to the file-sharing companies for new ways to distribute their products. "We are the future of digital distribution," Weiss said in an interview. "They're plaintiffs today -- but they'll be partners tomorrow."
A Hint Of Deal-Making To Come?
The Supreme Court case, MGM v. Grokster, turns on the issue of whether tech companies should be held liable for the infringing activities of their customers and, if so, on what grounds. The attorneys for the Grokster and StreamCast file-sharing firms filed reply briefs Tuesday.
At least 26 other groups ranging from the conservative Eagle Forum to the wireless and Internet group CTIA also filed friend-of-the-court briefs. They urged the court to uphold a 1984 decision that said technology manufacturers are not liable for copyright infringement if their products have substantial non-infringing uses.
Regardless of the outcome of the dispute, the entertainment industry is moving ahead in preparing for a more digital future.
Late last year, the music trade paper Billboard reported that Universal Music Group signed a deal with the startup firm Snocap, which was co-founded by Napster founder Shawn Fanning. Snocap's goal is to let copyright holders such as Universal seed file-sharing networks with copies of music for consumers to buy. Sony BMG Music Entertainment also announced last week that it will use Snocap's system for identifying music and managing rights to it.
In a conference call with analysts last month, meanwhile, Brandon Burgess, NBC Universal's executive vice president of digital media, international channels and business, said his company is examining the idea of using the BitTorrent file-sharing protocol to deliver content over high-speed Internet lines. In explaining his company's technology strategy to financial analysts, Burgess said Universal is technology agnostic, as long as the technology delivers and markets the company's entertainment to consumers in a desirable way.
"With so much consumer power out there and so much sophisticated technology, we have to become much more knowledgeable technologically or a technology-savvy company, even though we're not a technology company," he said. "We have to understand exactly how consumers are using or not using technology, and we have to ... protect our content in an environment where there are people out there who steal material."
Independent music companies, musicians and educational institutions also are experimenting with file-sharing. A group of musicians including rapper Chuck D, singer-songwriter Janis Ian and others filed a friend-of-the-court brief last week saying that they believe their use of file-sharing software to distribute their works has been beneficial. And Emory University plans to use Atlanta-based Intent MediaWorks' file-sharing program iPeer to distribute student movies online as part of its campus movie festival later this year.
The Cycle Of Panic, Denial And Embrace
As a former entrepreneur in the video-rental business before such rentals became a cultural norm and an acceptable business model for the movie industry, Weiss said he is familiar with the industry's cycle of panic, denial and eventual embrace of new technologies and business models. His combative style yet eagerness to do business also reflects a long history of both tension and cooperation between the technology and entertainment industries.
"When I opened my video store [in 1978], the movie industry had this business model that you buy one video from us for $60, and then you sell the video for $90 to your customers and then you come back and buy another one," Weiss recalled. "So I had customers who would come up to me and say: 'I don't want to buy this movie for $90; I just want to see it tonight. Can't you rent it to me for a couple of bucks?'"
Weiss and other pioneering video-store owners did just that. Ultimately, that led to a lobbying battle in Congress between video retailers and the movie studios, who then wanted to repeal a legal doctrine that permits the purchasers of copyrighted works to sell, loan, lease or display works without the copyright owner's permission.
Jack Valenti of the Motion Picture Association of America lost that fight in the early 1980s. Like others on the side of the tech industry in the current dispute, Weiss said that defeat, along with the Supreme Court's so-called Betamax decision in 1984, paved the way for successful future generations of home entertainment, such as the digital videodiscs, for the entertainment industry.
"The Big Picture: The New Logic of Money and Power in Hollywood," a new book by investigative journalist Edward Epstein, illustrates that these fights over control of content distribution and new technology development are part of a long history of both tension and co-operation between the entertainment and technology industries. The book details the evolution of the movie studios and how they have addressed successive waves of technological innovation with a mixture of boycotts of new media and tough negotiation tactics.
Waiting For Rights Holders With Vision
Entrepreneurs such as Weiss are betting that the file-sharing business ultimately will open a new vein of profits for both the technology and entertainment industries. They are betting that the entertainment industry will discover how to exploit distribution via file-sharing technology to lower their costs and better market their wares online.
Marty Lafferty, CEO of the Distributed Computing Industry Association, said that in addition to lower costs of distribution, file-sharing can bring other benefits, such as virally marketing artists online and rapidly expanding the sheer volume of available choices for consumers in ways not possible in the physical world.
But he emphasized that rights holders ultimately must act. "Our model is Mel Harris [former president of Paramount Pictures' Television Group], who invented the [videocassette] business for motion pictures," Lafferty said. "It took someone on the side of the rights holders who has a vision to step out of line and say, 'I can see how this can work.'"
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