[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
DIGITAL CONTENT AND ENABLING
TECHNOLOGY: SATISFYING THE
21ST CENTURY CONSUMER
HEARING
BEFORE THE
SUBCOMMITTEE ON COMMERCE, TRADE,
AND CONSUMER PROTECTION
OF THE
COMMITTEE ON ENERGY AND
COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
MARCH 29 AND MAY 3, 2006
Serial No. 109-90
Printed for the use of the Committee on Energy and Commerce
Available via the World Wide Web: http://www.access.gpo.gov/congress/house
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COMMITTEE ON ENERGY AND COMMERCE
JOE BARTON, Texas, Chairman
RALPH M. HALL, Texas MARSHA BLACKBURN, Tennessee
MICHAEL BILIRAKIS, Florida JOHN D. DINGELL, Michigan
Vice Chairman Ranking Member
FRED UPTON, Michigan HENRY A. WAXMAN, California
CLIFF STEARNS, Florida EDWARD J. MARKEY, Massachusetts
PAUL E. GILLMOR, Ohio RICK BOUCHER, Virginia
NATHAN DEAL, Georgia EDOLPHUS TOWNS, New York
ED WHITFIELD, Kentucky FRANK PALLONE, JR., New Jersey
CHARLIE NORWOOD, Georgia SHERROD BROWN, Ohio
BARBARA CUBIN, Wyoming BART GORDON, Tennessee
JOHN SHIMKUS, Illinois BOBBY L. RUSH, Illinois
HEATHER WILSON, New Mexico ANNA G. ESHOO, California
JOHN B. SHADEGG, Arizona BART STUPAK, Michigan
CHARLES W. "CHIP" PICKERING, Mississippi ELIOT L. ENGEL, New York
Vice Chairman ALBERT R. WYNN, Maryland
VITO FOSSELLA, New York GENE GREEN, Texas
ROY BLUNT, Missouri TED STRICKLAND, Ohio
STEVE BUYER, Indiana DIANA DEGETTE, Colorado
GEORGE RADANOVICH, California LOIS CAPPS, California
CHARLES F. BASS, New Hampshire MIKE DOYLE, Pennsylvania
JOSEPH R. PITTS, Pennsylvania TOM ALLEN, Maine
MARY BONO, California JIM DAVIS, Florida
GREG WALDEN, Oregon JAN SCHAKOWSKY, Illinois
LEE TERRY, Nebraska HILDA L. SOLIS, California
MIKE FERGUSON, New Jersey CHARLES A. GONZALEZ, Texas
MIKE ROGERS, Michigan JAY INSLEE, Washington
C.L. "BUTCH" OTTER, Idaho TAMMY BALDWIN, Wisconsin
SUE MYRICK, North Carolina MIKE ROSS, Arkansas
JOHN SULLIVAN, Oklahoma
TIM MURPHY, Pennsylvania
MICHAEL C. BURGESS, Texas
BUD ALBRIGHT, Staff Director
DAVID CAVICKE, General Counsel
REID P. F. STUNTZ, Minority Staff Director and Chief Counsel
SUBCOMMITTEE ON COMMERCE, TRADE, AND CONSUMER PROTECTION
CLIFF STEARNS, Florida, Chairman
FRED UPTON, Michigan JAN SCHAKOWSKY, Illinois
NATHAN DEAL, Georgia Ranking Member
BARBARA CUBIN, Wyoming MIKE ROSS, Arkansas
GEORGE RADANOVICH, California EDWARD J. MARKEY, Massachusetts
CHARLES F. BASS, New Hampshire EDOLPHUS TOWNS, New York
JOSEPH R. PITTS, Pennsylvania SHERROD BROWN, Ohio
MARY BONO, California BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska GENE GREEN, Texas
MIKE FERGUSON, New Jersey TED STRICKLAND, Ohio
MIKE ROGERS, Michigan DIANA DEGETTE, Colorado
C.L. "BUTCH" OTTER, Idaho JIM DAVIS, Florida
SUE MYRICK, North Carolina CHARLES A. GONZALEZ, Texas
TIM MURPHY, Pennsylvania TAMMY BALDWIN, Wisconsin
MARSHA BLACKBURN, Tennessee JOHN D. DINGELL, Michigan
JOE BARTON, Texas (EX OFFICIO)
(EX OFFICIO)
CONTENTS
Page
Hearings held:
March 29, 2006 1
May 3, 2006 62
Testimony of:
Krikorian, Blake, Chief Executive Officer, Sling Media 18
Feehery, John, Executive Vice President, External Affairs,
Motion Picture Association of America 31
Denney, Jim, Vice President for Product Marketing, TiVo, Inc. 36
Mitchell, Stevan, Vice President of Intellectual Property
Policy, Entertainment Software Association 43
Parsons, Gary, Chairman of the Board, XM Satellite Radio 67
Ostroff, Michael, General Counsel and Executive Vice President,
Business and Legal Affairs, Universal Music Group 75
Halyburton, Dan, Senior Vice President and General Manager,
Group Operations, Susquehanna Radio, on behalf of the
National Association of Broadcasters 80
Regan, Robert J., President of the Board, Nashville
Songwriters Association International 87
Lawrence, Jeffery T., Director, Digital Home and Content
Policy, Intel Corporation 89
Additional material submitted for the record:
Parsons, Gary, Chairman of the Board, XM Satellite Radio,
response for the record 116
Ostroff, Michael, General Counsel and Executive Vice President,
Business and Legal Affairs, Universal Music Group,
response for the record 118
Halyburton, Dan, Senior Vice President and General Manager,
Group Operations, Susquehanna Radio, on behalf of the
National Association of Broadcasters, response for the
record 119
Lawrence, Jeffery T., Director, Digital Home and Content
Policy, Intel Corporation, response for the record 121
Parsons, Gary, Chairman of the Board, XM Satellite Radio,
submission for the record 122
The American Society of Composers, Authors and Publishers,
prepared statement of 131
DIGITAL CONTENT AND ENABLING
TECHNOLOGY: SATISFYING THE 21ST
CENTURY CONSUMER
WEDNESDAY, MARCH 29, 2006
HOUSE OF REPRESENTATIVES,
COMMITTEE ON ENERGY AND COMMERCE,
SUBCOMMITTEE ON COMMERCE, TRADE,
AND CONSUMER PROTECTION,
Washington, DC.
The subcommittee met, pursuant to notice, at 1:05 p.m., in Room
2123 of the Rayburn House Office Building, Hon. Cliff Stearns [chairman]
presiding.
Members present: Representatives Stearns, Radanovich, Bass, Terry,
Ferguson, Otter, Barton [ex officio], Schakowsky, Towns, DeGette,
Gonzalez, and Baldwin.
Staff present: David Cavicke, General Counsel; Chris Leahy, Policy
Coordinator; Will Carty, Professional Staff Member; Billy Harvard,
Legislative Clerk; Jonathon Cordone, Minority Counsel; David Vogel,
Minority Research Assistant; and Chris Treanor, Minority Staff
Assistant.
MR. STEARNS. Good afternoon. In today's digital world, movies,
music, and software travels at light speed to any user in any corner of the
world with the technology to receive and utilize digital material, whether
it is web-based, satellite, or an old-fashioned DVD. The law, however,
clearly does not move at the speed of light and historically has struggled
to keep up with the constant evolution of technology. Creative digital
content and the slick, innovative enabling technology that makes it
accessible for the consumer has begun an incredible evolution over the
past few years. Powered by better electronics, faster chips, and the
widespread deployment of broadband, today's digital technology
hardware amazes us with its ability to quickly provide consumers with
exactly what they want, when they want it, wherever they may be. It
seems like almost any type of digital content--movies, music, games--is
available via download or through some new and ingenious means of
distribution that makes it more accessible, convenient, and portable for
the consumer.
The other side of the slick and virtually seamless distribution of
digital material is the content itself. A $300 iPod is a $300 piece of shiny
plastic and metal without the music and video content that makes it
worth the investment. In addition, these new means of distribution and
digital technology push the creativity of those desiring compensation for
their creative endeavors and investment. Maintaining the incentives to
produce creative works in a market teeming with seamless technology
and inexpensive ways to distribute copies of digital content continues to
be an issue for the content community and is one that is at the heart of
the ongoing struggle between these two great American industries.
Content is obviously the major driver for many of these slick gizmos, but
the consumer electronics industry also believes its slick gizmos are
opening up consumers to new forms of content, just look at Pod-casting
and streaming.
I don't think a chicken or the egg analysis about what drives what
will get us very far in this case, but is clear that the American content and
consumer electronics industries are indeed interdependent, and therefore,
have a stake in each other's success. The key issue to put it in base terms
is to ensure that everyone is getting paid and getting paid fairly. My
colleagues, more specifically the challenge is to ensure the legal
framework that bounds the market, including over-the-air, web-based,
and satellite programs, allows the consumer electronics industry the
freedom to engineer even more innovative distribution devices and
methods while maintaining incentives for the content industry to create
material consumers want to watch and listen to with all their fancy
hardware.
Today's hearing is the first part of a two-part series on the future
of digital content and the consumer electronics industry and what lies in
store for the consumer. I think taking a look at some of the more
innovative content and device stakeholders to better understand where
they see their industry moving in the future will help us, as legislators,
here in the committee. It will give us some perspective on how we can
help these industries remain the best in the world and a very important
engine for the American economy and for American jobs. Todays panel
represents the video side to the content and consumer electronics
industry. Our second part of this hearing series will be focused on the
audio and software side of this sector. The basic question I have for all
the witnesses is how they see the way content delivery via devices that
can run on several platforms, like cable, Internet, and satellite, affecting
the distribution of audio, video and software media to the ultimate judge
with the wallet, the consumer. In addition, I would like to hear more
about the challenges, both in the domestic market and internationally,
that both industries face as they work to serve and satisfy their
consumers.
As all of you know, the subcommittee has held a number of hearings
focused on the issue of fair use and digital rights management, DRM,
technology and we continue to be engaged on these issues. My
colleagues, this subcommittee also remains concerned that both
counterfeiting and piracy remain critical problems for both the consumer
electronics and content industries, and believes that strong enforcement
of intellectual property rights in our trade agreements is critical to
fighting those problems. This series of hearings will be very helpful in
getting us a broader understanding of the business of entertaining
consumers from the supply and distribution side so that, in the end, the
demand component of the equation, the American consumer, will
continue to benefit and fuel the tremendous growth and innovation in
these two great American industries.
Obviously, I would like to welcome the panel today and I look
forward to the testimony, and with that, the Ranking Member, Ms.
Schakowsky, is welcomed.
[The prepared statement of Hon. Cliff Stearns follows:]
PREPARED STATEMENT OF THE HON. CLIFF STEARNS, CHAIRMAN, SUBCOMMITTEE ON
COMMERCE, TRADE, AND CONSUMER PROTECTION
Good afternoon. In today's digital world, movies, music, and software
travels at light speed to any user in any corner of the world with the
technology to receive and utilize digital material, whether it is web-based,
satellite, or an old-fashioned DVD. The law, however, clearly does not move
at speed of light and historically has struggled to keep up with the constant
evolution of technology. Creative digital content and the slick, innovative
enabling technology that makes it accessible for the consumer has begun an
incredible evolution over the past few years. Powered by better electronics,
faster chips, and the widespread deployment of broadband, today's digital
technology hardware amazes us with its ability to quickly provide consumers
exactly what they want, when they want it, wherever they may be. It seems
like almost any type digital content - movies, music, games - is available
via download or through some new and ingenious means of distribution that
makes it more accessible, convenient, and portable for the consumer.
The other side of the slick and virtually seamless distribution of
digital material is the content itself. A three hundred dollar iPod is a
three hundred dollar piece of shinny plastic and metal without the music and
video content that makes it worth the investment. In addition, these new
means of distribution and digital technology push the creativity of those
desiring compensation for their creative endeavors and investment.
Maintaining the incentives to produce creative works in a market teeming
with seamless technology and inexpensive ways to distribute copies of
digital content continues to be an issue for the content community and is
one that is at the heart of the ongoing struggle between these two great
American industries. Content is obviously the major driver for many
these slick gizmos but the consumer electronics industry also believes its
slick gizmos are opening up consumers to new forms of content, just look at
"Pod-casting" and "streaming."
I don't think a chicken or the egg analysis about what drives what will
get us very far, but it is clear that the great American content and consumer
electronics industries are indeed interdependent, and therefore have a stake
in each other's success. The key issue, to put it in base terms, is to
ensure that everyone is getting paid - and getting paid fairly.
More specifically, the challenge is to ensure the legal framework that
bounds the market - including over-the air, web-based, satellite platforms -
allows the consumer electronics industry the freedom to engineer even more
innovative distribution devices and methods while maintaining incentives for
the content industries to create material consumers want to watch and listen
to with all that fancy hardware.
Today's hearing is the first part of a two part series on the future of
the digital content and consumer electronics industries and what lies in
store for the consumer. I think taking a look at some of the more innovative
content and device stakeholders to better understand where they see their
industries moving in the future will help give the Committee some perspective
on how we can help these industries remain the best in the world and a very
important engine of the American economy. Today's panel represents the video
side of the content and consumer electronics industries. Our second part of
this hearing series will be focused on the audio and software side of this
sector. The basic question I have for all the witnesses is how they see the
way content delivery - via devices that can run on several platforms (like
cable, Internet, and satellite) - affecting the distribution of audio, video
and software media to the ultimate judge with the wallet - the consumer. In
addition, I would like to hear more about the challenges, both in the
domestic market and internationally, that both industries face as they work to
serve and satisfy their customers.
As you all know, the Subcommittee has held a number of hearings focused
on the issue of "fair use" and digital rights management (DRM) technology and
we continue to be engaged in these issues. The Subcommittee also remains
concerned that both counterfeiting and piracy remain critical problems for
both the consumer electronics and content industries and believes that
stronger enforcement of intellectual property rights in our trade agreements
is critical to fighting those problems. This series of hearings will be
very helpful in giving us a broader understanding of the business of
entertaining consumers from the supply and distribution side so that, in the
end, the demand component of the equation - the American consumer - will
continue to benefit and fuel the tremendous growth and innovation in these
two great American industries.
Again, I would like to welcome the panel before us today. We look
forward to your testimony
Thank you.
MS. SCHAKOWSKY. Thank you, Mr. Chairman, and let me apologize
for being a bit late. I was caught in a motorcade coming back from lunch
honoring Ranking Member Dingell. So I thank you for holding today's
hearing on how digitized content has affected copyright and the
consumer experience.
Technological innovations open the door to novel means of hearing
your favorite singer, in my case, Aretha Franklin, or watching a movie
on a portable device. However, the digitization of books, music, and
movies, in tandem with the ability to transmit that information over the
Internet, has also necessitated the updating of laws that have either been
rendered ineffective or become too stifling because of technological
advances. I look forward to today's witnesses about how the new
platforms for distributing content in digital formats affect artists,
consumers, researchers, libraries, and the creative industries, including
technology developers.
With the passage of the DMCA in 1998, which was before I came to
Congress, my colleagues made a significant attempt to contend with the
new challenges that digital capabilities introduced to copyright law. The
DMCA was meant to stop copyright infringement on new digital
mediums. Unfortunately, by trying to predict where the technology
would take us, the DMCA was drafted with broad strokes that many
argue went too far concerning the fair use provisions of the copyright
law. DMCA has been abused by those who want to squelch competition
in areas wholly unrelated to copyright. For example, manufacturers of
garage door openers have used the DMCA to try and prevent their
competitors from developing alternative and cheaper models.
Remember, these competitors are not infringing on copyrights or
violating any patents. They are simply trying to provide a better product
at a better price.
There is no denying that copyrights need to be protected and artists
need to be compensated for their work. However, I am concerned when
a law makes consumers and artists enemies, when fans and innovators
are considered criminals, when companies can use the DMCA to prevent
new products from coming to the market, and when libraries may have to
limit or charge for services they traditionally have provided for free.
Since we began these hearings two years ago, I have been talking
with artists' groups, consumer groups, technology developers, and I truly
believe that we can work together to craft a remedy to the problems at
hand. We need to find a balance between the rights of the consumers
and the rights of the artists and we need to do that without hurting other
industries.
I am hoping that today's hearing will help us understand better how
consumers and technological developers have been able to work with
artists and content providers in innovating within the DMCA. I believe
we are in the midst of a paradigm shift on how we think about
commerce, art distribution, and traditional consumer protections. It is
our responsibility as lawmakers to make sure that all voices are here in
this debate and that the proper regulations are put in place. I am glad we
are here today with so many people who are affected by the DMCA and
are interested in fair use. I look forward to your testimony and
demonstrations. Thank you, Mr. Chairman.
[The prepared statement of Hon. Jan Schakowsky follows:]
PREPARED STATEMENT OF THE HON. JAN SCHAKOWSKY, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF ILLINOIS
Thank you, Chairman Stearns, for holding today's hearing on how the
digitized content has affected copyright and the consumer experience.
Technological innovations opened the door to novel means of hearing your
favorite singer, like Aretha Franklin in my case, or watching a movie on a
portable device. However, the digitization of books, music, and movies, in
tandem with the ability to transmit that information over the Internet, has
also necessitated the updating of laws that have either been rendered
ineffective or become too stifling because of technological advances. I look
forward to hearing from today's witnesses about how the new platforms for
distributing content in digital formats affect artists, consumers,
researchers, libraries, and the creative industries, including technology
developers.
With the passage of the DMCA in 1998, (before I came to Congress), my
colleagues made a significant attempt to contend with the new challenges
that digital capabilities introduced to copyright law. The DMCA was meant
to stop copyright infringement on new digital mediums. Unfortunately, by
trying to predict where the technology would take us, the DMCA was drafted
with broad strokes that many argue went too far concerning the Fair Use
provisions of the copyright law. DMCA has been abused by those who want to
squelch competition in areas wholly unrelated to copyright. For
example, manufacturers of garage door openers have used the DMCA to try to
prevent their competitors from developing alternative and cheaper models.
Remember, these competitors are not infringing on copyrights or violating
any patents; they are simply trying to provide a better product at a better
price.
There is no denying that copyrights need to be protected and artists need
to be compensated for their work. However, I am concerned when a law makes
consumers and artists enemies, when fans and innovators are considered
criminals, when companies can use the DMCA to prevent new products from
coming to the market, and when libraries may have to limit or charge for
services they traditionally have provided for free.
Since we began these hearings two years ago, I have been talking with
artists' groups, consumer groups, and technology developers, and I truly
believe that we can work together to craft a remedy to the problems at hand.
We need to find a balance between the rights of the consumers and the rights
of the artists. And we need to do that without hurting other industries.
I am hoping that today's hearing will help us understand better how
consumers and technological developers have been able to work with artists
and content providers in innovating within the DMCA.
I believe we are in the midst of a paradigm shift on how we think about
commerce, art distribution, and traditional consumer protections. It is our
responsibility as lawmakers to make sure that all voices are heard in this
debate and that the proper regulations are put in place. I am glad we are
here today with so many people who are affected by the DMCA and are interested
in fair use. I look forward to your testimony and demonstrations.
MR. STEARNS. Mr. Ferguson?
MR. FERGUSON. Thank you, Mr. Chairman. Let me first express my
appreciation to you and the Ranking Member for putting this hearing
together. This subcommittee can serve an important role in this
particular area, shining a light on exciting new technologies and
examining how to effectively protect digital content and ultimately
ensure that consumers get access to new products in a quick and reliable
and a responsible fashion. The pace at which digital content is reaching
our constituents is at an all time high. With each passing day, it seems
there is something new for consumers to enjoy on devices that are
becoming more and more user friendly.
We have the ubiquitous and wildly popular iPods, its video version
allowing consumers to download their favorite shows and watch them on
a metro on the way home. Our cell phones are increasingly becoming a
favorite device for watching and listening to content, and more legal
downloads of motion pictures, TV shows, and music are available on our
home computers than ever before. Why do consumers have so many
options? What facilitated such a rich market of content available on
demand? I will tell you one thing: it wasn't through piracy; it wasn't
through Grokster; it wasn't through Kazaa; and it was certainly not
through the circumvention of copy protection technology. It was through
industry and technology companies working together, entering into
licensing agreements for legal distribution of content, creative products
that owners not only should, but must be compensated for.
By protecting creative content, you encourage innovation and in turn,
increase options for the consumer. The theory that loosening protections
for digital content is somehow pro-consumer is not only seriously
flawed, it is misguided, and it is one that I roundly reject. The
proliferation of piracy and the ease with which digital content can be
misappropriated has made it more difficult than ever to protect
copyrights against massive infringement. To ensure that these exciting
products continue to flow to consumers, intellectual property needs to be
protected. There must be a balance. The content and tech industries
must continue to work together to achieve these goals. It is not only in
their best interest, more importantly, it is in the consumers, our
constituents', best interest as well. I look forward to hearing from our
witnesses and I thank you, Mr. Chairman. I yield back.
[The prepared statement of Hon. Mike Ferguson follows:]
PREPARED STATEMENT OF THE HON. MIKE FERGUSON, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF NEW JERSEY
Let me first express my appreciation to Chairman Stearns for holding
this hearing. This subcommittee can serve an important role in this area,
shining a light on exciting new technologies, examining how to effectively
protect digital content , and ultimately, ensuring that consumers get access
to new products in a quick, reliable - and responsible - fashion.
The pace at which digital content is reaching our constituents is at an
all time high. With each passing day, it seems there's something new for
consumers to enjoy, on devices that are becoming more and more user friendly.
We have the ubiquitous and wildly popular Ipod, its video version
allowing consumers to download their favorite shows and watch them on the
metro on the way home. Our cell phones are increasingly becoming a favored
device for watching and listening to content. And more legal downloads of
motion pictures, tv shows, and music are available on our home computers than
ever before.
Why do consumers have so many options? What facilitated such a rich
market of content available on demand? I'll tell you one thing, is wasn't
through piracy. It wasn't though Grokster, it wasn't through Kazaa, and it
was certainly not through the circumvention of copy protection technology.
It was through industry and technology companies working together,
entering into licensing agreements for legal distribution of content,
creative product that owners not only should, but must be compensated for.
By protecting creative content, you encourage innovation and in turn
increase options for the consumer. The theory that loosening protections
for digital content is somehow pro-consumer is not only seriously-flawed,
it's misguided, and its one I roundly reject.
The proliferation of piracy and the ease with which digital content can
be misappropriated has made it more difficult than ever before to protect
copyrights against massive infringement. To ensure that these exciting
products continue to flow to consumers, intellectual property needs be
protected. There must be a balance.
The content and tech industries must continue to work together to achieve
these goals. It's not only in their best interest. more importantly, it's
in the consumers - our constituents' - best interest. I look forward to
hearing our witnesses. Thank you Mr. Chairman.
MR. STEARNS. Ms. Baldwin.
MS. BALDWIN. Thank you, Mr. Chairman. I am delighted that we
are having this hearing today to continue the ongoing dialogue regarding
the need to balance digital rights management technology with the
concept of fair use. As we know, the analog to digital transition in the
telecommunications arena has presented great opportunities, but also
challenges to the U.S. copyright industry. Specifically, the capabilities
of digital technology have in some instances facilitated copyright
infringements, such as elicit peer-to-peer traffic in movies and music. It
is therefore crucial for the copyright industries to invest and develop
secure content delivery systems through advancements in digital rights
management technologies. It would benefit not only consumers, but also
rights owners.
I am delighted to see the participation of both TiVo and Sling Media
in this panel. TiVo's digital video recorder allows a consumer to time-
shift entertainment programs through the recording of a broadcast TV
program; while Sling Media's Slingbox place-shifts television programs
from television sets at the home to just about any location on any device
with a broadband Internet connection. We are living in an exciting age
where rapid advancements in digital technology have led to a
proliferation of innovative entertainment products, and both TiVo and
Sling Media perfectly illustrate that.
I look forward to hearing their testimony and learning more about
their efforts to balance the delivery of content and the protection of
intellectual property rights. Finally, as we move ahead to a broader
system of legal but competing digital rights management technologies
for different products by different companies, we should pay close
attention to how rival DRM standards could stifle innovation and
economic growth, as well as create inconveniences for consumers.
While I am confident that market forces will eventually resolve
interoperability issues caused by DRM licensing, I hope technology
companies and content providers will work together to expeditiously
create more uniform ways of protecting copyrighted digital content. I
look forward to all of your testimony. Thank you for being here. Thank
you, Mr. Chairman.
[The prepared statement of Hon. Tammy Baldwin follows:]
PREPARED STATEMENT OF THE HON. TAMMY BALDWIN, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF WISCONSIN
Thank you Mr. Chairman. I am glad that we are having this hearing today
to continue our ongoing dialogue regarding the need to balance digital rights
management (DRM) technology with the concept of fair use. As we know the
analog-to-digital transition in the telecommunications arena has presented
great opportunities but also challenges to the U.S. copyright industry.
Specifically, the capabilities of digital technology have in some instances
facilitated copyright infringements, such as illicit peer-to-peer traffic
in movies and music. It is therefore crucial for the copyright industries
to invest and develop secure content delivery systems through advancements in
DRM technology that would benefit not only consumers, but also rights owners.
I am delighted to see the participation of both TiVo and Sling Media in
this panel. TiVo's digital video recorder allows a consumer to "timeshift"
entertainment programs through the recording of a broadcast TV program, which
Sling Media's Sling Box "placeshifts" television programs from television sets
at home to just about any location on any device with a broadband internet
connection. We are living in an exciting age where rapid advancements in
digital technology has led to a proliferation of innovative entertainment
products, and both TiVo and Sling Media perfectly illustrate that. I look
forward to their testimonies and learning more about their efforts at
balancing the delivery of content and the protection of intellectual property
rights.
Finally, as we move ahead to a broader system of legal, but competing
DRMs for different products by different companies, we should pay close
attention to how rival DRM standards could stifle innovation and economic
growth, as well as create inconveniences for consumers. While I am confident
market forces will eventually resolve inter-operability issues caused by DRM
licensing, I hope technology companies and content providers will work
together to expeditiously create more uniform ways of protecting copyrighted
digital content.
I look forward to the testimonies and thank you Mr. Chairman.
MR. STEARNS. Mr. Gonzalez.
MR. GONZALEZ. Thank you very much, Mr. Chairman, and I
appreciate your calling this hearing and hearing from the witnesses
today, and I apologize if I have to leave a little early. I am going to be
really brief. I am one that really believes that certain legal precepts and
principles have served this republic well for time immemorial, and I
believe that they can be adjusted to accommodate modern technology. I
don't see that technology is the problem, but it really should be part of
the solution. When we say proprietary rights, I was part of a panel last
week or the week before, South by Southwest in Austin, regarding
content and regarding the writers, the artists, and the producers being
rewarded justly and fairly for their creations and such, and yet we
understand that technology moves forward, and it makes things easier.
There are easier ways to infringe and such. But I really believe that we
can get in here and recognize all of the stakeholders' interests in this.
But again, the guiding light for all of us should be what has allowed this
country and its free enterprise system and its capital system to thrive, and
it has been the regulatory system, rich in principles, in legal principles of
proprietary rights, and somehow we do need to reconcile that. So I look
forward to your testimony today. Thank you, Mr. Chairman.
MR. STEARNS. Mr. Towns.
MR. TOWNS. Thank you very much, Mr. Chairman, and of course
Ranking Member Schakowsky for having this hearing today. I am
pleased to see the video game industry represented here today, as it
continues to provide consumers with innovative technology and
products. With that said, I would like to stress that the protections in the
DMCA have helped companies bring their products and intellectual
property to the market, and we should do our best to preserve the stream
of commerce.
America's content companies continue to entertain and amaze all of
us, and the movie industry at large has aggressively and innovatively
embraced the digital marketplace. Movie and television studios are not
holding back their content, as some would have you to believe, but rather
are exercising due diligence and caution and not licensing a business
model that exacerbates piracy. Consumers want new products and recent
movies in their hands as quickly as possible. We must be extremely
careful when reviewing the protections and guidelines that govern the
distribution of content. I feel that the entertainment industry has made
great strides, and I cite Mr. Feehery's testimony in that regard. He looks
at a number of recent digital content deals cut by motion picture
companies to distribute their work online on IPTV Services for the iPod
and peer-to-peer services. And through innovative uses of the airwaves,
these efforts, I believe, are steps in the right direction.
I was intrigued by Denney's testimony, in which he cites century old
examples of one or another content industry's opposing various new
technologies. However, it appears to me that a look at more recent
history shows the movie industry has embraced and driven the adoption
of the DVD player and other consumer electronic devices. Therefore, I
look forward to Mr. Denney's comments here today and hearing his
rationale.
Finally, I would like to quickly mention that the video industry is not alone in fighting piracy and in need of protection. We must be just as
diligent in coming to the aid of those who operate the audio realm, as our
music artists are also under siege from rampant piracy and improper file
sharing. I look forward to the second session of this two-part hearing,
Mr. Chairman, where we will concentrate on audio protections in greater
detail. So on that note, I yield back and again, thank you and the
Ranking Member for holding this hearing today. Thank you.
[The prepared statement of Hon. Edolphus Towns:]
PREPARED STATEMENT OF THE HON. EDOLPHUS TOWNS, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF NEW YORK
Thank you, Mr. Chairman for holding this timely hearing. I'm again
pleased to see the video game industry represented here today, as it
continues to provide consumers with innovative technology and products.
That said, I'd like to stress that the protections in the DMCA have helped
companies bring their products and intellectual property to market, and we
should do our best to preserve their stream of commerce. America's
content companies continue to entertain and amaze all of us, and the movie
industry at large has aggressively and innovatively embraced the digital
marketplace. Movie and television studios are not "holding back" their
content, as some would have you believe, but rather are exercising due
diligence and caution in not licensing a business model that exacerbates
piracy.
In an age when consumers want new products and recent movies in their
hands as quickly as possible, we must be extremely careful when reviewing the
protections and guidelines that govern the distribution of content. I feel
that the entertainment industry has made great strides, and I cite Mr.
Feehery's ("FEARIE") testimony in that regard. He lists a number of recent
digital content deals cut by motion picture companies to distribute their
works online, on IPTV services, for the i-Pod, on peer-to-peer services,
and through innovative uses of the air waves. These efforts, I believe, are
steps in the right direction. I was intrigued by Mr. Denney's testimony, in
which he cites century-old examples of one or another content industry
opposing various new technologies. However, it appears to me that a look at
more recent history shows the movie industry has embraced and driven the
adoption of the DVD player and other consumer electronic devices. Therefore,
I look forward to Mr. Denney's comments here today and hearing his rationale.
Finally, I would like to quickly mention that the video industry is not
alone in fighting piracy and in need of protection. We must be just as
diligent in coming to the aid of those who operate in the audio realm, as our
music artists are also under siege from rampant piracy and improper file
sharing. I look forward to the second session of this two-part hearing, when
we will concentrate on audio protections in greater detail.
Thank you, Mr. Chairman. I yield back the balance of my time.
[Additional statements submitted for the record follow:]
PREPARED STATEMENT OF THE HON. JOE BARTON, CHAIRMAN, COMMITTEE ON ENERGY
AND COMMERCE
Good afternoon. Thank you, Chairman Stearns, for holding this hearing.
I understand that this is the first day of a two-part hearing, and I am glad
that we are exploring the issues surrounding digital media and its
distribution; specifically the intersection of the content and the consumer
electronics industries.
Some have said that the content industries have been slow to adapt to
the "anytime, anywhere" world of entertainment. At the same time, the
consumer electronics industry has exploded with new devices and new platforms
to distribute digital entertainment. The content creators are afraid of
widespread piracy in the digital world, and understandably so. The digital
world has made the transfer of large files fairly easy. At its worst, the
digital age offers a thieves market where the products are stolen and both
the sellers and the buyers are crooks. The sellers always know what they're
doing, but the buyers rarely do. Accordingly, the industry has worked hard
to educate consumers about illegal conduct, and has indeed prosecuted many
bad actors. But in their enthusiasm for protecting their copyrights, some
have said that consumers' long-standing and legal rights of fair use actually
promote illegal behavior.
Consumers have reacted strongly to new limitations on their rights
imposed by technological constraints. While some of this technology has
been largely benign, some has obstructed consumers' legitimate use and
enjoyment. And shockingly, in one instance, software that was supposed to
help protect copyrighted material actually ended up actually spying on the
people who bought it. This is absolutely unacceptable.
Although the history of this debate may suggest otherwise, my hope is
that these groups can work together to determine the appropriate
technological protection for content without curtailing consumers' rights.
It remains illegal to circumvent technological content protections, even if
you are not ultimately infringing on a copyright. That's not right. People
are liable for infringement, but should not be called criminals for
exercising their recognized rights, for making legal use of their legally
acquired music or movies. I hope to hear today about the future of digital
rights management in that context.
The content and consumer electronics businesses are two of the great
American success stories. In this new world of media distribution, they not
only can benefit each other, but depend on one another. The device makers
can sell more new and innovative machines as long as there is an abundance of
easily acquired content. And similarly, the content creators can sell more
original movies, music, and other media as long as there are new tools with
which to enjoy them-new tools that consumers want and expect.
These tools and the content created for them must work together in a way
that does limit consumers' rights.
I want to thank Mr. Boucher for attending this hearing today. He has
done important work on these issues. While he is not on the subcommittee, I
want to welcome him and commend him for his leadership. This is not a hearing
on Congressman Boucher's "fair use bill", which I support. Later, this
subcommittee may start talking about legislation, but today's hearing is
intended to give us a fresh look at the environment. I hope we learn some
things today and in the second day of hearings that will help us come up with
a new way to address the dilemmas before us.
Thank you, Mr. Chairman. I am anxious to continue the Committee's
involvement on these important issues, and I look forward to the second day
of this hearing as well.
I yield back the balance of my time.
PREPARED STATEMENT OF THE HON. MARY BONO, A REPRESENTATIVE IN CONGRESS FROM
THE STATE OF CALIFORNIA
Mr. Chairman, thank you for holding this hearing today.
We live in one of the most exciting times in history when it comes to the
advancement of technology for personal use. The challenge is how to continue
to nurture new technology while at the same time, protecting the very content
these devices deliver to us.
We have learned what can happen when industry is slow to adapt to the new
environment. At first, the music industry didn't know what to make of these
new technologies and how best to use them to deliver their content. This was
their burden, not the government's. But after struggling, this industry has
found a way to embrace these advances in technology. Apple's iTunes and other
online music stores deliver high quality music to consumers while protecting
intellectual property rights. I have always maintained that the "enter" key
is the entertainment sector's best asset.
In fact, recently Universal Pictures announced that like Warner Brothers,
it would start a pilot project in Europe to debut digitally downloaded movies.
Universal's first "download to own" movie service will include a DVD as well
as two digital downloads for the PC or laptop. If the U.S. ensures strong
content protection, I am certain we will see this service in our own country
soon.
Now that the entertainment industry has met its burden to adapt and
embrace new technologies, Congress must be careful to not only undermine the
rights of copyright holders, but also those who depend on the industry - from
grips to caterers to sound technicians and thousands of others. We need to
protect the content if we are to hope for advancement in technology or
otherwise, technology will not have anything to deliver.
Mr. Chairman, I am a great proponent of technology. I own several iPods,
a DVR and most recently a Slingbox, to mention only a few devices. But as an
advocate for copyright holders, I believe the U.S. must take the lead in
protecting intellectual property rights if we are to realize the full
potential of the marriage between entertainment and technology.
Again, thank you Mr. Chairman for holding this hearing. I look forward
to hearing from the witnesses today.
PREPARED STATEMENT OF THE HON. C.L. "BUTCH" OTTER, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF IDAHO
Thank you for holding this hearing today, Mr. Chairman. We spend a lot
of time debating fair use, and most people in this room know how strongly I
feel about this issue and the larger issue of protecting property rights.
However, if we are ever going to get this right we must continually go back to
the industry and take a look at what they are doing. Today's hearing offers
us the chance to do that.
I have had the opportunity to take a look at some of the stuff that the
consumer electronics industry has created over the past few years, and I am
continually astounded by what they come up with and how they allow us to
enjoy the creative genius of musicians, movie makers, and others. And the
more I see of these products, the more convinced I am that the industry, on
both sides of the issue, is far more capable of responding to the growing
concern with fair use and copyright protection than is the government.
Both the past and the present make it clear to me that government
involvement in this issue only impedes innovation for both sides of this
issue. For example, about twenty years ago we had a similar debate when a
new technology called the VCR hit the market. At first the implications of
this new technology seemed devastating for the industry. But then a
marvelous thing happened: rather than allow government regulations to harm
both industry and consumer, the industry responded to consumers' desire to
see films at home and became innovative, thus building an economic empire in
the video rental and retail industry as a result. Everybody won.
While there are certainly differences in today's debate over fair use, I
believe one principle is the same: Consumer demand, not governmental
regulation should lead industry response.
It seems to me that the entertainment industry again has an opportunity
to work with the software and device manufacturers to develop and sell
products that meet consumer demand. Protecting intellectual property
investments is the key element in achieving cooperation. Without these
protections, all of these industries will ultimately suffer.
Today's hearing is an important part of ensuring that we promote good
policies that do not stifle investment and innovation. I look forward to
hearing from the witnesses and again thank the Chairman for the opportunity
to step back and hear from the industry on this issue.
PREPARED STATEMENT OF THE HON. JOSEPH R. PITTS, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF PENNSYLVANIA
Mr. Chairman, I would like to thank you for convening this hearing today
on this timely issue.
As we all know, for the last several years, we have witnessed significant
growth in the Internet. In fact, the Internet connects more than 407 million
host computers in 214 countries.
Through the World Wide Web, one can view pictures, listen to music, or
see movies. Users communicate and exchange information freely without
burdensome regulations and fees.
Aside from the Internet, innovations in other enabling technology
continue at a rapid pace, as does consumer demand for this technology and for
the content that can be played and stored on devices. iPod and TiVo are
perfect examples of enabling technology that have taken the consumer world by
storm, and have allowed consumers to enjoy unprecedented access to their
favorite music, movies, and TV shows.
iPod and TiVo decision-makers have struck the proper balance in
respecting copyrights, discouraging piracy, and providing consumers with a
variety of choices at affordable prices.
It is my hope that this hearing is a step toward ensuring that content
and consumer electronics businesses will continue to work together to provide
a legitimate marketplace that will encourage innovation and advances in
technology, respect copyrights, foster creativity among artists, and provide
increased choices and greater convenience for consumers.
Thank you, Mr. Chairman, and I yield back my time.
MR. STEARNS. I thank my colleague. We welcome the panel, Mr.
Blake Krikorian, Chief Executive Officer of Sling Media in San Mateo,
California; Mr. John Feehery, Executive VP, External Affairs, Motion
Picture Association of America; Mr. Jim Denney, Vice President for
Product Marketing, TiVo; and Mr. Stevan Mitchell, Vice President of IP
Policy, Entertainment Software Association. We welcome your opening
statements. Mr. Krikorian, you are first. And just put the mike closer to
you and turn it on. It has an on/off switch.
MR. KRIKORIAN. Yes, I am a techie, so--
MR. STEARNS. Okay. All right.
MR. KRIKORIAN. --this is a little too complicated for me, but I got it,
I got it.
STATEMENTS OF MR. BLAKE KRIKORIAN, CHIEF EXECUTIVE OFFICER, SLING MEDIA;
JOHN FEEHERY, EXECUTIVE VICE PRESIDENT, EXTERNAL AFFAIRS, MOTION PICTURE
ASSOCIATION OF AMERICA; JIM DENNEY, VICE PRESIDENT FOR PRODUCT MARKETING,
TIVO, INC.; AND STEVAN MITCHELL, VICE PRESIDENT OF IP POLICY, ENTERTAINMENT
SOFTWARE ASSOCIATION
MR. KRIKORIAN. Thank you. Thanks for the opportunity,
subcommittee. This is really an exciting thing for me. In fact, it is really
interesting, but I have been in the digital convergence world for, oh,
about 15 years, for lack of a better term. We don't know what we call
ourselves. And about two years ago, I was spending some time with one
of the co-founders of Excite, Joe Krause, who has been pretty passionate
about some of these issues. He saw some of the products that we had
been incubating in our previous company and he was urging us to get our
rear ends out here to D.C. to start to show you all some of the things that
we are working on to try to bring some of this in real context instead of
us always sitting around in these rooms talking about it from a theoretical
perspective. Because it is very, very difficult to understand how certain
legislation could affect products that don't yet exist. And so it is funny,
two and a half years later, I am sitting here today.
So what I wanted to do is a couple things here. I am going to
actually throw up a live demonstration to give you an idea of the product.
But let me first start by saying, one thing that is very exciting for us in
the United States is I believe that we are on the verge of a renaissance for
consumer electronics companies that were based and founded in the
United States to actually thrive again. With the exception of a company
like Palmer or a company like a TiVo, it is really about once a decade we
see consumer electronics companies come to life in the United States and
we stand here today as a company who has been around now for about
two years. Hopefully, we still have a long runway ahead of it. When we
started this company, Sling Media, we viewed ourselves as a new kind of
consumer products company, and most investors looked at us as really
insane, thinking that we can't possibly sell a product that is a hardware
product at retail. That is for the mega corporations and for the Chinese
and the Japanese. And yet, what we believed was that these new types of
products are a very tight blending of hardware and software and services
and user interface and content, and that is where the U.S. is strong. And
so we are able to apply quite a bit of our software expertise and know
how, which, again, the U.S. still leads in actually creating these new
products that are really software. It is not in a box of cardboard, but
software that is in a box of silicon. So I am pretty excited about that and
hopefully there will be more and more startups like us that come about.
So one of the things I want to introduce to you is this notion of
placeshifting as we go into the demo. If we can switch over to the PC. I
know it is highly unusual for people to throw up a PowerPoint on here,
but I will keep it very, very brief. One of the things, just to set the
context, is I talked from a consumer, because this is how the product and
the company actually was born, but most of you already know this, but
from a calibration perspective, I will just spend a minute on it. People
love their television, but more and more, as we know, they want it on
their terms. And the product that the DVR and TiVo popularized, really
delivered on, this notion that the VCR had promised early on, which is
the ability to time-shift, the ability to watch my TV when I want it. But
now, us as consumers, we are finding ourselves more and more spending
time in front of displays other than the living room television. We are
spending time in front of our laptops, our desktops at work, our mobile
phones, and so forth, and in fact, if you look to the television industry,
this has actually started to hurt them, in terms of ratings that have
continually plummeted. But as consumers, we are spending more time in
front of these other displays and more time outside of that living room.
And so what we believe is this notion of placeshifting is the next
major evolution in television viewing. And what does it do? It greatly
increases the number of displays, that I can watch my familiar television,
which is the key word here, but also greatly increases the number of
places that I can watch my familiar television as well. And in some ways
you can actually say that overnight we have doubled or tripled the
number of television sets on the planet by turning every single display
into a living room television. So quite simply, the Slingbox, which is
this small box that you can buy now at Best Buy, CompUSA, over 3,000
stores nationwide, is $200, $249 retail. Basically take your television
signal, put this in your home, take your basic cable, take your TiVo, take
your satellite box, really over 5,000 different devices, plug your TV
signal in, connect it to your home network, and then wherever you
happen to be, you can watch and control your living room TV just like
you were sitting on the couch.
Now the way this came about was actually out of sheer consumer
frustration. My brother and I had a firm before we started Sling, and we
were born in the Bay area. We are big San Francisco Giants fans,
unfortunately, and the Boston Red Sox. Now they have one so they can't
gripe as much as us now. We are moving up the totem pole. But it was
the summer of 2002 when the Giants were heading to the playoffs and
my brother and I, as entrepreneurs, found ourselves working like dogs,
sitting in the office, late at night, and also traveling quite a bit, and we
just wanted to watch our home team. And we looked around and we
couldn't find a way to do it, even though there was an offering on the
Internet that promised to deliver me all my games. You know, albeit, it
was another monthly fee. I was willing to pay that extra monthly fee.
But then I went to watch my Giants, and I am sitting in San Mateo,
literally two miles from my house, and the Giants didn't come on.
I thought to myself, well, what is going on here? And I went down
and I read the legal fine print at the very bottom of the screen and it says,
oh, I am sorry, you get all the games except for your local team, which
they black out. And I am scratching my head and kind of wondering,
well, wait a second. What is going on here? I have been traveling and
there was some of that happening back home and I wanted to understand
what was going on, and I was thinking to myself, you know what? If I
could only watch my television back in my house, I have all these
channels, all this programming that I love and know. I have a broadband
connection in and out of my home. I am spending more time in front of
all these other displays. Why can't I just basically create these big
binoculars so I can look into my house and watch my TV and control it?
And that is really how the Slingbox was born. So really, it is about your
living room TV wherever you want.
Now one thing that probably hasn't happened in one of these
subcommittees, at least I would imagine, is I am showing you a few
goofy videos of just how I use it as a consumer.
[Video.]
MR. KRIKORIAN. One of the ways that I end up using the Slingbox, I
am sitting here at home. I never thought I would use it in the living
room. But I am sitting here babysitting my daughter who is watching
this Barbie Rapunzel thing for 50 times, and I start singing the songs at
work, and I am about to go crazy. So that is her hogging the whole
couch and everything. And so I was able to watch my football game at
the same time while she was watching her DVD.
[Video.]
MR. KRIKORIAN. You know, another goofy one, of course, is I am
sitting in my house, in the hot tub doing a little bit of work, and I have
my dog looking at me and wondering what the heck is going on and I am
watching in the corner. While I am going, I am watching a little bit of
sports. Then, of course for most of you have traveled, the boundaries for
this are limitless anywhere I have a broadband connection.
[Video.]
MR. KRIKORIAN. And then the last one, and this is a horrendous
one, but some of the dads might understand. I had to go to a Beauty and
the Beast play and well, fortunately, we had just worked on our mobile
client.
[Video.]
MR. KRIKORIAN. So I was able to watch the football game while I
am sitting in the play. I did it only for a little bit. So the one problem
was my daughter was elbowing me because daddy's face was--
MS. SCHAKOWSKY. I draw the line. Come on.
MR. KRIKORIAN. I know. I am sorry. This is not about good
parenting today. So one of the things that I wanted to just give you is a
very quick demo of how this works. I have a laptop that was provided to
me from some members of the staff here and I just loaded on a little
client, the little SlingPlayer, and what I did is then I added, and I will
actually even show you here in a second. Each Slingbox has a unique
identifier, and it is this gosh awful ID that you can never memorize, and
a password. And what I do is I enter my ID and my password and then
anywhere I am in the world, I can connect and watch my living room
TV. So, here I am just going to go ahead and say watch, and what is
going to happen, without even knowing my IP address or anything else, I
am going to connect back into my home in San Mateo.
[Video.]
MR. KRIKORIAN. So this is my television right now live at home, so
I can go ahead and do anything that I could normally. And if you notice,
here is a Comcast remote. Before, you saw on the video I had a TiVo
remote. What our goal is, is to take this and turn this into your familiar
experience, right down to the remote control. So if I want to go to
Channel 5 as an example, I have some favorites I can add, I can go
ahead and I can change the channel to five, watch a little Price is Right. I
can go to CNN. Whatever it is that I can do from my living room couch,
I could be in China right now. What we see quite a bit is people not just
using it at home, but people using it at work as well, where here, people
have CNN or CSPAN or CNBC going on in the day and they dock it
over on the side so they can be working on their documents.
So one of the things that I wanted to highlight here, and I can show
you after, if we have time, is I can actually watch it on my phone now, as
well. But to summarize, the one thing I wanted to point is that this is not
a mass piracy machine. We have actually taken voluntary steps to ensure
that this is not P to P, but this is actually me to me. And so right now, if
my wife, for example, tried to connect to my Slingbox back home, she
would not be able to do so because I am watching it. It only allows one
stream at a time, as an example. So I would like to conclude that, but
again, thank you very much. I just want to watch my living room TV
wherever I happen to be. Thank you.
[The prepared statement of Mr. Krikorian follows:]
PREPARED STATEMENT OF BLAKE KRIKORIAN, CHIEF EXECUTIVE OFFICER, SLING MEDIA
Chairman Stearns, Ranking Member Schakowsky, and other members of the
Subcommittee, thank you for the opportunity to appear today. My name is Blake
Krikorian, and I am co-founder and CEO of Sling Media, a privately held
company based in San Mateo, CA.
I am here to speak to you both as a consumer and as an entrepreneur. My
brother Jason and I started prototyping our first product, the "Slingbox", in
the summer of 2002. We poured much of our life's savings into this idea, and
fortunately, in October 2004 we were able to raise our first round of venture
financing.
Since then, our company closed a subsequent round of financing in
January 2006. Our investors include a number of America's top companies and
capital firms, such as Allen & Company, Doll Capital Management, EchoStar
Communications, Goldman Sachs, Hearst Corporation, Liberty Media, Mobius
Venture Capital, and Texas Instruments.
The initial launch of the Slingbox was in July 2005. It was available
on day one nationwide at Best Buy and CompUSA. This nationwide launch was an
unprecedented feat for a new product coming from a new U.S.-based consumer
electronics company.
The Slingbox is currently available at over 3,000 stores throughout the
US. It retails at $249 and does not require any additional monthly fees or
subscriptions. Needless to say, after years of development, we are thrilled
to bring our product to the American public.
Sling was inspired by our love of the San Francisco Giants. Back in
2002, Giants were poised to make the playoffs for the first time in years.
My brother Jason and I are diehard fans, and the Giants playoff run had us
simultaneously thrilled and very frustrated. As young entrepreneurs we
spent our lives in the office, on airplanes, and in hotel rooms - in short,
everywhere but in front of our living room TVs watching our favorite team.
In desperation, we tried various commercial products, but quickly
realized that there was no way we could do want we wanted - simply watch our
own TV while in another location. Our frustration led us to develop the
Slingbox.
While the VCR and digital video recorder, such as a TiVo, allows a
consumer to "timeshift" - record a TV program for viewing at a more
convenient time - the Slingbox adds a new dimension to TV viewing, which we
call "placeshifting".
Quite simply, the Slingbox placeshifts your living room TV, thereby
empowering you to watch your TV from virtually any location and on any
device. For a real life scenario, I am actually sitting in my kitchen as I
type this testimony on my wireless laptop and at the same time, watching my
living room TV in a small window on my laptop display. In this case, the
Slingbox in my living room is placeshifting my local news from my cable box
to my laptop in the kitchen.
We have found that consumers use the Slingbox to placeshift their living
room TV to other rooms in their home, to their desktop computer at the office,
and even to their laptop computers and mobile phones while on the road or
anywhere in the world they have broadband Internet connection.
Personally, I have been as far away as a hotel room in China and
watching my favorite TV shows back home. I have even been on a WiFi-equipped
commercial airliner at 40,000 feet above the Atlantic and able to placeshift
the baseball playoffs from my living room to my seat in 37C!
Most of the time, however; I find myself using my Slingbox on my desktop
PC at the office, typically tuned into the local or national news throughout
the day.
To respect the rights of content holders, we have taken voluntary steps
to ensure the Slingbox is a personal-use system. The Slingbox will only
placeshift to one device at a time, meaning that multiple parties cannot
consume the content simultaneously. Moreover, each Slingbox has a 32-bit
unique ID, password protection, and encrypted messaging between the Slingbox
and the client device.
The Slingbox does not make a copy, or allow indiscriminate
redistribution over the internet. It simply takes the TV programming that
you have already bought and paid for, and "slings" it somewhere else. Rather
than "P to P", the Slingbox enables "me to me".
Beyond the applications that I have described, I am delighted that
Americans are developing new and unanticipated ways to use the Slingbox's
placeshifting technology.
For example, Disney is using Slingboxes in their movie post-production
process by enabling workers to remotely view daily filming from virtually
anywhere. A Dairy Queen franchisee has installed Slingboxes in several of his
restaurants for remote security and surveillance purposes. Comcast has
deployed dozens (if not hundreds) of Slingboxes around the country to monitor
remote ad servers.
Even our local firefighters are exploring ways to use the Slingbox to
placeshift the local news helicopter video feed from the fire station to a
mobile phone at the scene of the fire, thereby providing the firefighting
crew with an overhead view.
And of course, our technology allows members of Congress to set up their
Slingbox in their district office, and watch their local news live from their
computer in the Rayburn Building.
We are pleased that the Slingbox has been eagerly embraced by consumers.
In addition to empowering tens of thousands of Americans to enjoy their local
TV programming beyond the confines of the living room, the Slingbox has been
recognized by many leading popular publications. TIME Magazine named the
Slingbox one of the Best Inventions of 2005. Popular Mechanics acknowledged
the Slingbox as one of its Breakthrough products for 2005. Fortune Magazine
named Sling Media one of the 25 Breakout Companies of 2005. In addition,
Business Week named the Slingbox one of the Best Products of 2005.
Thank you for allowing me to introduce the Slingbox and the notion of
placeshifting. I look forward to giving the Committee a personal
demonstration of Slingbox technology.
APPENDIX
Recent Press Coverage
Video:
CSPAN interview (aired March 25, 2006) (RealPlayer required):
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Slingbox Video Streaming Not Perfect, but Remarkable
Washington Post
By Rob Pegoraro ? Thursday, March 23, 2006; D05
I watched television while I walked to the Metro on Tuesday morning --
and during my trip through the subway, then at my desk at the office. My TV
set was a Treo 700w "smart phone," my antenna was the phone's wireless data
connection, and the broadcast came from a small silver rectangle parked next
to the TV in my living room.
This experience had a lot in common with the first days of video on the Internet,
complete with irritating dropouts. But getting a full spread of satellite-TV channels on the
screen of a phone was a sufficiently remarkable feat that I could overlook those flaws.
The technology behind this feat came from Sling Media Inc., a San Mateo,
Calif., start-up. Its $250 Slingbox debuted last year, allowing users to
stream any video source -- over-the-air TV, cable, satellite, DVD, whatever
-- to a broadband-connected computer running Sling's software.
The Slingbox did that reasonably well and generated an impressive level
of hype in the process, but it also required some finicky configuration and
hit one nagging relevancy issue: How often are you within reach of broadband
Internet but not TV?
Since then, Sling has fine-tuned its setup software, and today it's
introducing the ability to stream video to a Windows Mobile handheld organizer
with a broadband Internet connection -- either WiFi or the wireless carriers'
data services.
This new feature both extends the reach and utility of Sling's
product and helpfully expands the ongoing debate over television's future.
Installing a Slingbox took far less work than last year. I didn't have to
turn off my computer's firewall (Sling's software requires Windows 2000 or
XP, with a Mac OS X version due by midyear) or restart the candy-bar-shaped
Slingbox over and over. The only real hassle was the wiring: audio and video
cables to a satellite-TV receiver, an "IR emitter" to send commands to that
box's remote-control sensor, and an Ethernet cable to link the Slingbox to a
wireless router.
(A WiFi receiver and digital-television tuner built into Slingbox could
immensely simplify things.)
After identifying the satellite receiver in the Sling program and
adjusting a security setting on my wireless network with the help of clear
directions on Sling's Web site, the setup concluded with my installing
SlingPlayer Mobile -- a beta release that will cost $30 for people who buy a
Slingbox after April 26 -- on the Treo.
And so I found myself watching a spring-training baseball game on the
Metro. Later on, I watched a handful of other live programs, plus a couple of
recorded shows stored on the satellite box's hard drive.
Sling's mobile software can function even on such slow data links as the
50 to 70 kilobits per second of Verizon's NationalAccess, at the cost of awful
image quality (players in that baseball game looked like the faceless
characters of an early-1990s video game) and frequent dropouts.
But with the 200 to 300 kbps of Verizon's BroadbandAccess, Sling-relayed
TV looked a lot more like TV, aside from hard-to-read text in news tickers.
Like its desktop counterpart, Sling's mobile software lets you control
the video by selecting buttons in an onscreen remote control; the lag between
selecting a command and seeing its effects seemed longer on the Treo, however.
With all of its trying moments -- say, when the Verizon broadband would
mysteriously shrivel away to 30 or 40 kbps -- Sling video also looks pretty
good compared with other options for on-the-go TV watching.
Unlike Apple's iTunes downloads or the mobile-video services of wireless
carriers, Sling doesn't require you to pay for each show or cough up a
subscription fee. Unlike video recordings transferred from a Media Center PC,
it doesn't require running complicated software before syncing large files
over to your handheld.
On the other hand, networks, broadcasters and cable or satellite
operators don't make anything extra off the Slingbox either. Some people in
those businesses seem uneasy about the way the Slingbox gives customers so
much more control over their TV viewing.
Like that's a bad thing.
Living with technology, or trying to? E-mail Rob Pegoraro [email protected].
c 2006 The Washington Post Company
TV Here, There, Everywhere
New York Times
By David Pogue, March 23, 2006
IN the olden days, Americans gathered in front of the television sets in
their living rooms to watch designated shows at designated times. You had a
choice of three channels, and if you missed the broadcast, you'd feel like an
idiot at the water cooler the next day. Quaint, huh?
Then came the VCR, which spared you the requirement of being there on
time. Then cable TV, which blew open your channel choices. Then TiVo, which
eliminated the necessity of even knowing when or where a show was to be
broadcast. What's next - eliminating the TV altogether?
Well, sure. Last year, a strange-looking gadget called the Slingbox
($250) began offering that possibility. It's designed to let you, a traveler
on the road, watch what's on TV back at your house, or what's been recorded
by a video recorder like a TiVo. The requirements are high-speed Internet
connections at both ends, a home network and a Windows computer - usually a
laptop - to watch on. (A Mac version is due by midyear.)
Today is another milestone in society's great march toward anytime,
anywhere TV. Starting today, Slingbox owners can install new player software
on Windows Mobile palmtops and cellphones, thereby eliminating even the
laptop requirement.
On cellphones with high-speed Internet connections, the requirement of
a wireless Internet hot spot goes away, too. Now you can watch your home TV
anywhere you can make phone calls - a statement that's never appeared in
print before today (at least not accurately).
Now, if you don't travel much, and even if you do, your reaction to this
statement may well be, "So?"
Sure enough, the Slingbox has always been intended to fill certain
niches. It's for people with a fancy satellite receiver downstairs in the
living room, but who want to watch upstairs in bed before retiring. It's for
the hotel-room prisoner who wants to watch a movie on a TiVo at home, having
realized that it's cheaper to pay $10 for a night of high-speed Internet than
$13.95 for an in-room movie. It's for the traveler who wants to keep up with
his hometown news while away.
And if you have friends who can't see the big game because of a local
broadcast blackout - really, really good friends - you could even let them
download the free Slingbox player software and watch your local broadcast,
though the Slingbox folks don't endorse this last use.
Now that all of this is available for cellphone viewing - with no
monthly fee - well, the mind boggles.
THE Slingbox itself is truly eccentric-looking. Picture three squares
of chocolate broken off a Nestl� bar, cast in silver and blown up to 10.6 by
10.6 by 4 inches. ("It's supposed to be an ingot," a spokesman corrected me.)
For most people, setting it up is a 15-minute prospect, according to the
company. An Ethernet cable connects the Slingbox to the router on your home
network. (Wireless networks aren't fast enough to handle the Slingbox's
video reliably. If there's no Ethernet jack handy, Sling will sell you a
$100 Powerline adapter, which you plug into an electrical socket; it makes
the electrical wiring of your house part of your network.)
Another cable connects a spare video recorder or TV output to the
Slingbox itself. It has inputs for RCA and S-video cables; you can switch
between sources from the road. A third cable is designed to control the
channel-changing and other functions of your recorder or cable box; it
terminates with two so-called infrared blasters, which are meant to be taped
in front of the infrared "eyes" of your TV equipment.
But suppose you're not most people. Suppose you're a newspaper reviewer
with bad karma and a router that Slingbox doesn't recognize. In that case,
setting up a Slingbox can be a more time-consuming ordeal. Anyone still
puzzling over the phrase "the router on your home network" might be in
trouble, too.
Once the setup is done, though, and once you've installed the necessary
software, your PC's speakers burst to life - and there, on your computer
screen, is whatever's on TV right now. By clicking a photographic on-screen
representation of your actual remote control, you can change channels, see
what's available to play on your TiVo, pause or rewind, or even tell the TiVo
to record something. All of this works equally well at home (across the
network) and on the road (across the Internet), although your components at
home take a couple of seconds to respond.
(Unless you've bought a cable splitter, changing what's on the TV screen
from the road also changes it at home, which could alarm anyone who happens to
be watching TV in person at the time.)
The sound is excellent - and at home, viewed across your home network, so
is the standard-definition video. Viewed away from home, the video is only
O.K. There are blotchy patches here and there, not to mention periodic
temporary freeze-ups; all of it depends on the Internet connection speeds at
both ends. The video resembles a VCR recording, which is still perfectly fine
for talk shows, reality shows, game shows and movies where sweeping visuals
and special effects aren't the main attractions.
Once that's all running, you can embark on the next adventure: tuning
into your Slingbox from a palmtop or cellphone. This task involves downloading
and running another installer from slingmedia.com - free to Slingbox owners
until April 26, and a one-time $30 payment thereafter.
At that point, you can use tiny tappable on-screen controls to tune in to
your home TV and video recorder, and control all their functions, just as you
can with a laptop. The Slingbox can direct its video to only one gizmo at a
time, however; you can't watch on your cellphone while someone else is using a
laptop.
Once again, all you need is high-speed Internet access. For PocketPC
palmtops (like the HP iPAQ and Dell Axim), that usually means finding a Wi-Fi
hot spot in a hotel, airport or coffee shop. Life is even easier if you have a
cellphone with a $60-a-month high-speed cellular data plan like Verizon's
EV-DO network (Palm Treo 700w, Samsung i730, and so on); in that case, you
can tune in from anywhere in the 100 major cities with coverage. You can kill
time watching your own TV while in cabs, friends' houses and the line at the
Department of Motor Vehicles.
The mobile Slingbox player also works over Bluetooth or U.S.B.
connections to the Internet, meaning that you could watch on your palmtop over
an Internet signal provided by a nearby laptop. But that's sort of pointless
- if you have a laptop, why not watch your TV on it and enjoy the much bigger
screen?
On the small screen, the video once again has perfectly adequate VHS
quality. If the Internet connection is very slow - for example, if your
cellphone is outside those 100 cities covered by EV-DO - you can opt for
"slide-show mode" (one frame of video a second, accompanied by full audio).
On the pocket player, Sling Media has yet to fashion photographic
remote-control replicas for all 5,000 different TV components offered by the
laptop version. Still, the most important buttons are all available as generic
rectangles; they appear when you tap the right "soft key" on your palmtop or
phone. Keyboard shortcuts are available for most functions, too: to control a
TiVo from the Treo's thumb keyboard, for example, you can press R for record,
P for play, F for fast-forward.
The Slingbox isn't the only video-to-go option, of course. TiVoToGo, the
iPod TV store and Archos pocket players all let you carry TV shows and movies
on your travels - but only if you record material and transfer it before the
trip. Orb (orb.com) is free and also works with some cellphones, but gets its
video from a PC with a TV tuner card, not from your actual TV and video
recorder. And, of course, your cellphone company will be happy to sell you
short TV shows - a canned selection of their choosing, not yours - if you're
willing to pay a monthly fee and watch exclusively on your phone (not your
laptop).
The Slingbox and its simple, satisfying new cellphone/palmtop player
join those portable personal-video options. It seems clear that along with
traditional TV schedules and traditional TV channels, the next victim of
high-tech progress may be the traditional TV couch.
Take Your Cable Channels With You on the Road
New York Times
By KEN BELSON, December 21, 2005
In 2002, Blake Krikorian and his brother Jason were beside themselves.
Their beloved San Francisco Giants were in a pennant race, yet Blake and
Jason, two Silicon Valley engineers, were traveling so much that they missed
many of the games on television.
Desperate, they signed up for a service that offered live audio and
video of the games over the Internet, only to find that subscribers from San
Francisco could not watch Giants games because of blackout restrictions.
The idea for Slingbox was born. The Krikorians decided to find a way to
let cable and satellite television customers watch what was on their home
televisions while they were on the road. After several years developing the
product, their company, Sling Media, released its first boxes in July.
"I was paying $80 a month to Comcast, and I have a broadband pipe in
my house and all these other displays," Blake Krikorian said. "So why can't
I just watch the TV coming into our house?"
Just as TiVo and other digital video recorders ushered in the concept
of "time shifting" a few years ago, the Slingbox promises to make "place
shifting" a reality for households. By letting consumers connect with their
cable or satellite hookups when they travel, Slingbox has the potential to
splinter further the way television is watched.
For instance, even people living far from their hometowns could get a
Slingbox, allowing them to watch their local television in another city or
even country. Sling Media does not endorse this use of its device for fear of
antagonizing cable and satellite companies, which may see it as illicit
sharing.
As with music, where many younger consumers are forgoing CD's in favor
of downloadable songs, television viewers - with the help of devices like
Slingbox - are expected to download more and more of their programming when
and where they want it.
"The trend over the past 30 years is towards fragmentation," said John
Mansell, a cable industry analyst at Kagan Research. "It makes life a little
more complicated" for cable and satellite operators and programmers.
For consumers, however, Slingbox could not be simpler. The size of a
shoe, it sells for $250 and unlike TiVo does not require a monthly
subscription. The box can be hooked to a cable set-top box or a digital
video recorder, and must be linked to a broadband line so the video can be
"streamed" to a laptop or other device. Faster connection speeds provide
better video quality.
Users install software on laptops that communicates with the Slingbox
over a high-speed Internet connection at a hotel or other remote location.
(Again, faster connection speeds make for better viewing.) Users can watch
what is playing live on the cable or satellite service at home, or anything
stored on a digital video recorder. A virtual remote control that appears on
the laptop allows users to change channels or play, pause or
rewind a recorded program.
For all its convenience, few people are all that interested in watching
programming intended for full-screen televisions on laptops, especially if
connection speeds are slow and the picture is jerky. But Mr. Krikorian, who
has worked as an engineer in Silicon Valley for 15 years, says he has
developed a solution called stream-optimization technology.
Through a sophisticated software program, it automatically adjusts the
video stream to match the quality of the broadband connection. Mr. Krikorian
named the technology "Lebowski" after his favorite movie, "The Big Lebowski."
"Our product allows the video to abide by the network conditions at any
time," Mr. Krikorian said, paraphrasing the line "the dude abides," delivered
by the film's star, Jeff Bridges.
The technology is one reason Slingbox already has a cult following
among travelers like David Garrison who crave a touch of home while on the
road.
Mr. Garrison, the chief executive of iBahn, a company that sells
technology to hotels, travels to Asia once every three months and is in
Europe every six weeks. He loves to ski at home in Salt Lake City and can
make plans to hit the slopes by watching the local news to check the weather
conditions in Utah. He also watches University of Utah sports teams and
programs from the Golf Channel that he records on his TiVo.
Mr. Garrison says he watches just as much television in hotels as he
did before. But now he is more likely to watch what interests him rather
than flip through the channels on the hotel television in search of something
appealing.
"Before I had the Slingbox, I would turn on the TV and do the guy thing
and spend two seconds on each channel before turning it off," said Mr.
Garrison, who uses a laptop with a 12-inch screen, connected to headphones.
"Now, I feel like the time is better spent than just zoning out in front of
the TV."
Mr. Garrison said the picture quality on his laptop was adequate and
the sound quality superb. Laptops that have an S-video output jack can
connect to a television for better viewing.
Slingbox is already stocked in almost 4,000 stores, including Best Buy,
CompUSA and Circuit City. Mr. Krikorian said unit sales were nearing "six
figures." The company has lined up financing from Doll Capital Management,
Mobius Venture Capital, Hearst and Lenovo, the Chinese computer manufacturer.
There are drawbacks, though. In addition to having to watch programs on
a small computer screen, Slingbox users may also interfere with their
family's viewing back home; in some cases when channels are changed remotely,
the television at home moves with it, and vice versa.
For now, video streamed from a Slingbox cannot be viewed on an Apple
Macintosh computer, though Mr. Krikorian says his company will announce a
solution to that problem in January.
And as with TiVo, which has lost market share because cable and
satellite set-top box makers have developed their own DVR's, imitators are
catching on. Sony, for instance, sells LocationFree, a $350 device that
connects to a home entertainment system and beams television signals to a PC
or hand-held device anywhere in the world. Others are sure to follow.
Down the road, programmers, particularly sports teams, may object to
Slingbox's ability to sidestep their blackout restrictions. Cable and
satellite operators could also oppose attempts by their subscribers to use
Slingbox to give others free access to their programming.
But Mr. Krikorian sees opportunity in these potential conflicts. He is
talking to cable companies that could lease Slingboxes to their subscribers,
he said, giving them fewer reasons to switch to a rival provider and more
reasons to buy a faster broadband connection. Down the road, Web content,
including advertisements, could be linked to shows beamed from the Slingbox.
For now, though, Mr. Krikorian is optimistic that the Slingbox will do
for travelers what TiVo did for couch potatoes.
"You should always be concerned about competition," he said. "But I
think we're in a good spot because no one has the technology we have. We've
got a head start."
Gadget of the Year - 2005
Jupiter Research
Michael Gartenberg , December 28, 2005
This one was another really hard category. Lots of interesting things
that came to market this year. I was looking for something new, different and
ground breaking for this category. There's still lots of choices but it came
down to one for me. The Slingbox from the folks at Slingmedia.
What's Good - The Slingbox is amazing. From the unique design and the
wonderful setup experience, the Slingbox does one thing and does it really
well. (For fun, try accessing your music and pictures too using the TiVo home
media option.) Like all groundbreaking devices, it doesn't fit into some neat
category, it creates a whole new one (and a new buzzword, place-shifting).
For the weary road warrior killing time in an airport or sitting in a hotel
room in a place far away, the Slingbox brings some of the comforts of home to
your laptop and soon to other devices. If you travel a lot (or just like
the idea of accessing your content from anywhere in the world) and you have
a good broadband connection, you need to get one of these things. At $249,
it's one of the best bargains in consumer electronics.
What's Missing - Setup is excellent but if you're working in a slightly
funky network setup, you're going to stumble. Sling's challenge is going to be
to keep updated with all the new stuff coming to market while increasing
support for legacy stuff. It will also be nice to see support for more
platforms beyond Windows. Smartphone, PocketPC, Mac OS and the like are all
in the works and hopefully we'll see them soon.
Slingbox lets your TV travel with you
Clever design lets you watch, control your home TV from a PC screen
MSNBC
By Gary Krakow, Updated: 1:11 p.m. ET Dec. 21, 2005
You know a device is ground-breaking when it doesn't fit into any
particular category.
Slingbox might be called a personal video broadcast box. Or a cable
TV-over-computer box. Or a junction box that lets you access your cable,
satellite, DVD, or VCR from anywhere on the planet.
This very clever device works by letting you "broadcast" an audio/video
signal - via your high-speed Internet connection - and watch the result on a
PC or laptop. You can watch that feed on any computer running the Slingbox
software, anywhere in the world.
Slingbox is pretty sophisticated and needs your PC and home computer
network to be sophisticated as well. Aside from that high-speed Net
connection, minimum requirements include a PC running Windows XP or 2000 SP4
and an Ethernet connection to your router. You can get the full list on the
company's Web site.
At approximately 10.5 by 4 by 1.5 inches, the Slingbox is nice and
compact. You can place it anywhere; in my case it rested perfectly on top of
the cable TV control box.
First, you need to connect your Slingbox to your video source, which
can be a cable TV box, a satellite service, a DVR such as TiVo, a DVD player
or even a VCR. Slingbox has antenna (good), composite video (better) or
S-video (best) inputs for the incoming signal.
Next, you hook Slingbox to your computer network via its Ethernet port.
That can be tricky if, as in my case, your high-speed networking hub is
nowhere near your living room TV setup. It would have meant more than 100
feet of Ethernet cable running through the living room. You try explaining
that to the spouse.
Slingbox has thought of that, fortunately, and there is an easier way.
You can purchase a separate Netgear 802.11 wireless game adapter and
configure it to your home network's wireless settings while it is attached
to your computer. Then you unplug it from the PC and plug it into the
Slingbox.
The last step is to install the Slingbox control software onto your
computer and follow the step-by-step, on-screen instructions. During that
process, the software assigns a 32-digit, alpha-numeric identification tag
to your Slingbox. That ID allows any PC running the Slingbox software to
search for - and find - that box via any Internet connection.
What that means is once you install and configure the software you can
control and watch your Slingbox anywhere you can access a high-speed Internet
connection. That's very cool. The system also allows you to use and choose
from multiple Slingboxes installed in your home.
I particularly like the on-screen remote controller. As part of the
set-up process, you tell the Slingbox software which cable or satellite
service you're using. When you're finished, the Slingbox remote control
window on your computer screen acts like the actual TV remote control -
right down to button placement.
I have to admit that I was skeptical about Slingbox's worth until I
actually started using the system. Now it's difficult to stop. I find myself
keeping a Slingbox screen open on my computer desktop all the time -
sometimes with the sound muted - and then taking advantage of the latest news
bulletins, weather, traffic reports and the occasional football game or two.
(You thought you weren't getting any work done as it was.)
One interesting note, regular TV channels produce a larger computer
image than their high-definition equivalents. That's because Slingbox lets
you watch a 4:3 image on your computer, but the 16:9 HD images just look
cut-off.
The bottom line is that Slingbox works exactly as described and is
addictive. It allows you to watch and listen to TV wherever you are. Video
quality is very good whether you watch inside or outside your home. I
haven't yet tried it overseas but I plan to in the very near future.
Slingbox is available online and retails for $249.99. They're
currently offering $50 online discounts as well. It's a good deal.
Looking toward the future, it would be great if the Slingbox gurus
could extend this remote control TV service to mobile phones. I know I
would be near the front of the line for the software when they accomplish
that.
c 2006 MSNBC Interactive
c 2006 MSNBC.com
URL: http://www.msnbc.msn.com/id/10546353/
Remote Control
Never miss a game again while traveling. The new Slingbox sends your home's TV
channels to a laptop
October 3, 2005
If you're a traveling sports fan who hates to miss your home team's
games, technology has just thrown you a lifeline. The Slingbox, from Sling
Media Inc., a tech firm in San Mateo, Calif., plugs you into your own living
room, enabling you to use your laptop to watch every television channel that
you get on your home TV. Fred from Philadelphia can sit in a Tokyo hotel room
and watch the Phillies on his computer screen, and Harry Kalas's calls will
lose nothing in translation.
Blake and Jason Krikorian, who along with Bhupen Shah cofounded Sling
Media, say they were inspired to invent the Slingbox in 2002 when they were
traveling often for work and had a hard time following the San Francisco
Giants, who were in a pennant race. They thought, What if it were possible to
tap into your home TV signal through the Internet? Three years later they've
made it happen. On a trip to Singapore in May, Blake was able to watch the
UCLA women's water polo team -- coached by his brother Adam -- win an NCAA
title because the game was broadcast on CSTV, part of his cable package
back in California. "I was lying in bed watching it in my hotel room just
like I was back home," he says.
The Slingbox, which costs $250 (no subscription fees), is a brick-sized
piece of hardware that connects to your home cable or satellite box and works
with software that you load onto your PC laptop. (A Mac version is in the
works.) True, you need to have both feet firmly planted in the 21st century
to use this device -- your home must have broadband and a router, and when
accessing your programming, you must also have a broadband connection at your
remote location. Installation takes between 15 minutes and an hour. While
the tech-savvy should be able to do it, you can pay someone at CompUSA
or BestBuy (currently the only brick-and-mortar retail outlets for Slingbox,
though more are expected) an extra $100 or so to handle the installation.
Once you get Slingbox installed, it's easy to operate. You change
channels by clicking on a remote-control interface on your computer screen.
Your home TV need not be on. The video quality is not as clear as a TV's, but
it's not bad. I watched a Mets-Phillies game on a public wireless connection
in New York City's Bryant Park, and I could make out Tom Glavine's pitches
O.K. But when the Phillies' David Bell stroked a ball into rightfield and the
broadcast switched to a wide-angle shot, I could no longer follow the ball
and had to read the body language of rightfielder Victor Diaz to see that it
was dropping in for a hit. Text on the screen was clear; I could read the
ESPN news crawl just fine.
Improving the picture quality is a big part of the company's mission.
Since the commercial release of Slingbox on June 30 it has issued three free
software patches to make the picture better. But such quibbles aside, it's a
wonder that you can flip through the channels on your home TV from anywhere
in the wired world. And you can watch any programming, not just sports. You
can even access your TiVo and watch those stored episodes of The Sopranos.
Your TV can be as portable as a laptop.
One potential complication: You are not just watching TV, you are
watching your TV, so if you're tuning in while on the road and someone at
home wants to watch a different program, you may be in for a long-distance
tug-of-war over the remote.
MR. STEARNS. Thank you. Mr. Feehery.
MR. FEEHERY. Thank you, Mr. Chairman. I am the guy that is
following him. I am John Feehery and I represent the Motion Picture
Association of America. Our members companies are made up of the
seven major studios, Fox, Disney, Paramount, Warner Brothers,
NBC/Universal, Sony Pictures, and MGM. As you can see, these are
very interesting times in the movie business. Since the Supreme Court
declared unambiguously, in the Grokster v. MGM decision, that Internet
business models based on the principle of theft were not legitimate and
should cease operations, we have seen an incredible burst of creative and
legal business activity.
The market for visual distribution of motion pictures is still very
young, yet we have already seen the following very important
developments: feature films are now available for download from all the
major studios through online services that include Movielink and
CinemaNow. Disney is offering legal downloads of some of its most
popular television shows, including Lost and Desperate Housewives for
the video iPod. NBC/Universal and Viacom followed suit. You can see
Dora the Explorer, Spongebob Squarepants, and the Daily Show on your
video iPod.
Apple hit the one million download mark within three weeks, and
today there have been more than 12 million video downloads through
iTunes and more than 50 TV shows are available. Fox, NBC/Universal,
Disney, and Viacom have all entered into agreements with Verizon to
distribute TV and video content through its new FiOS network. Disney
and Verizon struck a deal to provide episodes of Lost, created
specifically for the V-Cast network. Warner Brothers is partnering with
AOL to launch the first broadband television network, In2TV. This
network offers the largest collection of free on-demand TV shows on the
web, including Welcome Back Cotter, Chico and the Man, Kung Fu,
Lois and Clark, and Maverick, my personal favorite. NBC/Universal has
announced the licensed peer-to-peer distribution of some of their films
and TV shows through Wurldmedia. It also announced an agreement
with Aeon Digital to make similar content available on demand over the
Internet.
Disney has spun out MovieBeam, a video-on-demand movie service,
with the help of Cisco, Intel, and others. This service offers the first
wireless distribution and on-demand access to high definition films in the
U.S. And Sony released the Universal Media Disc format for its Play
Station Portable. This specialized format has led to over 350 titles being
licensed by our movie studios. This explosion in activity, legal activity,
has happened for a very simple reason: what is bad for the black market
is very good for the legitimate marketplace. And, Mr. Chairman, what is
good for the legitimate marketplace is very good for the consumer. It is
also good for policymakers such as yourselves. It means more tax
revenues for Federal, State, and local government. It creates jobs. For
example, the U.S. motion picture industry employs nearly 750,000
people nationwide. These jobs are not just in California. Increasingly,
major motion picture productions are created all across the United States,
including Florida, Mr. Chairman, Texas, Louisiana, New York, and, Ms.
Ranking Member Schakowsky, my home State of Illinois. And a
legitimate marketplace encourages even faster digital developments in
the long run. That in turn means more choices and more convenience to
consumers.
The Grokster decision has provided us with commonsense rules of
the road that inspire the legitimate marketplace to move forward. The
Congress should continue down that road by ensuring that content is
adequately protected as we move ever further into the digital age. Both
broadcast flag and analog hole legislation will help spur the transition to
digital television and a robust digital marketplace, rich with more choices
for consumers. But by weakening copyrights and promoting freeloading,
we will hurt the legitimate marketplace. Piracy devices that circumvent
content protection should not be protected in law. The so-called analog
hole shouldn't be allowed to persist and slow down the transition to a
vibrant digital marketplace for audiovisual content. And a mistaken
understanding of the fair use doctrine that will lead to greater piracy
shouldn't be codified in law.
All too often, the content industries and the consumer electronics
industries have been pitted against one another in legislative battles. But
choosing between technology and content, and the content it carries, is
like choosing between Florida and the sunshine. It doesn't make any
sense and it is a false choice. The content and technology industries are
working together, as I show with the different examples, to provide
consumers the best and the most entertaining value.
Mr. Chairman, it is impossible to predict with any accuracy what is
going to happen in the future. You can see all of these new
developments that we knew nothing about three or four years ago. That
is the nature of a vibrant marketplace. But it is possible to predict that if
commonsense rules of the road that respect copyrights are established, if
freeloading is discouraged, and if the marketplace is allowed to work to
provide consumers the most choices at the best prices, at the end of the
day, the consumer will win and that is how it should be. Thank you.
[The prepared statement of Mr. Feehery follows:]
PREPARED STATEMENT OF JOHN FEEHERY, EXECUTIVE VICE PRESIDENT, EXTERNAL
AFFAIRS, MOTION PICTURE ASSOCIATION OF AMERICA
Mr. Chairman,
Thank you for this opportunity to testify before your Committee today.
My name is John Feehery, and I am Executive Vice President for External
Affairs for the Motion Picture Association of America.
Our member companies are made up of the seven major studios: Fox, Disney,
Paramount, Warner Bros., NBC/Universal, Sony Pictures and MGM.
These are interesting times in the movie business.
Box office receipts were down about eight percent last year.
No one knows exactly what caused this decline. Perhaps it was the movies
themselves. Perhaps it was piracy. Perhaps it was the prevalence of home
theaters.
But while the box office may be disappointing, the movie business itself
is adapting in many exciting and unpredictable ways.
Since the Supreme Court declared unambiguously in the Grokster v. MGM
decision that internet business models based on the principle of theft were
not legitimate and should cease operations, we have seen an incredible burst
of creative business activity.
The market for digital distribution of motion pictures is still very
young, yet already we have seen:
Feature films now available for download from all of the major
studios through online services that include Movielink and CinemaNow.
The video iPod together with the announcement from Disney that
it was offering legal downloads of some of its most popular television shows,
including Lost and Desperate Housewives.
NBC-Universal and Viacom followed closely thereafter. You can
now see episodes of popular shows like Dora the Explorer, Spongebob
Sqaurepants and The Daily Show on your video Ipod.
Apple hit the 1 million download mark within three weeks, and
today there have been more than 12 million video downloads through iTunes and
more than 50 TV shows are available.
Fox, NBC-Universal Disney and Viacom are all entering
agreements with Verizon to distribute TV and video content through its new
FiOS network.
Reports that Disney has struck a deal with Verizon to provide
so called episodes of the popular television series "Lost" created
specifically for distribution to telephones through Verizon's V-Cast network.
Jon Stewart lovers can also get The Daily Show on their
Verizon V-Cast phones.
Warner Bros. partnered with AOL to launch earlier this month
the first broadband television network-In2TV-that offers the largest
collection of free on-demand TV shows on the Web, including such Warner Bros.
classics as "Welcome Back, Kotter"; "Chico and the Man"; "Kung Fu"; "Lois
and Clark"; and "Maverick."
NBC Universal announcing the licensed peer-to-peer
distribution of some of their films and TV shows through the Wurldmedia
network, as well as an agreement with Aeon Digital to make similar content
available on-demand over the Internet.
The announcement of MovieBeam, a video-on-demand movie
service spun out of Walt Disney Co. with the help of Cisco, Intel and
others, which offers the first wireless distribution and on-demand access
to high-definition films in the U.S.
Sony's release of the Universal Media Disc format for its
Play Station Portable, with movie releases being supported in this
specialized format by many of the major studios which together have
licensed over 350 titles.
Announcements by each of the major studios in support of
next-generation, high-definition DVD formats.
MTVNetworks, a division of Viacom, has already launched 4
Internet broadband channels-Comedy Central's The Motherload, Nickelodeon's
TurboNick, MTV's Overdrive, and VH1's V-Spot, all of which offer
consumers a rich array of on-demand, interactive content.
This explosion in activity has happened for a very simple reason: what
is bad for the black market is very good for legitimate market place.
And what is good for the legitimate marketplace is good for policy
makers such as you.
A legitimate market place means more tax revenues for federal, state
and local government.
A legitimate marketplace creates jobs and is good for America's
economy. For example, the US Motion Picture Industry employs nearly
750,000 people nation-wide.
The average motion picture employs 350-500 people (listed in the film's
credits) and with larger special effects driven films that number can be in
the thousands.
In short, the motion picture industry means jobs for middle class
Americans who make, on average, $47,000 per year.
These jobs are not just in California either. Increasingly, major
motion picture productions are created all across the United States,
including in Florida, Texas, Louisiana, New York, and my home state of
Illinois.
When Hollywood goes on location, it not only benefits the people
working on the movie, but the entire community as well.
A major motion picture on location contributes up to $200,000 per day
to the local economy, with people filling gas tanks, using the local dry
cleaners, caterers, stores, hotels, etc.
Finally, by encouraging the legitimate marketplace, our entertainment
products drive demand for improved technologies and broadband services.
In turn, that means more choices and more convenience for consumers.
As we move into the digital future, the Congress faces a simple choice.
It can take steps to help foster a more robust, more creative and more
exciting marketplace for consumers, content providers and tech manufacturers.
It can enact and enforce laws that respect copyrights, inspire
cooperation between tech and content, and crack down on freeloaders and
pirates.
The Grokster decision was a good start, by providing us common sense
rules of the road that inspired the legitimate market place to move forward.
The Congress should continue down that road by ensuring content is
adequately protected as we move ever further into the digital age.
Both broadcast flag and analog hole legislation will help spur the
transition to digital television and a robust digital marketplace, rich with
more choices for consumers.
But by ignoring copyrights and promoting freeloading, we will hurt the
legitimate marketplace.
You shouldn't protect in law piracy devices that circumvent content
protection.
You shouldn't permit the so-called analog hole to persist and slow down
the transition to a vibrant digital marketplace for audiovisual content where
DRM technologies can function properly.
You shouldn't codify in law a mistaken understanding of the fair use
doctrine that will lead to greater piracy.
Fair use does not mean that our content is fair game for anyone who
wants to take it and consume it without paying.
All too often, the content industries and the consumer electronics
industries have been pitted against one another in different legislative
battles.
But trying to choose between technology and the content it carries is
like trying to choose between Florida and Sunshine.
It is a false choice. The content and technology industries must work
together to provide customers the best and most entertaining value.
Mr. Chairman, it is impossible to predict with any accuracy what the
future holds.
That is the nature of a vibrant market place.
But it is possible to predict that if common sense rules of the road
that respect copyrights are established, if freeloading is stopped, and the
market place is allowed to work to provide consumers the most choices at the
best prices, at the end of the day, the customer will win.
And that is how it should be.
Thank you, Mr. Chairman.
MR. STEARNS. I thank the gentleman. Mr. Denney. I just need you
to put the mike on.
MR. DENNEY. There we go.
MR. STEARNS. Yes.
MR. DENNEY. Thank you, Mr. Chairman and Ranking Member
Schakowsky and all the members of the subcommittee. Thanks for
having me here today. Before I get going, I just want to say, Blake, I feel
bad for you as a Giants fan, but you should try being a Cubs fan some
day. That will be even better.
TiVo was founded in 1997. We have been working since then to
bring innovative and compelling new consumer experiences, television
experiences to consumers. Currently, we have a little above four million
subscribers. New innovations often challenge existing business interests.
Live performers resisted the player piano. The recording music industry
resisted radio. The broadcast industry didn't like the idea of cable
television. It was feared that the VCR was going to destroy the movie
and television industries when it first debuted. Innovation, while
sometimes threatening, is ultimately good for the consumer, the
innovator, and the content industry. To address what the point is here,
we are not critiquing current efforts that the industry has, just raising the
fact that sometimes technology can be threatening.
Current law provides a solid base for innovation. It has provided a
balance between the copyright holders' rights and innovation that can
delight consumers and give birth to new markets. The key to this success
is providing flexibility in allowing the market and the court system to
determine the reasonable balance between copyright holders' rights and
the consumer's right to enjoy legally acquired content on their own
terms. The dynamic balancing act has allowed the cycle of innovation to
continue.
A longstanding interpretation of the Copyright Act makes it clear
that the act was intended to punish bad behavior rather than stifle
innovation itself. Innovators like TiVo must be free to concentrate on
developing compelling new ways to enjoy legitimately acquired media.
Innovation can create business opportunity and benefit the consumer at
the same time. The TiVo DVR has given users unprecedented flexibility
in finding and watching television. TiVo provides the ability to pause
live TV, record each episode of your favorite TV show, find shows that
are of interest to you. Online scheduling capability ensures that you
won't miss your favorite show, even if you forget to record it after you
left the house. Our new KidZone feature allows parents to create what
they deem to be a safe environment for their children based on their own
personal values and interests.
None of these innovations would have been possible without the fair
use provision of the Copyright Act. Consumers must be allowed to make
personal copies of shows that they want to watch in order to watch them
when they want to watch them. Much of the innovation of fair use has
enabled increased consumption of media by consumers and new
opportunities for content providers. At the time TiVo debuted in the
market, many in the television industry predicted the demise of ad-
supported television. The actual result has been that TiVo subscribers
often watch more television than they did before. Broader audiences are
able to watch shows that they otherwise would not have watched.
Educational and informational programming for children is not always
available when it is convenient for parents or the children. TiVo is
always working on innovative tools for advertising on the DVR
environment as well, and working on tools that are attractive to both the
consumer and the ad and content industry at the same time.
Finally, TiVo is a strong supporter of protecting content against
piracy. We condemn piracy and take strong measures to protect content
stored on the TiVo DVR. There is no room for piracy in striking the
reasonable balance between innovation and the content owners' interest
and consumers' needs. However, we don't believe the right approach is
to legislate the need for particular technology, but instead believe the
marketplace and industry should be left to determine the right approach.
Indeed, TiVo has recently been criticized by some members of the open
source community for implementing certain content and system
protection schemes. We believe that the fact that our direction causes
tension on both sides of the issue probably indicates that we are on the
right path to balance.
The balance provided in our Copyright Act by the fair use doctrine
has served our Nation well. It is fostering an environment that has
propelled the United States into the current leadership position in
technology and innovation. It has served consumers by enabling them to
lawfully acquire content in new and compelling ways. And it has
benefited the content providers by providing unforeseen markets and
demand for new content. We urge this committee and Congress to
preserve fair use and ensure that it is not undermined or weakened. I
would be happy to answer questions that you may have, and I have an
opportunity for a short demonstration of TiVo capabilities.
MR. STEARNS. Sure. Go ahead. Hold on just one second. You
can't hear? We need you to use the mike so that it is being recorded.
MR. DENNEY. Is that okay?
MR. STEARNS. Yes.
MR. DENNEY. Okay, I will try to make that work. So one of the key
capabilities of TiVo is controlling live television, so we don't have a live
television signal, but it basically works this way.
[Video.]
MR. DENNEY. I am watching television. If the doorbell rings, I can
now hit pause. The television signal that is coming in my house is now
paused. It is constantly being buffered--every half-hour of live
television. So I can basically be interrupted from the television and be
able to walk away. I can also record television, so as I record television,
it creates what we call a now-playing list. So a now-playing list is a list
of recordings that exist on my TiVo DVR. So this is a list of all the
shows that I have recorded. These are things that I have deemed that I
am interested in. We can also help people find interesting content or
content that are of interest to them. So in this case, I know that I want to
watch 24, but I don't remember exactly when it is on or I know that there
are different reruns that might be on. I can use tools like search by title,
which allows me to enter a program show, and it will list all the airings
of the show coming up. In this case, you see 24 is on quite a bit on
satellite. I can set to record this episode. I can get a season pass. If I get
a season pass to this, I can record every episode of 24 that comes on. I
can say only record new episodes. Don't record reruns. So I can hone in
on what I want to watch.
Another thing I can do is set up what is called a wish list. So if I
have a particular interest that I want to find content about, in this case, I
might be interested in cooking or I might be interested in chocolate in
particular. I can set a wish list and then this will go off and find shows
that fulfill that particular interest. So in this case, this is cooking and
chocolate and I can look at the shows that are coming up and I can shop
through the shows coming up to find the things that might be of interest
to me.
The last thing I wanted to show, recently we announced that we have
an initiative called KidZone, and what KidZone allows you to do is take
the shows that you have recorded and allow the parent to determine what
is appropriate for their children. So we leverage both V-Chip-like
ratings, allow the parent to set up their own criteria, identify shows that
they want their children to be able to watch, and what it does is take that
now-playing list and then filter it down to only the shows that are child-
appropriate. So now your children are within this environment and they
have full control over what they watch, but it is what you, the parent,
have determined. Without the ability to record, I wouldn't be able to
create this environment and set this up for my kids. We are also working
with third parties like Common Sense Media, like other third parties for
recommendations to leverage search tools that allow parents to find
appropriate television, including taking the EI data, the educational and
informational data, that comes in the broadcast signal and a lot of people
do hone in on educational and informational programming. Thank you.
[The prepared statement of Mr. Denney follows:]
PREPARED STATEMENT OF JIM DENNEY, VICE PRESIDENT FOR PRODUCT MARKETING,
VIVO, INC.
Chairman Stearns, Ranking Member Schakowsky, and other members of the
Subcommittee, my name is Jim Denney. I am Vice President for Product
Development at TiVo. I want to thank the Subcommittee for inviting me to
testify on the vitally important issue of fair use and its impact on
innovators, consumers, and content providers. As an innovator, TiVo depends
equally on the ability to continue innovating to create products consumer
want and the continued creation of compelling content to be consumed on
TiVor devices. Accordingly, I applaud your willingness to examine the vital
role of fair use that has contributed to our nation's leadership in both
innovation and content creation.
Founded in 1997, and located in Alviso, California, TiVo pioneered a
brand new category of products with the development of the first
commercially available digital video recorder (DVR). Sold through leading
consumer electronic retailers, TiVo has developed a brand which resonates
boldly with consumers as providing a superior television experience. With a
continued investment in its patented technologies, TiVo is revolutionizing
the way consumers watch and access home entertainment. Rapidly becoming
the focal point of the digital living room, TiVo's DVR is at the center of
experiencing new forms of content on the TV, such as broadband delivered
video, music, and photos.
Summary
As an innovator TiVo depends upon strong intellectual property rights.
Yet we also depend on the fair use doctrine to bring benefits to consumers
and content creators. Fair use insures that innovators, content creators, and
consumers reap significant benefits from a copyright system that promotes
innovation, that guarantees consumers are able to enjoy content they
legitimately acquire, and that provides incentives to content creators.
Indeed, fair use has enabled the United States to maintain unparalleled
leadership in both innovative technology and content creation.
The Challenge of Innovation
New inventions have always challenged existing business interests. At
the turn of the last century the copyright industry was challenged by the
player piano. Later the radio was seen as the devil's instrument, giving away
music for free. Television was to be the death of movies. When that proved
false, it was the VCR that would destroy both movies and television.
Fortunately for innovators, consumers, and copyright owners, the content
industry was saved from itself. Each time the content industry failed to
eviscerate those technologies in court or before Congress. After failing to
throttle the new technologies, the content industry successfully co-opted
each new technology and turned such "threats" into significant profits.
Fair use has maintained the balance between the copyright holder's
exclusive rights and the promotion of progress by innovators. The fair use
doctrine ensures the balance our founding fathers put in the Constitution
when it gave Congress the power "to promote the progress of science and the
useful arts by securing for limited times to authors and inventors the
exclusive right to their respective writings and discoveries.." The secret of
our nation's success is that Congress wisely codified judge-made fair use law
in a special way. Rather than laying down rigid black and white rules,
Congress continued fair use as a flexible test allowing judges to carefully
examine the facts of each case to determine whether the use of the
copyrighted material was appropriate. In Section 107 of the
Copyright Act, Congress laid out four non-exclusive factors that allow courts
to determine a reasonable balance between the content owner's exclusive rights
and the consumer's right to enjoy the content, which in turn permits further
innovation. It is fair use's dynamic balancing act that has continued the
cycle of innovation.
Fair Use Benefits Innovators
Both the fair use language and the Supreme Court's interpretation of
the Copyright Act make it clear that the law was intended to punish bad
behavior rather than inventions that can be used for good or ill. It is the
hallmark of our law and the secret of our world technical and content
creation leadership that our nation looks to punish those that misuse
inventions rather than throttle innovation itself. In the famous Sony Betamax
case, the content industry sought to have the producers of the VCR held
liable for making a device that could copy video content. Fortunately, after
examining user conduct under the fair use provision, the Supreme Court held
that the VCR had legitimate uses, such as time shifting scheduled TV
programs; the Court found Sony not guilty of secondary copyright
infringement. After the decision, the content industry leveraged the VCR's
popularity and, from zero at the time of the Court's decision, developed a
$23 billion home video market.
Thus, innovators like TiVo are free to concentrate on developing new and
innovative devices such as TiVo's DVR. Innovators need merely ask themselves,
will this device enable consumers to better enjoy their legitimately acquired
content under the fair use doctrine. Indeed, often the innovator doesn't even
know all of the possible uses of the innovation. Thomas Edison, for example,
did not invent the record for music. He believed his wax recording cylinder
would be used to eliminate business letters - everyone would dictate and mail
wax cylinders. It was a small company that licensed Edison's invention -
RCA - that thought people might wanted to listen to recorded music in their
home. What if the sheet music publishers and live performers had been able to
stop RCA in court? We wouldn't have the over $13 billion recorded music
industry today.
The flexible fair use doctrine, honed over two hundred years of court
decisions and Congressional action, benefits innovators and is a significant
weapon in the battle for world leadership in technology.
Fair Use Benefits Consumers
Each new innovation in consumer technology has enabled consumers to
better enjoy and consume more content. The player piano allowed listening
(and singing along) to music in one's own home without learning to play the
piano. The radio brought all sorts of information and entertainment into the
home that most consumers would never have experienced. TV added moving
pictures. The VCR allowed consumers to watch shows they would have missed
because they were not home. TiVo's DVR has given consumers unprecedented
flexibility and has revolutionized how people watch TV.
TiVo gives consumers simple but powerful features such as pause so you
won't miss a single part of the program because the phone rings or the
delivery person is at the front door, as well as advanced but easy to use
features as: SeasonPassr which remembers to record your favorite series so
you won't miss an episode; WishListr that can record all the movies by a
favorite director or actor or favorite team's games, so that you won't
miss the program because you weren't home; Online Scheduling which allows
you to "phone home" and remotely program your TiVo DVR if you are stuck at
work and will miss a special program you wanted to watch. These and many
other features have brought unprecedented value to consumers. They can
enjoy their TV programs when they want and not miss a single program
because they had to work late or were tied up in traffic. Moreover, TiVo
benefits consumers by allowing them to store and easily access their
personal photographs, home videos, and their music collection.
One of the most exciting consumer benefits is TiVo's recently
announced KidZone. In concert with leading family organizations, such as
Parents' Choice Foundation, Common Sense Media, and Parents Television
Council, we have developed a safe place for parents to make decisions about
what their kids can watch based on their personal interests and values. In
1990 Congress required TV broadcasters to air at least three hours of
children's educational and informational programming each week. Yet most of
such programming is broadcast early in the mornings or weekends; not the
ideal time for viewing. TiVo KidZone will help solve this problem. In
addition to its other child friendly features, KidZone will make sure
parents can automatically program their TiVo's KidZone with a menu of
children's Educational and Informational programming, or select their
favorites from it. I am extremely proud of the new KidZone service. I could
not have summed it up better than Congressman Fred Upton, Chairman of the
Subcommittee on Telecommunications and the Internet:
"As a father of two teenagers, I understand that parents are the first
line of defense - I commend TiVo for providing parents such a valuable and
easy to use resource to determine what programming is best for their kids.
This major breakthrough of technology through public and private cooperation
directly addresses the goals that Congress and the FCC had in mind when they
created the children's Educational and Informational programming category."
Yet none of these consumer, family, and child friendly features would
have been made available had it not been for the fair use provision of the
Copyright Act. Clearly, consumers must be allowed to make "copies" of the
programming in order to watch it when they want to watch. Parents must make
copies of the educational and informational TV programs to create a kid-safe
viewing experience for their children. It is the fair use
doctrine's wise balancing of rights that foster these consumer benefits.
Fair Use Benefits Content Creators
As discussed above, much of the innovation that relies on fair use has
sparked new and increased legitimate consumption of content. This is not
surprising as one portion of the fair use balancing test is to insure that
the use will not cause excessive economic harm to the copyright owner. It was
obvious to the Supreme Court that allowing a person to watch a TV show at
that person's convenience would not harm the market for that content. Much
like Edison's wax cylinder, few could have predicted a $23 billion dollar
home video market enable by the Betamax decision. That is the elegance of the
fair use test. It is flexible enough to allow innovators to create new
devices that allow users to use legitimately acquired content in new ways.
The end result has almost invariably been increased legitimate consumption
and, in the case of the VCR, creation of a new profitable market for the
content creator.
The same is true of TiVo. TiVo's innovative technology has resulted in
consumers watching more television. Yet at the time TiVo debuted in the
market, many in the television industry predicted the demise of free
over-the-air TV. Indeed one DVR manufacturer was sued into bankruptcy. But
once again it turns out that the innovation has not only been a boon to
consumers but to the content industry as well. Studies have found that TiVo
users actually watch more television than before. Again, a new innovation
has increased the demand for content.
But equally as important, innovative devices such as TiVo are able to
take advantage of recent innovations in broadband, wireless, and cellular
technology to continue expanding the market for video content. TiVo recently
announced a partnership with Verizon Wireless that lets TiVo subscribers
schedule recordings on their TiVo device directly from their Verizon
Wireless handset. Moreover, forward looking content distributors such as
ABC and NBC are offering consumers the option of paying to download
commercial free episodes of their TV programming over the Internet as an
alternative to viewing the programming with advertisements without charge.
Thus, once again, the innovation fostered by the fair use doctrine has expanded to market for content and not harmed it.
Finally, TiVo is a strong supporter of copyright protection of content.
We condemn piracy and take strong technical measures to protect content
stored on TiVo DVRs. Indeed, when TiVo's TiVoGuard protection system was
scrutinized by the Federal Communications Commission, the Motion Picture
Association of America said:
"It appears to contain a strong level of security, including well
vetted algorithms and a well designed multi-layer security architecture. It
is upgradeable, so that it can be repaired in the event of a compromise, and
it includes the capability for device revocation and system renewability."
TiVo believes that the reasonable balance between innovation, content,
and consumers does not mean anyone should engage in piracy. Rather,
commercial piracy can, has, and will continue to be fought while at the
same time preserving fair use for consumers and innovators. Such a balance
will continue to create incentives for content providers by expanding
markets.
Conclusion
The balance provided in our copyright by the fair use doctrine has
served this nation well. It has fostered innovation that has propelled the
United States to its current leadership in technology and innovation. It has
well served consumers by enabling them to use lawfully acquired copyrighted
content in new and compelling ways. Finally, it has benefited content
providers by opening new, often unimagined markets resulting in the
demand for more content. We urge this Committee and Congress to preserve
fair use and ensure that it is not weakened or undermined.
MR. STEARNS. Thank you. Mr. Mitchell?
MR. MITCHELL. Thank you, Mr. Chairman, Ms. Ranking Member
Schakowsky and members of the subcommittee. I thank you for the
invitation to appear here today and to give you a glimpse of the
entertainment software industry's new technology. The Entertainment
Software Association serves the business and public affairs needs of
companies that publish video and computer games for dedicated game
consoles, for personal computers, and the Internet. Our members
collectively account for more than 90 percent of the $7 billion worth of
entertainment software that was sold in the United States in 2005.
MR. STEARNS. Mr. Mitchell, is this part of your presentation?
MR. MITCHELL. Yes, it will be in just a moment. I will introduce--
MR. STEARNS. Oh, sure. No, that is fine, that is fine, that is fine.
MR. MITCHELL. If I may take just a moment to set the stage for our
presentation?
MR. STEARNS. Sure.
MR. MITCHELL. In the 34 years since the Magnavox Odyssey first
emerged on the market, considered the first home console, our industry
has grown tremendously. Estimates place the global video game
industry at about $27 billion worth of sales of hardware and software
each year, and perhaps even more remarkably, that figure is expected to
double to $55 billion by 2009. Much of this growth is propelled by
enthusiasm for an entirely new generation of video game consoles, the
first example of which is already with us and has been for several
months, and that is the Microsoft XBox 360, which we will be
demonstrating for you today. The other new generation consoles which
will be out later this year are Sony's Playstation3 and the Nintendo
Revolution.
More of the industry's growth, too, will come from the increasing
popularity of online games and mobile games, particularly in Asia. As I
mentioned, the first of the new generation of consoles has arrived and I
would like to ask ESA's anti-piracy investigator, Tim Tire, to take you
through the play of an extremely popular racing game called Project
Gotham Racing. It is a game that is now in its third generation. Tim is
controlling the black car that you see there and the other cars that you see
on the road are actually being controlled by the Project Gotham software
program. However, if we were to take this console live online through
the XBox Live service, then it would give other players the opportunity
to join in the game, actually up to seven other players, and they would
control the cars that Tim is racing against. Tim, would you like to give
us a little volume on that, as well?
MR. STEARNS. How fast are the cars going? Does it have any
speed?
MR. MITCHELL. There is a mile per hour indicator. He is at about
115 now, before breaking, and back down to a more reasonable 80. I
should add, too, that the XBox Live service also allows for the download
of additional cars and additional tracks in addition to multiple player
game play. Thanks, Tim. You can turn that down for just a moment.
There are also other out-of-game features to the XBox Live online
service that includes a live messaging service. An XBox Live subscriber
can actually invite friends to join in multi-player games, send voice or
text messages, and initiate one-to-one voice chat with other players all
without interrupting game play. You would be able to jump right back
into your game from the point that you left.
There is also a feature called a friends list where subscribers can
identify which of their friends are currently online and actually view the
game that their friends are playing at any given time. There is also a
feature called XBox Live Marketplace where subscribers can download
additional game features. In this case it would involve additional tracks,
additional cars. It may also be full versions of arcade-style games, game
demos, and more.
Many are taking advantage of this XBox Live marketplace feature,
by the way. Microsoft announced just last week that the ten millionth
download had been made through the XBox marketplace. Importantly,
too, XBox and XBox Live and in fact, all of the new generation of
consoles will offer enhanced parental controls. XBox Live offers an
entire suite of password protected parental controls which are called
family settings that permit parents to tailor the types of entertainment
experiences that children are exposed to online as well as in offline game
play.
While Tim is on a roll here, I would encourage him to keep going,
but I would also like to talk about some of the other technology that has
been circulating among the panel this afternoon and that has to do with
handheld game technology. Nintendo essentially created the handheld
game device with its tremendously popular line of Gameboy products
that emerged in 1989 with the original Gameboy and has been succeeded
since by multiple generations. Estimates place the number of Gameboy
units sold at over 120 million. Nintendo's newest handheld device, it is
the silver device that is circulating among you up there, is called the DS,
for dual screen. When you get a chance to work with the dual screen,
you may want to take note that the bottom of the two screens is actually
touch sensitive and it is one of the controllers that you can use in game
play.
Sony has also entered the handheld marketplace in March of last year
with a revolutionary device called the Playstation Portable or PSP. I
believe there are a number of PSPs circulating among you, as well.
Those are the black devices. The PSP is capable of displaying still
images, movies, and audio files stored either on removable disks or on
memory sticks. One of the PSPs we are circulating is playing a game
and the other one is actually playing a full-length feature film, Spiderman
2. And so in addition to being a game playing device, it is a movie
playback device, as well.
The PSP is possible because of an entirely new generation of storage
media called the Universal Media Disc, or UMD. It is a very small
encased optical media disk that actually stores 1.8 gigabytes of data and
makes it possible for it to contain not only a full game, but also a full-
length motion picture. Even though the PSP was released last March, it
only took until the end of the calendar year, first for Sony Studios, but by
the end of the year, all of the major motion picture studios, to recognize
that this was a technology that was very much in demand by consumers
and began making movie content available in this UMD or PSP format.
These handheld devices also use blue tooth and other wireless
technologies to enable multi-player game play.
I don't want to put too much of a damper on the party, but I would
like to make just a couple of policy points, if I may. The first one being
that all of these technologies that you have seen demonstrated are
predicated on the ability to control and regulate access to the game play
experience, whether it is access to software on disks or other storage
media or access to servers that contain software or connection
capabilities. The technologies that you have seen here and the access
control technologies make it possible for consumers to get exposed to
more products than they would otherwise if access control technologies
were not available. It makes it possible, for example, for someone to
download a full version of a game and actually try it for a limited period
of time or even share it with friends and family or over the Net before
making the decision whether to purchase that particular game.
These technologies provide consumers with enhanced flexibility. It
is at the heart of the parental controls that I spoke of just a few minutes
ago, that allow a parent to regulate their children's access to game
content. It allows our industry to open markets that we never imagined
we would be in before. Access control technologies are at the heart of
some of the industry technology that is being used in China right now by
Nintendo and some of our other companies, as well.
Our industry knows how to use this technology and implement it in
ways that consumers appreciate. Our products have always been digital
and so we have always had to combat digital piracy, but we struck upon
ways of doing it in a manner that does not interfere with consumers'
enjoyment of legitimately acquired product. You have helped us to a
great extent with that by giving us the anti-circumvention provisions and
other protections that we need to defend our products.
And my final message is that we believe these laws are working
extremely well. They were well conceived, initially; they continue to
serve their purpose even when applied to today's technologies. There are
effective checks and balances with respect to the anti-circumvention
provisions. As a matter of fact, just this afternoon, there is a hearing
going on at the Library of Congress on the Section 1201 rulemaking
proceeding, which is one of the vital safety valves that keeps a check on
whether non-infringing uses are being inhibited by these technologies.
We don't believe that any further changes to these laws are
warranted. I thank you very much for the opportunity to demonstrate our
technology and look forward to answering your questions.
[The prepared statement of Stevan Mitchell follows:]
PREPARED STATEMENT OF STEVAN MITCHELL, VICE PRESIDENT, INTELLECTUAL PROPERTY
POLICY, ENTERTAINMENT SOFTWARE ASSOCIATION
Mr. Chairman and Members of the Subcommittee:
My name is Stevan Mitchell, and I am Vice President for Intellectual
Property Policy with the Entertainment Software Association. We are the
U.S. association dedicated to serving the business and public affairs needs
of companies that publish video and computer games for video game consoles,
personal computers, and the Internet. ESA members collectively account for
more than 90 percent of the $7 billion in entertainment software sold in the
U.S. in 2005, and billions more in export sales of U.S.-made
entertainment software.
We are entering another dramatic phase in the growth of this young and
vibrant industry. Every day we learn more about the promise of a new
generation of game consoles that bring previously unimagined levels of
computing power and graphics processing capability to consumers' homes.
In the 34 years since the release of the Magnavox Odyssey, computer
and video game sales have grown to over $27 billion worldwide, and are
projected to double again, to nearly $55 billion, by 2009. Much of this
growth will be propelled by enthusiasm for the new generation of video game
consoles, including Microsoft's XBox 360, Sony's Playstation3, and the
Nintendo Revolution.
Still more growth will come from the dramatic expansion of demand for
online and mobile game play -- particularly in Asia. The OECD took
particular note of these growth opportunities in its studies, last year, of
the Online Computer and Video Game Industry and on Mobile Content.
Our industry's products were born digital and have always been digital
- meaning that the industry has always had to stay ahead of digital piracy.
But we have done so with care and have learned a great deal in the process.
Entertainment software publishers learned long ago, through experimentation
with various copy-protection technologies in the 1980s and early 1990s, that
consumers would vote by closing their wallets for technologies that were
inconvenient or that interfered with their enjoyment of legitimately acquired
products.
Accordingly, entertainment software publishers have learned to employ
technological protection measures, including digital rights management (DRM)
and various forms of disc-based authentication, in ways that not only protect
publishers' investments in their intellectual property, but that enhance
consumer exposure and promote consumer choice.
1) Enhancing consumer choice
These technologies make it possible, for example, for consumers to
obtain full versions of games on a "try-before-you buy" basis - which would
simply not be possible without the ability to achieve varying levels of
access to these products. These technologies even allow sharing of trial
versions with family, friends, and over the 'Net.
2) Expanding consumer features, including parental controls
These technologies also increase flexibility for consumers. While
parental controls have been a feature of some consoles since 2001, in the
next generation, all video game consoles will feature parental controls that
allow parents to control children's access to game and movie content based
on established industry ratings. The technology that allows parents to
permit access to some games but not others is also a variant of the DRM
technology built into every console and game.
3) Opening markets previously believed unavailable
Elsewhere in the world, technological protection measures make it
possible for consumers to enjoy access to games in markets that were not
previously regarded as viable due to astronomical piracy rates for
traditional, "disc-bound" copies. In China, for example, DRM technologies
are being used by Nintendo to deliver games to owners of its iQue consoles,
at very competitive price points, in ways that are highly resilient to
piracy.
Also in China, and other high-piracy markets, technological
features of online games allow publishers to authenticate users and hardware,
and to control access to the game experience through the sale of pre-paid
access cards. So publishers, long plagued by piracy rates exceeding 90
percent, are actually beginning to see a return on investments made in
online games and are responding accordingly - including by investing in
further game development.
4) Implementing technology in ways that consumers appreciate
There is compelling proof of the appreciation of these technologies
in the industry's growth - measured not only by the number of games sold
but by the proliferation of new and successful game platforms.
Consider the healthy market we are seeing for sales of handheld
games. Last year Nintendo announced having surpassed 10 million units in
sales of its Dual Screen (DS) handheld device. And Sony's PlayStation
Portable (PSP) has successfully launched an entirely new media format for
games and movies that can now be found on Universal Media Disc (UMD).
Although the PSP was released last March, it took only until the end
of the calendar year for all of the major movie studios to begin making
content available on the new format.
At a time when some would argue that consumers are being oppressed
by DRM technology, our industry provides consumers with an unprecedented
level of flexibility to determine where, when and how they wish to enjoy a
full range of digital products - with new delivery mechanisms coming on
line every day.
Our industry continues to drive broadband uptake and adoption of a
wide range of technology-based consumer products. Our industry and our
member companies pledge to keep making compelling entertainment experiences
available, on an ever-increasing number of platforms.
And to do so, they continue to rely on certain baseline legal
protections, like the anti-circumvention provisions of the DMCA. We do not
believe changes to this legislation are warranted. Adequate "safeguards," to
the extent they are needed, already can be found within the four corners of
that legislation.
The Copyright Office's Section 1201 Rulemaking obligates the
Copyright Office to remain vigilant to instances in which non-infringing uses
of certain classes of works are likely to be adversely affected. This
process, we believe, has served as an effective "safety valve" and has been
administered in a way that has not adversely affected the growth and success
of the entertainment software industry.
Entertainment software publishers invest millions of dollars so
that consumers are assured of seamless and reliable access to the digital
products they have lawfully acquired, and that technological protection
measures do not interfere with consumers' entertainment experiences.
The measures that publishers take to furnish access to their
products are constantly scrutinized, by the consuming public, and through
healthy competition with one another, over factors including convenience,
reliability, and ease of use. To this, U.S. consumers
have responded favorably, with their purchases of more than two hundred
million PC and video games each year since 1999 - and those numbers continue
to grow.
We appreciate the tools that Congress has created, that allow this
industry to protect its technologies and products, while at the same time
delivering on the expectations of hundreds of millions of satisfied
customers. I thank the Subcommittee for its invitation
to appear here today, and welcome the opportunity to respond to your
questions.
MR. STEARNS. Thank you and I have given each of you a little extra
time so you can show your demonstration. I will start with the questions
first. Mr. Krikorian, when I saw your demonstration, I thought to myself
if some Americans maybe have a second home, why would they need
cable in their second home? If they had the ability to get broadband,
then they could have cable at their second home through their computer
or possibly tied into their existing TV, and then they wouldn't have to
pay the $50-$60 a month for cable. Is that true?
MR. KRIKORIAN. Well, I mean, first off, you probably know a lot
more people that have second homes than me, but--
MR. STEARNS. Well, let me put it this way. Could a person do that,
if they had a second home?
MR. KRIKORIAN. If a person had a second home and they had
broadband access that they were paying for in their home and they
wanted to connect back to their primary residence, they absolutely could
do that. I think, realistically, if someone has enough money to own a
second home, they are probably going to want high-definition, they are
going to want to have a nice, big 80-inch screen.
MR. STEARNS. But some day high-definition is going to come
through broadband. Once you get broadband at three million kilobytes
per second as opposed to DSL, then you will be able to have broadband
through your computer, you are a third generation wireless, which
means--
MR. KRIKORIAN. Sure.
MR. STEARNS. So the question I have is don't you think there is one
of privacy, or don't you think the cable companies are going to get upset
about that?
MR. KRIKORIAN. Well, I think for the cable company this is a great
thing if you look at it across the board. You look at it, number one, from
a local broadcaster perspective. This is one of the technologies that I
think lets them, the local broadcasters, stay relevant in this day and age
when they are getting bombarded actually by the studios, and the
broadcasters actually circumventing them. I think for the cable
company, let us say I have Comcast in my primary residence and I am
fortunate enough to have a secondary residence; I think a product like
this actually is going to help drive their services. It is going to probably
get me, let us say there is this three million bits per second service. Here
is actually a compelling application why you actually might want to pay
for it incrementally and get access to it. So I view it as a very additive
thing, as well.
MR. STEARNS. Mr. Feehery, we know what the iPod has done for
music, and Mr. Jobs is going to come out with an iPod for digital movies,
and someday you are only limited by the possibility of the storage. So
that you have here this Sony Playstation2 in front of me, and it has a disk
in it that I have here and I can watch a movie. So what is wrong with me
making a copy of this and putting this in my computer at my office and
then having a copy that I give to my son or a copy that I have in my
home. What is wrong with making a copy of that?
MR. FEEHERY. Well, I think that as you go through this process, you
want to make sure that the same thing can be said about making a copy
of anything.
MR. STEARNS. Well, let me just ask you a question. Do you agree
with the idea of allowing the consumer, if he has his Playstation that he
carries around and he goes to a business; he puts it in his pocket; if he
wants to make a copy of this and leave it with his child or with his wife
or in his home, do you agree that he should be able to make that one
copy? Yes or no.
MR. FEEHERY. It is complicated. I think that we need to be part of
that value-chain discussion so that we can offer consumers that choice.
MR. STEARNS. Well, your predecessor, who came here and testified,
said he didn't want one copy made. I just want to know if the Motion
Picture Association is still taking the position that the consumer cannot
make one copy?
MR. FEEHERY. Well, it is more complicated in the sense that we
want to make sure--
MR. STEARNS. Well, he was pretty clear. He put it up and said we
don't want one copy made. Is that still your position?
MR. FEEHERY. We want the marketplace to work, so we are giving
the opportunity through this to provide people with copies if they choose
to pay for it or not. I mean, that is what we are working for.
MR. STEARNS. Are you saying you can't make one copy unless you
pay for it? That is your position?
MR. FEEHERY. Well, we want to let the marketplace work on that,
so--
MR. STEARNS. Well, but if you want to make ten copies of this.
They want to make more than one copy. We have had people testify that
CDs, they make more than one copy. Sometimes they make just one
copy, but I guess the question is, I am just trying to see. You have got to
convince us that not making one copy is your position and that you are
sticking by it or are you going to say if the marketplace works out that
you can make one copy by putting a flag on it, you will accept that?
MR. FEEHERY. This is what the marketplace does.
MR. STEARNS. Okay.
MR. FEEHERY. We hope to give consumers those kinds of choices
and we are working towards that, but I don't think that we can say we
want to give our stuff away for free.
MR. STEARNS. Mr. Mitchell, Sony's Playstation, which I just
showed you, do you have any concern about erosion of consumer rights
in this area, movies and music as well as games. Are you concerned at
all about something like this in the software side?
MR. MITCHELL. Not at all, Mr. Chairman. It is an enabling device.
MR. STEARNS. Okay.
MR. MITCHELL. It enables consumers to take with them their music,
their photographs, and other media. It creates more opportunities to
enjoy those products.
MR. STEARNS. Mr. Denney, in your opinion, has the evolution of the
Fair Use Doctrine struck the right balance between content protection
and a consumer's right to enjoy content?
MR. MITCHELL. We think that so far, it has. There has been a good
balance.
MR. STEARNS. Okay. You know, you saw Mr. Feehery, the TiVo
demonstrations. They can download TV shows and put it in the TiVos,
and we are hopefully some day they will be able to do it just like they do
for the iPod. Do you see anything wrong with what is occurring that
way?
MR. FEEHERY. Well, this guy, he is a Giants fan and he is a
customer. I am a White Sox fan, but I am not a copyright lawyer. I
would say that we understand the importance of consumer convenience
with the respect of portability as well as remote access. The key is
facilitating consumer convenience while ensuring that it does not become
a shield for infringement or piracy. MPA is interested in working with
providers of remote access and time shifting technologies to help ensure
that safeguards such as identity mechanisms and cryptographic controls
are in place to strike that appropriate balance.
MR. STEARNS. Okay, my time is expired. Ms. Schakowsky.
MS. SCHAKOWSKY. Thank you, Mr. Chairman. Mr. Krikorian, you
make a big assumption that I actually know how to use my remote
anywhere and so I guess my question is would you show me how to use--
no. And Mr. Denney, when I am at my grandchildren's home, I love the
TiVo, but again, I am trying to figure out how to get to where I want, so
that is kind of where I am. What I wanted to ask, though, Mr. Feehery
and Mr. Mitchell, of the things that Mr. Krikorian showed and Mr.
Denney showed, is there problems for you in those, and if there are, I just
want you to tell us where you see the problem and go ahead.
MR. FEEHERY. Well, like I said before, I am not a copyright lawyer,
so I don't want to get into the technical difficulties. We think that there
are great possibilities to offer consumers, lots of choices. We want to
work with anyone that has provided these kinds of remote access devices
to make sure that we have the proper safeguards in place and we want to
work with them to make sure that it doesn't lead to greater piracy and
that is our biggest concern, piracy is a huge problem for industry. We
already see what has happened to the music industry.
MS. SCHAKOWSKY. And so I am asking, since we have seen some
pretty exciting technologies from a consumers standpoint, are you
looking at those and seeing problems for your industry, and I just wanted
you to say if there are.
MR. FEEHERY. Well, we want to make sure that the proper
safeguards are in place and that is our, as we work with these industries,
make sure that the proper safeguards are in place so that piracy does not
happen. So that is what we are working with them on.
MS. SCHAKOWSKY. Well, let me ask Mr. Mitchell. I will come back
to you, Mr. Krikorian.
MR. MITCHELL. Yes. Well, I am a lawyer. I come from the
enforcement side and furthermore, the criminal enforcement side, and we
tend to take a fairly black and white view of these things. So from a
perspective of making infringing reproductions, I was quite relieved to
hear Mr. Krikorian's technology, for example, would only allow access
by one user at a time, which took away some of the initial concerns that I
had flagged in my own mind. Beyond that, we would be happy to
provide a more detailed analysis. I am not sure if I could do that for you
on the fly today.
MS. SCHAKOWSKY. Okay. Mr. Krikorian.
MR. KRIKORIAN. Just one thing I wanted to point out is I agree with
everybody on this panel in trying to find a middle ground between
content and technology, but in all the examples that these gentlemen
brought up, it is not to their fault, at all. Those are deals that are done
with mega-corporation to mega-corporation, Apple and the studios. And
one thing that is very important, I hope that you all continue to think
about the two guys or gals in a garage who are working on some
innovative technologies and are reliant on some level of fair use so they
can actually innovate without going and asking for permission in
advance, because I could never get these types of meetings with folks in
the studios and the broadcasters, as hard as we actually tried.
MS. SCHAKOWSKY. Well, maybe this will help.
MR. KRIKORIAN. Now we can, which is great and this is helpful, so
it brings everyone to the table, but it is a difficult thing when you are
small company and that is where a lot of the true innovation comes from,
is that garage.
MS. SCHAKOWSKY. Well, let me ask you, I am just curious. How
successful has Slingbox and Sling Media been?
MR. KRIKORIAN. Well, when we launched the product and actually,
it is quite interesting. We started the company in June of 2004. By July
of 2005, 12 months later, we had actually deployed the product in over
1,000 stores nationwide in Best Buy and CompUSA, which was very
interesting because you never could build a company like this ten years
ago. We are actually using a Sony factory that was sold to a private
party in Singapore, and it is really interesting how you can virtualize and
build an organization. Since then we have expanded into over 3,000
stores, and while we don't publicly disclose the specific numbers, we are
now into the six figures of products sold, which is a pretty big deal for a
small company. We are fortunate enough to raise our Series B round in
January, so I have a job for at least another 12 months, I think.
But one thing that was really interesting, when we first started, it
was very difficult to raise money and we were sort of living under this
shadow of potential litigation all the time and investors were quite, quite
nervous about it. Fortunately enough, we had a few folks that gave us a
shot and we tried to act very responsibly with some of this one-to-one
and so forth that we have been able to get to this point, but it is tough
living under that shadow when you are first starting out.
MS. SCHAKOWSKY. Well, of course, the devil is in the detail, so I
appreciate, though, the attitude of everybody at this table that we want to
work out a way that we can satisfy consumer demand and not stifle
innovation and still protect the products and the creative products that
you create, so thank you.
MR. TERRY. [Presiding] Mr. Ferguson.
MR. FERGUSON. Thank you, Mr. Chairman. I just want to revisit
one thing. I do have a couple of questions, but I am sorry Chairman
Stearns has left, but I just believe that was a false choice that Mr.
Feehery was being asked to make. It seems to me that when we are
talking about making a copy for your use of a video game or something,
when we are talking about the technology and we are talking about
legislating, we are not talking, I, anyway am not very interested in
somebody who makes a copy of their video game for their wife, for their
child or something. How do you distinguish between the person who is
going to make one copy of their video game for their child or their
spouse or something, and the guy who is going to make 100 copies and
start selling them on the street corner?
The problem is technology allows both, and if we start going down
the road of well, it is buy one, get one free, what would happen if you
bought a car and you said well, because I paid for this car, I am actually
entitled to a second car. If that is what happened in the automobile
industry, you would see two things happen real fast. Number one, the
price of cars would shoot up and the amount of innovation and R & D
that goes into finding new cars would go down really, really fast. We
talk a lot about prescription drugs these days. What happens if you got a
prescription from your doctor and you went to the pharmacy and you
bought your drugs and you say well, actually, I know that I am buying a
month's supply, but I should really be able to have two months' supply
or a year's supply.
It is preposterous to suggest that that wouldn't have an impact. We
can have an argument of whether it is right or wrong, but it is
preposterous to suggest that that would not have an impact on the price
of those goods and on the amount of innovation and future R & D that
goes into the development of those goods, so I don't know how one can
possibly contend that loosening copyright protections will lead to an
increase in products and an increase in products getting to consumers.
So I think that needs to be said and I think Mr. Feehery was being put in
a difficult position to have to answer a yes or no question to a question
which frankly doesn't have a yes or a no. It is a very complicated
question. I don't know if you want to comment any further.
MR. FEEHERY. Mr. Ferguson, I thank you for that comment. I
would say that the fact of the matter is the consumers want to make a
copy and there is a marketplace for that and we have the critical
protections in place so it doesn't go crazy and we are giving everyone
you know thousands of copies if we give them one. If we have the
critical protections in place and if the marketplace is allowed to work, we
will do that, but the fact of the matter is the marketplace has to work and
we have to have the critical protection technology in place so that it
doesn't get out of hand and lead to mass piracy that will kill our industry.
MR. FERGUSON. I appreciate that and I am short on time, so I just
want to get to my questions and that is kind of where I am going. Just a
couple of questions for Mr. Denney. In the past few years, especially
since the Grokster decision, we have seen an explosion in the amount of
content that is being made available to consumers legitimately. We have
these agreements after agreements after agreements that are being
worked out. The market seems to be working, yet folks who are working
on legal and legitimate content distribution, doesn't better content
protection lead to more content being distributed to the marketplace
legitimately?
MR. DENNEY. As we said, content production is an important aspect
of what we design into the product. We are conscious of it, we make
deliberate steps to deter piracy so yes, we do think it is an important
thing. Should that be legislated or how should that be implemented, I
think, it is up to the marketplace to figure out.
MR. FERGUSON. We all seem to be talking about the marketplace
and people seem to have different definitions of that. In your testimony,
you cited several examples of your new partnerships, as well as new
technologies in the marketplace. Doesn't this mean the marketplace is
working? I mean, you have got agreements that you are working out
with folks?
MR. DENNEY. We believe that the marketplace is working. If we
have a concern, it is access to content, so you can work this out. So it is
access to cable signals, it is being able to have access to some of the
content so you can do innovative things.
MR. FERGUSON. But are you advocating, what are your thoughts on
some of the legislation that has been introduced and that is being bandied
about amongst some of the committee here?
MR. DENNEY. Which, I guess, which one in particular or do you
want me to generally comment?
MR. FERGUSON. Sure.
MR. DENNEY. Okay.
MR. FERGUSON. H.R. 1201.
MR. DENNEY. So we appreciate things that solidify--
MR. FERGUSON. I like what I hear, what I think I hear you saying,
but where the rubber hits the road, how do you feel about H.R 1201?
MR. DENNEY. Well, again, I am not an attorney. I can speak to
some general--
MR. FERGUSON. We are in the same boat on that one.
MR. DENNEY. We believe that, generally, we support things that
support access to content and fair use. We have some concerns about
some specific issues, but in general we are appreciative of things that
preserve fair use the way it is today.
MR. FERGUSON. I would only suggest, and my time is up. I would
think we agree. We all seem to rhetorically agree that the marketplace
should be able to handle these things, but the difference is that the sands
are shifting very quickly because of technology. Technology is a
wonderful thing, but technology is enabling incredible new opportunities
for piracy that, frankly, weren't available just a few years ago and that is
where, frankly, I have a concern, a number of us have a concern, and if
the balance is shifting toward enabling and really encouraging piracy, I
sure don't want to see that pendulum swing any farther in that direction.
I want to bring it back more towards the center.
MR. DENNEY. We agree, piracy has got to be controlled. We do not
advocate piracy. We work against it. We think that the content
providers in the market have tools, such as Grokster is an example,
where the court decided it was making the distinction between people
who encourage piracy and technology that could be used for other
purposes.
MR. FERGUSON. Technology is fast, courts are slow.
MR. DENNEY. I agree.
MR. FERGUSON. It would be nice if we had some understood rules
of the road that everybody had to live by from the beginning rather than
having to adjudicate and go through a court battle every time we had a
disagreement.
MR. DENNEY. Agreed, but they do create guidelines; when we make
product decisions, we adhere to what we believe those guidelines to be
and we take particular steps. And one other comment about, you had a
question about other legislation that is pending. One comment that I did
want to make is about analog. In general, the legislation that is pending
is not something we advocate, and we believe it doesn't work for the
consumer. There are concerns about access to signal, there are concerns
about its impact on the ability to innovate around content. And that said,
we are completely open to working out what the correct solution is, so
the forum to do that, I think, is within the industry.
MR. TERRY. Ms. Baldwin.
MS. BALDWIN. Thank you, Mr. Chairman. As we look to the future
of digital rights management technology, one thing that has struck me is
that there are so many different DRM standards that exist in the current
market. For example, a TV show downloaded from iTunes is not going
to work with Real Video streaming software. Recently, Sun
Microsystems, Incorporated announced a project called the Open Media
Commons Initiative, which is aimed at creating an open source, royalty-
free, digital rights management standard. I am going to ask this to any of
the panelists who wish to comment. I would like to hear your comments
generally on such a DRM model and also, do you think that such an idea
could still fully protect the rights of content owners, and why don't we
start with you, Mr. Krikorian?
MR. KRIKORIAN. Yes. First off, I think you are hitting the nail on
the head. This is one of the most critical things and items and personally,
I don't think it is being addressed. You see what Apple has now done
and they have created a DRM that is very proprietary and ties the content
and the consumer to Apple-only products. That is definitely not a free
market effort and with their strong stranglehold on the industry. Let us
say I wanted to make a distribution product in the home to be able to
stream my content around legally and securely, so forth.
I can't get access, as a company, into that DRM, so I believe the
notion of an open DRM that is truly interoperable across many, many
devices makes a heck of a lot of sense. I mean, at the end of the day the
devil is in the details and the execution in making sure it is truly robust,
but we are going to see a lot of consumer backlash, I believe, in the next
couple of years, of people who have bought stuff from iTunes and they
don't quite understand all the limitations that come with that content.
And again, it is not the studio's issue at all, it is Apple's, keeping
everyone focused just on their products alone, and that will definitely
stifle innovation, there is no question in my mind.
MR. FEEHERY. Boy, I am really glad you said it wasn't the studio's
thing.
MR. KRIKORIAN. It is not.
MR. FEEHERY. Just talking to some of our folks, I think that this is
something that with the risk of not getting into too much detail, I would
say that this is something that we would like the marketplace to work out
right now and I think that is where we are. I wasn't talking about that
particular thing in this hearing, but I think that where we are is let the
marketplace work itself out.
MR. KRIKORIAN. Just one other thing. I wish the studios and the
broadcasters actually, in terms of the marketplace deciding, I wish that
they would actually push that and require that whenever they do a deal.
They say look, this has to be open DRM standard because I think
unknowingly what is happening, is that they are creating another cable
monopoly but they don't quite understand that. So I would urge
marketplace perspective, that the broadcasters and the studios actually go
and require that when they do deals.
MR. FEEHERY. The most important thing for us is protecting our
content so it doesn't lead to mass piracy, but other than that I think for
these particular things, let the marketplace work itself out.
MR. DENNEY. In general, we are supportive of the concept of Sun's
proposals, the exact right solution. I think interoperability is a big issue
that as time goes along, consumers are going to be burdened with
navigating and we are generally supportive of protecting content, so we
think that is the right thing. We agree that some proprietary protection
schemes out there are basically impossible to work with, so you will
never be able, as an innovator, you will never be able to break into that
realm, so that is a concern that we have.
We are actually, in our next generation, the Series 3 box that we
announced in January, we are going to support Windows Media DRM as
part of that box, and we are doing it because it is something that we
actually have the ability to license and is used in the marketplace
generally widely, but it does mean that we license that from Microsoft,
so we will be tied to Microsoft's terms and conditions for that. Not
saying they are overly onerous, but I think the idea of interoperability is
something that consumers are going to have to grapple with as time goes
along.
MS. BALDWIN. Mr. Mitchell, did you wish to comment on that?
MR. MITCHELL. No.
MS. BALDWIN. All right, I yield back.
MR. TERRY. Thank you. Mr. Mitchell, did you provide these for the
committee's observations?
MR. MITCHELL. We did.
MR. TERRY. Well, on behalf of the committee, we will have to mark
these as exhibits and keep them. I don't know if you understood that at
the beginning. Not really. But there are several of us on here that have
already purchased those types of equipment. But I guess the ultimate
question, and Chairman Stearns has hit on it, but I want to ask it more
succinctly and plainly to everyone up here, from your unique
perspectives in the marketplace, both with TiVo and Sling, various
niches and then Mr. Feehery representing, kind of, the big dog producers
here, you said that right now the marketplace is kind of taking care of it,
but we keep hearing that perhaps we need to tweak laws here and there
by various parties with various interests.
I am just curious to hear from you whether or not you think that
Congress should act in some certain way, and you fill in the blank. What
would you tell us that we need to do to make sure that we protect both
content and consumers' rights? And I guess what I will say, to frame it a
little bit more is doesn't it seem like Congress helped create the PSP or
the new XBox 360s or the new PS3 that will come out eventually, twice
delayed now, but we won't get into that because that is just saving me
whatever they are going to sell it at in the market. So it doesn't seem to
me that Congress needs to interfere with anything right now, but at least
with content protection, we are constantly being told that we need to.
What do you think, Mr. Krikorian?
MR. KRIKORIAN. I think, and I wish I could give you a very specific
item, but I think in general, you need to help preserve or keep a
marketplace, if you will, or an environment where innovators can work
under the fair use provisions to truly innovate without going and getting
advanced approval. So let us take something specifically--and I am not
an attorney, but when I look at the DMCA as it has been described to me,
let us say I could make a product right now where I could make one copy
of a DVD and I could specifically make sure that that could be audited,
and I would allow only the person who bought the DVD to make one
copy and put it on, let us say, another display device like a cell phone. It
doesn't even matter whether that is fair use or not. Basically, I have now
violated the law. I have violated, I have circumvented encryption to
actually make that work and so that is what is particularly troubling to
me, is just having hard and fast rules sometimes, I think, prohibit that
innovation because you can't possibly make a hard and fast rule because
no one could possibly think what is coming down in the future.
MR. TERRY. Mr. Feehery, I am interested in your answer,
particularly.
MR. FEEHERY. Well, I would say that, in our view, greater content
protection leads to greater innovations in the marketplace because it
gives us a chance to get our content to more eyes in more different ways
and look at what happened to DMCA and the direct development of the
DVD and how many people now enjoy DVDs because of what happened
to DMCA. I think that two things that we would really like, because
Congress mandated that digital television, that we have broadcast flag
and analog hold was the two things that we have asked for and that
means with greater content protection there will be more consumer
choice and more products that people can view our content on, which is
ultimately our goal.
MR. TERRY. Mr. Denney, you had partly answered that question in
your discussion with Mr. Ferguson.
MR. DENNEY. Yes. So just to follow up, we think generally things
are working the way they are today. We are not asking for
modifications. We would be a little concerned about mandating a
particular technology in the marketplace, so mandating a certain DRM or
some other technology, which I think creates the environment where you
have to go ask permission or you are basically, you are forced to
innovate down a certain path, so we would have concern about that, but
in general, we think things are working the way they are today.
MR. TERRY. Mr. Mitchell.
MR. MITCHELL. Thank you. First, if I can have just a moment to
respond to Mr. Krikorian. He said that a hard and fast rule against
circumvention was likely unworkable and I think Congress had
anticipated that within the four corners of the DMCA by creating the
Section 1201 rulemaking, and I would suggest that the appropriate forum
for his issue is that proceeding, which is a recurring proceeding; it comes
up every three years and it gives the opportunity to basically issue
exemptions to this or to any particular prohibitions. Hearings are going
on now. Brewster Kahle, when he was seeking an exemption for his
Internet archive enterprise, went to the copyright office and in fact, was
issued an exemption, which he continues to make use of today. So I
think the mechanisms are there to permit that flexibility without opening
up the book on the law, itself.
MR. TERRY. Thank you. Should I go to--
CHAIRMAN BARTON. Has Mr. Gonzalez been recognized?
MR. TERRY. You would be next, but you are the Chairman of the
full committee.
CHAIRMAN BARTON. No, no, no. We alternate.
MR. TERRY. Mr. Gonzalez is recognized.
CHAIRMAN BARTON. After his snide remarks at full committee this
morning, he still deserves the right of recognition before I do.
MR. GONZALEZ. Thank you for saying that, Mr. Chairman. I did
appreciate that. But that has been my quote from the day that I got that
operation, so it wasn't anything. I know that my colleague, Mr. Terry,
said that Congress didn't have anything to do with the invention of the
PSP. I want you all to know that Al Gore had one of these 20 years ago.
You have to have a sense of humor. He didn't know how to use it, but
he had it. Anyway, why not get in trouble with both sides of the aisle?
Mr. Krikorian, I think you indicated that if you are in New York, you
have got your laptop, y one user at a time can log in back home, right? It
is not going to be like everyone in the dorm is going to be logging into
that one student's, right?
MR. KRIKORIAN. Correct.
MR. GONZALEZ. Because that was a concern and is a curious one.
And I think that it was Mr. Ferguson who was talking, and we are talking
about piracy devices and so on, and copyright and patents and all of that,
yet there are other things that occur as a result of technology and the
advances and the products that you are already discussing. And there
was a story regarding Sling, and I am going to go ahead and read a
couple of the quotes, and I am not even sure where we end up with this
particular issue and I am not saying that it is going to be this committee
or Judiciary or wherever it is, but this is the quote from the Wall Street
Journal. "The TV industry has long been alarmed about the problem of
digital piracy on the rise now, that more viewers watch shows via the
Web, iPods, and cell phones. The concerns about the industry's
geographic structure are a newer and more complex issue. Geographic
lines that have held certain parts of the TV business together are being
eradicated into big concern."
Then the other quote, this is an analysis: "The whole business model
in the broadcast industry is based on geographic exclusivity. The
potential use of the Slingbox fractures that." How do you see the
consequences of devices of the type that you have out there in the market
impacting the way we do business now and broadcasters and such?
MR. KRIKORIAN. Right. I am really glad you brought that up. The
funny thing was the day after the writer wrote that I had the opportunity
to meet with her and walk her through, and the funny thing was, she
flipped all the way around and realized that what we are doing is
probably the best thing since sliced bread for the local broadcasters. So
let us pretend for a second that you are a local broadcaster, okay, let us
say you are KORN TV in San Francisco and I live in San Francisco.
What the Slingbox does is it gives you, that broadcaster, the ability, a
longer leash, if you will, to reach me on more displays and more places
than you ever could. So let us go in sort of concentric circles. In the
home, you have continued to lose me as a customer because I am
spending more time on the Internet. What the Slingbox does is let you
get your content to me on these displays where you have lost me. Now I
am sitting in the office place in my cubicle. I am still in the same
geographic area. And so what now is happening is that you are able to
reach me, another ten hours a day that you never could reach me before.
Now, let us go ahead and say that I am also a Nielsen household, okay?
MR. GONZALEZ. Okay.
MR. KRIKORIAN. And one of the arguments that I hear right at the
very beginning, someone says well, that is good that you are able to
reach me, but you are not getting credit. That is not true, at all. If I am a
Nielsen household, what ends up happening, let us say I had a set meter,
as an example. The Slingbox fits in very synergistically with that whole
system, so now I am watching it on my display at the workplace. That
meter is running even more. You are getting more and more and more
credit. So now let us say, for example, that now I am in Washington,
D.C. in a hotel room, like I was today, watching my KORN back home.
One of the arguments could be well, this is a bad thing because the local
D.C. affiliate is not being able to be seen in the hotel room. Well, first
off, that local affiliate is not getting any credit from me watching it in the
hotel room, anyway; that is one of the flaws in the whole Nielsen system;
whereas, I am watching my local KORN back home, they are getting
credit. And then if you really looked at it from an advertising
perspective, anyways, I am watching a Toyota ad back in San Mateo.
What is more effective, for me to watch that Toyota ad when I am sitting
here in D.C. because I might buy the Toyota on the weekend, or is it
better for me to watch a Washington, D.C. ad? So I think what is
happening is we get down to this and what people end up realizing is this
is actually a good thing, but historically it is bad because you are
questioning the geographic boundaries and just historically, emotionally,
it is a bad thing. But if you will look at it economically, I do think it is
very additive thing.
MR. GONZALEZ. Well, it must be in its infancy stage as far as the
debate itself and I appreciate your views on it and your explanation,
because I found it somewhat confusing because I thought it could be an
advantage, but like I said, it remains to be seen and we will hear from the
other side on this. But my time is up and I thank you.
MR. TERRY. Chairman Barton.
CHAIRMAN BARTON. Thank you. I appreciate the hearing being
held today. I know Chairman Stearns is not here in the room at the time,
but I do appreciate that. My first question, I am trying to understand
what the Slingbox really does, since I have never seen one. Do you have
to have your TV on, the home TV, the base TV?
MR. KRIKORIAN. No, you don't. In fact, you don't even necessarily
have to have a TV plugged in to it. So you take the Slingbox, put it in
your home, plug your TV signal into it, your satellite, your cable, your
over the air, whatever, connect it to your home network and then
wherever you happen to be you can watch your TV. In fact, if you can
switch over to the display right now, I have to--
CHAIRMAN BARTON. That is okay. I just--
MR. KRIKORIAN. Well, just--
CHAIRMAN BARTON. So what you do is transfer the home signal?
MR. KRIKORIAN. Correct.
CHAIRMAN BARTON. Okay.
MR. KRIKORIAN. Right, we ship the home signal.
CHAIRMAN BARTON. Okay.
MR. KRIKORIAN. I am watching my TV right now, if you look up on
the screens. This is my TV. I promise I haven't been watching it the
whole time.
CHAIRMAN BARTON. Oh, that is okay.
MR. KRIKORIAN. And I can go ahead and change the channel and do
whatever I want. I just said watch CNN and I am tuning to CNN. This
is my TV signal live at my house in San Mateo right now on a laptop you
provided me.
CHAIRMAN BARTON. Now, we have had several hearings on this
general concept of fair use versus copyright protection over the last
several Congresses and it is no secret that I am a co-sponsor of Mr.
Boucher's Fair Use Bill, which we still have hopes to move this year. I
don't know who to ask this question to, probably Mr. Slingbox down
there, since you developed this technology. Is it possible to have a
technological solution to fair use so that we can protect the legitimate
copyrights of the content providers that the Motion Picture Association
represents, but yet let average consumers make a copy or two of
particular video or a music CD that they wish to? Is there a
technological solution that can allow what Mr. Boucher and I call fair
use, but not give a commercial application to somebody that wanted to
pirate dozens or hundreds or thousands of tens of thousands of the same
CD or video?
MR. KRIKORIAN. I think if you set forth certain rules, for example,
to say that the consumer has the right to make one copy of a DVD or
what have you, I believe that you can come up with a technological
solution to address that. To look at blanket technological solution that
can address all possibilities that we don't even know if it is going to
come down the pike, I think that is a pretty difficult thing. But
unfortunately, I don't know as much as I probably need to. Ask me in
another couple of months. I seem to be spending a lot of my time
worrying about this.
CHAIRMAN BARTON. Mr. Denney, how would you answer that
question?
MR. DENNEY. I would say that the beauty of technology is anything
is possible. Would it be to consumer satisfaction and is it viable in the
marketplace, is something I think we would have to look at a little more
closely to give you a solid answer. We can go on the record if you want.
But I think, certainly, there is a possibility of having such an
environment.
CHAIRMAN BARTON. And, Mr. Feehery, you raised your hand.
MR. FEEHERY. I would say that--
CHAIRMAN BARTON. Are you going to surprise me and semi-agree
with me?
MR. FEEHERY. Well, I would say that because of DRM and the
marketplace, it is already happening. In England, UA and Universal
made a deal. They get three copies for just the price of one DVD. So the
marketplace and the--
CHAIRMAN BARTON. So your solution is to just give them three
copies from the beginning.
MR. FEEHERY. Well, to give them the ability to make three copies. I
think that the marketplace is working and I think, as Mr. Denney says, if
given the chance to work, we can make this work for consumers who
want it.
CHAIRMAN BARTON. So you are saying that one of your companies
has signed an agreement that has in the original video the ability that it
can be copied twice. Is that what you are saying?
MR. FEEHERY. What it says is that they get three copies for the price
of just over one. I am not sure of the technicalities of it, if you do it
yourself or if they give you three copies. Mr. Chairman, what I would
like to do is--
CHAIRMAN BARTON. Well, that is a big difference.
MR. FEEHERY. I know. I understand. I understand that.
CHAIRMAN BARTON. I mean, if you sell a CD or a video that you
can copy twice and it works, that is a technical solution as opposed to
giving them a coupon. If you want a couple more copies, turn the
coupon in and we will give you two more copies.
MR. FEEHERY. My understanding of what has happened is you get
one copy on the DVD, one copy on your computer and one copy on a
portable for just over the price of a DVD. And what I would like to have
happen is that our company, at some point in time, could come and talk
to you about all the things that are happening technologically in the
marketplace and where they plan on going, because I think that there is
ways to make this work without a government mandate.
CHAIRMAN BARTON. All right. Mr. Mitchell you are the only
hardware guy here, and I haven't given you a chance.
MR. MITCHELL. Thank you, Mr. Chairman. I actually represent the
software side, but we did bring along our hardware to be able to
demonstrate our software. We believe that there are some real problems
with running together at high speed. What was originally understood to
be two entirely separate bodies of law, copyright law on one hand and
the law against circumvention of technological protection measures on
another. We think that some unintended consequences could come from
depending on one at the same time, or looking for violations of both and
only enforcing violations of both. The reason is because we know,
probably better than anybody in the video game business, that there are
real economic incentives out there for bad actors who would otherwise
be producing infringing reproductions of our software to produce
circumvention devices that will enable pirated games to be played on
video game consoles. There are some very advanced technologies that
are built into video game consoles, that are built into video game
software, such that if you were to download a pirated version of a piece
of video game software and put it in the console there, that X-Box 360,
the X-Box 360 would recognize it as an infringing copy. It would fail to
play it. And so being the arms race that it is, some enterprising
entrepreneurs have created devices, not for the 360, but for other video
game consoles that actually allow for the play of pirated games. They
are called mod-chips. They are circumvention devices. These are
devices that are clearly prohibited by the DMCA. They sell for about
$40 or $50, and why not? Because once you have voided your warranty,
once you have soldered this chip into your console, the whole world of
pirated games become available to you. And so there are real economic
incentives to produce a circumvention device, even though I may never
have an underlying copyright infringement.
CHAIRMAN BARTON. If I may reclaim my lapsed time, we are not
trying to circumvent anything, this committee. We are trying to get a
law that is workable that protects your copyright and your software, but
also allows the consumers of America to make one or two copies for
personal use and do it legally, and that is more like my original question,
is there a technological solution? You know, right now we don't have a
political solution, but if we at least started with the premise that we could
have a technological solution, we might get a political solution, that is
all, and no one on either side of this issue wants people to buy the device
that you just mentioned and use it so that they can run pirated games or
videos or whatever. I don't think there is any support on either side of
the aisle or in any committee in Congress for that. That is not what this
hearing is about. We are totally with you on trying to prevent that. Mr.
Chairman, I am going to yield back my time, but thank you and thanks to
the panelists for being here today.
MR. TERRY. Mr. Chairman, you were last Member, so if you would
like a second round of questioning, you are entitled. With that, I will
thank all of you for spending your afternoon with us. It has been very
interesting as well as educational, and we now stand adjourned.
[Whereupon, at 2:46 p.m., the subcommittee was adjourned.]
DIGITAL CONTENT AND ENABLING
TECHNOLOGY: SATISFYING THE 21ST
CENTURY CONSUMER
WEDNESDAY, MAY 3, 2006
HOUSE OF REPRESENTATIVES,
COMMITTEE ON ENERGY AND COMMERCE,
SUBCOMMITTEE ON COMMERCE, TRADE,
AND CONSUMER PROTECTION,
Washington, DC.
The subcommittee met, pursuant to notice, at 2:00 p.m., in Room
2322 of the Rayburn House Office Building, Hon. Cliff Stearns
[chairman] presiding.
Members present: Representatives Stearns, Bono, Terry, Murphy,
Blackburn, and Schakowsky.
Staff present: Will Carty, Professional Staff Member; Chris Leahy,
Policy Coordinator; David Cavicke, General Counsel; Consuela
Washington, Minority Counsel; Alec Gerlach, Minority Staff Assistant;
and Billy Harvard, Legislative Clerk.
MR. STEARNS. The subcommittee will come to order and I think we
will go ahead and start. The Ranking Member is on her way and we
have other Members that have things we have to sandwich in together, so
good afternoon. Today we continue our look at the future of digital
content, new media distribution channels, and what all of this means for
the consumer. That is what we are here today to talk about. In part two
of our hearing, we will focus our attention to the audio and software side
of the issue. I realize it has been over a month since our first hearing on
digital content and a lot has happened just over the past few months.
Apple celebrated its billionth download, a number of content and
device companies announced a new string of deals, and the market has
continued to excite us with new gadgets and innovative content almost
weekly it seems. I am excited to get back into this issue and hear from
the distinguished group of experts from the digital device and content
communities that are here before us today. Interestingly enough, Apple,
a company with a great story to tell in this area chose not to join us this
afternoon. Obviously, I am disappointed, as a legislator and a long time
Mac user. I think I am one of the few. There are only three or four of us
in the Senate and House, out of 535 Members here in Congress that use
Mac today, so I am very disappointed.
This is not an investigation. I think they thought it was an
investigation; it is not. And when I talked to their counsel, they said that
they just did not want to participate for any reason and so they were
pretty adamant about that, and I tried to tell them that it is just an
opportunity for them to talk about the digital revolution that is quickly
changing our marketplace, and to talk about devices. There is nothing
proprietary that we are divulging here, but I could not convince them.
I would like to sincerely thank those folks, that have come, for their
openness and assistance in helping us better understand the implications
of new digital content and the distribution technology for the American
consumers that exist today. You are doing all of us and the public a great
service by joining us this afternoon. I think Ms. Schakowsky should be
here momentarily, but I think, at this point, I will let the gentlelady from
Tennessee give her opening statement, Mrs. Blackburn.
[The prepared statement of Hon. Cliff Stearns follows:]
PREPARED STATEMENT OF THE HON. CLIFF STEARNS, CHAIRMAN, SUBCOMMITTEE ON
COMMERCE, TRADE, AND CONSUMER PROTECTION
Good afternoon.
Today we continue our look at the future of digital content, new media
distribution channels, and what all of this means for the consumer. Part
two of our hearing series will focus our attention to the audio and software
side of the issue. I realize it's been over a month since our first hearing
on digital content and a lot has happened over the past few months -- Apple
celebrated its billionth download, a number of content and device
companies announced a new string of deals, and the market has continued to
excite us with new gadgets and innovative content, almost weekly it seems.
I'm excited to get back into this issue and hear from the distinguished
group of experts from the digital device and content communities before us
today. Interestingly, Apple, a company with a great story to tell in this
area, chose not to join us today. I must say I'm disappointed as a
legislator and a long-time Mac user. Please understand this is not an
investigation it is rather an opportunity for members to learn about a
digital revolution that is quickly changing the nature of the device and
content market. I therefore again would like to sincerely thank you all for
your openness and assistance in helping us better understand the implications
of new digital content and distribution technology for American consumers. You are doing us and the public a great service by joining us this afternoon.
With that, I would like to turn to my friend and colleague, the ranking
member, Ms. Schakowsky for a few words. I also would like to encourage
members to allow us to go straight to our panel unless a member did not offer
a short statement at part one of our hearing series would like to do so now.
I also would like to remind members that all statements can be included in
the record and that statement time is always added to question time if you
chose not to use it when called.
Thank you and welcome.
MRS. BLACKBURN. Thank you, Mr. Chairman. I do want to thank
you for holding this hearing and for your attention to the issue of digital
content and technology that helps enable that content. I want to thank
the entire panel for being here with us today, for submitting those
testimonies to us, but I especially want to thank Bob Regan, who is the
president of the National Association of Songwriters International. As
co-chairman of the Congressional Songwriters Caucus, I believe that it is
important that our songwriters have a voice here on Capitol Hill and
having Bob be here today for our hearing is significant, and I appreciate
his efforts.
A little bit about him. He is an accomplished songwriter and you
may recognize some of his credits, which include Keith Urban's hit,
"You're Everything," and for an old man like the Chairman, he might
remember Billy Ray Cyrus' song "Busy Man." Tricia Yearwood--he
wasn't listening. He didn't catch that. Tricia Yearwood's "Thinking
About You," and Reba McIntire's "Til Love Comes Again." Thank you
for coming today, Bob. I am thrilled that you are here and appreciate
your time.
There are several issues that are important that we should be
considering today and as we go through looking at the digital content
issue. Congress gave the satellite services a compulsory license to
perform music so that subscribers could listen to it. Sometimes in this
discussion we forget where we began. At last week's Senate hearing, the
witnesses were asked whether new devices used by these services go
beyond the law because it enables your subscribers to cherry pick songs
and build a library of music, making what some believe the law calls a
distribution of the work.
Victoria Shaw, a songwriter from Nashville, spoke for a great many
of my constituents and a great many artists all over this country when she
noted that this new device used by the satellite industry is not merely
designed to play music, but to distribute that music, as well. It seems
more similar to an old iTunes download or a record sale and she rightly
seeks fair compensation for the distribution. I think her quote at the
hearing summed it up very well for these artists who are behind the scene
and don't enjoy the popularity of most performers, but are integral to the
creative process. And her quote, "I don't tour. I make 9.2 cents a song,
that is a song. That is how I feed my children. I am the parent that
works out of the house."
Mr. Chairman, my State is home to some of the most creative
songwriters and artists in the world. They are entitled to be paid fairly
when their music is used according to the law, and from what I have
learned, this new device is terrific, but many believe it is not just a
performance device. I know the companies involved in the process are
negotiating to address this issue and I know my constituents who would
like to see closure on this issue. I look forward to the testimony of the
witnesses; I look forward to the opportunity to ask some questions of the
witnesses; and I hope that we can agree to explore both protecting
content while providing new platforms for artists to distribute and market
their product and send a message to the world that we are serious about
protecting creative content. I yield back.
MR. STEARNS. I thank the gentlelady and I think we will move right
to the panel since we have no more opening statements. We have Mr.
Gary Parsons, Chairman of the Board of XM Satellite Radio; Mr.
Michael Ostroff, General Counsel and Executive Vice President,
Business and Legal Affairs, Universal Music Group; Mr. Dan
Halyburton, Senior Vice President and General Manager, Group
Operations, Susquehanna Radio, on behalf of the National Association of
Broadcasters; Mr. Robert Regan, President of the Board, Nashville
Songwriters Association International; and Mr. Jeffrey Lawrence,
Director, Digital Home and Content Policy, Intel Corporation. Thank all
of you for being here and Mr. Parsons, we will start with you.
STATEMENTS OF GARY PARSONS, CHAIRMAN OF THE BOARD, XM SATELLITE RADIO;
MICHAEL OSTROFF, GENERAL COUNSEL AND EXECUTIVE VICE PRESIDENT,
BUSINESS AND LEGAL AFFAIRS, UNIVERSAL MUSIC GROUP; DAN HALYBURTON,
SENIOR VICE PRESIDENT AND GENERAL MANAGER, GROUP OPERATIONS, SUSQUEHANNA
RADIO, ON BEHALF OF THE NATIONAL ASSOCIATION OF BROADCASTERS; ROBERT REGAN,
PRESIDENT OF THE BOARD, NASHVILLE SONGWRITERS ASSOCIATION INTERNATIONAL; AND
JEFFREY LAWRENCE, DIRECTOR, DIGITAL HOME AND CONTENT POLICY, INTEL
CORPORATION
MR. PARSONS. Thank you very much, Mr. Chairman.
MR. STEARNS. Just pull the mic up a little closer to you and I think
they are on.
MR. PARSONS. Is that better?
MR. STEARNS. Yes, okay.
MR. PARSONS. Thank you very much, Mr. Chairman and members
of the subcommittee, and thank you for inviting XM to speak on behalf
of the satellite radio industry, our customers, and actually, more broadly,
to defend consumers' rights to enjoy radio content for their own personal
use. We believe it is possible to promote consumer rights and at the
same time to protect the interests of content owners because we are a
company that has been built by both. We hope to grow the music
industry by enhancing the discovery of music by our 6.5 million
subscribers, and that is actually 13 to 15 million listeners across the
country.
We are excited about our potential at XM, but we are still an industry
in its infancy. We will only succeed by keeping our existing listeners
happy and by attracting new subscribers going forward. Today, XM
Radio subscribers pay approximately $120 per year to listen to over 170
channels of entertainment, sports, news, talk, and other programs,
including 69 channels of commercial-free programming. Until recently,
most of our subscribers heard their favorite programs only at home or in
their cars; they wanted more. They wanted the ability to enjoy the
service wherever or whenever they had a chance to listen.
So we have launched these new radio devices that give the
subscribers the portability that they sought, the opportunity to store up to
50 hours of programming from XM and the opportunity to purchase
additional music tracks, even entire albums with ease from the new legal
Napster on line music service. Offering a convenient way to buy music
that is heard on XM is important to us. Our research shows that XM
subscribers buy more music and over time buy a broader range of music
and attend more concerts than most music consumers. We built our
entire business in compliance with the laws that the music industry
supported.
Today, the music industry gets paid twice for the music that our
subscribers enjoy. First, through the royalties that we pay under Section
114 of the Copyright Act of 1998 and then a second time, through the
royalties paid under the Audio Home Recording Act, which go to the
songwriters, among others. Under current law, we already pay more than
any other company in copyright sound recording performance royalties,
annually generating tens of millions of dollars in revenue for the music
industry. In fact, we are about to enter a new round of negotiations to
determine the new performance royalty rates for the next five years. But
even under the current rates, satellite radio royalties to labels and artists
would be in the hundreds of millions of dollars over the next five-year
period.
Additionally, we will pay songwriters and music publishers hundreds
of millions of dollars, as well, with our ASCAP, BMI, and CSAC
licenses. And as the newest radios are just starting to roll out, if they are
successful, this would generate tens of millions in additional royalties
through the Audio Home Recording Act. Our new devices let consumers
do the same thing that many of us have all done for the last 50 years with
the convenience of digital technology. If a song comes on the radio you
simply hit a save button right in the middle of the unit, just like recording
off of FM radio. You can hear that song again later, if you want to.
You can set the radio by hour and channel to record at a given time,
just like TiVo allows you to time shift your favorite TV shows, so for
example, if you or your staff were busy at ten o'clock this morning when
the debut of Bob Dylan's new show on XM came on, you can set the
radio by time and channel to record it and listen later at your
convenience, or if you could have saved a late night West Coast baseball
game last night to enjoy this morning. This traditional fair use activity is
well known to all of you. In the analog era, we used to do it with reel-to-
reel tape recorders, cassette tapes, VHS tapes. Now, in the digital age,
satellite listeners and TiVo owners use new technology to do it more
conveniently.
But making it easier does not necessarily make it illegal. Let us be
clear about what the devices do not do. A song saved on the radio is
locked to the device. It can't be moved, it can't be copied to another
device. It can't be burned to a CD. It can't be e-mailed to a friend. It
can't be put out on the Internet; all of the things that you do if you
actually own a property. You can hear it only as long as you are an XM
subscriber and only on this individual personal radio. You can't get what
you want immediately when you want it. An XM subscriber can only
save a song on this device when and if an XM disc jockey has decided to
play it.
In the past, Congress has rejected similar complaints to the ones that
are being voiced today, the same complaints that seem to be raised every
time a new technology emerges. But striking the right balance between
the rights of users and rights of content owners, Congress gave
entrepreneurs the freedom to innovate, which gave consumers, in turn,
the right to purchase VCRs, TiVos, CD burners, even MP3 players. We
hope that you will continue this consistent record of innovation by
allowing satellite radio subscribers the opportunity to enjoy the services
for which they have paid, wherever they are and whenever they can
listen. Thank you very much.
[The prepared statement of Gary Parsons follows:]
PREPARED STATEMENT OF GARY PARSONS, CHAIRMAN OF THE BOARD, XM SATELLITE
RADIO
Mr. Chairman and Members of the Subcommittee, I am pleased to
appear on behalf of our 800 employees, who have made XM Satellite Radio
America's most popular satellite radio company. Thank you for inviting XM to
speak on behalf of the satellite radio industry and our customers, and more
broadly in support of consumers' right to enjoy radio content for their own
personal use. Like the Members of this Subcommittee who long have promoted
fair use, we believe it is possible to both support consumers' personal
rights to time-shift and record from broadcasts, and protect the interests
of content owners.
As we look to the future, we hope to help grow the music industry
by enhancing the discovery of music by our six and a half million subscribers
and an estimated thirteen to fifteen million XM listeners across the country.
We're very excited about our potential at XM, but we still are an industry in
its infancy. We will only succeed by keeping our existing subscribers and
attracting lots of new ones. And we can only do that through constant
innovation to improve listeners' experience.
Today, XM subscribers can expect to pay approximately $120 per year
to listen to over 170 channels of entertainment, sports, news, talk, and
other programs, including 69 channels of commercial-free music programming.
Until recently, most of our subscribers heard their favorite programs only
at home or in their cars and trucks. To add to their enjoyment, we first
developed a hand-held device that could receive XM live and store
up to five hours of programming. In response to growing consumer demand,
we are bringing new portable personal products to market that, for the first
time, will give our subscribers the ability to receive live XM satellite
radio, "time-shift" XM programming for later listening, and listen to their
own MP3 music collection, all in a single, convenient handheld device.
These new generation portable radios will allow subscribers to store up to
50 hours of XM programming, to enjoy their music on the go, and to purchase
additional music tracks--even entire albums--with ease from the new Napster
online music service.
Our research shows that XM subscribers buy more music, and over time
buy a broader range of music and attend more concerts, than other music
consumers. Despite this fact, the recording industry wants to stop these
new products from coming to market, that is, unless we let them take control
of designing the features we build into the devices. As a result, we have
been threatened with litigation and now face the prospect of device-crippling
legislation in this and other Congressional Committees.
About XM
XM is one of the great American high-tech success stories of this
decade. Using spectrum purchased at auction for nearly $90 million, we
launched our subscription service late in 2001. Since then, we have invested
nearly $3 billion in building a state-of-the-art network for the delivery of
radio programming. Despite the challenges of launching a business in an
economic recession and at the height of the dot.com bust, XM has grown into
an enormously popular consumer business. And we hope for it to be a
cash-positive business soon as well.
We built our entire business in compliance with the law,
particularly the Audio Home Recording Act and the Digital Millennium
Copyright Act of 1998. As a result, the record industry gets paid twice
for the music our subscribers enjoy; once through the royalties we pay under
Section 114 of the Copyright Act of 1998, and a second time when our device
manufacturers pay royalties under the Audio Home Recording Act.
We continue to make huge investments not only in technology, but
also in gifted individuals. We employ rocket scientists, electrical and
broadcast engineers, consumer electronics wizards, athletes, a public radio
legend, traffic reporters, marketing experts, and some of the world's
foremost music experts. Unfortunately, we also have been forced
to employ more and more lawyers.
Relationship to the Music Industry
Since the launch of our service, XM and the music industry have
enjoyed a symbiotic relationship. Without compelling content, our
multi-billion dollar, state-of-the-art delivery system would not have
attracted more than six and a half million subscribers. Nor would the
music and recording industries, and songwriters and performers have
received tens of millions of dollars in royalties from us. Having made
that investment, we are now delivering a wide diversity of music to
millions of enthusiastic, paying music fans. We have demonstrated that you
can build a business that promotes the interests of both consumers and the
music industry.
As an industry, satellite radio is the single largest contributor
of sound recording performance royalties to artists and record labels. In
fact, XM and Sirius pay more in such performance royalties than all other
digital broadcasters and webcasters combined. Likewise, XM and Sirius pay
huge royalties to composers and publishers. We respect, appreciate, and
compensate creators of music. In short, through the investment of
enormous amounts of risk capital, we have created a new source of royalty
payments for rights holders.
In addition to these new royalty payments, we continue to provide
the music industry with a powerful promotional platform. Airplay has long
been an essential promotional tool for music. In fact, Congress exempted
traditional radio from paying sound recording performance royalties precisely
because it recognized its promotional value. XM provides the same if not
greater promotional value to artists and labels, and yet we do not enjoy
this same exemption. Even for HD digital radio, terrestrial broadcasters
are exempt from the sound recording performance royalty obligations that
XM pays. In fact, as you know, recent payola allegations suggest that
record labels (that collect money from satellite radio) actually pay
traditional radio stations to play their music. Despite this disparate
treatment, we are not here today to ask you to change current law, but
instead to help you understand the competitive environment in which we
operate.
Over the past two decades, playlists at traditional radio stations
have been shrinking, forcing the public to endure an endless repetition of
the same handful of songs. The variety of formats has declined as well. By
contrast, XM offers our subscribers 69 channels of commercial-free music. We
have over two million titles in our collection, and play approximately
160,000 different tracks each month.
We have something for everyone: 24-hours per day of bluegrass,
blues, classical, country, hip hop, jazz, opera, pop, and rock and roll.
We have channels devoted to emerging artists. We have a channel for artists
that as yet are unsigned to any major record label. Our "Deep Tracks" channel
has helped to reinvigorate the careers of many rock stars of the 1960s and
'70s, and we have provided the opportunity for bands to perform live in the
"XM Caf�" at our recording studios. XM presents a series called "Artist
Confidential" and music shows hosted by stars as diverse as Bob Dylan, Quincy
Jones, Tom Petty, Wynton Marsalis, and Snoop Dogg to help our listeners
understand more about music from the artists' perspective. Our channel 73,
"Frank's Place," features the greatest singers of American Popular Song,
from its namesake Frank Sinatra to greats such as Ella Fitzgerald, Sarah
Vaughan, Tony Bennett, and Rosemary Clooney.
At the touch of a button, XM listeners see the name of the performing
artist and the name of the song they are hearing. Unlike broadcast radio
stations, which rarely announce what they play, XM is a powerful tool for
educating consumers hungry to discover and buy more music. In so doing, we
provide promotional value and royalty compensation never offered to the record
industry by traditional radio. And yet the music industry continually attacks
us for bringing great new products to market.
New Devices
From the outset, we have been committed to offering consumers the
best and most innovative products, while respecting copyright. Our
subscribers want more than just the ability to hear great music at home or
on the highway. Last year, we introduced a line of products called XM2GO.
These portable products allow consumers to listen to XM live
or to record up to five hours of programming, and thus to enjoy XM even when
they cannot receive a satellite signal, such as at the gym or on an airplane
flight.
We are building on the success and the functionality of the XM2GO
devices with the Pioneer Inno and the Samsung Helix. Like the XM2GO, these
new personal portable devices enable consumers to listen to live XM or to
record content they receive over satellite radio. A subscriber can program
these devices, like "time-shifting" on a VCR or TiVo, to record a program that
they cannot listen to live. Just as you can time-shift the television
broadcast of a baseball game for later viewing on your VCR or TiVo, you can
use these new XM portable devices to time-shift the radio broadcast of the
game from XM. The devices also will offer the type of functionality
consumers have come to expect from their everyday personal portable music
devices. The XM Helix and Inno players give consumers the ability to organize
the content they have recorded so they can listen to that content in any order
they choose. In addition, the new devices include the ability for consumers to
store songs from their personal music collection, as they can do with any
MP3 player, and to mix those songs with new music they hear on satellite
radio. And if they enjoy a song they have heard or recorded, they can
"bookmark" a song to buy it later on CD, or, they can connect to their
computer and purchase the song lawfully online from he new Napster and have
it downloaded directly to the device.
As a responsible business, we specifically designed our products to
comply with the Audio Home Recording Act (AHRA). When it adopted the AHRA in
1992, Congress created the legal framework for companies like XM to
manufacture and distribute devices that can record digital music. As you will
recall, that legislation allows consumers to digitally record music from CDs
and broadcast transmissions for personal use, but prevents making digital
copies from copies. In addition, under the AHRA manufacturers pay royalties
on the sale of devices. The millions in revenues paid by manufacturers are
shared with everyone in the music industry, under a formula enacted by
Congress with the support of all music industry stakeholders. In return,
manufacturers, distributors, retailers, and consumers are immune from lawsuits
based on copyright infringement. This represented a balanced compromise that
won unqualified support from the recording industry, the music industry, and
the consumer electronics industry.
Congress intended the AHRA as a comprehensive and forward-looking
compromise solution for the recording industry's concerns, for all new digital
recording devices. And so did the recording industry. Then-RIAA president
Jay Berman testified before Congress that the AHRA "will eliminate the legal
uncertainty about home audio taping that has clouded the marketplace," and
"will allow consumer electronics manufacturers to introduce new audio
technology into the market without fear of infringement lawsuits... ." In
supporting the passage of the AHRA, Mr. Berman assured Congress that they
would not have to revisit the home recording controversy for every new
generation of digital recorder, proclaiming that the AHRA "is a generic
solution that applies across the board to all forms of digital audio recording
technology. Congress will not be in the position after enactment of this bill
of having to enact subsequent bills to provide protection for new forms of
digital audio recording technologies."
Similarly, on behalf of the songwriting and music publishing
community, then-president of the National Music Publishers Association,
Edward P. Murphy, testified before Congress in support of the AHRA, "[Our]
enthusiastic support for the Audio Home Recording Act . stems from its
comprehensive approach to audio home taping issues. The proposed legislation
incorporates the critical royalty component, and it extends to all digital
audio recording technologies, not just to DAT."
In reliance on the AHRA, XM has invested in the design and
manufacture of our new generation personal portable radio products. In
compliance with the AHRA, these new generation devices do not allow any of
the recorded content to be moved off the device in digital form. Content
saved to the device from XM stays on the device, and cannot be copied or
moved. The only output on these devices goes to your headphones, in analog
form. The new Helix and Inno products promote personal listening enjoyment,
not Internet piracy.
Despite our payment of millions of dollars in performance royalties
and millions more in AHRA royalties, and the limitations we designed into
the devices so that XM content will not be uploaded to the Internet, XM still
faces opposition from the music industry. We have heard it said that allowing
consumers to record satellite radio turns our radio service into an unlawful
download business. We disagree. We have heard it said that we are now giving
consumers for the first time the ability "to slice and dice" music as they
see fit. We disagree. And we have been told our devices will cannibalize the
sale of recorded music, rather than promote sales as XM has done since its
inception. We emphatically disagree.
As an initial matter, we strongly reject the music industry's efforts
to roll back the long-established ability of consumers to record off the
radio for personal use. We are particularly disappointed that the head of
the RIAA has sought to vilify our law-abiding customers in testimony before
the House Judiciary Committee, when he accused home tapers using new
technology of "boldly engag[ing] in piracy with little fear of prosecution."
XM listeners are avid music fans and some of the music industry's best
customers, not pirates. And XM, and the consumer electronics manufacturers
which build our new products in compliance with the AHRA, are not pirates
either.
Recording content off satellite radio is not the same as downloading
music and has nothing to do with piracy:
? When a consumer wishes to download a song from the new
Napster or iTunes, he can acquire that specific song on-demand within seconds
of entering the name of the song. By contrast, XM subscribers have no ability
to choose what XM plays or, therefore, what songs they can record. XM
decides what is played.
? When a consumer buys a download from an Internet service,
she can typically copy the song onto multiple devices and even burn it on to
CDs. If a subscriber records a song from XM, the song is output only to her
headphones. It cannot be burned directly to a CD, moved to any other device,
or uploaded to the Internet.
? When a consumer purchases a download, he gets the full song
from beginning to end. When a subscriber records a song off of XM, the
recording is no substitute for the original. Just like recordings made using
a tape recorder from FM radio, songs recorded off XM include DJ talk,
overlapping parts of the preceding and following songs, and they may even
have a few seconds cut off.
? A download service, unlike XM, knows exactly what the
consumer is downloading and can charge for every download. XM, like any
radio service, has no way to know how many subscribers are listening at any
given time, no less whether or what any subscriber may be recording. That is
precisely why Congress created a royalty payment pool under the AHRA of funds
to be shared among the music industry, based on general digital recording for
personal use.
In short, we are providing our subscribers greater value from their
XM subscription: the ability to take XM with them everywhere, on the go in
their busy lives.
These new personal portable XM devices are merely today's equivalent
of recording off the radio, with the flexibility consumers have come to
expect from new digital technology. We are giving our subscribers the tools
to enjoy music they have lawfully acquired, with the capability to listen
to that music in any order they want, to skip over songs they don't like, and
to put together lists of songs for listening when jogging, commuting, or
shopping - including when shopping for CDs. When a consumer records
television programming on a TiVo, he or she can search for a particular
episode and disaggregate it from the other recorded content. Like TiVo, we
give consumers the tools to maximize their personal, non-commercial listening
experience. But unlike TiVo, we cannot offer a program guide to tell our
subscribers what songs are coming or when to record - because the law
prohibits us from doing so.
As in the days of reel-to-reel tape and later with analog cassettes,
consumers can record from XM programming and decide when and in what order
to listen to it. No doubt a few of you remember the experience of recording
a song off the radio, using a razor blade to cut the tape, and with the help
of Scotchr tape re-arranging the songs to make a party list of favorites. Our
devices, like many other lawful products on the market today, simply update
the tools for personal recording of radio into the 21st century. Had
Congress heeded the objections of the content industry to each new
technological innovation, consumers never would have had the right to enjoy
the analog cassette recorder, the VCR, the CD Recorder, the MP3 player, the
TiVo, the Slingbox - or, now, XM's new generation portable satellite radios.
Our new devices offer our subscribers the convenience of digital recording
technology that they get from every other new digital media device they own.
But just because a device makes personal recording convenient does not, and
should not, make it illegal.
Conclusion
Today, XM offers more than six and a half million subscribers and
thirteen to fifteen million listeners the ability to enjoy music wherever
they go. We are doing so lawfully, pursuant to the statutory framework
Congress established in 1992 and 1998. We are doing so in a way that delivers
tens of millions of dollars in new royalty payments to the music industry and
millions more in additional royalty payments under the AHRA. And we are doing
so in a way that facilitates the purchase of music and thus gives the music
industry another way to compete against illegal P2P networks.
In short, we are doing it right. We are following the laws that
Congress designed to apply to XM and to our new generation portable personal
products. Like the companies behind every new technology from the transistor
radio to the iPod, XM Satellite Radio is giving consumers new lawful ways to
take their music wherever they go. We provide compensation to songwriters and
music publishers both through performance rights and the AHRA. And, in
addition to the AHRA payments on our devices, satellite radio pays more
performance rights royalties to sound recording copyright owners and
performing artists than any other industry.
Thank you for your consideration of our views and thank you again
for standing up for the rights of innovators to bring new products to market
and consumers to exercise their fair use rights.
MR. STEARNS. Thank you. Mr. Ostroff.
MR. OSTROFF. Chairman Stearns and members of the committee,
thank you for inviting me here today. My name is Michael Ostroff and I
am General Counsel of the Universal Music Group. I am going to use
my time to highlight the ways in which Universal has welcomed the
opportunities that digital technologies provide artists, record companies,
and music fans around the globe. The music industry has gone through a
very difficult period. On-line piracy has caused substantial losses over
the last six years.
Thankfully, we are starting to climb out of the hole, in part because
of the support that we have received from the Administration and the
Congress. This committee helped educate the public about the dangers
posed by peer-to-peer technology. Your hearings informed parents,
teachers, and the news media on the ways that pornography inhabited
PDPs and the ways that services inserted viruses, spyware and other
dangerous software on a user's PC.
A key reason for our recovery is digital technology, which enables
consumers to enjoy music in new ways. Today, I am going to show you
several devices and services that we have authorized to perform,
distribute, or reproduce Universal's vast repertoire; oldies and today's
hits, from Mozart to Motown to Mariah Carey. I want to emphasize that
the services that I am going to describe got off the ground through free
market negotiations: a willing buyer; an entrepreneur with an idea; and a
willing seller, music companies that own the rights guaranteed by the
Copyright Act struck a deal.
Let us start with the ringtones that people use to personalize their
phone. We will use Matt's phone. When I call him, he knows it is me
because his phone plays a song by Universal artist Cheryl Crow that
mentions Santa Monica. That is where my office is located. Now let me
show you what you hear when you call Matt. This is called a ringback,
another way for a consumer to personalize his or her phone. When you
call Matt, you hear "Xs and Os" by the Universal artist Trisha Yearwood.
When Matt gets a call from Morna, he receives a music video as his
ringtone. You will have a hard time seeing it from the dais, but the
image is remarkably good. While the call is coming in, he can watch 30
seconds of a music video. The mobile phone industry seized the value of
music personalization and is using music to promote their networks. As
seen here, Verizon and others also offer their subscribers downloads of
full-length songs through the cellular network.
[Slide.]
The slide shows Moby TV, a service that streams music video to
your mobile phone. With a stream, the music video is not stored on the
phone; the consumer subscribes to a channel and watches and listens to
videos on the fly.
[Slide.]
Now let us move from mobile phones to personal computers and
portable music players. This is iTunes and this is the iPod. We sell our
recordings to iTunes which sells music downloads by the single song or
as an album.
[Slide.]
The next slide displays music subscriptions. For a monthly fee, a
consumer can download over one million different tracks, again, old
songs and new releases that you can store for as long as you subscribe to
the service. Music from Rhapsody can be transferred to over a hundred
different portable devices like those that I brought with me here.
[Slide.]
The next slide is of a particular kind of subscription service that
focuses on the college market. Piracy on university networks is a huge
problem for us, so we have heavily discounted our prices in order to
encourage colleges and their students to go legit.
[Slide.]
Next is an example of an on-demand music video service. Music
fans can now go to sites like Yahoo and view the music videos of their
choice. We also have worked out a deal with a company that offers
music videos on demand through cable television.
[Slide.]
Here is another service we authorize Yahoo to offer: an interactive,
personalized Internet radio service. With Launchcast, you tell the service
what your favorite songs and artists are and a customized station based
on those preferences is created for you.
[Slide.]
Another noteworthy development is the rollout of legitimate
authorized licensed peer-to-peer services. This product would not have
been feasible but for the Supreme Court's unanimous decision in support
of artists and creators in last year's Grokster case.
Mr. Chairman, I was glad that you asked me to highlight the devices
in a legitimate digital marketplace and I could have shown many more.
These examples make it clear that we are ready, willing, and able to
license viable business models. We can be as flexible as necessary to
build a partnership with any business that wants to play by the rules.
Indeed, we are working closely right now with our long-time partners,
the radio broadcasters, to come up with a way to support the expeditious
rollout of HD radio. We are working on a consensus on digital radio
copy protection.
We hope and expect that in the future we will be licensing the sale of
downloads and other services with your local broadcaster as our business
partner. I remain hopeful that we can also work out a marketplace
accommodation with XM, a company we have worked well with over its
critical first years. We did not object when Congress gave the satellite
services a compulsory license to perform our music so that their
subscribers could listen to it. We helped them get started by agreeing to
below market payments from them. Now XM wants to contort the
government imposed performance license into a service that allows their
subscribers to make permanent downloads of our individual songs.
The new device permits consumers to record satellite programming;
see a list of songs recorded; select the specific tracks they want to hold
on to, as well as those they wish to delete; and a library to select the
tracks for future use. It is a great device. In fact, it is much like an
iPod, but unlike an iPod, you don't have to pay for the music you keep.
Sirius Radio sells a similar device, which I have here. It is not as robust
as the new XM products, but similar. We brought our concerns to Sirius and
entered into a satisfactory agreement with respect to their S50 and look
forward to productive business discussions regarding the distribution of
future products.
Again, we are ready to license our rights on behalf of the artists and
creators we work with and hope to do so not only with XM, but with a
great many other services that approach us in the years ahead. Mr.
Chairman, thank you. I look forward to your questions.
[The prepared statement of Michael Ostroff follows:]
PREPARED STATEMENT OF MICHAEL OSTROFF, GENERAL COUNSEL AND EXECUTIVE VICE
PRESIDENT, BUSINESS AND LEGAL AFFAIRS, UNIVERSAL MUSIC GROUP
Chairman Stearns, Ranking Member Schakowsky, and Members of the
Subcommittee, thank you very much for requesting our views on the issue of
digital audio content and meeting consumer demand in the marketplace. My
name is Michael Ostroff and I am General Counsel and Executive Vice
President, Business and Legal Affairs, for the Universal Music Group. Music
has been at the forefront of the electronic marketplace and we at Universal
have worked hard over the past several years to provide consumers with the
most choices and the best digital music experience possible.
We are driven in the marketplace by consumers, and consumers are
demanding quality, convenience and choice. Today, consumers have more
choices in how they obtain their music than ever before: online downloads
such as iTunes; subscription services such as Napster and Rhapsody, including
portability features such as Napster to Go, and special discounted rates for
subscription services at colleges; ringtones; ringbacks; mobile downloads;
mobile videos; online videos on demand; kiosks in retail stores; legitimate
peer-to-peer services; interactive web radio; and instant post-concert
recorded CDs are just some of the new formats in which we are making music available. These are in addition to new physical formats such as DVD-Audio,
Super Audio CD, and DualDiscs.
Considering that all of the products and services listed above have
appeared in just the past few years - almost a blink of the eye in the long
history of music distribution - you can only imagine what is yet to come in
the near future. Universal is excited about licensing and selling our music
in these and other new digital formats to bring more music to more fans from
both our vast catalog as well as new artists. And we are flexible in the way
we craft digital agreements, so that consumers can use the music they
purchase conveniently and in ways that meet their reasonable needs, while at
the same time protecting the content against illegal redistribution and other
forms of piracy.
We believe that marketplace negotiations have worked best, allowing us
to set appropriate rates and ensure reasonable content protection. Such
negotiations have worked far better than compulsory licenses, such as those
granted to satellite, cable, and Internet listening services. Our legal
obligation to make our music available due to this compulsory license leads
to situations like one we are facing right now - in which XM satellite radio
is offering its customers the ability to download music and create a digital
music library on its portable devices, in much the same way that iTunes offers
permanent downloads. Of course, the big difference is that in the case of
iTunes, Apple compensates artists, creators and copyright owners through a
distribution fee.
Let's be clear. Congress gave the satellite services a compulsory
license to perform our music, so that their subscribers could listen to it.
Our company and others in the industry helped the satellite services get
started by agreeing to below market payments for our property. We worked
with them to help them develop interesting channels featuring interaction
with our artists. Now XM wants to stretch and reinterpret the
government imposed license into a service that enables their subscribers to
make permanent copies of our music.
Universal Music does not object to XM offering its subscribers a
distribution service in addition to a broadcast service, so long as XM
agrees to pay us for the distributions. Rather than working to reach a fair
accommodation through marketplace negotiations, however, XM claims that the
compulsory performance license it enjoys enables it to distribute our content
as though it's just another aspect of performing our music, and that
its payment for performances covers what are in fact distributions. XM also
claims that, instead of paying an appropriate distribution fee, its
manufacturing partners are merely required to pay royalties under the Audio
Home Recording Act, a payment system that was intended only to cover serial
recording on Digital Audio Tapes and was never intended to replace the
licenses required for distributions of music.
Allowing XM to make distributions while paying only performance fees is
unfair to the legitimate music distribution services like iTunes, Napster,
Rhapsody and Yahoo!, that are just starting to gain traction in the face of
competition from illegitimate, unauthorized services that have been giving
away our music for free. And it is unfair to the music companies and artists
who deserve compensation for the blood, sweat, tears and capital they invest
in creating new and innovative sounds. The growth of digital distribution in
its many forms - via cellphones, internet, cable and now via broadcast
signals -- depends upon a legitimate marketplace. A legitimate marketplace,
in turn, depends upon the ability to protect content effectively.
The emerging digital formats are made possible because content
protection is able to set levels of "ownership" of a copy of our music at
different price points. For streaming music, consumers pay at one price
point; for permanent downloads, consumers expect to pay at a higher price
point. Just like a consumer has a different expectation of price when
renting a musical instrument versus buying it. Without the ability to define
the parameters of use, without the ability to protect the content,
distributors could only offer consumers music on a one-price-fits-all basis;
and, in order to cover all platforms and services, that price would
necessarily be higher. That, of course, is not good for consumers. In
short, content protection presents more opportunities for content creators
and providers, which ultimately leads to more opportunities - and choice - for
consumers.
In last year's unanimous Grokster decision, the United States Supreme
Court gave the legitimate digital marketplace a boost. By holding liable
those services that facilitate piracy, the Court opened the door for the
legitimate digital marketplace to succeed and emphasized the importance of
protecting copyrighted works. Weakening copyright and allowing for the
circumvention of content protection is antithetical to the Court's holding;
and, by decreasing the market opportunities for both media creators and
distributors, the circumventing or "hacking" of content protection
ultimately harms consumers.
Unfortunately, a bill has been introduced and referred to this
Subcommittee, H.R. 1201, that would undermine the legitimate marketplace by
granting a "hacking" right to consumers. It would allow the removal of copy
protection contained on a digital product, as long as it is done for "fair
use" purposes. This legislation distorts the meaning of fair
use and would lead to the exact escalation of piracy the Grokster case sought
to prevent. Fair use has never meant "free access." If you want to copy a
portion of a chapter of a book to quote in a book report, you cannot steal
the book in order to do so. Yet, that is exactly what H.R. 1201 would allow.
It is the equivalent of allowing a consumer to buy a "black box" to get HBO
for free, as long as the consumer is only using it to watch programming for
"fair use purposes." And, of course, once the content protection is removed,
that protection is compromised for all purposes. Given that licensing
practices in the marketplace already allow for personal uses that meet
consumer expectations, this bill is unnecessary and dangerous.
H.R. 1201 would undo much of what this Committee and the Congress
accomplished in 1998 when it passed the "Digital Millennium Copyright Act."
Since passage of the DMCA, the digital marketplace for content has exploded.
Weakening it would stymie future growth.
In fact, the Congress rejected in 1998 the language proposed in section
5 of H.R. 1201. Instead, under the leadership of the Commerce Committee,
Congress created a procedure to ensure that adequate public access to
copyrighted materials is maintained: the Librarian of Congress, working with
the Commerce Department, investigates, every three years, whether public
access to copyrighted materials is being harmed or threatened. In both 2000
and 2003, the Librarian considered broad exceptions similar to H.R. 1201,
and rejected them, because proponents could not demonstrate harm.
Another proceeding is in process this year. There is no evidence the
Congress made a mistake in 1998. Just the opposite: the Congress got it
right, and there is no basis for undoing that decision now.
H.R. 1201 would also undermine efforts to fight piracy and promote
respect for copyrights worldwide. Because U.S. copyrighted works dominate
world markets, the U.S. Congress and Administrations - Republican and Democrat
- have all worked hard to upgrade copyright law and enforcement
internationally. Because America has such a huge stake in intellectual
property protection, we set the standard that we hope the world will follow.
In recent years, this effort has paid special attention to protecting
encryption and similar technologies against hacking. H.R. 1201 would pull
the rug out from under these efforts, and expose U.S. works to greater risks
of piracy in markets around the globe.
We ask that this Subcommittee reject H.R. 1201, and allow the
marketplace to continue to meet consumer expectations. The many different
options consumers have today in which to get their music is a function of
that legitimate free marketplace. This proves that one thing is certain -
if music distribution is left to the free market, we will find a way to
license these and many more uses of our music with functionality
consumers can only imagine today. Universal has embraced and made deals for
numerous different distribution models, and we look forward to welcoming many
more in the future. We are extremely eager for consumers to have increasing
numbers of options for where they get their music and how they experience it.
The better the experience for consumers, the better it is for us as well.
There are instances, however, where we do not have rights, in which the
free marketplace is not allowed to work, necessitating changes in the law to
maintain a legitimate marketplace. This is perhaps most evident with
over-the-air radio. The next generation of new HD Radio devices would allow
listeners to record, sort, and permanently store individual songs in a
digital jukebox, replicating a sale made from a digital download service such
as iTunes. But we have no performance right for over-the-air radio, which
means that we have no leverage when seeking to negotiate appropriate
use of our music.
Fortunately, we are already in productive discussions with the
broadcast industry to ensure that the functionality of these new HD Radio
devices does not substitute for sales in the marketplace. In part because
of our longstanding relationship with broadcasters, and additionally at the
urging of Senators Stevens and Inouye during a January hearing on Broadcast
and Audio Flag before the Senate Committee on Commerce, Science and
Transportation, representatives of the music and broadcast industries agreed
to meet to work out the issues. Since then, there have been several
meetings, including a very productive one in New York between senior
executives of both industries, resulting in the formation of two
negotiating groups, an Audio Flag Task Force and a Technical Implementation
Working group. We remain optimistic about these talks, are committed
to a swift rollout of HD radio, and continue to believe that the best
solution is one that comes from free marketplace negotiations.
But it is important to remember that there remains a marketplace
failure due to our lack of an over-the-air performance right - our
bargaining power is limited by the fact that we cannot simply say, "no,
you may not use our music." Therefore, while we are encouraged that the
broadcasters will continue to negotiate in good faith, we appreciate
the introduction of legislation such as H.R. 4861, The Audio Broadcast Flag
Licensing Act. This bill, introduced by Representatives Ferguson, Towns,
Bono, Gordon and Blackburn, addresses this marketplace failure by granting
the FCC jurisdiction to promulgate rules regarding content protection for
digital over-the-air radio. The bill requires digital radio services that
use the government spectrum to implement certain content protection
technology. H.R. 4861 strikes the right balance between creating new
radio services that bring more choices to consumers, and protecting the
property rights of creators. The bill also prevents unfair competition
between radio services and download services, by appropriately providing for
private market negotiations of an "audio broadcast flag" that will
differentiate between radio broadcasts and download services,
and require a market license only for download services.
The bill assures that no one device or technology manufacturer has an
advantage over another and will maximize the range of broadcast receiving
devices made available to the public. Further, it makes clear that the
adoption and implementation of an audio broadcast flag will in no way delay
the final operational rules for digital radio and assures that legacy devices
are not affected. By using broadcast flag technology, devices already
on the market prior to the enactment of legislation will not be made
obsolete, but will remain fully functional.
At the same time, we agree with the leadership of the Senate Commerce
Committee that it is preferable to find a marketplace solution, and
appreciate that they have asked the parties to work toward such a solution
and report to the Committee periodically. As Senator Stevens said, "the
creative content side and the distribution side of the music industry should
seek mutual ground that supports business models for both."
And we greatly appreciate NAB President David Rehr's acknowledgement of
his industry's "strong interest in collaborating to find a workable solution
to content protection issues associated with terrestrial digital radio
broadcasting," and his agreeing in a joint report to the Committee that the
scope of the negotiations on flag implementation would include usage rules
preventing the disaggregation or "cherry-picking" of songs from surrounding
content transmitted over HD radio, and assurance of an expeditious rollout of
HD radio nationwide. Following the positive initial meetings between our
industries, we think we are on the right track.
The future of the digital marketplace is a great one for consumers in
the 21st century. Wouldn't it be great if you could push a button and buy a
song when you hear it on the radio that is automatically charged to your
credit card? Or to push a button on your iPod that automatically purchases
an individual track? Or to play any song on demand on your portable player
any time you want for a monthly fee? All of this is possible in the free
market in a manner that maintains the incentive to create and invest in
music. Robust content protection, and preventing against the hacking of
that protection, will assure that possibility for consumers, and provide a
return on investment for creators, broadcasters, device manufacturers, and
all other parties that bring new and exciting entertainment to market.
Thank you for focusing on this important issue.
MR. STEARNS. Thank you and you could have added there are no
commercials, right? These are not our products. We have a vote, but I
think we have some more time, so Mr. Halyburton, go ahead.
MR. HALYBURTON. Thank you, Chairman Stearns and members of
the committee. My name is Dan Halyburton, I am Senior Vice President
and General Manager for Susquehanna Radio. I am here today on behalf
of the National Association of Broadcasters where I serve as the chair for
the NAB Audio Flag Task Force. The NAB is a trade association that
advocates on behalf of more than 8,300 free local radio and television
stations, as well as broadcast networks, before Congress, the FCC, and
the courts. Local broadcasters are engaged in an exciting transition to
digital. Currently 777 AM and FM stations are on the air in digital, and
many more will roll out in the near future.
Digital radio not only offers crystal clear audio, it also permits the
broadcasting of multiple free over-the-air program channels. Radio
stations will be able to bring additional local service to the public with
their current spectrum, while at the same time providing expanded
opportunities to promote more varied artists, music, and local
information services. Digital radio also offers greater format diversity
for listeners. In 1993, radio offered about 32 formats while expanding to
over 70 formats in the year 2004. HD radio offers listeners an even
greater expansion of programming, choice, diversity, and variety.
2006 and 2007 promise to be pivotal years for this revolution in
radio. Auto makers are signing up for factory-installed radios, retail
outlets are featuring many new digital radio products and we are doing
our part to spur the transition. Major radio groups are engaged in a
massive marketing campaign to make sure consumers are aware of
digital radio and educated on its benefits. The future of digital radio also
involves a discussion of content protection. Local broadcasters are
content producers ourselves and oppose piracy in all forms. To that end,
the NAB is working with the recording industry to develop options for
content protection so long as those options don't slow down radio's
digital transition.
These discussions have been very constructive and the NAB strongly
believes that the broadcast industry and the recording industry and other
stakeholders can work toward a consensus on digital radio copy
protection systems. While our discussions will explore many options,
one approach we both agree is not viable involves encryption at the
source. No proposal should be allowed to derail the HD radio rollout by
making obsolete thousands of receivers already on the market, as well as
millions more in the manufacturing pipeline.
As our discussions with the recording industry continue, we urge the
Congress and the regulators to allow these private negotiations a chance
to work. At this time, we should refrain from adopting an unnecessary
legislative mandate or pushing a premature adoption of a quick fix for
copy protection and digital radio. Mr. Chairman, as I mentioned, HD
radio will also enable broadcasters to better serve our local communities
and remain competitive in the evolving digital media marketplace. All of
these new digital services will amplify radio's traditional strength; free,
over-the-air service to the community.
As a public license holder, local broadcasters cover issues of concern
to local communities, adhere to regulations on over-the-air content, play
a vital role with emergency services including Amber Alert, and initiate
and partner in public service campaigns. Some of the discussion today
from other witnesses may involve calls for parity with over-the-air radio,
including calls for a new performance right tax on broadcasters. Local
broadcasters have a deep, extensive relationship with the recording
industry in promoting new music and artists, a relationship that has been
upheld by Congress on many occasions. This partnership works and
should not be changed.
I would also draw the committee's attention to satellite radio's
desire to ultimately provide local advertising and local content. As a
national service, satellite radio is not required to serve local
communities and is not subject to content regulations and many other
public service obligations. Local broadcasters appreciate the 125
cosponsors of H.R. 998, including Congressman Chip Pickering and
Congressman Gene Green. H.R. 998 clarifies satellite radio's role as a
national only service and preserves the local role of the broadcaster.
Mr. Chairman, the successful deployment of digital radio holds much
promise and will significantly improve services for our listeners and your
constituents. Thank you.
[The prepared statement of Dan Halyburton follows:]
PREPARED STATEMENT OF DAN HALYBURTON, SENIOR VICE PRESIDENT AND GENERAL
MANAGER, GROUP OPERATIONS, SUSQUEHANNA RADIO CORPORATION, ON BEHALF OF THE
NATIONAL ASSOCIATION OF BROADCASTERS
Good afternoon, Chairman Stearns and Members of the Subcommittee. My
name is Dan Halyburton. I am the Senior Vice President and General Manager
for Group Operations for Susquehanna Radio Corp., which owns 33 broadcast
radio stations. I am also Chairman of NAB's Audio Flag Task Force. I am
testifying today on behalf of the National Association of Broadcasters (NAB).
NAB is a trade association that advocates on behalf of more than 8,300 free,
local radio and television stations and also broadcast networks before
Congress, the Federal Communications Commission and the Courts.
My message today is a simple one. The radio broadcasting industry
is currently embracing digital technology. Given the importance of this
digital transition to both consumers and local broadcasters, any technical
system developed to provide copy protection for digital content must not
impede the digital radio roll-out. Although broadcasters oppose piracy in
all shapes and forms, NAB remains concerned that legislatively imposing
requirements for digital copy protection at this time could stall the
digital radio transition. Moreover, certain audio copy protection methods
that have been proposed, such as encryption, are problematic for additional
reasons. NAB accordingly urges Congress to allow the broadcast industry, the
recording industry and other vital stakeholders to continue working toward a
consensus on digital radio copy protection.
Any System to Protect Digital Content Must Not Impede the Digital Radio
Roll-Out
Today, I can report that local radio broadcasters are engaged in an
exciting transition to digital audio broadcasting (DAB). The industry sees
digital high definition radio as our future-it will enable us to better serve
our local communities and to remain competitive in today's ever-changing
digital media marketplace. But we face many challenges as we work toward a
successful and timely transition to digital radio. Those challenges would be
exacerbated - and the roll-out delayed - by a "quick fix" technical
system to provide copy protection for digital radio. For this reason, NAB
and the Recording Industry Association of America (RIAA) are now discussing
the development of a consensus on digital radio copy protection. We urge you
to allow this industry process to continue without the adoption of premature
legislative mandates that could well have disastrous consequences for our
industry.
The radio industry in America has begun its massive roll-out of
digital broadcast transmissions and all-new digital radio receivers.
Currently, 767 digital AM and FM stations are on the air. Broadcasters have
individually committed to upgrade more than 2,000 stations to high definition
(HD) radio technology this year. Why are radio broadcasters embracing HD
radio? In short, because it will allow local broadcasters to better serve
their listeners and to remain competitive in today's digital media
marketplace. HD radio not only offers crystal-clear audio; it also permits
the broadcasting of multiple free, over-the-air program streams to bring
additional content (including much more local content) to the public within
stations' current spectrum. It further enables other services, including
wireless data enabling text information, such as song titles and artists or
weather and traffic alerts. Even more innovative features are under
development, such as program menus giving listeners instant access to a
favorite drive time show, news and information, and special music
programming. New features of the future could also include real-time
traffic reports broadcast by local stations and visually displayed on a
vehicle's navigation system. In sum, digital radio will allow broadcasters
to remain a vital and vibrant part of the media landscape of the future.
But beyond thousands of radio stations converting to digital, the HD
radio revolution also involves the consumer electronics industry and, most
importantly, consumers. New digital radio receivers have been launched in
the marketplace across a range of product categories. Major radio groups are
engaged in a massive marketing campaign to promote digital radio to consumers.
And auto makers and after-market manufacturers are beginning to produce
digital radio products for car sound systems. 2006 and 2007 promise to be
pivotal years for the roll-out of digital radio, with auto makers signing up
for factory-installed radios, retail outlets prominently featuring many
new digital radio products, and hundreds more broadcasters commencing digital
transmissions. Given this investment by broadcasters and equipment
manufacturers and the benefits that consumers will receive from a successful
deployment of digital radio, it is of paramount importance that any copy
protection mechanism not impede the digital radio roll-out.
NAB remains concerned that developing and implementing a technical
system to provide copy protection for digital radio not have a negative
impact on the digital radio transition. Reaching a final consensus on the
digital television (DTV) broadcast flag mechanism, for example, entailed many
years of intense negotiations by scores of participants from a wide array of
industry sectors. The purpose, concept and methodology of the DTV flag were
then the subject of voluminous comments and reply comments from affected
industry and consumers groups, companies and organizations. The FCC
scrutinized these comments, heard in-person presentations from many
interested parties and concluded that the purpose of preventing widespread
indiscriminate re-distribution of digital video content over the Internet
was worthy and that the methodology was sound and workable.
NAB has expressed its willingness to participate in developing and
forging a consensus on a digital radio copy protection system so long as it
would not interrupt the digital roll-out or create uncertainty that would
lead to a slow down of adoption rates by manufacturers, consumers or even
broadcasters. To that end, NAB and RIAA are engaged in on-going discussions
regarding copy protection. We jointly held an executive level meeting in New
York City that served as a starting point for our discussions. We have
established two working groups that will continue to move forward with
meetings, which we expect will ultimately involve and include other vital
stakeholders in a successful resolution of the issues.
Given these on-going discussions, NAB does not believe that
legislation mandating any particular system of digital radio copy protection
is necessary at this time. Terrestrial digital radio is a far different
platform from satellite and on-line music services and delivery. The reality
or scope of any threat to the recording industry from a scenario in
which consumers make good quality recordings from digital broadcasts on their
local radio stations is still an evolving concern. Those desiring to obtain
and listen to pure, uninterrupted performances of sound recordings, in lieu
of the radio, already have an abundant number of means to do so. Satellite
and cable digital subscription services, hundreds of thousands of unencrypted
compact discs, peer to peer file sharing, and hours of uninterrupted music
that can be stored on recordable CDs and hard drives, are but a few such
means. These are far different concerns than that of consumers seeking out
random digital audio broadcast signals that may contain DJ patter over the
recordings in order to create files to make copies of or distribute sound
recordings. Nonetheless, NAB strongly believes that the broadcast industry,
the recording industry, and other vital stakeholders can work toward a
consensus on digital radio copy protection system, as warranted by
marketplace conditions and technological developments.
The Public's Right to Make Private Copies of Sound Recordings for Personal Use
Must Be Taken Into Account
In addition, in any discussion about affording copy protection to
digital audio recordings or transmissions, all parties must take into account
Congress' long-standing policy of protecting and preserving the public's right
to make home recordings of sound recordings for personal use. The House
Report accompanying the Sound Recording Act of 1971 stated:
HOME RECORDING
In approving the creation of a limited copyright in sound recordings
it is the intention of the Committee that this limited copyright not
grant any broader rights than are accorded to other copyright
proprietors under the existing title 17. Specifically, it is not
the intention of the Committee to restrain the home recording,
from broadcasts or from tapes or records, of recorded performances,
where the home recording is for private use and with no purpose of
reproducing or otherwise capitalizing commercially on it. This
practice is common and unrestrained today, and the record producers
and performers would be in no different position from that of the
owners of copyright in recorded musical compositions over the past
20 years.
Since that Act, Congress has expanded the sound recording right only
sparingly, in careful response to specific and well-documented threats, all
the while reiterating the importance of preserving the public's right to make
home copies for personal use. In the Audio Home Recording Act of 1992
("AHRA"), Congress definitively addressed the issue of home recording of
sound recordings and musical works. This Act was intended to be
comprehensive, forward-looking legislation designed to end, once and for
all, the "longstanding controversy" surrounding the home recording of
prerecorded music. Indeed, then-President of RIAA, Jay Berman, described
the bill that became the AHRA as "a generic solution that applies across
the board to all forms of digital audio recording technology."
The Senate Report that accompanied the AHRA opened its discussion of
the bill with the assertion that "[t]he purpose of S.1623 is to ensure the
right of consumers to make analog or digital audio recordings of copyrighted
music for their private noncommercial use." To this end, the provision of
the AHRA providing the exemption for home copying, section 1008, was
considered "one of the cornerstones of the bill" because it "removes the legal
cloud over home copying of prerecorded music in the most proconsumer way
possible: It gives consumers a complete exemption for noncommercial
home copying of both digital and analog music, even though the royalty
obligations under the bill apply only to digitally formatted music." The
Ninth Circuit confirmed this conclusion in Recording Industry Association of
America v. Diamond Multimedia Systems, Inc., 180 F.3d 1072 (9th Cir. 1999).
Certain Proposals for Audio Copy Protection Are Problematic
One proposal for resolving copy protection concerns is to mandate
that all radio broadcasters encrypt their digital content at the source. NAB
strongly opposes this approach. Such a mandate would be antithetical to the
concept of free, over-the-air broadcasting. No U.S. free, over-the-air
broadcast service, analog or digital, has ever been required to encrypt its
transmissions.
Any encryption requirement would also likely risk stalling the
digital radio transition by requiring a change in the technical digital radio
broadcasting standard of such magnitude that a year's delay and likely more
would be inevitable. Resulting uncertainty in the marketplace and potential
loss of confidence and interest in digital audio broadcasting by
manufacturers now ready to roll out DAB receivers would harm
broadcasters and threaten the public's receipt of digital radio. To date,
there has been no investigation of what kind of encryption would be utilized,
what copy control and re-distribution measures would be added (and acceptable
to various stakeholders), and what features receivers can and cannot employ
in terms of storage and replay.
Required encryption of DAB transmissions, even at this early stage,
would likely result in obsolescence of millions of units of DAB components
currently in the production pipeline, including receivers, integrated
circuits and installed component parts in automobiles. This would clearly
decrease manufacturers' and auto makers' enthusiasm for developing and
deploying DAB products.
Encryption and copyright protection considerations with regard to
digital radio differ in important ways from the DTV broadcast flag. The
DTV broadcast flag does not involve copy restrictions, but rather is
designed to prevent only indiscriminate re-distribution of broadcast
programming over the Internet. The DTV broadcast flag does not disable
the existing base of "legacy" receivers, which will simply not "read" the
flag and its instructions on re-distribution. As noted above, the
encryption of DAB signals would obsolete receivers now in the field, as
well as receivers and component parts currently in the production pipeline.
And, as previously explained, with the DTV flag, there was a consensus
solution developed by a broad cross-section of industry participants.
Congress Should Reject Efforts to Impose a Sound Recording Performance
Right in Digital Broadcasts
NAB urges the Subcommittee to recognize that a new performance right
tax on broadcasters is unnecessary and has no relationship to concerns about
the copying and redistribution of digital content.
Throughout the history of the debate over sound recording copyrights,
Congress has consistently recognized that recording companies reap very
significant promotional benefits from the exposure given their recordings by
radio stations and that placing burdensome restrictions on performances could
alter that relationship, to the detriment of both industries. For that
reason, in the 1920s and for five decades following, Congress
regularly considered proposals to grant copyright rights in sound recordings,
but repeatedly rejected such proposals.
When Congress did first afford limited copyright protection to sound
recordings in 1971, it prohibited only unauthorized reproduction and
distribution of records, but did not create a sound recording performance
right. During the comprehensive revision of the Copyright Act in 1976,
Congress again considered, and rejected, granting a sound recording
performance right. Congress continued to refuse to provide any sound
recording performance right for another twenty years. During that time, the
recording industry thrived, due in large measure to the promotional value of
radio performances of their records.
It was not until the Digital Performance Rights in Sound Recordings
Act of 1995 (the "DPRA") that even a limited performance right in sound recordings was granted. In granting this limited right, Congress stated it
"should do nothing to change or jeopardize the mutually beneficial economic
relationship between the recording and traditional broadcasting industries."
As explained in the Senate Report accompanying the DPRA, "The underlying
rationale for creation of this limited right is grounded in the way the
market for prerecorded music has developed, and the potential impact on that
market posed by subscriptions and interactive services - but not by
broadcasting and related transmissions."
Consistent with Congress' intent, the DPRA expressly exempted from
sound recording performance right liability non-subscription, non-interactive
transmissions, including "non-subscription broadcast transmission[s]" -
transmission[s] made by FCC licensed radio broadcasters. Congress made
clear that the purpose of this broadcast exemption was to preserve the
historical, mutually beneficial relationship between recording companies
and radio stations:
The Committee, in reviewing the record before it and the goals of
this legislation, recognizes that the sale of many sound recordings
and careers of many performers have benefited considerably from
airplay and other promotional activities provided by both
noncommercial and advertiser-supported, free over-the-air
broadcasting. The Committee also recognizes that the radio
industry has grown and prospered with the availability and use of
prerecorded music. This legislation should do nothing to change or
jeopardize the mutually beneficial economic relationship between
the recording and traditional broadcasting industries.
The Senate Report similarly confirmed that "[i]t is the Committee's
intent to provide copyright holders of sound recordings with the ability to
control the distribution of their product by digital transmissions, without
hampering the arrival of new technologies, and without imposing new and
unreasonable burdens on radio and television broadcasters, which often
promote, and appear to pose no threat to, the distribution of sound
recordings." In sum, the transition of traditional local radio stations
from analog to digital presents no basis to alter fundamentally the
long-standing mutually beneficial relationship between the recording and
broadcasting industries by imposing a new performance right in digital
broadcasts, when one does not exist in analog.
NAB further stresses that this discussion is not intended to
minimize legitimate concerns the recording industry may have about the need
for copy protection. Rather, it is intended to assist the Subcommittee in
understanding why a performance right for sound recordings is irrelevant to
those concerns.
Conclusion
The deployment of digital radio is essential for terrestrial
broadcasters to better serve their listeners and to remain competitive in
today's digital media marketplace. Because of the importance of a timely and
successful roll-out of digital radio, any system to protect digital content
must not impede the transition. NAB and RIAA are engaged in discussions to
develop a consensus on digital radio copy protection. Congress should
allow this industry process to continue without the adoption of premature
legislative mandates.
Thank you for this opportunity to share our views.
MR. STEARNS. I thank you. We have about three or four minutes
left, so we are going to take a short break and we have three votes, so if
you will be patient with us, we have got one; it is almost over, and then
we have got two more in five minutes, so we should be back in about 15
minutes or less.
[Recess.]
MR. STEARNS. The subcommittee will reconvene and Mr. Regan,
thank you, and all of you, for your patience here and I welcome your
opening statement.
MR. REGAN. Mr. Chairman, members of the subcommittee, thanks
for allowing me to speak today on behalf of songwriters. My name is
Bob Regan. I am the current President of the National Songwriters
Association International, the largest not-for-profit trade association for
songwriters in America. I have heard it said that writers really have only
one story to tell, their own. With that in mind, I would like to give some
insight into the profession of songwriting, what we call America's
smallest small business and what content creation actually entails.
Forty years ago I sat in my bedroom with the Beatles songbook, my
first guitar, and my first broken heart. As I fumbled with the chords to
"Norwegian Wood," I experienced the healing restorative powers of
music, though I doubt I would have put it that way at the time. In
college, when I played "Louie Louie" at frat parties, I saw firsthand the
exuberance and release that a song can bring about. Think 20 Sig Eps
doing the Gator on the floor. I witnessed songs like Bob Dylan's
"Blowing in the Wind" or Merle Haggard's "Walking on the Fighting
Side of Me" become far more than content or entertainment. They were
anthems and battle cries that cut as deep as the rifts in society at that
time.
Upon graduating from college, I postponed applying to law school
for a year to try the music business full time. Eight years later, I landed a
recording contract with a major label in Los Angeles. To that point, the
songs I had written were of value only to my friends, family, and myself.
They were performed at weddings; they commemorated the birth of my
children and the passing of my parents. Was my recording debut a
success? Unfortunately, I was one of the large majority of recording
artists who never make a dollar or make a second record.
At age 35, I gave myself three years to write a hit or pack it in. I
moved my family across country to Nashville, Tennessee. There I was
one of the lucky ones. I signed a contract as a staff writer for $100 a
week, fully recoupable from future royalties, by the way. I had a few
songs recorded and then right at the three-year mark, Reba McIntire
recorded and released a song which I had co-written. I finally had the hit
and the validation that I had been working and praying for. Was I now
wealthy? Well, I received about $35,000 for my share of the royalties,
paid over two years. Going forward, I was able to become a business
partner and co-owner of my copyrights.
Over the past two decades, I have had many songs recorded and had
several hits on country radio. I have been blessed beyond all my
expectations and have the greatest occupation anyone could ask for. Am
I now wealthy? Well, consider this: if I am lucky enough to co-write a
song on a million selling CD, my writer's share is about $23,000.
Congress, by the way, determines that rate.
The title of this hearing speaks to "Satisfying the 21st Century
Consumer." We songwriters and the artists who record our songs are
more than willing, as we have always been, to provide content for new
technologies. We welcome the opportunity. We are, however, opposed
to business models that attempt to devalue our music, to redefine how we
are compensated, or to turn a radio signal into an on demand record
store. We only ask that we are able to make a living; not a killing, a
living.
Songs and songwriters are the tip of the inverted pyramid upon
which the entire multi-billion dollar music industry is balanced, and
others can speak far better than I to the specifics of pending legislation.
As I said, I never did make it to law school. I am, however, familiar with
Article I Section 8 of the Constitution which guarantees me the exclusive
right to my creations. In addition, common sense tells me that we need
to have parity for all digital delivery platforms if any are to succeed and
if we are to all reap the benefits of the digital age.
As I said, I have only my own story to tell, but it seems my songs
have told the stories of many others, as well. Who knows? Maybe
somewhere right now there is a kid in his bedroom with a guitar and a
broken heart trying to learn one of my songs. If that should lead him to
embark upon a career in music today, he will have many wonderful
outlets that I never had. Let us value his creations fairly and give him the
chance to tell the stories of the next generation. Thanks.
[The prepared statement of Robert Regan follows:]
PREPARED STATEMENT OF ROBERT REGAN, PRESIDENT OF THE BOARD, NASHVILLE
SONGWRITERS ASSOCIATION INTERNATIONAL
Mr. Chairman, and Members of the Committee, thank you for allowing
me to speak today on behalf of songwriters. My name is Bob Regan. I am the
current President of the Nashville Songwriters Association International, the
largest not-for-profit trade association for songwriters in America.
I've heard it said that most writers really have only one story to
tell.their own. With that in mind, I'd like to give some insight into the
business and profession of song writing and into what content creation
actually entails.
Forty years ago I sat in my bedroom with a Beatles songbook, my first
guitar and my first broken heart. As I struggled to play the chords to
"Norwegian Wood," I experienced the healing, restorative powers of music,
though I doubt I'd have put it that way at the time. In college, when I
played "Louie Louie" at frat parties, I saw first hand the exuberance and
release that a song could bring about. Think 20 Sig Eps doing the Gator. I
witnessed songs like Bob Dylan's "Blowing in the Wind" or Merle Haggard's
"Walking on the Fighting Side of Me" become far more than entertainment. They
were anthems and battle cries that cut as deep as the rifts in society at
that time.
Upon graduating, I decided to postpone applying to Law School for a
year to try song writing and the music business full time. One year turned
into five which became ten before I landed a recording contract with a major
record label in Los Angeles. To that point, the songs I had written were of
value only to friends, family and myself. They were performed at weddings;
they commemorated the birth of my children and the passing of my parents.
Was my recording debut a success? No, I was one of the large
majority of recording artists who never make a dollar or make a second
record.
At age 35, I gave myself three years to write a hit or pack it in.
I moved my family across country to the songwriting capitol of the world,
Nashville, TN.
There, I was one of the lucky ones. I signed a contract as a staff
writer for $100 per week, to be repaid from future royalties. I had a few
songs recorded and then, right at the three-year mark, Reba McIntire recorded
and released a song which I had co-written. I finally had the hit and the
validation that I had been working and praying for. Was I now wealthy? Well,
I received around $35,000 for my share of the royalties. Going forward, I
became a co-publisher and co-owner of my copyrights.
Over the past two decades I have had many songs recorded and several
of those have been hits on country radio. I have been blessed beyond all my
expectations and have the greatest occupation anyone could ask for. Am I now
wealthy? Hardly. If I'm lucky enough to co-write a song on a rare million
selling CD, my writer's share is $22,750. Congress, by the way, determines
that rate.
The title of this hearing speaks to "Satisfying the 21st Century
Consumer." We songwriters are more than willing, as we have always been, to
provide content for new technologies. We welcome the opportunity. We are,
however, opposed to business models that attempt to devalue our music,
re-define how we are compensated or turn a radio signal into an on demand
record store.
Others here can speak better than I to the specifics of pending
legislation. As I said, I never did make it to Law School. I am, however,
familiar with Article I Section 8 of the Constitution which gaurantees me
the exclusive right to my creations. In addition common sense tells me that
we need to have parity for all digital delivery platforms if any are to
succeed and if we are all to reap the benefits of the digital age.
In closing, I may have only my own story to tell but it seems it
has been the story of others as well. Who knows, maybe somewhere right now
there's a kid in his bedroom with a guitar and a broken heart trying to play
one of my songs. If that should lead him to embark on a career in music
today, he will have many wonderful new outlets for his work. Let's value
his creations fairly and give him the chance to tell the stories of the
next generation.
Thank you for this opportunity.
MR. STEARNS. Thank you, Mr. Regan. I think that is a rather
touching story for all of us. Mr. Lawrence.
MR. LAWRENCE. Thank you, Mr. Chairman. Wow, that is really
hard to follow. My name is Jeff Lawrence. I am the Director of Content
Policy at Intel Corporation and I think that, you know, the perspective
that I want to bring here today is a sort of step back. There are a lot of
hot issues out there that people are focusing on, sort of micro-issues, if
you will, but I want to step back a little bit and take a look at progress
that has been made over the last decade and where we might end up in
the next decade.
Intel has this vision of a digital home. It is a vision that I
share. It is a world where consumers can enjoy the content of their choice
that they have lawfully acquired; any device, any place, any time the way
that they want to. To realize that vision, content protection is actually
a necessary part of it. And Intel has spent the better part of a decade
working to build a reasonably protected digital infrastructure in the home
and elsewhere to support these new emerging digital business models.
And what we do is we get together with a lot of companies across the
industry, with content creators, IT companies, and CE companies, and
we get together to try and strike deals with respect to content protection
to enable new business models, to look out for the rights of consumers,
to make sure that it all works in the ecosystem because one thing that we
have learned for sure is that if there is some part of the ecosystem that
doesn't work for them, then it doesn't work for the whole ecosystem.
And we are actually fairly confident, and we have a high degree of
optimism, when you look back, when you look forward a decade that we
are, in fact, going to realize that digital home.
And there are a couple of principles that we think are important
whenever we talk about content protection. One is respecting intellectual
property rights and respecting consumer issues and consumer rights.
Two, the reality that some form of a reasonably protected environment is
necessary to support that digital infrastructure and you know, one of the
things that is most important to me is the idea of a protected environment
is one that should actually enable all kinds of new and cool consumer
uses. It isn't one that necessarily has to lock it all down and prevent
consumers from doing things, rather it should actually open the locks and
allow people to do interesting and new things with the content that they
have acquired.
Lastly and very importantly is the notion that markets and not
mandates are the things that actually deliver these solutions, and I agree
with many of the comments of my colleagues here. And we have
focused a lot of our efforts out of the marketplace, you know, be it at the
DVD, CCA, which is in response for DVD video, content protection, or
the next generation optical media. There is a group out there that is
called AACS that does the content protection for that, enabling new
consumer experiences, learning from the mistakes of the DVD in the
sense of the limitations.
Debate goes into the next generations. To home networking
technologies to making sure that devices can interoperate, we are there.
We are confident, so I guess my message is yes, there are some issues,
but I don't think the sky is falling and looking from a larger, longer term
perspective with a reasonable balanced approach to the issues, letting the
market go out there and drive them, we are confident that the digital
home will be realized. And with that, I am going to stop and I don't
know if I was the closer or the opener, but I appreciate it, Mr. Chairman,
and thank you very much.
[The prepared statement of Jeffrey T. Lawrence follows:]
PREPARED STATEMENT OF JEFFREY T. LAWRENCE, DIRECTOR, DIGITAL HOME AND
CONTENT POLICY, INTEL CORPORATION
Good Morning Mr. Chairman. I am Jeff Lawrence, Director of Content
Policy and Architecture for Intel Corporation. Intel, the world leader in
silicon innovation, develops technologies, products and initiatives to
continually advance how people work and live. Intel is based in Santa Clara,
California and currently employs approximately 100,000 people around the
world, of which about 60% are located in the United States.
As Director of Content Policy and Architecture, I am responsible for
all of Intel's many content protection engagements, from public policy and
legal matters like the Broadcast Flag, to Cable Plug and Play, and a host of
market based initiatives where companies from the IT, CE and content
industries come together to find private, market based solutions to advance
new consumer experiences in digital media. Some of the initiatives that you
may be familiar with include Advanced Access Content System (AACS), for next
generation high definition optical media like Blue Ray Disk and High
Definition DVD, Digital Transmission Content Protection (DTCP) used to move
compressed digital content in a protected home network, and High-bandwidth
Digital Content Protection (HDCP) used to protect outputs to new digital
displays. I appreciate the opportunity to provide some perspectives on the
consumer digital media experience that I anticipate in the next ten to
fifteen years.
I share a vision that Intel calls "Digital Home", where consumers
are able to consume the content of their choice any time, any place and in
any device. It is a vision based on interoperability among a wide range
of intelligent devices, such as PCs, game consoles, home gateways, cell
phones, other peripherals, traditional and innovative CE devices, and a host
of new innovative devices that are sure to emerge as the engine of
innovation churns on. The Digital Home will be a place where consumer
choice, flexibility and portability enables consumers ease of use and a
multiplicity of compelling new media experiences. Mr. Chairman, it is my
belief that we will in fact realize the Digital Home vision in the next
decade, and that the market place will resolve the issues that some may
perceive as obstacles or threats to that progress. The key is to bring a
balanced approach to the digital media ecosystem. I firmly believe that
such a balanced approach should include the following fundamental principles:
? Respect for Intellectual Property, Rights holders and Consumer
interests
? Reasonably Protected Digital Environment is Necessary
Infrastructure For the Digital Future
? A Reasonably Protected Digital Environment Should Provide Consumers
Flexibility, Portability and Choice
? Markets, Not Mandates, Stimulate Innovation and Deliver Consumer
Value.
I have been actively engaged in the digital media transition for the
past eight years, and Intel has engaged for the better part of a decade. The
path of technical innovation with respect to digital media is rapid, and
although there are many challenges relating to rights management and content
protection, we have seen tremendous progress toward a realization of the
digital home goals. With such a wide range of often competing interests,
it is sometimes easy to lose sight of the tremendous progress that has been
made, that is being made now, and that will continue to be made into the next
decade. It is my opinion that in a decade from now, the digital home vision
will be realized, and that what are often characterized today as mountainous
roadblocks to realization of that effort, will then be forgotten in large
measure or simply viewed as small bumps along the digital highway. Here
are just a few of the reasons why I am optimistic that "new media" will
continue to evolve in ways that support an enhanced consumer experience while
fully protecting the rights of content creators and owners.
DVD Video. In 1996 the motion picture, consumer electronics and
information technology industries got together to develop a compelling new
consumer experience known as the DVD. Many said that consumers would reject
content protected disks and content protection generally, but they were wrong.
The DVD has proved to be the most successful consumer entertainment media of
all time. As consumer expectations with respect to DVDs are changing,
permitted DVD usage models are also evolving (even if slowly). For example,
today, you can stream DVD content in your IP based home network using
technologies like DTCP over IP and Windows Media DRM, something completely
unthinkable just a few short years ago, and the industries are exploring ways
to enable new uses, such as managed copies and DVD download to disk. While
the road may be bumpy with impatience, I'm confident that these new
experiences will be delivered in time.
High Definition Video. The CE, IT and content communities have
gotten together again to work on next generation high definition optical
media, including Blue Ray Disk and High Definition DVD. From the outset,
these industries have recognized that consumer flexibility and portability
are key factors to meeting the expectations of today's and tomorrow's
consumers, and from the outset have developed those specifications and
content protection schemes such as AACS with those capabilities in mind.
Digital Music on Demand. In a few short years we have seen a
revolution in the way consumers buy and consume music. "Napster", which was
once associated with unauthorized peer to peer file sharing, is today a
thriving, legitimate, online music business, and nothing needs to be said
about Apple's iTunes and the iPod, which have been immensely successful in
the marketplace.
Interoperability. There are a growing number of efforts in the
market place to address interoperability issues, including for example the
Digital Living Network Alliance which currently cites DTCP over IP as the
first interoperable digital link for protected content. From beginnings
like this, I am confident that the market will deliver a range of
interoperability solutions, including those that are device based and
those that are network based. It might take a little time to sort through
all of the business model issues associated with interoperability, but I am
confident that consumers will ultimately get what they want, and that the
market will pass by this bump on the road and never look back.
Consumer Notice. One of the most important factors in establishing
an effective and functioning digital market place is consumer choice based
on knowledge of the rights and limitations associated with a particular
digital offering.
Mr. Chairman, these are just a few of the examples why I am
optimistic about the future for consumers in the new digital age. We have
come a long way already, and although there is still a long way to go, some
of the world's best and brightest are fully engaged to address the problems
and issues along the way. Keeping a balanced perspective on where we have
come from, where we are going, and the needs and expectations of consumers
and other interested parties, will surely make the Digital Home vision a
reality.
MR. STEARNS. Well, you are the closer and so I have an opportunity
to start out the questioning. And I guess, perhaps, I will ask Mr. Regan
this question and then I will ask Mr. Ostroff this question. I will start
with you, Mr. Ostroff. Article I Section 8 of the Constitution states,
"The Congress shall have power to promote the progress of science and
useful arts by securing, for a limited time, to authors and inventors the
exclusive right to their respective writings and discovery." And this is
where the argument goes, this limited time. What does that mean to
you? Do you agree that the exclusive rights should be only for a limited
time, I guess that is the question I have and then for you, too, Mr. Regan.
Since you are an artist, you probably feel this more keenly, and then I
will go into a little bit on the fair use aspect of it, so go ahead.
MR. OSTROFF. Well, far be it from me to disagree with the
Constitution, so I don't have a problem with Article I Section 8 and the
Supreme Court recently ruled on that issue, so no, I don't have an issue
with that provision.
MR. REGAN. As far as for me, I would be delighted for my children
and my grandchildren to be able to reap the benefits of my labor, much
like anyone who creates anything else. I would point out that when Life
Plus 70 was passed, the songwriters, at the same time the restaurant bill
was passed which removed our royalties from any retail commercial
establishment under 3500 square feet, I believe, so we did get that
extension, but we did pay dearly and just real briefly speaking of--
MR. STEARNS. When you say you paid dearly, what do you mean by
that?
MR. REGAN. Up until that point we had received ASCAP and DMI
received licensing revenues from all retail businesses that used our music
under 3,500 square feet, which is, I would venture to guess, the vast
majority of retail establishments, so that is not really germane to the
question, but we got Life Plus 70, but the songwriters paid a price.
MR. STEARNS. Um-hum.
MR. REGAN. Speaking of time, just real briefly, just this morning we
are talking about content versus technology. It doesn't seem as though
technology is the problem. I pulled up from this week in 1956 the top
ten songs, number one, "Don't Be Cruel," number two, "Hound Dog,"
"Singing the Blues," "Heartbreak Hotel," "Love Me Tender." 1966:
"I'm a Believer," The Ballad of the Green Beret," "Winchester
Cathedral," "Soul and Inspiration," "Monday, Monday," et cetera, et
cetera. 1976: "Tonight's the Night," Rod Stewart; "Silly Love Songs,"
"Play That Funky Music." There was astounding content long before
there was astounding technology, so we can have all the tech in the
world. Without great content, it is dead in the water. That is what is
going to satisfy consumers.
MR. STEARNS. And I think most of us in this room have heard the
songs you mentioned and have felt the same euphoric, almost obviously
spiritual feeling that you can't even get, probably, any other way except
music. So Mr. Parsons, you have been accused of hiding behind the law
here and in defending his products against criticism, I thought I would
give you an opportunity to respond. You heard some of the criticism
here and so you might want to take a chance to do that.
MR. PARSONS. Thank you very much, Mr. Chairman.
MR. STEARNS. I think you have to put your speaker on.
MR. PARSONS. Thank you very much. Yes, we very carefully
followed the law and I guess I was accused of hiding behind the Audio
Home Recording Act, which we are in full compliance of. The important
element of it the Congress has set, in a number of different laws, is a
seamless web of protection for the music industry, appropriately, and for
the songwriters, appropriately, where they receive different payments for
different uses of their property in various ways. We have tried to not
only design our devices, but design our business to comply with all of
those and actually, I think I am the only person here at the table that pays
under all of those. I mean, this is not early Napster or illegal file sharing
or an illegal downloading situation.
We pay under each and every one of the mechanisms that have been
put in place. And frankly, when Congress took up the Audio Home
Recording Act it was in an effort to deal with how do you fairly
compensate for that underlying property and balance that with a
consumers' right that they have always had to make an impulse
recording of that for their own use and the focus, obviously, at that point
in time was very clearly on ensuring that it really was for their fair use;
only to record something off the radio, not to put it on the Internet, not to
distribute it, burn multiple copies. And so the payments that we make
are in full compliance with all of the laws.
We pay all of the performance elements, a percentage of our
revenue comes in and goes to the music industry and the songwriters for
the right to perform it. We pay through the manufacturing partners and
the Audio Home Recording Act for the right for our consumers to record
it.
MR. STEARNS. Right.
MR. PARSONS. And then to the extent that this is used actually as an
MP3 player, which it does serve that--
MR. STEARNS. Mr. Parsons, could I take that, after I record a song
could I play that through my hi-fi?
MR. PARSONS. You could hook it up to any speaker system.
MR. STEARNS. I could play it in my car or I could play it in my--
MR. PARSONS. Yes.
MR. STEARNS. Okay.
MR. PARSONS. Or you can play it through the ear buds.
MR. STEARNS. Right.
MR. PARSONS. But the only way to get the music out is through this
audio jack.
MR. STEARNS. Right. But when I play it through my hi-fi system, I
can record it with a cassette. Can I record it with a cassette once it is
going through my hi-fi set?
MR. PARSONS. Chairman, I think that virtually any device that can
be heard can then be re-recorded and then abused inappropriately.
MR. STEARNS. You could burn it on a CD.
MR. PARSONS. We have just taken to ensure that there are no ways
that any digital copies can be made, it cannot be abused in that way and
that was the substance of the Act.
MR. STEARNS. We might do a second round here, but Mr.
Halyburton, I just want to ask this question. You mentioned that the
NAB and the RIAA are in discussions about digital broadcast copy
protection.
MR. HALYBURTON. Yes.
MR. STEARNS. Can you give us an indication of what is on the
table? Are you looking at technical solutions? Is there still preservation
of a consumer's right to make fair use of a digital copy of a digital
broadcast? That is the key aspect.
MR. HALYBURTON. Yes, there is and the discussions have been
going very well. They probably break down into two areas: usage rules,
which, I think, are probably the more complicated part of it because that
kind of drives the technology, and what kind of tech will come to play.
But I think on the radio side, we are starting to understand the issues of
the recording industry and understand their needs and concerns. They
are learning about our business because there are some issues that I don't
think they knew, necessarily, about how we ran radio, so I think we are
finding some common ground and I think we are making good progress.
MR. STEARNS. Can you reveal what the technical solutions are?
MR. HALYBURTON. We are not there yet.
MR. STEARNS. You are not there.
MR. HALYBURTON. We have had four meetings; we have had one
good technical meeting just a couple of weeks ago, but we are making
good progress.
MR. STEARNS. Okay.
MR. HALYBURTON. It took a long time to do the television flag. I
am hoping that we can make progress and get further along and more
quickly than they did.
MR. STEARNS. My time is expired. I welcome the Ranking
Member, Ms. Schakowsky.
MS. SCHAKOWSKY. I want to apologize first to you, Mr. Chairman,
and then to our witnesses for my inability to hear all of your statements
and also, I am not going to be able to stay any longer. I wanted to just
tell you kind of where I am coming from, as you probably know. This is
really the second half of hearings that began in March and I hope that
this dialogue will continue and I appreciate your input. Not all of us are
as technically advanced as others and so it is really helpful for you to
inform our opinions.
And it is just a fact that in the age of the Internet that digital rights
management is among the most contested issues in the legal world.
Copyright principles and technological capabilities are constantly
changing, are challenging each other and it is not always easy to strike
the appropriate balance between protecting copyright holders and
consumer rights. In a way, the battle against piracy has pitted content
providers against consumers, who are not the true enemies, but
unfortunately, each time there is a new gadget for consumers to use to
hear their favorite music or classic movie, or enjoy a book, piracy
advances as new opportunities to steal and in the end, it is both the
consumers and the artists who end up paying the cost.
Since we began these hearings, I have been talking with artist
groups, content providers, consumer groups, and technology developers
and I believe, I hope not naively, that we can work together to fight
pirates and not each other, so I appreciate this hearing today to see how
technology has developed under the DMCA and what challenges have
arisen in the process. And as I said, I hope that we can constructively
move forward. So I thank you, Mr. Chairman, and all of you.
MR. STEARNS. I thank you. Ms. Bono.
MS. BONO. Thank you, Mr. Chairman, and I thank all of you
panelists for your time today. First of all, I guess, for Mr. Parsons; the
past two months I have bought two new cars, one for my 18-year-old son
and one for myself. Important to those vehicles, I didn't even open the
hood to see what kind of engine they had, but I know they both have
Bluetooth and satellite radio. And those are important selling points for
that car. But if Nissan, in my son's case, said I am going to sell this
Nissan with satellite capability but you don't have to pay for the satellite
capability, is that fair business practice?
MR. PARSONS. I think you can certainly purchase the radio with it in
order to subscribe to the service.
MS. BONO. But I found magically the code to the satellite and now I
am not going to pay you for your service, but the selling point for that
vehicle was that satellite radio, which is now stealing your signal, would
you be in here screaming like a banshee if that were happening?
MR. PARSONS. Congresswoman, absolutely so. Stealing and piracy
and not paying for this are, you know, something I think everyone on this
committee and certainly, everyone on this panel are completely against.
MS. BONO. Well, I wouldn't say stealing is, but the problem we are
wrestling here with your technology, and first of all, I love your product,
but it is not stealing, but you are not referring it to distribution and I think
the Chairman was referring to can I walk this around to multiple hi-fis,
my car, my PC, how many platforms can I integrate this with? This is
mobile now and you know, it is interesting. It is set to record my
favorites and as I scroll through my play list, I am told, like the Rolling
Stones and The Who and Led Zeppelin and blah, blah, blah, and I got the
song called "Do, Do, Do, Do" and I had to wrack my brain and never
heard of it, so you scroll through the Rolling Stones, gee, I like that song,
too, great. Give it to me. Never heard of it, but now I actually just got a
brand new song for free, distributed to me. So the difference to me, you
are saying this is a performance and I am saying it is just distribution,
correct?
MR. PARSONS. I think that is the essence of it, yes.
MS. BONO. The essence of it. Well, I own this and again, this is
when you said analog versus digital way back when, we loved that
argument. But the truth is, and you said this is an MP3 file or the
equivalent thereof, so it is not, I mean, it is a copy of a copy. This is like
a copy of a master, which is not the same as saying gee, I have taken my
little stereo and recording it analog onto tape. Isn't it entirely different
than that?
MR. PARSONS. Congresswoman, actually it is not, for the following
reason. I mean, clearly, we pay for each one of those issues. There may
be debates upon whether the rate for each one of those functions is
correct; whether our performance royalty should be more, which
obviously, the recording industry feels it should be, and we will go
through a negotiation and we will have an arbitration on that and
determine it.
MS. BONO. And thank you, I--yes.
MR. PARSONS. And whether the amount that is paid by the
manufacturer for that right to record is correct, Congressionally
established and we pay under that for that right to record. But the
essence that you talk about, the ability to take it from one place to
another, you may have taken your audio cassette from one place to
another and dropped it in your cassette player in multiple different
locations, but that didn't change the fact that you recorded it once. What
was the difference between analog and digital? The real difference
between analog and digital and the fearful aspects of digital, everyone in
this committee dealt with and effectively had to be addressed in the
Audio Home Recording Act, was digital can make multiple copies and
distribute them in perfect form. The first copy is really not much
different.
MS. BONO. That is my point.
MR. PARSONS. And in essence--
MS. BONO. Let me reclaim my time here.
MR. PARSONS. Sure.
MS. BONO. My time is limited. That is my point to you; I am glad
you are reiterating it maybe a little bit more articulately. It is a copy
of a master, so the quality of that is entirely different. So I think we are
talking about the same thing and I want to, you know, it is all semantics
here and is it, you paid major league baseball and Oprah Winfrey tens of
millions of dollars to promote your product, but you don't want to pay
the songwriter the distribution right, correct? And so isn't it that you are
building your business model based upon the back of the ordinary
songwriter and in my case, you know, it is personal for me and I hate to
do that, because you never know when you end up in the press being
terribly quoted, but my son, as I said, starts college in September and
thank God for Sonny's royalties because I could not afford college if
Sonny's royalties weren't paying for that in September. So it is personal
for me and I do take it very, very seriously. But you know, I think if we
need to define the difference between distribution and we need, in
Congress, to say what you are doing is distributing the product, then we
will work on that. I mean, is your model different from Sirius?
MR. PARSONS. No, Congresswoman, it is very similar and in fact,
the difference that has been defined between distribution and
performance is the reason that we are paying separate rates for each and
we are the largest single payer. I mean, we clearly believe--
MS. BONO. But I am sorry. So you are paying a distribution to the
songwriter?
MR. PARSONS. If it is done on a download basis, there is a
distribution--
MS. BONO. Come on, come on, come on, come on. So you are
saying this is not a download, I am saying it is. That is the difference
here. We are back to the same game.
MR. PARSONS. Correct. And I am saying that the laws that were
established that defined what a download was versus what a distribution-
-no, Congresswoman, the only thing that can get off of this device is the
artist and song title.
MS. BONO. How is that?
MR. PARSONS. We have restricted it such that nothing else can come
out.
MS. BONO. With what? With what?
MR. PARSONS. The encryption within--
MS. BONO. The DRM. Okay, so Congress right now is debating
that it could be legal to circumvent that DRM, right?
MR. PARSONS. Correct, in a different bill, yes.
MS. BONO. Yes, in a different bill, which gets to the same point. So
now we are hooking this, I don't know where that is going to go, but
potentially, if you can circumvent the DRM technology in this, suddenly
this is on the Internet. Your song that you gave me, I am now uploading
to whatever file sharing network I choose to.
MR. PARSONS. Correct. And in that case, everyone at this table will
be on the same side to try to prevent that from occurring because right
now, when only the artist and song title comes out, it is so that can
facilitate a legal download with Napster, our partner, so in fact that
distribution is paid. The things that cannot be done out of this, it can
only make one copy. It only makes this personal copy. It cannot move
beyond this device. It cannot be burned to CDs, it cannot be distributed
over the Internet. All of the classic things that would be done, if in fact it
was a distribution and we had paid underneath those amounts, so we pay
the performance; we are the largest single payer of performance rights.
MS. BONO. Of performance. We got that point.
MR. PARSONS. And--
MS. BONO. And thank you, by the way. Thank you very, very
much.
MR. PARSONS. And we would like other people paying this, too, if
we are going to debate that particular piece of it. And then we also pay,
once again, for the right to record under the amounts established by
Congress, and then we facilitate the payment for a distribution by only
allowing off of this device the artist and song title and then linking it up
with Napster so that, in fact, you can get a legal download and pay the
third way.
MS. BONO. I know I have overstayed my time. I thank you, Mr.
Chairman, but Mr. Lawrence, you said the sky is not falling. The sky is
bluer than ever for all of us in this room if one industry or one particular
component of it doesn't make it on the back of another and that is my
only point, but the sky is bluer than ever and I am encouraged by all
these technologies and the content providers, everybody, but I don't like
to see one, in your case, you profit on the backs of the songwriters. So
with that, I will yield back, Mr. Chairman.
MR. STEARNS. I thank the gentlelady. Mr. Murphy.
MR. MURPHY. I am going to ask some more questions, so you can
listen to me. Mr. Lawrence, you are sort of an expert here, Director of
Digital Home and Content Policy of Intel Corporation, so we want to get
to you here. I have got three questions for you. The first question is,
please explain how some of the current DRM technologies used in the
music business limit consumer use, particularly in music purchased on
line from such services as Apple's iTunes?
MR. LAWRENCE. Sir, I am not an expert in iTunes other than the fact
that I subscribe to it.
MR. MURPHY. Okay.
MR. LAWRENCE. But fundamentally, it is a deploying of a digital
rights management technology and there is really a wide range of them.
Microsoft builds one, Real Networks builds one. There are a number of
them out there and they are fundamentally based on encryption at the
source where the point of distribution, the content is encrypted and then
it is delivered to a device and when the device receives it, in order to
actually decrypt the content and use it, it has to have a key and to get that
key, to build the device, come a variety of rules that decide, that dictate
how robust against hacking it has to be and also dictate the usage rules,
you know, what is the device allowed to do.
And you know, the thing that is interesting about iTunes is actually
it is a very flexible consumer usage model and they had to. Had to,
maybe that is not the right word, but they adopted a model that
consumers would find usable in their everyday lives. And so you can
move it around to a couple of PCs and you can even make a backup copy
because they met those consumer expectations. But they are all
fundamentally based on the notion of distribution at the source where it
is protected, meaning it is encrypted. And once it is encrypted, you
know, there is a variety of just sort of tools that you can use to manage
the content and decide where it goes, and that is why we try to build an
environment where that content can move around in a protected manner
and consumers can still enjoy it.
MR. MURPHY. In the discussion, the gentlelady from California was
talking about the difference between distribution and downloading and
you heard their conversation, what is your opinion? I am putting you on
the spot a little bit on distribution and downloading. Would you say
what he is doing is downloading or distributing?
MR. LAWRENCE. Well, you are putting me on the spot. I knew I
was the odd man out.
MR. MURPHY. This is just an open discussion.
MR. LAWRENCE. Yes.
MR. MURPHY. I mean, you can give your reply here in a way that
can be from a technical standpoint.
MR. LAWRENCE. I will tell you what--
MR. MURPHY. I think it is an important point she made.
MS. BONO. Just clarify real fast between distribution and
performance.
MR. LAWRENCE. So without giving you a specific legal opinion.
MR. MURPHY. Yes.
MR. LAWRENCE. You know, I think that we do have the case where
we have a statutory regime that was developed in an analog world and
for analog business models, and now we have the digital world and
digital business models and they don't oftentimes mesh together very
well. And you know, as we talk about how do we address and fix some
of these problems, I think that is a real challenge, but there seems to be,
or there is often a tendency to want to point to the makers of devices, IT
devices or CD devices, and ask them, through a government mandate or
something to try and fix a problem that isn't really fixable there. It needs
to be fixed at a more fundamental place where the business relationship
between the rights holders and the broadcasters, that needs to be ironed
out more clearly. So without giving you the legal answer, I don't think it
is a technical problem so much as it is a business problem and an old
regime.
MR. MURPHY. I accept that. Yes?
MR. OSTROFF. Can I make a comment on the DRM point?
MR. MURPHY. Sure.
MR. OSTROFF. I think DRMs have gotten a bad rap, an unfair rap
because if you look at these devices here, if you look at the DVD, none
of those would be possible without DRMs. It is probably one of the
areas, few areas at this hearing where Mr. Parsons and I will disagree.
Without DRMs, his XM satellite service can be hacked.
MR. MURPHY. Do you two disagree or agree?
MR. PARSONS. No, we agree.
MR. OSTROFF. You know, when it comes to our intellectual
property, our copyrights, which we only have for a limited time, unlike
other property, we have to be able to market them and we want to be able
to make our content, our music, what Mr. Regan produces, what our
artists produce, available to as many people as possible in as many ways.
And it is just that we want to get compensated for them and DRMs is
what makes that available. That is what allows iTunes; that is what
allows the subscription services. And I just want that point to be clear
here today.
MR. MURPHY. Good. Mr. Lawrence, again, what are the limits and
the capabilities of DRM technologies? What limits do you believe may
be imposed on consumers by these technologies? And this is sort of a
tradeoff from what he is talking about.
MR. LAWRENCE. Yes, that is actually a really open-ended question,
as well, because you know, as a technology developer, there is almost an
unlimited range of things that you can do. But when you build a digital
rights management technology, you have to take into a number of
important considerations, such as the cost of implementation and what is
the actual goal that we are trying to solve and so I think that from a
technical perspective, you can do a lot of stuff, but it may not be practical
to deploy a highly complicated, overly sophisticated sort of military-
grade style security system. The real goal is to keep honest people sort
of honest. We say that a lot, I know, but also to support a reasonable
infrastructure that will support the digital business model.
And so when you go to build the technology itself, you actually
take--it is one place where you actually balance a whole host of interests,
you know what the goal is. How do we reasonably keep it secure; how
do we enable consumers, you have all these policy things that go in, and
what is the cost of building and implementing. Because one thing that is
interesting is consumers really don't pay extra for content protection and
it needs to be something that is seamless and friendly to them because if
they reject it, if it doesn't work for them, then they find alternatives. So
you can do a lot of stuff, but in practice what works is a different matter.
MR. PARSONS. Mr. Chairman, I will also note on that, that the
physical DRM, the inability to get something off, is very important.
Really, it is the object to make that which is legal very easy, very
convenient and that which is illegal, make it very complex and very
difficult to break, and that is the best shot that a developer, if you are
looking at creating a new device, what you are trying to do is to allow the
fair use elements to be done easily, seamlessly, but ensure that the illegal
activities or things that make serial copies are very difficult to
accomplish.
MR. STEARNS. You used, Mr. Lawrence, in your statement you said
that "reasonably protected digital environment" is essential for the future
of this business. I guess the question is, can you define more
quantitatively what that means?
MR. LAWRENCE. In terms of what is reasonable?
MR. STEARNS. Yes.
MR. LAWRENCE. Yes, I think that goes back to that interesting
balancing of interest tests that we talked about. You know, it is
ultimately a cost-benefit analysis and content protection because we
could build, for example, military grade security that would be
astronomical in the cost perspective to implement, and that wouldn't
advance any of these business models. The other piece is that law
enforcement is really an important part of dealing with piracy. The
things we have learned in the DRM world is that the determined hacker,
the determined pirate, he will defeat whatever you build and so this is
balancing, there is an important role for law enforcement in content
protection.
It is the only thing that is effective against pirates and then is sort of
a reasonable degree of protection which is effective to encourage
consumers to behave in a reasonable way. And so you have to balance
those things when you build your technology and deploy it. And you
know, to the rights holders community over the years, they have really
come to appreciate the fact that, and look at the cost factor. DVDs are
really inexpensive now, you know, and if they were still $600 apiece,
then there is not as big a market and so there really are a lot of cost
benefits that go in.
MR. STEARNS. You know, we had a hearing on the Boucher bill that
was referred to here earlier, and Jack Valenti, when he was still the
president of the Motion Picture Association, was adamant that he did not
want one copy made of a DVD, period. And then right next to him was a
man who was making lots of copies of CDs and recordings and he
probably, judging from his testimony, shouldn't have been doing as
much as he did, because he was making a whole library and providing
for his friends, and so as he kept talking, we started to realize he
probably was going much too far. But when you heard Jack Valenti be
so strict that we could not make, a family could not make one copy of a
DVD, this goes to the understanding of what is reasonably a protected
digital environment. Under that scenario, what is your opinion, now it is
just your opinion; do you think a family should be able to make a copy of
a DVD, one copy for their own personal use?
MR. LAWRENCE. So that is a great loaded question.
MR. STEARNS. It is a loaded question.
MR. LAWRENCE. Yes. No, that is really good one. So what I think,
and what they are working at at the DVDCCA, they are considering a
variety of ways to enable recording of DVDs because whether it is
appropriate as a legal matter or not, almost doesn't matter. The reality is
consumers want to do it and if they can do it in a way that rights holders
are still compensated, it really ought to be enabled and all of the content
protection efforts that we have been involved in, you know, we have
tried to stay away from the argument of what is legally fair use or not fair
use. Because in practice, when we build this protected environment and
they pump this high value entertainment content in it, ultimately all of
our customers are those consumers, and if they can do a variety of cool
things that go way beyond what the law would describe as fair use, then
that is going to be the most successful and compelling business model,
we believe.
MR. STEARNS. Okay. I am going to close by unanimous consent I
am going to put into the record Mike Ferguson's statement. Mr.
Ferguson has the Audio Broadcast Flag Licensing Act of 2006, it is H.R.
4861. He has done a wonderful job on this bill. He regrets he could not
be here, but I want to give high praise to his H.R. 4861 and to put his
opening statement into the record and with that, Mrs. Blackburn.
[The statement follows:]
PREPARED STATEMENT OF THE HON. MIKE FERGUSON, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF NEW JERSEY
Mr. Chairman, thank you for holding this hearing. This subcommittee
can serve an important role in this area, shining a light on exciting new
technologies, examining how to effectively protect digital content, and
ultimately, ensuring that consumers get access to new products in a quick,
reliable - and responsible - fashion.
Today's hearing will focus on digital audio devices, content
protection on those devices, and the effect on the American consumer. This
is an area of keen interest to me, as I have introduced legislation that is
designed to facilitate deployment of digital radio services, ensure consumer
choice and protect the property rights of content creators.
The Audio Broadcast Flag Licensing Act of 2006 is designed to ensure
that intellectual property rights are respected and that those who create
content are duly compensated, with the end goal being more consumer choice
on the marketplace. Most importantly, my bill makes sure that the
marketplace, not Congress, is where these negotiations happen. It is not
the role of Congress to pick winners and losers but to ensure that all
parties are competing on a level playing field.
The legislation first requires digital radio services using
government spectrum to acquire the same licenses from music creators that
download and subscription digital music services currently must obtain to
provide the same services. Some have claimed that these new services fall
under the Audio Home Recording Act (AHRA). The AHRA was passed in 1992 at a
time when even the Internet was mostly unknown to legislators and consumers.
The fact remains that Congress could not have foreseen that some
would choose to turn their performance license into a distribution licenses,
without paying for the privilege. I find it hard to believe that Congress,
while deliberating the AHRA, would agree that creators should be compensated
$2 million a year under the AHRA when they are currently making almost $2
million a day from legal download services.
Additionally, services such as Rhapsody and Yahoo! have both radio
services and distribution services currently in the marketplace. They
negotiated their licenses in the marketplace and did not claim that they
would fall under the AHRA. Why is it that others, wanting to provide that
same service, have decided to claim they are covered under AHRA?
The bill also provides for private market negotiations of an "audio
broadcast flag" that will ensure that digital radio broadcasts are not
indiscriminately disseminated over the internet.
While the bill is clear in its intent to protect content, it also
ensures that American consumers remain unaffected. Legacy devices already
in the stream of commerce would remain unaffected, and the bill specifically
states that the HD Radio rollout remain unimpeded.
Of course, the preference is to see these issues resolved between
the respective parties in the private sector. And I hope they can be
resolved - in quick fashion. But the fact remains that digital audio
products are on the market today that allow authorized downloading and carry
a risk of illegal uploading to the World Wide Web.
This is an issue that undoubtedly deserves Congress' attention, but
may also need Congress' direction. The Audio Broadcast Flag Licensing Act
is not only for the good of content creators, more importantly its for the
good of the consumer - our constituents. To ensure that these exciting
products continue to flow to consumers, intellectual property needs be
protected. There must be a balance.
MRS. BLACKBURN. Thank you, Mr. Chairman. I appreciate that and
I appreciate you all bearing with us as we have another hearing going on
downstairs and we have had votes in the middle of this, but we do
appreciate the work that you do and that you are here to talk with us. I
will have to tell you it is so interesting to me to listen to the
conversations taking place, having so many creators in my district. And
I love to tell people about my district, you know, because we have
creators, songwriters, producers, original thought thinkers and it is a
great community and a great place to be creative, and I think it is so
important that we realize what that creativity brings to this country as an
economic development issue, as a trade issue, entertainment being such
an enormous, enormous part of the exports that we have.
And some of you that are sitting there right now rolling your eyes
and acting so bored with my little dialogue, I would just like to say we
are here to protect what you create, too. And one of the ways that we do
that is to be certain that people understand that we should respect
copyright law in this country, so thank you all for coming and sitting
down with us because working this out is something that we want to do.
You know, Mr. Lawrence, listening to you talk, I hope that you are
paying attention and I am sure that you are and I am sure that the good
folks that work with you are paying attention to Section 107 of the
Copyright Act because that defines the difference in something that is
there for personal use and something that is there for commercialization.
And also, it is where we get into talking a little bit about what
is fair use and what is free use, or as one of my songwriter friends says,
fairly useful way to steal my music. And that is where we have to draw this
line. We have to send a message to all the creators in this country and to
our trading partners that we are going to respect what we create in this
country. That we recognize it is private property, and that we hold it to
be something uniquely wonderful and uniquely American.
Now, I do have a question I want to ask you. The Chairman just
mentioned the broadcast flag bill that Mr. Ferguson has worked on and I
do wish that he was able to be with us today. Ms. Bono and I have both
co-sponsored that piece of legislation and we were talking a little as we
were going down to vote about the compensation methods and the
business models and how things are structured. And so Mr. Parsons and
Mr. Halyburton, let me come to you with my question on this. It seems,
as we look at the broadcast flag issue and having that audio flag in there,
and you have talked a little bit about the HD and the satellite radio work,
that we want to be sure it doesn't translate into a download service.
You want to be sure that you protect your business model that you
have invested hundreds of millions of dollars to put into place and we
respect that because we like for companies to be successful. But it seems
to me that the audio flag would be a way for you to help protect that
content and still, at the same time, ensure the profitability of your
business. Do you want to comment on that?
MR. PARSONS. I think, actually, Mr. Halyburton began that
conversation with some prior descriptions of it. They are in the midst of
a negotiation and discussion about exactly how that is to be implemented
and those negotiations and discussions are going on to look at how the
technology can do it. Essentially, one element that I think we all agree
on, whether it is an audio flag purpose, whether audio flag is the way that
you achieve it versus other ways that you achieve it, there has to be some
way to ensure that digital content that comes over a delivery mechanism
cannot, then, subsequently be abused for more than personal use.
I mean, we are big defenders of fair use or personal use and we
believe we are correctly doing it, but we are also just as passionately
defenders that it not go beyond that. That hurts us, that hurts the
recording artists, that hurts everyone to have it beyond that point. So
from our standpoint, we essentially put a physical restriction on it. You
just simply cannot get off of the device to ever distribute it, so we don't
see a need in that system, since we have a closed protected system.
MRS. BLACKBURN. So you would consider it to be redundant?
MR. PARSONS. We would consider it to be redundant to our system.
It may not be to the HD radio system, because theirs is going to be a
more open system where they may not be able to restrict it without it, but
I will turn that to Mr. Halyburton.
MR. HALYBURTON. Yes, I think--
MRS. BLACKBURN. I think we are almost out of time and I have got
one other quick question.
MR. HALYBURTON. Okay.
MRS. BLACKBURN. Go ahead.
MR. HALYBURTON. Okay. Yes, I think that ours is a kind of unique
issue that the broadcasters are working on. We have had very good
meetings with the recording industry. We are understanding their issues
and they are understanding our operations and I think the meetings have
gone very well in the direction of finding a way to protect that content.
MRS. BLACKBURN. Okay, anybody else want to issue anything
there? I have got one other question. Mr. Parsons, you, in the beginning,
mentioned that you were paying hundreds of millions of dollars to
creators and performers and that you were paying twice and you spoke in
the aggregate. Would you like to, at this point, break that down so you
are talking about what you are paying the performer, what you are
paying the songwriter per play? Would you like to do that?
MR. PARSONS. Congresswoman, it actually doesn't end up being per
play, it ends up being as a portion of all of our revenue.
MRS. BLACKBURN. Okay.
MR. PARSONS. So whatever amount of revenue that we make--
MRS. BLACKBURN. For the record, would you like to explain that so
that it is clear in the record?
MR. PARSONS. Yes. Okay, clear in the record, the agreements that
we have in place right now, we have operated under five years of the
agreement. We are currently renegotiating those rates for the coming
five years on a performance basis. Those amounts come to tens of
millions of dollars now and with the growth of our industry under the
current existing rates, will be hundreds of millions of dollars over the
coming five years. It roughly equates to 6 to 7 percent off the top of all
of our revenue and then by the statutory requirements, that is broken
down by a percent that goes directly to the recording artist and
distributed; a percent that goes to the publishers; a percent that goes to
the composers; each of those get a designated portion under the
compulsory license.
The second area of payment that we referred to is a different
distribution.
MRS. BLACKBURN. Okay, now hold on just a second there. You
said they are going to get 6 to 7 percent of your total revenues and then
that is going to be split between your performers and your songwriters
and your publishers.
MR. PARSONS. Correct. We have different agreements with BMI,
ASCAP, CSAC for those purposes. We have different agreements. We
actually have a breakdown of what percentage each group gets out of
that.
MRS. BLACKBURN. That is great. For clarification for the record, as
we go ahead looking at the issue, just reading the testimony, I had a
feeling that you might want to clarify that for the record as we move
forward. Mr. Ostroff?
MR. OSTROFF. Yes, if I could make a point on that. What Mr.
Parsons is referring to as the second payment is payments that are made
under the AHRA by the device manufacturers. The music industry,
recordings and music publishers, songwriters combined this year, we
expect to make $2 million from all of the AHRA payments. In contrast
to that, for downloads today, we are going to sell two million copies of
digital downloads. Every day we are selling two million copies. On an
annual basis, the comparison is two million versus close to a billion, so
what the XM device, which is a distribution device, is paying less than
peanuts for that ability.
MR. PARSONS. May I note on that? However, that is because there
are very few devices that have been manufactured and if this is half as
popular as an iPod, it is tens of millions per year.
MRS. BLACKBURN. Mr. Parsons, I am now three minutes and 52
seconds over.
MR. PARSONS. Yes, ma'am.
MRS. BLACKBURN. And I need to yield back to the Chairman and
then he may want to continue with the line of questioning, but thank you
all so very much. We want to find a resolution to this issue and we
appreciate your work today. Mr. Chairman, thank you for your
generosity with the time.
MR. STEARNS. Oh, sure. Okay, Mr. Murphy, I am sorry I didn't get
you earlier. Go ahead.
MR. MURPHY. You know, I have written a few songs in my time, I
play guitar and I would be glad to audition for any of you. My concern
is, let me make sure I understand this. So let us say my song is a hit, I
am backed up by Marsha Blackburn and her Tennessee Gitpickers or
something like that. We have this great song. I wrote it, she has a back-
up band, she sings harmony. If I sell, we will be modest, a million CDs,
how much money do I get from that?
MR. REGAN. As I mentioned, if you--
MR. MURPHY. Give me a number. Make me excited here.
MR. REGAN. Well, you won't get excited, I am sorry to report. But
the mechanical rate at this point is, I believe, 9.1, 9.2 cents. As I said
earlier, if you co-write the song, which almost all Nashville songs are co-
written, and we have a publisher, you will reap approximately $23,000
for that million selling CD.
MR. MURPHY. And what if this gets played on XM Satellite Radio,
how much do I get?
MR. PARSONS. I wouldn't be able to tell you what the formula is for
that.
MR. MURPHY. If a million people download it.
MR. PARSONS. Well, they don't download it, but it is how often is it
played.
MR. MURPHY. Wait a minute.
MR. PARSONS. How we pay under this is--
MR. MURPHY. But they can record it; they can keep it, right?
MR. PARSONS. Correct.
MR. MURPHY. Okay, so they kept the song now, so it is on their
personal file. They got it from XM. How much money--
MR. PARSONS. It would depend on how frequently they were
played.
MR. MURPHY. Every time they play it on their own personal--I am
not talking about every time you play it.
MR. PARSONS. No.
MR. MURPHY. If you play it once and a million people say I like
that, I have got to get this song and they keep it now, how much money
do I get?
MR. PARSONS. It is a different percent that gets paid--
MR. MURPHY. Give me a ballpark figure. If you don't know, you
shouldn't be in this business. Give me an idea. How much money do I
get? Don't avoid the question. Give me an idea. I want to know. This
is not making me happy and--
MR. PARSONS. It will purely depend on how often you were played.
MR. MURPHY. Or her, either.
MR. PARSONS. It is just like this.
MR. MURPHY. Do I get a million dollars, do I get 23 cents, $20,000?
What do I get?
MR. PARSONS. It depends on how often you were played.
MR. MURPHY. Geez, Mr. Chairman, this is not good. We are not
getting cooperation from the witness. Come on. If a million people
decide to download it, would that make any difference in how much I
get? Yes or no.
MR. PARSONS. If a million bought it on Napster through our
flagging of it, it would be one fee.
MR. MURPHY. Okay. How much?
MR. PARSONS. If a million plays were done on our service on an
ongoing basis, it would be a different fee.
MR. MURPHY. Give me an idea.
MR. PARSONS. Well, it depends on how popular and how many you
make.
MR. MURPHY. I just told you. A million people heard it, they said I
want to keep that song.
MR. PARSONS. Okay, we will have to break it down. Over the next
five years we are paying hundreds of millions--
MR. MURPHY. We will just assume--Mr. Chairman, I would love it
if you could ask him to write a response to this question because of my
time.
MR. STEARNS. Will the gentleman yield just for a second? As I
understand it though, if people, a million people download that onto your
radio, you don't pay anything, isn't that true? If a million people are
recording it over the air? If they have your radio and they say by golly,
the announcer says we are coming up with "Don't Be Cruel," and a
million people download that into their radio, you don't pay anything and
those people can listen to that. You said in your opening statement they
can listen to "Don't Be Cruel" again and again and again.
MR. PARSONS. Mr. Chairman, that is--no. We cannot, by the way.
There are restrictions. We cannot say that this is what is coming up.
MS. BONO. Actually, if I might, you don't have to say it. I just
told my gizmo for the next 30 days find anything by Elvis Presley and
download it for me while I am asleep, so nobody needs to announce it.
MR. STEARNS. No, I am just saying, I mean, if you have got, if you
have worked out that you don't pay anything, just tell them. I mean, it is
no big deal in the sense that he is trying to make a point and I am trying
to help you answer the question, which I think is you don't pay anything.
MR. MURPHY. Is the answer zero?
MR. PARSONS. The answer for each recording of this would be zero.
MR. MURPHY. Thank you very much. Boy, it took me a long time.
I hope you will give me a little bit more time here. Okay, and here is my
concern. I talk to a lot of high school and college classes, students, and I
use, as an example of, does Congress have a role in their life because a
lot of them think there is really nothing I am interested in here. You talk
about highways and roads and deficits, things like that. But I ask them, I
bring up questions about the Constitution and the issues involved in the
Constitution from the onset about copyright law and patent laws. And I
ask them do they think it should be illegal for them to take music and
download it without giving any compensation to the songwriter, the
performer, the recording company, the gaffer, the janitor, all those people
involved.
And they say things to me like well, I don't really want to buy CDs
because nine out of ten songs, insert appropriate teenage slang here,
aren't very good or the musicians already make so much money; it
doesn't matter or it is available, so it must be okay; or I don't have the
money to get it all, so I just load it on or also, if I put it on my iPod
and I break my iPod, I have lost everything, so I make multiple copies and my
friends all share them. What should I tell teenagers and college students
today about the Constitution and ethics? I hear these things so often.
What should I tell them? Gentlemen.
MR. OSTROFF. Well, I think that you are asking the right questions.
MR. MURPHY. Because that is your audience.
MR. OSTROFF. But not getting the right answers. I think that there
has been a shift in recent years because of the things that we and others
have done. For one simple example, I buy a CD, there is only one good
song. I can go to iTunes and buy that one good song for 99 cents and the
different ways that we have now made music available, I think satisfy
consumers', kids' needs and you know, it is still very, very difficult to
compete with free.
MR. MURPHY. So let us talk about the ethics of this.
MR. OSTROFF. The ethics, I think, are pretty clear. Theft is theft
and people put their hard work, their blood, their sweat, their tears--Mr.
Regan can speak of that, you know, much more than me; I am just a
mere businessman--to create these wonderful songs and wonderful
recordings. And to just take it without paying the people who did the
work is just wrong.
MR. PARSONS. And Congressman, I agree 100 percent with that.
We have fought that and that is why we do pay. We are the largest
single payer of all these performance--
MR. MURPHY. We have already established you pay them zero, so
let us move on. Anybody else?
MR. REGAN. Well, I would just say if all we have to make is a moral
argument, it is extremely difficult. My own son, I have caught him with
burned CDs. He doesn't do it in my house, but his very Nikes are
dependent upon the proceeds of intellectual property and I try not to beat
him, but sometimes I can't stop myself. If all we have is the moral
argument, it is extremely difficult. That is why we have to have
Congress help us out to protect this stuff and--
MR. MURPHY. Mr. Lawrence, you were going to comment?
MR. LAWRENCE. Yes, I can't let this pass. We completely agree
that, you know, in a digital age and a digital society where the assets are
different than they have been in the past, the ethics and honest behavior
is a critical part of a successful digital marketplace, it just is. And it
has to become a fundamental piece of our society and it is incumbent on us,
as parents who have children and parents who, you know, just no
children and even amongst ourselves, the education piece is just
paramount and never has ethical behavior been more important and it is a
fundamental American value and we really, really do need to stress and
drive that home.
MR. MURPHY. Thank you. I know I am over time. One other thing
I would just like to ask for, for the sake of parents of young children. I
no longer have a young child, but one of the things that is valuable for
parents is, you know, for those DVDs they have already played 6,000
times, many times parents would prefer if I can keep the master copy
hidden away and give my kids a copy so when it gets covered with
peanut butter and jelly and milk and everything else there, we can always
make a new one. Is that something the industry would find a way to
permit?
MR. LAWRENCE. Yes. So you know, with respect to the content,
industry has recognized that people want the ability to do managed
copies and that they want the ability to burn backups and so when the
next generation optical media formats, which are high def DVD and blue
rate disc, they are going to come with those basic capabilities, you know,
that if you want to do a backup, you can do it. If you want to move it to
a portable device, those things will be enabled. When we did the DVD,
you know, there was some doubt that even consumers would accept
content protection at all, but they clearly do. The consumers'
expectations or their desire to make backups and such like that has
changed over time and so there is actually an effort in the DVDCCA to
try and address that, and I think that the content community, to their
credit, have said this is what our consumers want and demand and we
need to find a way to make a proposition that is acceptable to all parties
to make it happen.
MR. MURPHY. Given all that is taking place, I hope we will be able
to draft legislation that keeps up with the technology because by the time
we type this up, everything will change, so but thank you very much for
your testimony. Thank you, Mr. Chairman.
MR. STEARNS. I thank the gentleman. The gentlelady, Ms. Bono.
MS. BONO. Thank you, Mr. Chairman. Okay, if I take my iPod and
I hire Mr. Lawrence because he is clearly very brilliant and I say put
some antenna on my iPod and let us go around southern California and
start streaming music via wi-fi or EDVO or whatever the terrestrial
Internet is going to be, doing wirelessly, how is that different if my iPod
could suddenly start doing that, why would I need this if I could do that
with my iPod?
MR. PARSONS. Congresswoman, there are different rates that are
established for each one. The wi-fi may, in fact, not be paying a
performance, it might be paying on a download basis. Many of these
devices don't pay under the Audio Home Recording Act. They don't
pay a performance, but do pay on a download. The device that was
shown here, which is actually a video iPod, if you wanted to watch
Desperate Housewives for free, you watch it over the air for free. If you
want to put it on your TiVo and record it to watch it later, you do that, as
well, for free. If you didn't remember to record it, like you would have
on this, then you have to download it from iTunes and it costs you $2.
Each one of those--
MS. BONO. It would have been like I would have had to remember
on this?
MR. PARSONS. Pardon?
MS. BONO. Just 17 songs have been downloaded on here. I haven't
done a thing.
MR. PARSONS. Right, and if you had set up your TiVo to record
those, you might have gotten it or you might not have. Each one of
those, the consumer is willing to pay and willing to experience a
different environment--
MS. BONO. Then why aren't you? Why aren't you? I mean, again, I
love your product, but why aren't you? You know, he--God, he was
good for a psychologist. He can put you in your place. I hate to be on
your couch. But he got you to say it. I mean, why don't you--and I have
a feeling you will. I think at the end of the day you are going to hear
footsteps coming from Congress that are going to hopefully let you know
that we think you ought to be paying, that this is a distribution model, not
a performance model.
MR. PARSONS. Well, Congresswoman, you really do hit the exact
issue, which is it a distribution or is it a fair use recording over the air?
Because that makes all the difference.
MS. BONO. Well, we seem to think, as consumers, it is a
distribution.
MR. PARSONS. Correct. You are saying it is a distribution and I am
saying that in Section 114 of the Audio Home Recording Act, Congress
very carefully said this is a distribution; this is fair use over the air, and
established exactly what those rules were.
MS. BONO. I am sorry. What year was that written?
MR. PARSONS. 1992. But at that point in time--and it was written
for a digital environment. As a matter of fact, it was--
MS. BONO. Mr. Lawrence, do you think in 1992--you were probably
at MIT or somewhere, Cal Tech or something.
MR. LAWRENCE. I wish.
MS. BONO. But did you anticipate in 1992 this is where we would
be? I mean, in 1992, I mean, to go to something that is completely
antiquated. I mean, literally, as I said, my son and I bought cars that
are--I will let you get to it. I am on a roll. But I bought a car that is
basically a cell phone and satellite radio; so did my son. I mean, mine is
a BMW, his is a Nissan, but that is where we are today, so I am sorry,
please.
MR. LAWRENCE. You know, when you look back at some of the
efforts that have been made through laws to address innovations that are
happening in technology and business models, when I go back to 1992,
for me it shows that it is just oftentimes not effective because we don't
see where it is going. And so if we can level the playing field so that the
problem can be solved in the business world where it really ought to be
solved and let the markets address them, that is important. It goes back
to my point earlier about we have got one regulatory regime and a new
world and there has been a lot of discussion about efforts to try and
address the problem.
And I want to reiterate again that, you know, our industry is not
really a part of any of those discussions and there is a lot of talk about
technical solutions and there is a lot of talk about ways to do it. But I
fear that again we are going to go back and try and impose a fix on
technology providers or innovators; it is not going to fix the problem. In
fact, if you go back and look at some of the devices that were regulated, I
mean, it effectively just made them obsolete and everybody moved to
something else. We need to fundamentally address the problem and not
look for a band-aid solution.
MS. BONO. But it is so, I mean, clearly from the discussions about
the illegal downloading, my son, you know, my children previously
doing all sorts of PDP things, at the end of the day it is the songwriters,
the intellectual property rights holder who always gets hurt. But it is
always, and this is the case here, that they know that they can squeeze
out this guy, the intellectual property rights holder, because at the end of
the day this is the hardest argument to make, that that guy who wrote the
song, sitting in Nashville or sitting in Sunset Boulevard in Hollywood,
has a right to what he owns. That is the hardest argument to make and
the easiest guy to squeeze out of the equation, wouldn't you say?
MR. LAWRENCE. That may be true under the current regulatory
statutory regime and that is why I think that is a problem. I can't
disagree with your point. It is where do you try and fix it. I just think
that the history of sort of government mandates on technology providers,
you know, like device makers, to try and fix a lot of these problems, I
just don't think it has been effective and going forward, I don't think it is
effective but, you know, sometimes if there is some sort of a mandate
that by consensus all the people agree is appropriate, like the broadcast
flag where there was a process that people got together.
We had a material hand in participating. In fact, the guy who
worked for me drafted a big chunk of that regulation. There was a
consensus, there was an agreement that a particular technical approach
was narrowly tailored to solve a particular technical problem, a particular
problem and also, that the rules around it were reasonable and were
agreed to. And in fact, that it was the right legislative approach, if you
will, or the right regulatory approach, to solve a problem. And that a
regulatory approach was maybe the right way to do it. And the thing that
is really concerning for me is there seems to be this, a group that is going
down that path rapidly and we are standing by watching and none of
those other elements that went into the broadcast flag, for example, seem
to be--I mean, there is a variety of proposals out there and some are
closer than others, but that is a real concern, that none of that sort of
consensus process--we have consensus with some of the affected parties,
but the rest of us.
MS. BONO. Well, our doors are always open, all of us, I know and
we will welcome your input and guidance at any point in time. But I just
have one last question because again, the Chairman has indulged me with
too much time, for any of the panelists and I don't know the answer, but
with all of this that we are talking about and the international world, the
global marketplace, are we giving ourselves an advantage or a
disadvantage? Are we strengthening or weakening our hands here? And
just food for thought, are we--because I know the laws are different in
Europe and we face that battle, as well, but are we strengthening or
weakening our hands with distribution versus--and on that note, if I have
this for 30 days and I download every song that I like, can I just
discontinue my service with you without a penalty?
MR. PARSONS. No, Congresswoman, you cannot and as long as you
continue paying us, then a significant portion of our revenue goes to pay
for the--
MS. BONO. Performance royalties, but--
MR. PARSONS. And actually, one of the things that worked well out
of that, by the way, for the small guy was the compulsory license
because what actually happens on there, I mean, we constantly get
positive things from smaller artists. The record labels do tend to take
care of the big artists, but under the compulsory license, because we play
a much wider variety, what actually happens is the percent of our
revenue that flows in to compensate songwriters or artists or the
musicians ends up tending to go to the much smaller ones. There are
artists now getting checks for the very first time in their history that
never really got them or underlying performers that got them for that
reason.
MS. BONO. But I can cancel my subscription after my device has all
of my favorite songs on it without a penalty?
MR. PARSONS. No, Congresswoman, you cannot. You cannot
access that.
MS. BONO. I see.
MR. PARSONS. The only time you can access it is if you continue to
pay your subscription and therefore continue to pay the recording--
MS. BONO. From my pay list?
MR. PARSONS. Correct.
MR. LAWRENCE. Could I comment just briefly from a technical
perspective? You know, I think that if we would start by using the
technologies that are available to us and encrypt our content at the
source, you know, protect it, really protect it instead of just distribute it
out there in the clear, that it would go a long way to addressing a lot of
these issues.
MS. BONO. So you are against H.R. 1201 which makes it legal to--
right.
MR. LAWRENCE. Yes, you know, we have built a lot of technologies
and we understand what consumers want to do, but the fundamental
problem is you build a lock and if you tell people they can distribute
keys, then what is the point in building a lock and that is just-- it is
one of these, you know, there are probably some exceptions that are
appropriate, but they have got to be really narrowly tailored and just as a
general matter, I am afraid it is the exceptions that swallow the rule, I
mean, just in practice, when I lock it.
MS. BONO. In my international--
MR. OSTROFF. It is very important to this country. Intellectual
property, movies, music, other creative works are one of the country's
major exports. If we don't set the right standards, and the rest of the
world follows us in many respects, then our creative works won't be
protected anywhere in the world.
MS. BONO. Thank you. Thank you very much, Mr. Chairman.
MR. STEARNS. I thank you and I think we are concluded with our
hearing today. Mr. Regan, I am just curious. What was the name of the
song that after you finally hit and got paid for that succeeded?
MR. REGAN. Reba McIntire's "Til Love Comes Again."
MR. STEARNS. Oh, okay.
MR. REGAN. I mentioned that I made a certain amount of money.
The monies have gone up significantly.
MR. STEARNS. It was $23,000 I think you said.
MR. REGAN. Well, that was about 35 for a top five single back in
1985. It has gone up significantly.
MR. STEARNS. What would it be today?
MR. REGAN. Well, top five radio hit co-written, maybe performance
is $150,000.
MR. STEARNS. Okay.
MR. REGAN. Good year. By the way--I may make it all in one year.
MR. STEARNS. Zero the next.
MR. REGAN. Eaten alive tax-wise.
MR. STEARNS. Well, let me just conclude and thank the witnesses
for their patience while we voted. We are going to vote again here and I
am going to conclude. I think there has been enough interest on this that
we might have another hearing or at least a study and so we appreciate
your time and effort and the committee is adjourned.
[Whereupon, at 4:20 p.m., the subcommittee was adjourned.]
RESPONSE FOR THE RECORD BY GARY PARSONS, CHAIRMAN OF THE BOARD, XM
SATELLITE RADIO
Questions from the Honorable Joseph R. Pitts
1. For many years, we have made the assumption that songs played on
traditional radio promote music sales. How would you compare the promotion
value of your satellite service to traditional radio?
Response:
On behalf of XM Satellite Radio, I thank Congressman Pitts for posing
a question that illustrates one of the many beneficial aspects of XM Radio for
recording artists and recording labels. Airplay always has been a primary
promotional vehicle for the sale of recorded music, and XM is no exception.
Our research shows that XM promotes sales of recorded music, and that our
promotional impact is deeper in key respects than traditional radio's.
Today's typical FM radio dial presents the listener with a choice
among a small number of music styles and formats, and a limited playlist of
artists and songs. Consequently, traditional radio stations do an admirable
job of promoting sales of a few "hit" records by today's recording stars.
By contrast, XM features 69 channels of commercial-free music
characterized according to genres and themes: by decade from the 1940's to
1990's; channels of today's hits; country and folk channels; Christian music
channels; classic and alternative rock; jazz and American popular song;
blues; classical; hip-hop and soul; dance channels; Latin and world music;
and many more. Even channels dedicated to 40's Big Band music, Bluegrass
or Southern Gospel music, clearly play music that would receive little
airplay without satellite radio. Several XM channels are devoted to the
discovery of new artists, such the "Hear Music" channel. XM has a library
of more than 2.2 million recordings, and we estimate that during a given
month XM channels feature more than 160,000 different sound recordings.
In addition, XM Radio subscribers can hear special music programming
developed by XM solely for our listeners. Programs hosted by artists as
diverse as Bob Dylan, Quincy Jones, Wynton Marsalis, Tom Petty and Ludacris,
take listeners inside the musical minds of innovative and enduring artists
for their unique perspective on American music. XM presents concerts recorded
live in other locations or at the XM performance space in our studios here in
Washington, D.C., featuring stars of the 1960's through the present day.
Many of XM's announcers get behind the music to talk about the artists, and
program the music in ways that connect the songs by style or by theme.
As a result, XM subscribers are exposed to a far more diverse range
of artists, genres and songs than traditional radio listeners get to hear.
They can see on their radios the names of the artists and the songs we play,
and so can more easily become familiar with new artists and new styles of
music. Our research indicates that XM subscribers enjoy XM more than
traditional radio because they are able to enjoy and learn about music they
cannot hear elsewhere; and, not surprisingly, that they tend to purchase more
recorded music and concert tickets than the average consumer.
Artists featured on XM tell us that the airplay and artist specials
they receive on XM have benefited their careers, and we hear this from
artists as diverse as those who had their "hit singles" decades ago as well
as "up and coming" artists just starting their careers and looking for their
first big break.
All in all, XM believes that for those consumers who listen to "hit"
radio channels on XM instead of traditional terrestrial radio, XM, just like
FM radio, is a great vehicle for of promoting sales of those hits. But
moreover, for the vast majority of recording artists who have extraordinary
musical talent but don't top today's limited playlist charts, we believe that
XM is a far more effective promotional medium than traditional radio is
or ever has been.
RESPONSE FOR THE RECORD BY MICHAEL OSTROFF, GENERAL COUNSEL AND EXECUTIVE
VICE PRESIDENT, BUSINESS AND LEGAL AFFAIRS, UNIVERSAL MUSIC GROUP
RESPONSE TO QUESTION OF THE HONORABLE JOSEPH R. PITTS
QUESTION: In his testimony, Mr. Parsons points out that consumers have been
making "mix tapes" of their favorite songs for decades. I was struck by Mr.
Parsons' argument that making something simpler or more convenient doesn't
make it illegal. Why does the recording industry object to something
consumers have been doing for decades?
ANSWER: Our objection to the new portable satellite radio/mp3 players
offered by XM has nothing to do with customary or traditional recording off
the radio by listeners. Specifically, we object to XM's allowing subscribers
to record up to 50 hours of XM programming, see a list of tracks that have
been recorded (by artist, song title or genre), cherry pick the specific
tracks they want to keep on the device, and delete the rest - without
payment of a license fee for that activity.
Congress gave the satellite services a compulsory license to perform our
music, so that their subscribers could listen to it. Our company and others
in the industry helped the satellite services get started by agreeing to
below market payments for our property. Now XM is stretching and
reinterpreting the government-imposed license into a service that enables
their subscribers to make permanent copies of our music. This service goes
beyond mere performance - in copyright law, such services are characterized
as distributions. When music services want to distribute recorded music,
they must seek a marketplace agreement with the copyright owners of the
music they plan to offer. Just as other music services had to come to
companies like ours to reach market agreements on their new "simple and
convenient" distribution service, we believe it is only fair that XM
do the same.
During the hearing Congressman Tim Murphy asked the Chairman of the Board
of XM how much a songwriter would make per song if 1 million XM subscribers
used the new portable device and the new service XM is offering to record
and store a song. After some hemming and hawing, the XM Chairman finally
responded: "The answer for each recording is zero." That fact is contrary
to the policy at the heart of the compulsory license and unfair to creators
who rely upon royalties from music sales for their livelihood.
RESPONSE FOR THE RECORD BY DAN HALYBURTON, SENIOR VICE PRESIDENT AND GENERAL
MANAGER, GROUP OPERATIONS, SUSQUEHANNA RADIO, ON BEHALF OF THE NATIONAL
ASSOCIATION OF BROADCASTERS
QUESTIONS FROM THE HONORABLE JOSEPH R. PITTS
1. Are you concerned that the recording industry is trying to
persuade Congress to require broadcasters to begin paying money in order
to broadcast music in high definition?
Yes, broadcasters are very concerned. For decades, the recording
industry sought and Congress has consistently rejected providing a
performance right for sound recordings.
Congress specifically and definitively rejected applying
performance rights in sound recordings played by terrestrial analog and
digital radio stations because they posed no threat to sales of sound
recordings and for the following additional reasons:
? Congress has long recognized that the recording industry reaps
huge promotional benefits from the exposure given its recordings and
artists by radio stations. These include airplay of the recordings,
on-air interviews, and concert promotion publicity. Many stations, such
as WGMS here in Washington provide specific opportunities to feature new
and emerging artists.
? In the words of the Senate Judiciary Committee: "Free
over-the-air broadcasts are available without subscription . . . and provide
a mix of entertainment and non-entertainment programming and other
possible interest activities to local opportunities to fulfill a condition
of the broadcasters' license."
? Again, in the words of the Senate Judiciary Committee, Congress
did not want to "upset longstanding business and contractual relationships
among record producers and performers, music composers and publishers and
broadcasters that have served all of these industries well for decades."
With respect to this last point, the symbiotic relationship among
the various industries is a complex one. Music composers and publishers
receive enormous compensation through public performance licensing fees paid
by broadcast radio stations to performing rights organizations such as ASCAP,
BMI and SESAC. In 2006, the radio industry will pay these organizations
approximately $435 million in royalties. Music producers and publishers
also receive some royalty payments from producers of sound recordings that
record their works, but those sums are small relative to the receipts by the
record companies from the sale of recordings.
The record producers and recording artists, on the other hand,
receive the vast majority of their revenues from the sale of sound recordings.
While receiving no copyright fees from broadcasters, they enjoy tremendous
promotional values from fee over-the-air broadcasting. In 1995, Congress
granted record companies a very limited performance right with respect to
interactive and subscription digital audio transmissions of sound recordings
(over both cable systems and the Internet). The granting of this new
limited right was not premised on any recognition that the producers and
performers of sound recordings were suddenly entitled to a new revenue
stream. Rather, the rights were granted in response to recording industry
concerns "that certain types of subscription and interactive audio services
might adversely affect sales of sound recordings and erode copyright owners'
ability to control and be paid for their work." Senate Commerce Committee,
1995 Report.
The recording industry and others also like to trot out the "free
spectrum" argument in their call for a performance right. While it may be
true that pioneer radio broadcasters receiving allocations decades ago paid
no fee for their spectrum, virtually every current radio broadcast operation
has paid anywhere from tens of thousands of dollars to tens of millions of
dollars to acquire those operations and collectively the industry has paid
hundreds of billions of dollars in such acquisition costs. Our industry
also has paid billions of dollars to build and upgrade our facilities, and
bring value to the American public over what is otherwise simply air.
Terrestrial radio broadcasters continue doing so today as we convert to
digital. These acquisition costs include the cost of acquiring the
right to use the spectrum on which these stations operate. Second, since
1997, new commercial radio stations must obtain their licenses by way of
auctions just like any other spectrum user.
In addition to the points above, it should be noted the unique
role broadcasters' play in serving local communities - these licensing and
public service obligations are by no means insignificant. Licensing
requirements include: providing and reporting on programming giving
significant treatment to community issues; providing "equal opportunities"
to candidates and favorable rates to certain candidates; program sponsor
identification; regulated contests and promotions; indecency regulations;
maintaining public inspection files; and regulation of lotteries. In 2003,
the radio industry provided $6.7 billion in free air time and fundraising
for worthy causes. Results for 2005 will be available shortly.
RESPONSE FOR THE RECORD BY JEFFREY T. LAWRENCE, DIRECTOR, DIGITAL HOME &
CONTENT POLICY, INTEL CORPORATION
Answer of Witness Jeff Lawrence to Supplemental Question for the Record of
Mr. Pitts
1. As a major intellectual property owner, Intel obviously cares about
protecting its hard work from theft by pirates. At the same time, you seem
to have very open approach to letting consumers make fair use of content,
recognizing that there probably will be some leakage in the system. Tell us
how you strike the balance to achieve the right equilibrium.
A: Intel believes the balance is struck by the proper use of DRM technology
in a manner that recognizes consumers' legitimate fair use interests in
utilizing all or portions of a work, while protecting the legitimate
commercial interests of content owners. Intel has worked hard to bring to
the market discrete DRM functionalities that allow consumers to make limited
copies of all or portions of a work for fair use purposes - whether it be
the making of a limited number of personal copies for use in different
platforms, or the copying of small portions for purposes of parody,
scholarship, etc. Intel does not subscribe to any approach that would
encourage or allow consumers to make unrestricted use of content in the
name of "fair use", and we support the right of content owners to seek
legal redress for products or services that are marketed with the principal
objective of facilitating copyright infringement.
Content owners are now beginning to embrace such fair use functionalities
in DRM tools as a means of providing greater value to consumers.
SUBMISSION FOR THE RECORD BY GARY PARSONS, CHAIRMAN OF THE BOARD, XM
SATELLITE RADIO
SUBMISSION FOR THE RECORD BY THE AMERICAN SOCIETY OF COMPOSERS, AUTHORS AND
PUBLISHERS
The American Society of Composers, Authors and Publishers ("ASCAP"),
on behalf of its almost 250,000 songwriter, composer and music publisher
members, thanks the Subcommittee for the opportunity to comment on the
issues discussed at the May 3, 2006 hearing, "Digital Content and Enabling
Technology: Satisfying the 21st Century Consumer." ASCAP commends the
Subcommittee for its timely hearing on the crucial issues facing the
creators, owners, users, and consumers of copyrighted works in connection
with emerging digital technologies, and respectfully offers its perspective
for the Subcommittee's consideration. In summary:
? ASCAP and its members embrace and encourage music performances by
new digital technologies. ASCAP has developed and offered innovative
licensing arrangements for satellite radio, Internet, and wireless services
which perform copyrighted musical works created and owned by ASCAP's members.
Thousands of those services hold ASCAP licenses.
? ASCAP supports enactment of H.R. 4861, the Audio Broadcast Flag
Licensing Act of 2006. This bill would protect creators and owners of music
from online piracy, while preserving ASCAP's ability to track and monitor
performances for the benefit of creators and copyright owners, including its
songwriter, composer and music publisher members.
? In the digital world, the transmission of a copyrighted musical
work does not have to be either a "performance" or a "distribution."
Rather, under the Copyright Act, the digital transmission of a musical work
is both a performance and a distribution, and both rights should be fairly
compensated.
About ASCAP
ASCAP is this nation's first and largest performing rights
organization ("PRO"), with almost a quarter-million composer, lyricist,
and music publisher members, and a repertory of many millions of copyrighted
musical works. On behalf of its members, ASCAP licenses the nondramatic
public performance rights in musical works to a wide range of users,
including television and radio broadcasters, online services,
background/foreground music services, hotels, nightclubs, and colleges and
universities. ASCAP represents not only American writers and publishers,
but also hundreds of thousands of foreign writers and publishers through
affiliation agreements with PROs in more than 80 countries. Under those
agreements, ASCAP licenses the foreign PROs' repertories in the United
States, and the foreign PROs license the ASCAP repertory in their countries.
Because performances of American music are a popular export product
worldwide, ASCAP collects between 4 and 5 times as much from foreign PROs
as it pays out to them, generating a trade surplus for the United States.
ASCAP's repertory is as richly diverse as this country's history.
ASCAP composers and lyricists write in nearly every musical genre
including pop, jazz, symphonic and concert, film and television scoring,
rock, country, new age, hip-hop, Latin, gospel, and rhythm and blues, and
their works range from some of the most familiar standards to the latest
hits. As creators and owners of this vast array of musical works, ASCAP's
writers and publishers have an important stake in ensuring that the
copyright law adequately protects their rights, both now and in the future.
ASCAP Welcomes and Encourages the Spread of
New Digital Technologies to Consumers
ASCAP understands that emerging technologies often require flexible
business models. We have long worked with music users to offer innovative
licensing arrangements to meet the needs of these new technologies -
arrangements which must also secure a fair return to writers and music
publishers for the commercial use of their intellectual property. ASCAP
never wants to cut off or limit the public performance of music. We
license any user who requests a license, and ask only that a reasonable
license fee be paid to compensate songwriters, composers and music
publishers for the use of their property.
To this end, ASCAP has been at the forefront of licensing new
technologies like satellite radio, Internet, and wireless music services:
? When satellite radio first entered the marketplace, ASCAP was
there to help supply the music. ASCAP entered licenses with XM and Sirius
in 2002, ensuring that these services could build and expand diverse arrays
of programming for their customers.
? ASCAP first began offering Internet music license agreements in
1995. Since that time, we have worked with many operators of Internet
sites and services to develop the best licensing solutions for the
ever-growing number of online music uses and business models. ASCAP has
continued to update its online licenses to adjust to changing times, and
currently offers two versions of our widely-used Internet web site and
service license agreements: the "ASCAP Experimental License Agreement for
Internet Sites and Services Release 5.0" for non-interactive sites and
services, and the "ASCAP Experimental License Agreement for Interactive
Sites and Services Release 2.0" for interactive sites and services.
? Since 2001, ASCAP has offered a license agreement designed
specifically for providers of "ringtones," "ringbacks," and other
music-related products and services offered on wireless devices. Today,
the "ASCAP Wireless Music" license agreement authorizes a wide variety of
such performances.
But songwriters, composers and music publishers still face
significant challenges in the digital marketplace. We must ensure that,
as new technologies and uses take hold, any legislative solutions will
protect our members' rights and ensure adequate and fair compensation for
performances of musical works in the new media.
ASCAP Fully Supports H.R. 4861, the
Audio Broadcast Flag Licensing Act of 2006
ASCAP wholeheartedly endorses and supports the enactment of H.R.
4861, the Audio Broadcast Flag Licensing Act of 2006 introduced by Rep.
Ferguson and co-sponsored by Reps. Towns, Bono, Gordon, and Blackburn. It
is apparent that the unauthorized distribution of musical transmissions
over the Internet and otherwise, made possible by digital technology,
harms the economic well-being of ASCAP's members and America's entire
musical community. H.R. 4861 would authorize reasonable licensing
conditions on digital audio radio broadcasts which would prevent that
harm, while ensuring that home listeners could continue to enjoy music
through all the means they have traditionally enjoyed.
H.R. 4861 also contains specific provisions that would enable ASCAP
to continue an activity that is crucial to its operations and those of
other creators and copyright owners-the digital monitoring of broadcasts
and transmissions. ASCAP has long tracked music performances to ensure
that its members are properly compensated. In recent years, ASCAP has
developed the leading digital fingerprinting technology that, today,
electronically monitors the broadcasts of nearly 2,500 radio stations in
almost 200 U.S. markets. Using this technology, ASCAP tracks each of the
millions of over-the-air performances that occur every day in these radio
markets. Digital monitoring services are vital for ASCAP to serve its
members, and H.R. 4861 would preserve ASCAP's ability to continue
employing such technologies for signals with an audio broadcast flag.
Digital Transmissions of Musical Works
Are Both Performances and Distributions
At the May 3 hearing, the discussion turned to the question of
whether certain digital transmissions of music were "performances" or
"distributions," and accordingly, how such uses should be compensated.
The uses and statutory rights that are implicated in digital transmissions,
however, are not an "either-or" proposition, as some assumed. Digital
transmissions of musical works implicate both the performance and the
distribution right. In particular, all such digital transmissions involve
a public performance protected by copyright.
The Copyright Act states this much when it defines "perform" as
"to recite, render, play, dance, or act" a work, "either directly or by
means of any device or process . . . ." 17 U.S.C. 101. A transmission
is precisely such a recitation or rendering, and no one particular
technology limits it. The Senate and House reports accompanying the Digital
Performance Right in Sound Recordings Act of 1995 addressed this very point
and confirmed that digital transmissions of musical works are public
performances:
Under existing principles of copyright law, the transmission or other
communication to the public of a musical work constitutes a public
performance of that musical work. The digital transmission of a
sound recording that results in the reproduction by or for the
transmission recipient of a phonorecord of the sound recording
implicates the exclusive rights to reproduce and distribute the
sound recording and the musical work embodied therein. New
technological uses of copyrighted sound recordings are arising
which require an affirmation of existing copyright principles and
application of those principles to the digital transmission of
sound recordings, to encourage the creation of and protect rights
in those sound recordings and the musical works they contain.
S. Rep. No. 104-128 at 27 (1995); H.R. Rep. No. 104-274 at 22 (1995).
We should note that just because digital transmissions of musical
works involve both performance and distribution rights, both rights need
not be compensated equally. Understandably, the value of each right
depends on appropriate marketplace considerations, including which use
predominates. But when it comes to such digital transmissions, giving
compensation only for the distribution and not for the performance (or
vice versa) would deny the full value of the use to the creators and owners
of musical works. Any legislative enactment that affects digital
copyrighted works and the technologies for transmitting them must
preserve both the performance and distribution rights that are inherent in
the transmission.
Conclusion
ASCAP thanks the Subcommittee for the opportunity to share its
perspective on behalf of its songwriter, composer and music publisher
members. As the Subcommittee considers the impact of new digital
technologies on the creators, users, and consumers of digital copyrighted
works, we trust Congress will continue to recognize that songwriters,
composers and music publishers must receive the proper protection for all
their rights under the Copyright Act.
As we reported earlier this year in our Joint Reply Comments -- since the
2003 rulemaking, over 1800 new console games, 700 handheld games, and over
2200 PC games have been made available to the public.
H. Rep. No. 92-487, 92d Congress, 1st Sess. at 7 (Sept. 22, 1971)
(emphasis added).
See S. Rep. No. 102-294, 102d Cong., 2d Sess. 30, 51 (June 9, 1992).
Hearing Before the Senate Subcommittee on Communications, S. Hrg. 102-908,
Serial No. J-102-43, at 111 (Oct. 29, 1991) (statement of Jason Berman,
President of RIAA) (emphasis added).
S. Rep. No. 102-294, at 51.
138 Cong. Rec. H9029, H9033 (daily ed., Sept. 22, 1992) (statement of
Rep. Hughes) (emphasis added).
See, e.g., S. Rep. No. 93-983, at 225-26 (1974) ("The financial success
of recording companies and artists who contract with these companies is
directly related to the volume of record sales, which, in turn, depends in
great measure on the promotion efforts of broadcasters.").
S. Rep. No. 104-129, at 15 ("1995 Senate Report"); accord, id. at 13
(Congress sought to ensure that extensions of copyright protection in favor
of the recording industry did not "upset[] the long-standing business
relationships among record producers and performers, music composers and
publishers and broadcasters that have served all of these industries well
for decades.").
Id. at 17.
17 U.S.C. 114(d)(1)(A).
1995 Senate Report, at 15.
Id.
As authorized.