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A Fruit Vendor's Lesson for Hollywood

By Howard Gleckman Turner Broadcasting CEO Jamie Kellner needs to have a long talk with my friend John, who sells wonderful peaches at my local farmer's market.

Kellner, you recall, has accused TV viewers who buy SonicBlue's ReplayTV boxes of stealing. Why? Because they use the devices to make digital copies of his shows, as a way to zap through the commercials. His view is shared by most big broadcasting companies, including AOL Time Warner (Kellner's parent company), News Corp., Viacom, and Walt Disney. They've all sued SonicBlue to stop it from making its ReplayTV 4000, the offending device.

PUNISHING BUYERS. Stopping copyright infringment is one thing. But this is just one more example of the war that the nation's entertainment giants have declared on their own customers. It's the same spirit that's driving the big music outfits to try to put Internet radio out of business. And it's this attitude that defines their ongoing battle with MP3 users.

I don't know about the law. And I surely don't understand the technology. But I do know this: It's very bad business to treat your customers as the enemy. If you do, they'll vote with their feet, as Ronald Reagan used to say. "The customer is always right" has been a watchword of successful businesses since cavemen sold the first mammoth skins.

This brings us to John, the fruit man. In peach season, he takes a couple of pounds of fruit -- maybe six or eight peaches depending on their size -- sticks 'em in one of those little wooden boxes and sells each carton for a few bucks. This saves his customers the time of sorting through the peaches and saves him the time of having to weigh them. Plus, it reduces the number of peaches that get squished by overly picky buyers. For most folks, the system works just fine. But sometimes, a customer will ask for just two peaches, instead of a full box.

PAYMENT IS KEY. Does John scream at them to get away from his fruit stand or threaten to arrest or sue them? Nope. He sells them their two peaches. He makes a little money, and his happy customers come back next week for more. The customer has made a selection, and the customer is always right. John obviously has no future at AOL Time Warner or Disney.

John and AOL execs do agree on one thing: John expects to be paid for his peaches, and AOL expects to be paid for the music, movies, books, and TV shows it owns. Make no mistake, AOL deserves to paid, no less than John does.

John understands that the success of his business lies in selling his customers what they want to buy, however. The suits who run the mega-entertainment companies are struggling with this simple concept -- even though consumers are making their preferences quite clear.

TIME FOR TIME-SHIFING. Today, people want to listen to the music they like, when they want. That means they increasingly prefer Internet radio to the homogenous elevator music corporate programmers have loaded onto generic FM radio. And it means they would rather burn their own multi-artist CDs that are personally tailored to their tastes, rather than spend $18 for a disk by the latest invention of the Sony marketing department.

In the same way, TV viewers increasingly want to watch Survivor at their own convenience. They aren't going to sit at home during prime time, waiting for what the network execs want them to take in at the appointed hour. And they don't want to sit through hideous commercials.

Technology makes all this time-shifting and personal remixing possible. And, not incidentally, it opens huge new markets for the entertainment business. But instead of seeing this as an opportunity, the music, movie, and TV industries see it as a threat.

TV'S DEMISE? It is, to them, something to stop at all costs, whether through the courts or Congress. In effect, they're telling their customers: "We'll stop you from doing what you want. We won't sell it to you, and we'll make it illegal for anyone else to provide it."

Kellner says widespread use of ad-busting digital recordings could kill broadcast TV. Maybe it will. But then again, maybe producers of commercials will create ads people want to see. Maybe "free" TV will die. Maybe we'll have to pay a monthly fee for all TV, as we do now with cable and satellite.

American magazines and Web sites like this one are all struggling with the same issues -- how much of the business should be ad-driven, and how much should be subscriber-driven? It's hardly unique to TV. The point is: The market should decide, not a judge somewhere.

UNSTOPPABLE FORCE. There has perhaps never been an industry so resistant to change as the entertainment business. It opposed radio, it hated TV, it sued to block VCRs, some 1920s movie moguls even fought talkies. Now, it's putting on a full-court press to stop Internet radio, digital recording of TV, and music downloads.

When will the entertainment honchos learn? The industry can't stop the latest technology. In the long run, nothing can. What these companies need to do is sit down with folks like SonicBlue and and work out a compensation arrangement that's fair to everyone.

And who knows, once they do, they may even make more money. After all, it works pretty well for John and his peaches. Gleckman is a senior correspondent in BusinessWeek's Washington bureau. Follow his views every Tuesday in Washington Watch, only on BusinessWeek Online

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