The Customer Is Always Wrong

Music and film moguls, and a few senators, think fans are thieves—and want to cripple technology to stop you from making copies.

There was something decidedly enron-esque about the hearing last week before the Senate Commerce Committee. No potential illegalities, mind you. But you had Disney CEO Michael Eisner and News Corp. president Peter Chernin speaking on behalf of record labels and movies studios to lobby Congress for laws to prop up their beleaguered business model as they cope with the Internet. As with a certain Houston energy company’s dealings with friendly government officials, one couldn’t help but wonder where the little people stood in all of this. The answer came from Sen. Fritz Hollings, clearly a friend of content holders. “When Congress sits idly by in the face of these [file-sharing] activities, we essentially sanction the Internet as a haven for thievery,” said the committee chairman, charging “over 10 million people” with stealing. That’s where citizens stand—not as potential consumers, but as candidates for prison denim.

This tracks with the mentality of the record labels and film studios these days. Despite a plethora of problems that have nothing to do with the Net, media executives are obsessed with the idea that their customers are shiftless pirates who want their wares for free. The world got a chance to sample this mind-set at the Grammys last week, when National Academy of Recording Arts and Sciences head Michael Greene hijacked his own awards ceremony to rant Queegishly about music downloading, “the most insidious virus in our midst.” (So much for HIV.)

In the short run, the media companies are counting on the courts to shut down the Napsters of the world. Long range, they’re betting on security schemes that intentionally limit the functions of both hard- and software. Some labels have already begun to ship compact discs encoded with a special process that prevents copying. Consumer advocates are appalled that the copy-protected discs deny users their legal rights to copy music for personal use on digital devices like computers and MP3 players.

To make sure that the customer’s larcenous options are totally closed off, however, copy protection must be built into computers and other devices. Enter Hollings’s proposed Security Standards and Certification Act. The bill demands that all digital electronic devices be saddled with systems that restrict copying of tunes and movies. Earth to moguls: beware of what you wish for. Business-school professors could feast for years on the unintended consequences that come from treating Britney Spears tunes like nuclear secrets. Clearly, clamping locks on electronic equipment and intentionally crippling CDs wouldn’t increase sales. Would it depress sales? Almost certainly.

Millions of people commonly, and legally, buy CDs, rip the tunes on computer hard drives, and then either download to MP3 players or mix and burn their own CD compilations. But if new discs are copy-protected, someone who wants a classic James Taylor album might do better to buy a vintage disc on eBay. MP3 fans desiring a rip-friendly disc of Moby’s latest would be forced to seek a pirated version where someone has illegally broken the security controls. I can’t see how this situation would boost album revenues.

Then there’s the impact on the electronics industry. If new computers, CD-DVD players and personal video recorders are hobbled, consumers will hold on to their pre-Hollings machines. As Intel’s Leslie Vadasz warned the Commerce Committee, ”[Your legislation] will substantially retard innovation … and will reduce the usefulness of our products to consumers.”

What makes this all totally insane is that Internet file sharing is not necessarily the foe of copyright holders. True, the ease of making and distributing digital files will always present a challenge for the labels and studios. But it’s also a potential gold mine: an instant, ultra-low-cost delivery system and a targeted marketing vehicle. No outlaw service can ever provide consumers with the deep libraries at guaranteed high quality that content owners can deliver. And if media companies adopted a perfectly feasible system of “digital-rights management” that allowed music fans to make a few copies for personal use, most people wouldn’t bother to do the pirate thing. If the prospect is scary, the media giants can take comfort in history—their original reaction to previous technological advances, from talkies to television to the VCR, was just as hysterical as it is with the Internet.

The Disney Corp. was once celebrated for its crowd-pleasing recipe: underpromise and overdeliver. But Eisner and his copyright-holding counterparts, drinking deep from the fountain of fear, seem to have adopted a new motto: overcharge and disable. Things won’t get better for them until they realize that even for copyright holders, the Internet can be a Magic Kingdom.

Author: Steven Levy


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