Digital piracy was a hot topic on June 9 when the National Cable & Telecommunications Assn. gathered in Chicago for its annual convention. During an opening session, CNN commentator Lou Dobbs moderated a panel comprising the industry's heaviest hitters, including AOL Time Warner (AOL ) Chairman Richard Parsons, Viacom (VIA ) President Mel Karmazin, Microsoft (MSFT ) Chairman Bill Gates, and Comcast (CMCSA ) CEO Brian Roberts.
Following are edited excerpts of their hour-long discussion:
Q: What does the digital revolution mean to consumers?
Gates:Consumers have high expectations that whether it's dealing with music or photos or finding the TV shows they want, the technology is going to make that easier and easier. The pieces are really coming together. The one that's probably the trickiest is making sure that it's simple -- that people can set it up and understand how to use it.
Parsons: We're on both sides of the divide -- content and distribution. The No. 1 album in the country right now is Led Zeppelin's How the West Was Won. This is a group that hasn't played together in 27 1/2 years, but digital technology has enabled us to put it in a new format.... This new technology is giving us an opportunity to create new forms of entertainment and new combinations, putting sound and video together in a way that previous technologies didn't.
Now the other side of that is it creates opportunities for people to get access to things that formerly you could protect and secure in the old analog distribution world. And we've got to put our best minds forward and collaborate across industries to figure out how to create a secure environment for content to move digitally.
Once we do that, it's going to not only enable companies like ours to create new and different kinds of offerings but to really penetrate and distribute it in a [different] way.
Q: How can we make cable TV's 500-channel world safe from pirating?
Parsons:The interactive capacity is something that cable offers uniquely. And so I am confident cable is going to be...the preferred and most robust platform. In terms of safety it's not the platform itself -- it's the software and encryption capacity that we've got to come up with. [We have to work with] the information technology industry and the consumer-electronics industry to create a paradigm, or an environment, where things can move around and be secure.
It's one of the reasons again we've been pleased to kind of strike a relationship with our friends at Microsoft because that's a challenge that the content creators, the software makers, and the [consumer-electronics] industry has to get their arms around.
Q: How can Hollywood avoid the music industry's piracy disaster?
Gates:Well, the music case is a very cautionary case: If you don't provide the right flexibility in a license form, then you'll get habits [formed] around using unlicensed content. And what has happened is really scary for the artists who create that content and the businesses that help them with that. The music industry has come around recently to provide more flexible licensing. For 99 cents, Apple and others are now able to [offer] the use of a track -- letting people put it on the portable devices. That wasn't allowed before.
The movie people have looked at the music experience and are saying, "O.K., let's get ahead of this thing and use technology in the right way." But it's still an issue that the content and technology industries are going to have to face together.
Roberts: Video-on-demand presents an opportunity to the content companies to reposition their content ahead of the technological shift. You're right that there's content you've got to protect, [but] if you wait too long to give the consumer a good deal, it's going to be too late.
That's why in video-on-demand you have free video-on-demand, subscription video-on-demand, and pay-per-view. And we've got to find a model that can work for the content companies but at the same time [take into account that] the consumer wants to be able to get it now. And I think we have that ability to do that in a secure, commercial way, and we should really continue to push that.
In Philadelphia, something like 65% of our customers who have digital [cable] have used the video-on-demand service in the last four months. Two-thirds of that content is free. Half of them are using it all the time.
[We could do this with] televisions shows. They could be watching MoneyLine later on that night. It goes back to the personalization of TV. It's why the Internet was so successful, and that's going to be where the technology marches us.
Karmazin: The other high-tech method we have for distributing our content is called Blockbuster.
Parsons: Four or five years ago [the music industry] saw this wave coming, but each of the companies wanted to own the solution...and, therefore, to become gatekeeper in some respect or at least have some technology that they could license to the other.
And it wasn't until the wave broke on the shore and almost drowned everybody that they realized "Hey, we've got to work together on this." The companies came together and are beginning to make some strides in terms of creating secure environments.
We not only need to work together within industries but across industries to come up with a -- as they say -- paradigm or a solution that touches not just the content creators but the software industry, the consumer-electronics industry.
And I think, finally, people are getting their minds around the enormity of the problem and beginning to say, "O.K., let's all work together." We all have skin in this game, and let's all work together to come up with some ways of protecting these golden eggs, this goose that's laying these golden eggs.
Q: Should the federal government impose copy-protection regulations?
Karmazin:The hope would be that the industry can get together without it, but I'm not that optimistic. So if in fact the consumer is going to benefit from broadband and get the richest content, I think we do need to address certain copy-protection issues, and I think there may be a role for the government in that regard.
Parsons: I agree with that, and once we come up with some standards, we may need the government to effectively put its muscle behind it. But by and large, regulation tends to be backward-looking. Let's see what the marketplace [does] before we think about regulating it.
We don't know where this thing can go and how big it can be and what the right manifestations are [of] the interplay between providers and consumers. Let the market run, and then if tangible, observable, and correctable abuses occur, then you deal with it.
Q: How does the creative community view piracy?
Parsons:We could all be losers if we don't solve this security issue. At the end of the day, that's what's holding the content folks back -- fear of putting your product out and having it pirated.
And if we don't have a means of securing any of this digital content in a broadband world, eventually people won't gravitate to that area. They won't put the time and talent in that's required if they can't get remunerated and recognized in some way for their efforts.