Pirates & Paranoids

[Gregg Lengling]

Recording Restricted
Arik Hesseldahl, 02.10.03, 12:00 PM ET

NEW YORK - Video recording is a convenience that consumers have grown accustomed to since the introduction of the first videocassette recorders in the 1970s. Many consider it an entitlement.

To a point, it is. The U.S. Supreme Court, in fact, said so: In 1984, in the landmark Betamax case, which pitted Sony (nyse: SNE - news - people ) against Universal Studios and The Walt Disney Co. (nyse: DIS - news - people ), the court ruled that recording television programs for private viewing in homes does not infringe on copyright protections.

However, the rights handed down by the court don't seem so clear now. When the videotape in the VCR is replaced by a hard drive so that the copy made is as good as the original and can be shared over the Internet with a multitude of people, the right to record looks more--at least in the view of several media companies--like a license to steal.  
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The recording industry's legal victories over the music-sharing service Napster and some of its emulators has emboldened media companies eager to protect their TV programming from a Napster-like fate. For consumers, the basic convenience of recording television would start to erode, especially as they navigate the transition to digital and high-definition television (HDTV).

For one thing, what media companies such as Viacom (nyse: VIA.B - news - people ) and Disney want sounds innocuous enough. It's a few bits of code embedded into the signals of the programming they send. These "broadcast flags" would give broadcasters the ability to prevent certain programs from being copied and shared over digital networks.

And late last year, consumer electronics manufacturers, among them Hitachi (nyse: HIT - news - people ), Royal Phillips (nyse: PHG - news - people ), Sony and Matsushita's (nyse: MC - news - people ) Panasonic, announced a major agreement with cable companies such as AOL Time Warner's (nsye: AOL - news - people ) Time Warner Cable and Cox Communications (nyse: COX - news - people ). The crux of the deal focused on eliminating digital set-top boxes. But the deal also included an agreement on proposed "encoding rules."

Under the proposed rules, most regular TV shows available for free from the major networks would fall under the "copy freely" category, while pay-channel programs on networks such as HBO or Showtime might fall under "copy once" that would allow recording but restrict sharing. Pay-per-view and video-on-demand programs would likely be tagged "copy never."

But copying and sharing programming over a network is at the heart of what many consumer electronics and PC manufacturers want to pursue. If the recent International Consumer Electronics Show in Las Vegas is any indication, manufacturers such as Sony and Hewlett-Packard (nyse: HPQ - news - people ) and even software giant Microsoft (nasdaq: MSFT - news - people ) showed off product concepts that would allow consumers to record a show from a TV in one room to a hard drive, and then watch it later on any TV or computer screen in the home. And all of those networks were in turn connected to a broadband line to the Internet.

And that's the part that gives Hollywood night sweats: the idea of perfect copies of TV programs sitting on PC hard drives just waiting for thousands of Kazzaa users to download them. Without the flags to protect their content on free channels, media companies may be forced to push their more valuable programming toward pay channels.

Viacom wants broadcast flags so badly it advised the Federal Communications Commission in a filing late last year that it would stop HDTV programming on its CBS network for the 2003 to 2004 season if the flags aren't mandated. Disney wants them too.

"Disney has no asset more valuable than the film The Lion King," says Preston Haddon, a Disney executive vice president. "We have presented, and would like to present again, The Lion King free over the air on Sunday night on ABC's Wonderful World of Disney. But if doing so means that perfect digital copies will be posted to file-sharing sites on the Internet, then we would have to seriously reconsider putting it on ABC."

But the fact is, consumers expect high-quality recording to be available. A study by GartnerG2, a unit of research firm Gartner (nyse: IT - news - people ), found that 90% of consumers think it's OK to make a copy of a TV show for personal backup purposes, while 63% think it's OK to give a copy of a TV show to a friend.

TV broadcasters have caught most of their fears from the music industry. Indeed CD sales were down 9% in 2002, to 681 million units. By contrast, consumers bought 1.7 billion blank CDs, according to the Consumer Electronics Association (CEA). As expected, the Recording Industry Association of America blamed the availability of freely downloadable music. But that's a simplistic view.

It could be that consumers simply don't like what they're hearing. In 2000, record companies released 35,500 new CD titles, which accounted for 296.5 million in unit sales, according to Nielsen-SoundScan, which tracks CD sales. That's an average of 8,352 units sold for every new CD title released. By 2002 the average number of sales per new release had dropped to 7,975 units, while the number of new releases had dropped to 33,400.

So if TV studios can learn anything from the experience of their colleagues in the music business, it's that consumers will respond favorably, and with open wallets, to programming they can record for their own use or to share with friends, without being treated like criminals.

But the studios may have little to fear. According to one estimate by the Electronic Frontier Foundation, HDTV broadcasts take up far too much bandwidth for even the fastest Internet connections to handle easily. Even under ideal conditions, it would take 40 hours to download a single two-hour movie in HD format and would require about 17 gigabytes to store on a hard drive. Even the biggest hard drives widely available for PCs store only about 200 GB, leaving room for only a few movies in that format.

The proposed regulations for flags and encoding rules are currently before the FCC. And if the personal preferences of FCC Chairman Michael Powell have anything to do with it, the rules may stay fairly loose. During an exchange with CEA President Gary Shapiro at the Consumer Electronics Show in Las Vegas, Powell said he received a TiVo (nasdaq: TIVO - news - people ) recorder as a Christmas gift. He loves it, and has called it "God's machine."

He even suggested that he'd like to record shows for use on several screens in his home and might like to share programs with his sister. Broadcasters, cable companies and others have until March 28 to tell Powell why he should or shouldn't be able to do just that.

From Forbes.com

[Joseph S]

Haven't they learned anything from DVD?

Give us the shows on DVHS or HD-DVD and people will continue to buy them. HiPix and MyHD have their glitches and commercial elimination isn't always perfect. Then there's the switch issue and the massive HD space required.

[Matt Heebner]

First I want to say that I do NOT condone any type of copy right infringement of any type BUT I do want to knock Hollywood and the Music Industry down a notch.

1. I have yet to hear any type of mp3, even using the best codec, that even comes remotely close to sounding like a good CD.  And how can it be that CD's are now more expensive than when they first came out? If the music industry really wants to counter horrible sounding mp3 downloads...lower the damn price of a CD. $16.99 is wwwaaaayyyyy too much to pay for a CD with maybe 5 or 6 good songs, and 5 or 6 filler songs.  The whole notion of a perfect copy on a hard drive is absurd. I have a few SACD's that I consider audiophile grade quality, but I would not consider them perfect, and especially not a copy of one. If the newer formats like SACD or DVD-Audio were $5 or $6 a peice, I'll bet mp3's would be forgotten about in a hurry. It would be easier, and better to buy the higher resolution format (or course compatible with portable and car systems...but that is another rant!) than to download a cruddy, garbage sounding mp3. Of course in an All-You-Can-Eat world, sometime quantity, not quality is what people want.

2. Same thing goes for HD movies. First of all, a 1080i or a 720p is hardly even close to what resolution true 35mm or 70mm achieves. Yes it is the best of what we can view, but I'll give it 5 years before there are devices that are way higher than this. Look at the VHS, then Laserdisc. A good mastered DVD will blow these completely out, as will a HD movie to a DVD. Give it 5, 6 years and we will be seeing 1080p and even higher resolution than what's possible now.

Trading 20 and 30 and 40 gigabite movies at HD resolution (but not perfect), and downloading crappy mp3's are not going to bring disaster to these industries. They are doing it to themselves by not "changing with the times", and by pricing themselves right out if the world.  Average  Joe Consumer has no idea about whats going on with all the copy protection schemes, and worse he probably doesn't much care...yet. But Hollywood and the Music Industry  had better start preparing for a huge back-lash because people are starting find out...and they don't like it.

Matt

[Talos4]

For a long time now it's been my belief that the music/movie industry has been too high and mighty in their own minds.

My belief goes all the way back to when VCR's debuted and the move industry thought we would/should pay ~$100 for a videotape.

I'm in agreement about copyright infringement.  I still cannot see myself paying $15-20 for mostly dreck.

I tried MP3's sorry, sounds like garbage.  takes forever to get and don't get me started on buying new hardware to listen to them.

In my own (very) little way of protest of the industries, I buy most of my stuff used. $6-8 for CD's $10-15 for DVD's $3-5 for :eek: Vinyl!

All of this of course is just my HO!:D

[gyoung]

I agree with both of you.  I don't mind the quality of the MP3's so much because it allows me to take the music with me.  I can play it in the car or take it somewhere without the fear of losing the hard copies that are back safe at home.  In the car I'm not as concerned about the audio quality.

The price of a CD is absurd.  We all know for sure that the actual CD media is negligible in price, but the prices haven't changed in over 20 years.  Go into a mall CD shop and new CDs are running $16 - $20.  

The real reason for the downturn in music sales is that the majority of music out there is awful, which means only one thing, it can only get better.

[oz]

I think you guys are in the minority. I bet 99% of people think MP3 files sound just fine, and most "regular" people think they sound EXACTLY like the original.  It goes without saying that a lot of people who own a high definition TV are audio- and videophiles, so nothing but the best is acceptable for you. While I enjoy the premium sound that a SACD or DVD-Audio disc can provide, high-end MP3 files can sound great.

Maybe you are getting your files from the wrong place, but high quality MP3's are easy to get and take little time to download on a broadband connection.  Even $6 CD's aren't going to prevent people from downloading 200 songs an hour off a newsgroup server. The selection changes daily and if you don't like the music, you can delete it without losing any money.

[johnmark]

As much as it pains me, I have to agree that the studio's have a legitimate concern.  The argument that people will not swap 20 gig movies is flawed for two reasons.  One as stated above about mp3's, most people don't know or don't care about quality.  Second and most important is that technology marches on.  The studio's realize that the current fight will affect them for decades if not centuries to come.  At some point in the near future down loading a 100gig file will be nothing.

Lets not forget that the studio is motivated by the same thing as all of us are at our jobs.  Pure and simple, they want to make lots of money.  Why would anyone invest hundreds of millions of dollars in a project, if they knew that free copies would be available on the internet within hours of the movies release?

I think the broadcast flag idea as described in the original post is a good comprimise.  I also think that without some sort of flag in place we will not see much more growth in HDTV.

John