There have been a lot of efforts lately by the entertainment industry to legislate what you can and cannot do with your computer; including hard coding functional limitations into hardware and software, preventing some of what this equipment and applications were originally built to do. The courts have agreed that some of these things restricted uses are legitimate, especially in light of the Betamax case. Such actions could alienate Hollywood’s customers, so why are they taking this line of action?
At the Digital Hollywood Conference in Beverly Hills in September, Donald Whiteside, Intel Vice-President of Legal and Government Affairs, stated; "consumers expectations evolve as technology evolves." Microsoft Chairman of the Board, Bill Gates stated, on September 5th at the Windows Media 9 Beta Launch Event, that Microsoft has found that now, consumers’ expectations are, after they purchase content, that they expect to be able to play that content on any device." There are also indications from many sources that consumers are expecting content to be available in multiple forms and formats sooner after its initial release in its first form (example: movie in a theater) than is currently practiced.
Karen Randall, Executive Vice-President of Universal Studios, stated at the Conference that their studio wishes to make adjustments to their distribution methods and schedules to better meet the expectations of their customers. In fact, the move to digital distribution allows simultaneous global release of content, which was not possible before, and now gives the ability to reduce the times between releases of content in different forms. However, they are locked into long-term contracts with their distribution channels that will take 5-7 years to change. Other studios are in a similar bind.
In the past when companies or industries did not make the changes to adjust to consumer expectations, consumers reacted in ways to get around it. One such way was an increase in black and gray markets for such goods. The impediments to black markets in Hollywood’s content are dropping, including piracy. This reduction of impediments includes an increasing number of people with broadband Internet access and DVD recorders and media becoming affordable to the consumer by the end of 2002.
This may be the reason why Hollywood is pressing so much to put restrictions on computer copying and distribution technologies. However, consumers could react to such restrictions as Californians did with the 55 mile an hour speed limit – disobey the law en mass.
Another way for consumers to react is to buy substitute goods. This is especially true when a company or industry alienates its customers. In fact, a recent Los Angeles Times article states that there are indications the Hollywood studios may currently be benefiting from the record industry’s alienation of its customers by some shift from buying Music CDs toward buying more DVD movies. One shift could be to enjoy movies produced by smaller independent companies, which may have more latitude in distribution. Another might be for individuals to produce more videos for viewing by themselves and their friends. However, it is more likely that there would be a shift toward other forms of entertainment. The real beneficiary of these problems may be the computer games industry, which is rapidly growing.
In regards to Hollywood’s trying to legislate against consumers reacting to circumvent Hollywood’s inability to adjust to new consumer expectations, history shows that it only works in the short-term. Market and political forces eventually overwhelm such efforts. However, Hollywood only needs for it to work a few years until they get out from under the distribution contracts that are handcuffing them. Hollywood is lobbying to get such legislation passed over the objections of computer and consumer electronics industries and groups representing computer users, such as the Electronic Frontier Foundation.
Hollywood right now seems to be trying to prevent the consequences of their mistakes in signing long-term contracts with their distributors. They are trying to do this via legislation and they only need it to work for a few years. Meanwhile the computer and consumer electronics industries plus many computer users seem to have the same opinion on Hollywood’s efforts as Donald Whiteside of Intel: "Ridiculous asinine legislation like the Hollings Bill should be recognized as such."
Hollywood is going to provide us with an interesting battle for the next few years.
Timothy Everingham is CEO of Timothy Everingham Consulting in Azusa, CA. In addition, he is the Vice President of the Windows Media Users’ Group of Los Angeles. He is also part-time Press in the areas of high technology, video, audio, and entertainment/media and has had articles published throughout the United States and Canada. He is a member of TUGNET.
