 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
Ensuring Content Protection in the Digital Age
Subcommittee on Telecommunications and the Internet
Mr. Larry Jacobson
Mr. Chairman and members of the
Committee, I am delighted to appear before you today and thank you for the
opportunity to come to Washington-the "other Washington" for those of us
with a Seattle orientation-to discuss some of the pressing issues facing the
media and technology industries at this moment. RealNetworks as a Pioneer in
Internet Media Delivery RealNetworks,
founded in Seattle, Washington in 1994, is a pioneer in the development of
digital media technology and services that enable people to create, deliver,
discover, and play digital audio and video content over the Internet and within
intranets, both through downloading and through a method RealNetworks developed
called "streaming." Streaming
enables consumers to enjoy uninterrupted, real-time broadcasts over the
Internet, by compressing digital media files and dividing them into packets,
that then are delivered to the consumer's personal computer.
RealNetworks
developed the first streaming media player and the first streaming media server
in 1995. RealNetworks has released
nine versions of the RealPlayer streaming media player.
In addition, RealNetworks has released two versions of its RealJukebox
software, which was first introduced in 1999, and which permits consumers to
manage their music collections on their personal computers.
That dynamic pace of innovation continues given the rapid adoption and
increasing use of digital media on the Internet.
RealNetworks
offers a universal platform for end-to-end delivery of digital media, from
creation to broadcasting to end-user consumption.
This allows companies to build powerful digital media applications like
video subscription services on our platform without regard to the underlying
hardware or the software operating system. RealNetwork's business model is
based primarily on (1) licensing
and selling software to create, deliver, play and secure digital media; (2)
selling subscriptions for access to audio and video content from major content
providers, including ABC News, CNN, Wall Street Journal, Fox Sports, E!
Entertainment, Warner Music Group, BMG Records and EMI Music; (3) providing
professional services, such as hosting others' streaming media and technology
implementation, and (4) selling advertising and promotions via RealPlayer,
RealJukebox, and the RealOne Player for our RealOne sports, news and
entertainment subscription service. As
a fundamental part of our digital media platform, RealNetworks has developed a
robust and sophisticated DRM-Digital Rights Management-technology to protect
content that is delivered in streaming or digital download formats.
This DRM, called the Real System Media Commerce Suite, currently protects
digitally downloaded and streamed files from major record labels via the
MusicNet platform and has been licensed to the MovieLink consortium, organized
by Sony, Universal, Warner Brothers, MGM and Paramount Pictures, to protect the
digital download of feature films. Today, we have licensed our
technology to over 270 million unique registered users around the world with at
least one of our products. These
consumers have consistently proven their desire to enjoy music and video,
whether streamed on demand, streamed in a webcast mode, or delivered via digital
download. As bandwidth increases
for connected users, music video and long-form video content are proving equally
popular. In fact, broadband
consumers are the heaviest users of our technology and as broadband adoption
increases we can expect similar increases for streaming media technologies. As a company with applications
on an estimated ninety percent of personal computer desktops in the United
States and hundreds of millions of users around the globe, we are keenly aware
of the challenges to Internet distribution of music, video and other forms of
content that require licensing of intellectual property rights. The
Challenge of Secure Digital Distribution at a Critical Time for our Industry Mr. Chairman, this hearing
comes at a critical time for the Internet and specifically for companies that
are building the new distribution channels for music and video content.
We are all aware of the explosion of online file-sharing services and
their global popularity. Countering
this trend, both independent and major recording companies have licensed their
works to subscription online services such as MusicNet, PressPlay, and
Listen.com's Rhapsody and other online ventures. RealNetworks has been one of the driving forces behind the
creation of legal subscription services. As
for the prospect of distribution of feature films on a pay-per-view basis,
RealNetworks is contributing technology to the MovieLink venture and we hope to
see other pay-per-view and subscription video services roll out in the near
future. Our technology and
subscription services model is designed to facilitate just this sort of
business. For any of these new content
distribution channels to succeed, we will need to make sure that content is
secured, that consumers see value in the digital purchases they make, and that
the underlying business models make sense for all participants in the "food
chain." Security for music and video
distribution is essential. Whether
digital content is produced by a garage band or a global media company, content
owners need to reach a comfort level with putting that content into the digital
marketplace. We all know that today's
Internet marketplace is characterized by an unacceptable level of piracy of
copyrighted works. The balance of
copyright-providing authors with a fixed exclusive period of time to reap the
rewards from creating new works-will be upset if this situation prevails. The business leaders testifying alongside me today will
undoubtedly give a more detailed picture of the dimension of the piracy problem
and the steps they are taking to address it.
Let me simply say that RealNetworks does not take widespread Internet
piracy lightly, both as a creator and licensor of our own intellectual property
and as a long-standing partner of many content creators. RealNetworks was the first
company to successfully invoke the anti-circumvention mechanisms of the DMCA to
stop the distribution of software that attempted to break the proprietary
content protection measures within our RealServer and RealPlayer software and we
will continue to invoke legal mechanisms to prevent piracy. As a person who has spent most
of my career in the entertainment industry, culminating from 1997 to 2000 as
President of the Fox Television Network, I understand that copyright protection
lies at the core of America's ability to create and sell entertainment
products throughout the global marketplace on a variety of distribution
platforms. Digital copying via the
Internet poses fundamental challenges for the economics of both the
entertainment and technology industries and we need to meet that challenge in
order to realize the potential of this new distribution medium. The good news is that
RealNetworks is building distribution channels, business models and new
subscription services that will over time create a robust and legitimate content
marketplace for digital music, video and other products provided that license
rights to that content can be efficiently and effectively obtained and
administered. DRM technology is one key
ingredient for establishing a legitimate digital marketplace.
The Real System Media Commerce Suite currently is used by technology
platforms such as MusicNet to protect tens of thousands of valuable sound
recordings from major record labels. To
protect valuable intellectual property with a level of assurance required for
digital distribution, DRM's must be universal, flexible and secure.
We design our DRM with the ultimate goal of supporting all types of media
to all devices. Further, these
DRM's must support flexible set of business rules that allow the content
creator to determine payment scenarios ranging from pay per use to permanent
ownership. Finally, we design our
DRM to be native, end-to-end, tamper resistant and to be quickly renewable in
the event of malicious attack. Technology alone will not
create the legitimate marketplace for online distribution of content.
After an era where first advertising and then e-commerce was widely
expected to carry the new online industry to the promised land, we have learned
from experience that a mix of business models, matched to consumer behaviors,
are required for our industry to succeed. RealNetworks
has led the way with premium content services-offering distinct packages of
digital downloads, on-demand streamed content and webcast streamed
programming-that reward content owners while providing unique value to end
users. These services are prime
examples of RN working in content with using RN technology to promote content to
deliver it to consumers on a subscription basis. Baseball fans can't get
condensed games of complete baseball broadcasts on-demand on network TV, but
they will be able to pay for this product this season through our RealOne
subscription products. In parallel
efforts, we are working with Fox Sports, CNN, E! entertainment, ABC News, NASCAR,
the NBA and other world-class media companies and sports leagues to bring unique
value to the online consumer. In
this sense, the Internet won't directly compete with television or radio, but
it will offer programming that is uniquely interactive and well-suited to the
online digital medium. While RealNetworks can build
the launching pad for digital distribution, our content partners supply the
rockets. Simply put, there can be
no meaningful marketplace for digital goods without compelling content.
From major media companies, to independent radio stations, to
non-profits, to individuals seeking an outlet for creative expression, the
Internet is a vast network of content markets.
It is in fact a "super market," where great content can reach over
500 million globally connected users. Just
as other digital products such as the compact disc and DVD video disc created
new markets for traditional content, online digital distribution will enrich
content creators and serve consumers in new ways.
RealNetworks has played a special role in inventing the channels for
digital streaming and downloading of audio and video and our philosophy here is
simply to "Let a Thousand Flowers Bloom." Building a Competitive Marketplace Absent
Government Intervention
When the history of the first
decade of the Internet is written by some future historian, he or she will
probably focus one salient fact: that
public policymakers in the United States were wise enough to let the infant
medium evolve with a minimum of government interference and regulation.
It is hardly a secret that the United States, spurred by companies such
as Amazon.com, E-Bay, Cisco and Intel, to name only a few, leads the world in
innovating the software, infrastructure and business models that make the
Internet run and that unprecedented economic value has been created in a very
short span of time. In contrast to
the European Union, where policymakers have an instinct to "regulate first"
then let the market develop, the foresight of American public policy in this
sphere must not be underestimated. Congress
has stepped in wisely, to respond to distinct needs to protect certain classes
of information such as healthcare, financial data, or information pertinent to
children. Yet Congress has eschewed
more sweeping regulation, and has resisted any temptation to become, in essence,
the "Chief Technology Officer for the Internet." We should continue to be guided
by two core principles: First, that
government should only intervene in technology markets where there is clear
evidence of market failure. Second,
that competition will always create the best technologies, resulting in new
revenue, new quality jobs and new consumer benefits. Let me first address the issue
of market failure. Recently, we
have been told that unless a single unitary and open standard is created for
digital content protection, the digital marketplace will not evolve.
Concerned companies have sketched a scenario where competing and
conflicting technologies will create a digital Tower of Babel, where consumers
are confused by different technical choices and where systems fail to
interoperate with one another, preventing the build out of an end-to-end
distribution channel for digital content. From our perspective, the Tower
of Babel scenario ignores the realities of today's marketplace. Scores of
companies, including RealNetworks, are laying the foundation for secure content
distribution through flexible DRM's. Software
can be built to accept multiple DRM's and play back content that is encoded in
a variety of file formats. For
example, RealNetworks supports several different secure file formats, including
Microsoft's Windows Media DRM. Unlike
a hardware environment where a media player is permanently "locked in" to
one DRM or can only play content from one source, software media players are
designed to be rapidly updated to accommodate new file formats and improved
security schemes. In addition, our
player technology supports multiple third party DRM solutions.
In this manner, a consumer can get content secured by a variety of
different DRM's in different formats. In
designing these DRM solutions, we also adhere to a principle of "ease of
use" for consumers, with the digital rights management functions occurring
through automation that is essentially transparent to the end user who simply
wants to access interesting and entertaining content delivered online. To win the business of major
media companies, technology companies will make sure that their security
solutions meet the specifications outlined by copyright holders.
If we fail to do this, we won't get their business.
As in the case of the VHS vs. Betamax systems, the marketplace will
ultimately decide on the most appropriate technology for specific consumer and
industrial uses. We see evidence
that market-driven solutions for security is rapidly evolving on the Internet
today and we will continue to design our software players and security solutions
to be flexible, multi-platform and renewable. Market-driven solutions, as has
been the case in American industry from the Nineteenth Century invention of the
telegraph to the 21st Century mapping of the human genome, consistently create
the most enduring economies-economies that reward inventors and consumers with
products that become a part of the fabric of their daily lives. Only a few years ago, the Internet was primarily a text-based
medium. Now we think of going
online in terms of accessing the latest news, sports, entertainment, music
videos and short films. Ten years
from now, we may think of the convenience of the Internet like a literal "home
video" store, where we can "stop by" to rent the latest films or our
favorite television shows. This is
why we are so excited about playing a role in creating these new digital
distribution markets by creating platforms for rich media content delivered to
millions of consumers and secured by our DRM solutions. Government-Mandated Standards will Stifle
Innovation and Fail to Reduce Piracy.
The alternative to market led
solutions for digital rights management is a scenario where
the government picks a winner and mandates that this government regulated
standard become the "open standard" for the industry.
This scenario is embraced in the Consumer Broadband and Digital
Television Promotion Act, S 2048, introduced a few weeks ago by Senators
Hollings and Stevens. The Bill mandates that all
hardware and software digital media devices respect standard security
technologies that are approved by the FCC.
If the undefined "industry" fails to develop the specified security
technologies within a one year period, then the FCC is authorized to develop a
standard based on the criteria listed in the proposed bill. The criteria may sound familiar
to you, given my description of the RealNetworks and other industry developed
DRM solutions that are already protecting digital content in today's
marketplace. Standard security technologies,
according to the Hollings-Stevens legislation, must be:
reliable, renewable, resistant to attack, readily implemented, modular,
applicable to multiple technology platforms, extensible, upgradeable, not cost
prohibitive and the software portion of such standards must be based on open
source code. Aside from the last
requirement, several current DRM's meet the proposed legislation's test.
The recent advances in the Broadcast Protection Discussion Group for
digital television affirm that the IT, consumer electronics and content
industries can work together to develop effective security measures outside a
framework of government bureaucracy and regulation. However, S. 2048 not only sets
abstract requirements for a technical standard, but also poses serious issues
for consumer use of digital content. We
find it very troubling that S. 2048 appears to make it a crime for an individual
to alter security technology to access protected content, unless their behavior
fits within a very narrow safe harbor. To
be precise, the person must be a lawful recipient of a personal copy for lawful
use in their home and only play back such content at a time when "it is
lawfully performed." This safe
harbor is so narrow as to radically rewrite the long-standing Fair Use doctrine
in our copyright law, which has been applied time and again by courts from every
Federal Judicial Circuit to ensure that consumers can use purchased or public
domain content for legitimate purposes. For example, S. 2048 could be
read to prohibit-indeed criminalize-the practice of a consumer taping a
digital TV program and saving that file for future multiple viewings with
extended family and friends. Mr. Chairman, this proposed
"government mandate" approach to solving the digital piracy problem will
create a host of problems for the information technology industries, cause a
firestorm of protest among American consumers, and ultimately do very little to
prevent the proliferation of pirated digital music and video files.
We reach this conclusion, based on our track record of developing
successful software products that are used by millions of consumers to
legitimately play back and store online content and from our observation of the
history of government mandated standards. Please
allow me to summarize these conclusions as seven "lessons" based on our
experience, which call into question whether any government mandated standard
would solve the piracy problem it is designed to address:
The Need for Targeted
Legislation to Update Existing Copyright Law to Accommodate New Technologies and
Promote Digital Content Services Congress must always proceed
carefully before tampering with the regime of Copyright, Patent and technology
laws that maintain the balance of copyright between the incentive to create new
works and the rights of consumers to enjoy those works.
S. 2048, as currently drafted, would radically alter the copyright
balance in ways that disrupt the development of a robust marketplace for digital
media, and therefore would benefit neither content creators, nor distributors,
nor consumers. Only four years ago, Congress
created new rights in copyright law and new security enforcement mechanisms with
the passage of the Digital Millennium Copyright Act.
Recently, in its Section 104 report, the Copyright Office recommended
several changes that would update the DMCA to better solve the problems of
digital distribution. Clarifying
the status of temporary copies in RAM and server copies, for example, would
eliminate legal uncertainty in the area of licensing of music for online
distribution and speed up the legitimate offering of music on a subscription
basis. Changing notice provisions
to copyright owners, allowing for blanket notices to license thousands of works
at a time, would similarly stimulate this music distribution channel-all in a
way designed to compensate copyright owners. We don't need additional new
criminal penalties designed to make it harder for consumers to access digital
works. In fact, the DMCA already provides powerful mechanisms to
prosecute those who distribute software primarily designed to circumvent
technical protection measures and, as I mentioned above, RealNetworks was the
first company to enforce these provisions.
If pirates reach a level of activity where they begin to pose a challenge
to secure distribution of content in a given channel, the DMCA and current
copyright and criminal laws provide the tools to go after them and shut down
illegal products. Rather than focusing its energy
on creating a new regulatory framework for digital media distribution, we
believe it would be wiser for Congress to eliminate practical barriers to the
current marketplace, particularly in areas such as Internet radio where new
legal regulations have made it harder for innovative programming services to
compete on a level playing field with other content offerings.
Several of these measures are already under consideration in the House
and Senate and RealNetworks would urge policy makers to adopt limited
legislation designed to impact and resolve the following issues:
Mr. Chairman, as set forth in
Article I of The Constitution, our copyright system is predicated on the balance
of consumer rights to enjoy content and the limited monopolies granted to
creators of content in order to incentivize them to create works that promote
the progress of "Science and the Useful Arts."
Yet recent changes in our copyright laws threaten this delicate balance
and we believe it is time for Congress to address the confusion caused by the
DMCA regarding the status of consumer Fair Use, not in the limited and
restrictive manner contemplated by S. 2048, but in a way that clarifies that
consumers have the right to store, archive and time shift purchased and public
domain content. The simple act of
breaking a digital seal should not be a crime in this country if the underlying
purpose falls within the accepted personal use ambit of our long-standing
copyright balance. A clearer zone
of fair use will stimulate the invention of legitimate products designed to
allow users to enjoy purchased music and video that is delivered by new digital
services. In turn, this will create
demand for broadband services and increase investment in new technologies. Working cooperatively, the
content and technology industries will create a dynamic marketplace for digital
distribution of content. Such a
market will enrich consumers with new choices and lead to new product
innovation. Eventually, it will
stimulate artists to create new art forms unique to the new digital medium. RealNetworks has worked in
partnership with independent artists and leading media companies to build the
framework for online distribution in a way that respects copyright, pays artists
and offers value to consumers. We
stand ready to work with policymakers, consumer electronics companies, broadband
providers, media companies and all other important actors in this environment to
create a digital marketplace that affirms the best principles of American
innovation and the rule of law. Thank you for your attention. I'd be happy to answer any questions you may have. |
