[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
THE AUDIO AND VIDEO FLAGS:
CAN CONTENT PROTECTION AND TECHNOLOGICAL
INNOVATION COEXIST?
HEARING
BEFORE THE
SUBCOMMITTEE ON TELECOMMUNICATIONS AND THE
INTERNET
OF THE
COMMITTEE ON ENERGY AND
COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
JUNE 27, 2006
Serial No. 109-112
Printed for the use of the Committee on Energy and Commerce
Available via the World Wide Web: http://www.access.gpo.gov/congress/house
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COMMITTEE ON ENERGY AND COMMERCE
JOE BARTON, Texas, Chairman
RALPH M. HALL, Texas JOHN D. DINGELL, Michigan
MICHAEL BILIRAKIS, Florida Ranking Member
Vice Chairman HENRY A. WAXMAN, California
FRED UPTON, Michigan EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida RICK BOUCHER, Virginia
PAUL E. GILLMOR, Ohio EDOLPHUS TOWNS, New York
NATHAN DEAL, Georgia FRANK PALLONE, JR., New Jersey
ED WHITFIELD, Kentucky SHERROD BROWN, Ohio
CHARLIE NORWOOD, Georgia BART GORDON, Tennessee
BARBARA CUBIN, Wyoming BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois ANNA G. ESHOO, California
HEATHER WILSON, New Mexico BART STUPAK, Michigan
JOHN B. SHADEGG, Arizona ELIOT L. ENGEL, New York
CHARLES W. "CHIP" PICKERING, Mississippi ALBERT R. WYNN, Maryland
Vice Chairman GENE GREEN, Texas
VITO FOSSELLA, New York TED STRICKLAND, Ohio
ROY BLUNT, Missouri DIANA DEGETTE, Colorado
STEVE BUYER, Indiana LOIS CAPPS, California
GEORGE RADANOVICH, California MIKE DOYLE, Pennsylvania
CHARLES F. BASS, New Hampshire TOM ALLEN, Maine
JOSEPH R. PITTS, Pennsylvania JIM DAVIS, Florida
MARY BONO, California JAN SCHAKOWSKY, Illinois
GREG WALDEN, Oregon HILDA L. SOLIS, California
LEE TERRY, Nebraska CHARLES A. GONZALEZ, Texas
MIKE FERGUSON, New Jersey JAY INSLEE, Washington
MIKE ROGERS, Michigan TAMMY BALDWIN, Wisconsin
C.L. "BUTCH" OTTER, Idaho MIKE ROSS, Arkansas
SUE MYRICK, North Carolina
JOHN SULLIVAN, Oklahoma
TIM MURPHY, Pennsylvania
MICHAEL C. BURGESS, Texas
MARSHA BLACKBURN, Tennessee
BUD ALBRIGHT, Staff Director
DAVID CAVICKE, General Counsel
REID P. F. STUNTZ, Minority Staff Director and Chief Counsel
SUBCOMMITTEE ON TELECOMMUNICATIONS AND THE INTERNET
FRED UPTON, Michigan, Chairman
MICHAEL BILIRAKIS, Florida EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida Ranking Member
PAUL E. GILLMOR, Ohio ELIOT L. ENGEL, New York
ED WHITFIELD, Kentucky ALBERT R. WYNN, Maryland
BARBARA CUBIN, Wyoming MIKE DOYLE, Pennsylvania
JOHN SHIMKUS, Illinois CHARLES A. GONZALEZ, Texas
HEATHER WILSON, New Mexico JAY INSLEE, Washington
CHARLES W. "CHIP" RICK BOUCHER, Virginia
PICKERING, Mississippi EDOLPHUS TOWNS, New York
VITO FOSSELLA, New York FRANK PALLONE, JR., New Jersey
GEORGE RADANOVICH, California SHERROD BROWN, Ohio
CHARLES F. BASS, New Hampshire BART GORDON, Tennessee
GREG WALDEN, Oregon BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska ANNA G. ESHOO, California
MIKE FERGUSON, New Jersey BART STUPAK, Michigan
JOHN SULLIVAN, Oklahoma JOHN D. DINGELL, Michigan
MARSHA BLACKBURN, Tennessee (EX OFFICIO)
JOE BARTON, Texas
(EX OFFICIO)
CONTENTS
Page
Testimony of:
Bainwol, Mitch, Chairman and Chief Executive Officer,
Recording Industry Association of America 17
Levin, Andrew W., Executive Vice President and Chief
Legal Officer, Clear Channel Communications, on
behalf of National Association of Broadcasters 22
Harris, Stewart, Songwriter, on behalf of Songwriters
Guild of America 29
Ziegler, Ruth A., Deputy General Counsel, Sirius
Satellite Radio, Inc. 32
Attaway, Fritz, Executive Vice President and Special
Policy Advisor, Motion Picture Association of
America 72
Shapiro, Gary, President and Chief Executive Officer,
Consumer Electronics Association 78
Sohn, Gigi, President, Public Knowledge 88
THE AUDIO AND VIDEO FLAGS:
CAN CONTENT PROTECTION AND TECHNOLOGICAL
INNOVATION COEXIST?
TUESDAY, JUNE 27, 2006
HOUSE OF REPRESENTATIVES,
COMMITTEE ON ENERGY AND COMMERCE,
SUBCOMMITTEE ON TELECOMMUNICATIONS AND THE INTERNET,
Washington, DC.
The subcommittee met, pursuant to notice, at 2:05 p.m., in
Room 2322 of the Rayburn House Office Building, Hon. Fred
Upton (Chairman) presiding.
Members present: Representatives Stearns, Gillmor, Cubin,
Shimkus, Bass, Walden, Terry, Ferguson, Blackburn, Barton (ex
officio), Markey, Engel, Wynn, Gonzalez, Inslee, Boucher, Towns,
and Gordon.
Also present: Representative Bono.
Staff present: Neil Fried, Counsel; Will Nordwind, Policy
Coordinator; Anh Nguyen, Legislative Clerk; Jaylyn Jensen,
Senior Legislative Analyst; Johanna Shelton, Minority Counsel;
and Davis Vogel, Minority Research Assistant.
MR. UPTON. Good afternoon. Today's hearing is entitled "The
Audio and Video Flags: Can Content Protection and Technological
Innovation Coexist?" I would like to think that the answer to the
question posed in the title of this hearing is: "yes, they can
coexist." In fact, the marketplace is replete with examples of that
fact, which is a good thing since one of our Nation's most precious
resources and exports is the creative genius and artistic ability of
her citizens, otherwise known as intellectual property.
This then begs the question of where, if at all, is it wise or
appropriate for the Government to intervene in the marketplace
and mandate specific content protection technologies, like the
audio and video broadcast flags which are at issue in today's
hearing. In my view it is those who advocate intervention in the
marketplace and federal technology mandates that bear the burden
of the persuasion in this debate.
Today's hearing is divided into two panels, one on the audio
flag and the other on the video flag. This subcommittee has a long
record on the video broadcast flag since it was a major issue in the
subcommittee's examination of the transition to digital TV. We
held a number of hearings in which the broadcast flag was
addressed, and under former Chairman Billy Tauzin's leadership
we held many, many, numerous multi-party roundtables which
were, in part, responsible for industry consensus on a video
broadcast flag.
It was that consensus that helped pave the way for the FCC's
video broadcast flag order, which was ultimately struck down by
the D.C. Circuit on the grounds that the FCC lacked authority to
issue such rules, not on substantive grounds. So, today's hearing
will help refresh our record on this important issue, which, at its
heart, was always about preventing illicit mass distribution on the
Internet of digital over-the-air broadcast content, a goal that I
strongly support.
However, this will be the first hearing that we have held on the
audio broadcast flag. I want to commend Mr. Ferguson for his
motivation and for focusing our attention on it. As I stated at the
outset, I believe it is those who advocate intervention in the
marketplace and Federal technology mandates who bear the burden
of persuasion in this debate. I believe that digital TV transition,
which is government driven with a hard date now set into law, is
very different than the digital radio transition which is purely
market driven. It does not require a separate spectrum and does
not require the shut-off of analog service. As such, I believe that
the radio marketplace will be much more sensitive to government
intervention and Federal technology mandates than the TV
marketplace, and that is of great concern to me.
In any event, my understanding is that the NAB and the RIAA
have been engaged in a productive dialogue over the audio flag
issue, and I commend those organizations for their diligence. I
would hope that the parties to that dialogue could be expanded to
include other interested parties to ensure that, if there is ever to be
a consensus on audio flag, that it is a broad-based consensus. I
know from our experience with the video broadcast flags that these
issues are highly technical. There are important consumer issues at
stake and ample time needs to be given to careful consensus
building before the Government intervenes, if a case is to be made
that it intervenes at all.
With that, I look forward to hearing from our witnesses today,
and with perfect timing I recognize the Ranking Member of the
subcommittee from Massachusetts, my friend, Mr. Markey.
[The prepared statement of Hon. Fred Upton follows:]
PREPARED STATEMENT OF HON. FRED UPTON, CHAIRMAN,
SUBCOMMITTEE ON TELECOMMUNICATIONS AND THE INTERNET
Good afternoon. Today's hearing is entitled: The Audio and
Video Flags: Can Content Protection and Technological
Innovation Coexist ?
I would like to think that the answer to the question posed in
the title of this hearing is: "YES, they can coexist." In fact, the
marketplace is replete with examples of this fact, which is a good
thing since one of our nation's most precious resources - and
exports -- is the creative genius and artistic ability of her citizens,
otherwise know as intellectual property.
This then begs the question of where, if at all, is it wise or
appropriate for the government to intervene in the marketplace and
mandate specific content protection technologies, like the audio
and video broadcast flags which are at issue in today's hearing ?
In my view, it is those who advocate intervention in the
marketplace and federal technology mandates that bear the burden
of persuasion in this debate.
Today's hearing is divided into two panels, one on the audio
flag and one on the video flag.
This Subcommittee has a long record on the video broadcast
flag, since it was a major issue in the Subcommittee's examination
of the digital television transition. We held a number of hearings
in which the broadcast flag was addressed, and, under former
Chairman Billy Tauzin's leadership, we held numerous multi-party
roundtables which were, in part, responsible for industry consensus
on the video broadcast flag. It was that consensus that helped
paved the way for the FCC's video broadcast flag order, which was
ultimately struck down by the D.C. Circuit on the grounds that the
FCC lacked authority to issue such rules, not on substantive
grounds. So, today's hearing will help us refresh our record on this
important issue, which, at its heart, was always about preventing
illicit mass distribution on the Internet of digital over-the-air
broadcast content -- a goal I strongly support.
However, this will be the first hearing we have held on the
audio broadcast flag. I want to commend Mr. Ferguson for his
motivation and for focusing our attention on it. As I stated at the
outset, I believe it is those who advocate intervention in the
marketplace and federal technology mandates who bear the burden
of persuasion in this debate. I believe the digital television
transition, which is government driven with a hard date now set
into law, is very different than the digital radio transition which is
purely market driven, does not require separate spectrum, and does
not require the shut-off of analog service. As such, I believe the
radio marketplace will be much more sensitive to government
intervention and federal technology mandates than the television
marketplace - and this is of great concern to me.
In any event, my understanding is that the NAB and RIAA
have been engaged in a productive dialogue over the audio flag
issue, and I commend those organizations for their diligence. I
would hope that the parties to that dialogue could be expanded to
include other interested parties to ensure that, if there ever is to be
a consensus on audio flag, it is a broad-based consensus. I know,
from our experience with the video broadcast flag, that these issues
are highly technical, there are important consumer issues at stake,
and ample time needs to be given to careful consensus-building
before the government intervenes, if a case is to be made that it
intervenes at all.
With that, I look forward to hearing from our witnesses today,
and I thank them for their participation.
MR. MARKEY. Thank you, Mr. Chairman, and I want to
commend you for calling this hearing today on content protection
technologies for broadcast audio and video content. Protecting
copyright in the digital era is unquestionably important for content
owners. The inability of content owners to safeguard their
financial and creative interests in digital versions of their
copyrighted products could have an adverse impact on jobs
innovation and the widespread availability of digital audio and
video programming for consumers.
Content owners have a reasonable and lawful expectation that
privacy of their products will not be condoned in the marketplace
or countenanced by entities charged with enforcing copyright laws.
And I believe it is important that we stress as we move even
further into the digital era our strong opposition to the theft and
illegal distribution of copyrighted content. The content community
has several tools to combat piracy. The content community has
utilized lawsuits against individuals who engage in massive illegal
infringement on-line.
It has also prevailed the Supreme Court in the Grokster case
which held that distributors of technologies used for infringement
by others could be held liable for such activity. The content
community has also worked closely with universities around the
country on educational programs about theft and piracy and the
risk of lawsuits to students and faculty. In addition, many
companies have experimented with digital rights management and
technologies to provide consumers with copyrighted content in a
way that permits limited reasonable subsequent use by consumers.
In recent years content providers have also promoted the use of
other technological tools and protection measures, most notably
the so-called broadcast and audio flags. Such technology flags,
particularly digital content with imbedded content protection
instructions in order to thwart unauthorized use. The broadcast
video flag has been advanced by leading providers of video content
as a technological tool to help impede widespread theft of digital
content. In contrast, many consumers view the broadcast flag as
potentially frustrating or prohibiting their ability to fully utilize
their home electronics equipment, including what they view as
reasonable use of their computers and the Internet.
The broadcast flag rule that the FCC promulgated was
successfully challenged in the D.C. Circuit which ruled in May of
2005 that the Commission lacks sufficient authority to adopt the
regulations. Presumably this legal interpretation of the
Commission's authority would also hold for the broadcast audio
flag for radio. Broadcast radio, like its television counterpart, is
also moving towards digital technology. Yet unlike broadcast
television, broadcast radio can migrate to digital without the need
for additional spectrum.
As a result, hundreds of radio stations across the country are
already broadcasting in digital form. In addition, satellite radio
providers, XM and Sirius, are providing a digital subscription radio
service. Each of these satellite radio providers offers a device in
the marketplace which permits subscribers to store songs
transmitted over their services. With the rise of both terrestrial and
satellite-delivered digital radio the music industry has sought
implementation of audio flag technology to limit unauthorized
copying or distribution of content.
I want to thank you, Mr. Chairman, for calling this hearing
today. I believe this is a very useful inquiry. As we considered
developing a regulatory approach to these issues, particularly
technology regulations that will impact a consumer's use of digital
technology and the Internet, I believe it is vitally important to
assure the public that any new regulation appropriately balances
the legitimate concerns of both consumers and content owners.
I would also like to welcome Andy back to the committee
today. It has been a long time since he has paid us a visit. I yield
back the balance.
MR. UPTON. His year is up, I think. Mr. Gillmor.
MR. GILLMOR. Thank you, Mr. Chairman, and I appreciate the
opportunity for us today to discuss the matter of content protection
in the digital age. Digital age has presented us with some
unexpected and exciting public policy challenges, many of which
we continue to debate. Protecting content has become one of, if
not the paramount issue. Many of our favorite music, TV, and
movie selections are now being distributed in digital formats.
These advanced digital distribution formats give consumers a
better listening and viewing experience, certainly much better than
the grainy images from the 1948 seven-inch TV that my family
first bought when I was a small child, while at the same time
offering consumers an increased ability to manage the use of both
their audio and video content.
The ability of a consumer to manage his or her experience has
led many to question the appropriate nature by which this content
is protected from illegal use and distribution. Striking a balance
between consumer fair use and the protection of creative and
intellectual property is extremely important, and addressing this
problem is going to require some insight into what technology may
yield in the years to come.
Dealing specifically with the broadcast video flag, I am glad to
see that all stakeholders worked together to reach an agreement
and, given the court's decision on the FCC's ability to implement
such rules, it is now incumbent upon us to act in a responsible
manner to ensure the protection of the video content. A matter of
greater contention surrounds the issue of audio flag. Unlike the
video flag, I believe it would be in the best interest of all
consumers and the future of the industry to sit down with all
affected parties and again try to work out a privately negotiated
agreement rather than rely on a legislative solution.
However, those talks cannot be allowed to be drawn out. I
think they have to be a priority because as we all know from the
1996 Telecom Act, the tech sector changes rapidly. Furthermore,
from my discussions with industry representatives, a privately
negotiated solution is preferred because recent Congressional
efforts have fallen short of a consensus approach, and as that
negotiation goes forward I would hope that the members of this
committee could be kept informed as to how it progresses. And I
yield back, Mr. Chairman.
[The prepared statement of Hon. Paul E. Gillmor follows:]
PREPARED STATEMENT OF THE HON. PAUL E. GILLMOR, A
REPRESENTATIVE IN CONGRESS FROM THE STATE OF OHIO
MR. CHAIRMAN: Thank you for holding this important
hearing. I appreciate the opportunity to openly discuss the matter
of content protection in a digital age.
The digital age has presented us with many unexpected and
exciting public policy challenges-many of which we continue to
debate. Protecting content has become one of, if not the
paramount issue as many of our favorite music, TV, and movie
selections are now being distributed in digital formats. These
advanced digital distribution formats give consumers a better
listening and viewing experience-much better than the grainy
images from the 1948 seven-inch TV that my family first received
when I was nine years old-while at the same time offering
consumers an increased ability to mange the use of both their audio
and video content.
The ability of a consumer to manage his or her "experience"
has led many to question the appropriate nature by which this
content is protected from illegal use and distribution. Striking a
delicate balance between consumer "fair use" and the protection of
creative and intellectual property is extremely important.
Addressing this dispute will require not only knowledge of the
present, but also insight into what technology may yield in the
years to come.
Dealing specifically with the broadcast video flag, I was glad
to see all stakeholders work together to reach an agreement. Given
the court's decision on the FCC's ability to implement such rules,
it is now incumbent upon us to act in a responsible manner to
ensure the protection of video content.
A matter of greater contention surrounds the issue of the
proposed "audio flag." Let me be clear on my current position,
like the video flag, I believe it is in the best interest of all
consumers and the future of the industry to sit down with all
affected parties to, again, work out a privately negotiated
agreement-rather than rely on a legislated solution. However,
these talks cannot be allowed to be drawn out-they must be a
priority because, as we all know from the 1996 Telecom Act, the
tech sector changes rapidly. Furthermore, from my discussions
with industry representatives, a privately negotiated solution is
preferred because recent Congressional efforts have fallen short of
a consensus approach.
Mr. Chairman, I look forward to the testimony from today's
witnesses and to working closely with you on these lingering
public policy issues. Additionally, I would respectfully request
that should any industry negotiations take place that this committee
be kept informed of the ongoing status of those discussions.
Again, thank you Mr. Chairman for yielding me this time.
MR. UPTON. Thank you. Mr. Boucher.
MR. BOUCHER. Thank you very much, Mr. Chairman. I have
no hostility to a statutory authorization for a TV broadcast flag if
certain key conditions are met and are clearly accommodated in the
authorizing statute. First, there should be clearly stated
exemptions from the flag mandate for news and public affairs
programs and for content subject to the TEACH Act. These
programs should never be flagged. News and public affairs
broadcasts erode in value over time and should be broadcast in the
clear so that excerpts can be easily e-mailed from one interested
party to another.
The TEACH Act specifies content that under existing law is
available for use in distance learning applications. The TV
broadcast flag should not be permitted to interfere with this well-
functioning law. The Senate, in fact, has acknowledged these
principles in the draft of the bill that is being considered in that
body. Secondly, it is essential that Congress reinforce fair use
principles. The DMCA broadly undermined fair use for digital
media and actually empowers the creators of digital content to
eliminate fair use altogether.
I want to commend Chairman Barton for his determination to
protect fair use rights for the consumers of digital media and for
his announcement that the TV broadcast flag will only be
considered in the broader context of assuring fair use protections
for digital media consumers. I also appreciate Chairman Barton's
co-sponsorship of H.R. 1201, which is pending before this
committee. That bill is the right policy. The proposed audio
broadcast flag, however, is an entirely different matter. Unlike the
TV flag, there is no agreed-upon technical standard for an audio
flag.
After years of work the inter-industry forum known as the
Copy Protection Technical Working Group produced a TV
broadcast flag standard which the diverse interested parties have
accepted as both being workable and effective. That work has
really not taken place for an audio flag. In fact, even though the
technical group has been meeting monthly, the industry
representing the recording companies elects not to attend those
sessions, and this is the forum that is comprised of the equipment
manufacturers and in fact all interested parties.
The work to create a technical standard for a broadcast flag has
in essence not even started. Moreover, if there were agreed-upon
technical standards, those standards could be effectively
implemented without Congress having to pass a statute. The
technology for high definition radio was developed by a company
called iBiquity, which holds the intellectual property for the
equipment the high definition radio stations are using. Without
Congress doing anything, if a technical standard for an audio flag
is some day created, iBiquity could easily incorporate that standard
into its license agreement with radio stations and could have the
flag implemented simply through that private arrangement.
This matter clearly lends itself to a complete private-sector
resolution, with the private parties creating and implementing the
technical standard. And I would add my voice to others expressed
here today encouraging that work to occur. Congress really need
give the matter no further consideration. Thank you, Mr.
Chairman, and I yield back.
MR. UPTON. Mr. Shimkus.
MR. SHIMKUS. Thank you, Mr. Chairman. We ought to have
our colleague, Rick Boucher, just testify. He always puts us to
shame and we appreciate how smart he is.
MR. UPTON. His handwritten notes.
MR. SHIMKUS. Here is mine. I think you hear the message. A
lot of us would like to see private negotiated agreements involved
in this process and let the system work out. I always talk about in
this debate you had Guttenberg with the printing press. You had
Xerox with the copy machine, 8 tracks, cassettes. I am showing
my age. Now MP3. My wife is a church organist, and we have an
artist here and there is an issue of church choirs Xeroxing music
that should be protected and compensated for when the church
choirs use that, and my wife went through and threw all the
Xeroxed copies out.
Now it didn't make the church council very happy because that
means they had to pay for the sheet music for the entire choir but it
is an issue of compensating the artist for their work. And so we
have a tremendously difficult balance here to make sure that we
continue to encourage the artist and those, and I am not for one, I
just married one so I now know all this stuff whether I wanted to or
not. And as my friend, Mr. Boucher, would say the fair use issue
and what you pay for is what you can use, but what you pay for is
not what you can sell in essence.
So we appreciate you coming here. We are going to learn a lot,
and, Mr. Chairman, I yield back.
MR. UPTON. Mr. Gonzalez.
MR. GONZALEZ. Thank you very much, Mr. Chairman. I think
regardless of the subject especially in this subcommittee on
telecom it always strikes me that many times people will say
because of the technology and it is fast moving and developing and
so on, somehow it lends itself to different criteria than we have
adopted and relied on for many, many years in this country, and
those are just general principles. One of those principles of course
is the legislative one and that is not to act unless you really have to
to let the market forces play out, let the innovation, let the
stakeholders get together, and obviously we have already referred
to that.
Yet, because--now technology does add something that maybe
legislators or members of our society and the legal system did not
deal with, and that is that it moves quickly--here is a whole lot
more creativity. There is change every day and sometimes the law
has to anticipate some of that but it surely has to react in a timely
mode. So technology has narrowed the window of what I refer to
as timeliness. We are not there yet. I don't believe that. And I
would like to think that we are still going to have all stakeholders
actively engaged knowing that they have a vested interest in this
before Congress acts because there is one eternal truth and that is
when we do act very few people walk away truly satisfied and
many times the problem is not really improved measurably.
And with that, I look forward to the discussion today and to the
testimony. And I really had never heard from the artists and the
writers and the producers until I went to Austin last March to
attend South by Southwest, and that was very encouraging and
enlightening, and for anyone that may have been out there, I thank
you for engaging in that particular discussion. When it comes to
industry and others, I have had ongoing discussions for a couple of
years now and I appreciate your input.
What I ask now is your active participation as a stakeholder in
trying to arrive at some solution and giving us some direction. I
was talking to staff today, and, Mr. Chairman, the Wright
amendment, the infamous Wright amendment regarding Southwest
flights to Dallas finally was resolved among the stakeholders. And
I thought, gee, if you are a Texas and you can resolve that, you can
resolve anything.
However, he did remind me they took 20 years to come to that.
We do not have 20 years. And if you indulge me, Mr. Chairman,
at this time I do want to introduce one of our witnesses who is a
fairly new resident to my home town of San Antonio, and of
course that is Andy Levin, who served on the staff of this
committee from I think 1995 to 2002, invaluable service, was here
for some monumental legislation, and I am sure that bears some of
his handiwork and fingerprints of the outstanding job that he does
for Clear Channel. And I need to tell you that Clear Channel is
one of our leading corporate citizens, not just of course in San
Antonio but throughout the State and this Nation. And the
leadership that he has brought and the direction that he has
provided the past years there is exemplary and has really assisted
not just the community but I think all of what is going on out there
with the broadcasters.
And, Andy, I want to say welcome. I wasn't here when you
served on staff but I have heard great stories about you and they
are all fine and good. And with that, I yield back.
MR. UPTON. Mr. Ferguson.
MR. FERGUSON. Thank you, Mr. Chairman, and thank you for
holding this hearing. Our subcommittee can serve a constructive
role in the area of digital content protection in the surest way to
insure that competition in the marketplace and encourage creativity
and innovation. This hearing is particularly timely regarding the
digital audio flag issue. Protection and compensation for content
and new technologies have been the subject of negotiations,
settlements, and litigation.
And as we hold this hearing today, the Senate is considering
language in their cable franchise and legislation that includes both
audio and video flags. These are exciting times for consumers.
There are more options available in the marketplace than ever
before. Apple's iPod has permeated the marketplace and is a
stunning success story. Digital audio can now be heard across
multiple platforms from Web casts to wireless. The advent of
consumer consumption and ultimate success of these products was
not born out of circumventing copy protection technology under
the banner of fair use, and it was not achieved by ignoring the
property rights of those who create content.
The preference, of course, is to see the issue of digital content
protection resolved between the respective parties in the private
sector, and I hope it can happen and happen quickly. But the fact
remains that digital audio products are on the market today that
allow unauthorized downloading and for the potential for illegal
uploading to the World Wide Web. This is an issue that deserves
Congress' attention but if these issues are not resolved soon it may
also require Congress' direction.
Early this spring I introduced the Audio Broadcast Flag
Licensing Act of 2006. The goal of this legislation is to promote
maximum consumer choice in the marketplace by ensuring that
intellectual property rights are respected and that content creators
are treated fairly. Specifically it provides that technical licensing
agreements currently taking place between satellite and HD radio
and developers of digital audio broadcast systems include a
broadcast flag or similar technology that limits the unauthorized
dissemination, duplication, and redistribution of content.
If the products in question allow downloading that was not
legally authorized, the parties would need to come back to the table
with content creators and work out fair royalties. My bill makes
sure that the marketplace and not Congress is where these
negotiations happen. Some have claimed that these new services
fall under the Audio Home Recording Act. The AHRA was passed
in 1992 at a time when even the Internet was mostly unknown to
legislators and consumers. This argument has a shaky foundation
at best. Considering the rapid pace of technology, it is hard to
believe that Congress could have foreseen over a decade ago that
some would choose to turn their performance license into a
distribution license without paying for it.
While my bill is clear in its intent to protect content, it also
insures that American consumers remain unaffected. Legacy
devices already in the stream of commerce would remain
operational, and the bill specifically states that the HD radio roll
out remain unimpeded. The bottom line is that if private-sector
negotiations are unsuccessful in ensuring a level playing field
between content creators and distributors, it is our responsibility,
Mr. Chairman, to help jumpstart those talks in the private
marketplace.
The goals of the Audio Broadcast Flag Licensing Act are not
only for the good of content creators, more importantly they are for
the good of our constituents, the consumer. It simply requires that
if you are going to use these products, make sure it is done fairly.
That is my definition of fair use. I would like to thank the
witnesses for taking out their time to be with us today and in
particular recognize and commend Sirius Satellite Radio in
recently negotiating with the recording industry to ensure that
content creators are compensated with regards to their S50 satellite
radio and download service. It is my hope that your industry peers
will also follow suit.
Mr. Chairman, thanks again for holding this hearing. As we
begin to debate this issue, we should not focus only on the
products marketed today but rather the products that will be made
available in the future. Do we want to see a marketplace where
there is a constant flow of new and exciting technology to our
constituents? Do we want to ensure the most options? If we do,
then there must be a balance among new radio services, property
rights of creators, and fair competition among all parties. It is our
responsibility to ensure that this balance is achieved.
Thank you, Mr. Chairman. I yield back.
MR. UPTON. Mr. Gordon.
MR. GORDON. Thank you, Mr. Chairman. Our remarks are
beginning to sound a little repetitious so I will ask that my remarks
be made part of the record, and just quickly say that I am a co-
sponsor, original co-sponsor, of the audio flag bill because I think
we do need to have a balance between technology and content.
Hopefully the parties can develop that but if they can't, we will let
the FCC do it and it should be done. Thank you.
MR. UPTON. I would just make a unanimous consent request
for all members on the subcommittee that their statements be
entered as part of the record. And with that, I recognize Mr.
Towns.
MR. TOWNS. Thank you very much, Mr. Chairman. It is true
that everything has been said but everybody didn't get a chance to
say it. The copyright industries, movies, television programs, and
music and recording, books, video games, and software provide
jobs for 8 percent of all United States workers. As Members of
Congress, I feel it is important that we never lose sight of this
human element. These jobs all depend on protection of
copyrighted works from being devalued by piracy and
unauthorized use. I call upon all of my colleagues to keep this in
mind as we proceed.
As many of you know, I have been a long-time advocate of
flagging technology because I feel it provides important protection
to our artists and content providers. In an age when digital radio
broadcast can be copied and redistributed worldwide over the
Internet, I worry that our current piracy prevention methods do not
go far enough to stem the tide of audio and video theft. I share in
the concerns of the recording industry that the ability to record
digital content will allow users to compile large song collections
for free, and I hope we are able to put a stop to this through a
solution that is favorable to all of these parties sitting before us
today.
All of you are well aware of how widespread piracy has
become and I worry about the next wave of creative theft, and I
pray that it is not born from the devices that we will be discussing
today. It is my belief that if we enact reasonable mutually agreed
precautions now we will not leave the door open to rapid
manipulation in later years. H.R. 4861 is not an attack on
traditional home taping services but rather ensures that fair
licensing agreements are negotiated and piracy is thwarted. Most
importantly it does this without delaying the final guidelines for
HD radio.
I look forward to working with Congressman Ferguson, the
satellite radio companies, and the recording industry as we
consider H.R. 4861 and work towards a fair and equitable solution
to this dilemma. Also, before I yield back, Mr. Chairman, I would
like to welcome Andrew Levin back to Capitol Hill and to know
that you can survive even after this committee. On that note, I
yield back, Mr. Chairman.
MR. UPTON. Thank you. This concludes--oh, Mrs. Cubin. I
am sorry.
MRS. CUBIN. I will submit mine for the record.
[The prepared statement of Hon. Barbara Cubin follows:]
PREPARED STATEMENT OF THE HON. BARBARA CUBIN, A
REPRESENTATIVE IN CONGRESS FROM THE STATE OF WYOMING
Thank you Mr. Chairman.
I appreciate that this subcommittee remains engaged on the
important issues surrounding digital media. As an I-Pod owner
myself, I am very aware of the I-Tunes music store as a successful
means of digital content distribution. Additionally, the video
component of these devices serves as a great example of how
content providers and consumer electronics companies can work
together for the real benefit of both businesses and consumers.
Technology continues to advance at breathtaking speeds,
however, and with this new technology comes new challenges to
strike the right balance between a consumer's right to enjoy their
new gadgets, and the content provider's right to be paid for their
innovation and performance. It is safe to say that no one on this
subcommittee is interested in stifling the innovation of either
content providers or consumer electronics companies. Both
provide invaluable service to consumers and both should be
promoted as examples of American innovation.
Because both sides in this debate are so integral to each other's
success, I am interested in hearing from the witnesses today about
any common ground the parties have reached in negotiations that
could lead to a non-legislative solution. Congress will act if we
must, and I appreciate your leadership on this Mr. Chairman, but I
believe that both businesses and consumers are best served by
limiting the regulatory involvement of Congress. Innovation will
not stop no matter what we do in Congress, that is the wonder of
the economic system we have established in this country. So if
this hearing can serve as a springboard to a voluntary agreement
that benefits all, it will have served its purpose.
Thank you again Mr. Chairman. I look forward to hearing
from the witnesses about this important issue. I yield back the
remainder of my time.
[Additional statements submitted for the record follows:]
PREPARED STATEMENT OF THE HON. JOE BARTON, CHAIRMAN,
COMMITTEE ON ENERGY AND COMMERCE
Mr. Chairman, thank you for holding this hearing today.
Digital content, services, and devices allow more artists to create
new and innovative content, and allow consumers to enjoy that
content in increasingly exciting and convenient ways. But the
digital age also makes it easier to copy and redistribute content in
unauthorized ways.
There is no question that content creators and owners are
entitled to compensation for their content. Without compensation,
they have neither the resources nor the incentives to produce more
of the music and video content that we enjoy. At the same time,
consumers are entitled to legitimate ways of enjoying that content.
And device manufacturers are entitled to make devices that permit
consumers to enjoy audio and video content. It is critical that we
strike the right balance between these interests. I also believe that
any broadcast flag legislation should include adequate protections
for consumers' fair use rights.
We have already heard much about the broadcast video flag,
and, as I have previously indicated, I believe there is a compromise
that can be struck between content protection and legitimate
consumer use. We have heard less about the audio flag, and I look
forward to today's testimony so that we can flesh out that issue a
bit more.
I yield back.
PREPARED STATEMENT OF THE HON. ELIOT L. ENGEL, A
REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW YORK
Thank you Mr. Chairman -
I am struggling with this push for an audio flag. I see the
broadcasters and satellite radio industry battling the record industry
- once again.
And I see the artists, songwriters and performers stuck in the
middle along with consumers.
I am a strong supporter of the video flag. The federal
government is mandating the switch to digital television.
Moreover, the federal government ordered the switch in 1996.
And it took 7 years of intense negotiation to find a solution that
most found acceptable. That solution was adopted by the FCC but
thrown out by the courts - not on grounds that the agreement was
flawed but simply that the FCC did not have the authority to
implement the agreement. I think the FCC needs that authority.
When it comes to the audio flag, I find myself concerned that
negotiations on an audio flag began in April - about 3 months. I
must wonder why there is a push for Congress to intervene so
early.
I would admonish those who seek quick legislative action that
what you hope for rarely is what you get. Instead, it is better for
all parties to meet and come to an agreement and, if necessary, ask
Congress to pass implementing laws.
I would think that the old Napster problem would be a case
study for the recording industry. Don't fight new technologies.
Embrace them and find a simple, legal and profitable business plan
to meet the needs and wants of consumers. The IPod proves this
clearly.
I am told that one of the major concerns is that satellite radio
companies have devices that allow people to record a song and
create playlists. I am having real trouble seeing how this is an
infringement of fair use.
In my day, I could go to the store and by a TDK audio tape, put
it into my expensive Kenwood Stereo, tape songs from albums of
many record companies, take that tape and play in my cheap car
stereo. I make this point because many companies were involved
in making music portable for me.
As I understand the satellite radio recording device does not
make the music portable. In fact, it can only be played on that
device - it cannot be transferred to a computer or a CD or even an
old audio tape.
But, I am always mindful of the talent, such as the Nashville
songwriters. They are the working men and women of the music
industry. And they deserve to be compensated for their work.
So I fall back on what I have said many times before. I will
continue to strive to find balance. We must ensure the talent is
fairly compensated while the fair use rights of the American people
are maintained.
I believe we should move forward on the video flag but give
the record companies, broadcast and satellite radio, talent and
consumers time to work out a solution. I know one can and will be
found.
I yield back.
MR. UPTON. Okay. Thank you. This concludes the opening
statements. We are delighted to have really two outstanding
panels. It will be led by--maybe we should have Mr. Levin go first
with all these accolades, a friend on this side of the aisle too. But
we welcome Mr. Mitch Bainwol, Chairman and CEO of the
Recording Industry Association of America, certainly an old friend
of mine for sure; Mr. Andrew Levin, Executive VP and Chief
Legal Officer for Clear Channel on behalf of the National
Association of Broadcasters; Mr. Stewart Harris, Songwriter, on
behalf of the Songwriters Guild of America; and Ms. Ruth Ziegler,
Deputy General Counsel of Sirius Satellite Radio from New York.
We welcome all four of you. We appreciate your willingness
to submit your testimony in advance. It is made part of the record
in its entirety. If you would try to limit your remarks to 5 minutes,
that would be terrific. Mr. Bainwol, we will start with you.
Welcome.
STATEMENTS OF MITCH BAINWOL, CHAIRMAN AND CHIEF EXECUTIVE OFFICER, RECORDING
INDUSTRY ASSOCIATION OF AMERICA; ANDREW W. LEVIN, EXECUTIVE VICE PRESIDENT AND
CHIEF LEGAL OFFICER, CLEAR CHANNEL COMMUNICATIONS, ON BEHALF OF NATIONAL
ASSOCATION OF BROADCASTERS; STEWART HARRIS, SONGWRITER, ON BEHALF OF
SONGWRITERS GUILD OF AMERICA; AND RUTH A. ZIEGLER, DEPUTY GENERAL COUNSEL,
SIRIUS SATELLITE RADIO, INC.
MR. BAINWOL. Thank you very much, Chairman Upton,
members of the subcommittee. Thank you for focusing on the
timely issues arising from radio's transition to distribution platform
for music. Today has special meaning. It is the one year
anniversary of the Supreme Court's nine to zero Grokster decision.
That unanimous decision reminds us that finding a balance
between technical and creative innovation is in fact possible. Not
long ago, I read about Clear Channel's new program at their
concert venues where the live performance is immediately burned
to CDs to sell as people leave, so the venue has two chances to
make money, one for the ticket, the performance, and one for the
sale of a CD, the distribution.
The consumer though does not get a free copy ownership after
paying for the listening experience. They have to buy it. The
same should hold true as radio morphs from a place to listen to
music to a place for acquiring it. I will back up for a second.
Today's marketplace is a dynamic competition between a variety
of platforms seeking to become a place where the fans listen to
music, discover music, store music, and acquire music. Listen,
discover, store, and acquire whether by iPod, by Nano, by cell
phone, by Trio, Zen Creative for a subscription service or by a
radio device. The competition between platforms increasingly is
all about the portable device. That competition is a good thing.
Fans will benefit and if the competition is fair music creators will
benefit too.
Competition isn't fair. iTunes and Wal-Mart download
services pay to distribute our music. Rhapsody and Napster
subscription services pay. Cingular and Verizon pay. Even new
legitimate P to P sites pay to distribute our music but radio does
not. We don't quarrel with the choice by radio to transition their
business model. We have done it. But concocting a legal shell
game so some radio services can get out of paying for content just
isn't right. XM in particular seems to think they should enjoy the
unique right to be exempt from paying for the music they give to
consumers as a mechanism to attract and retain subscribers.
This is an ad running at Sky Mall magazine. The slogan for
XM is hear it, click it, save it. Left unsaid, of course, is don't
bother paying for it. There is a word for this, hutzbah. We also
think it is illegal. Regardless, it is unfair and certainly bad policy.
Because of anomalies in comp rate law, satellite radio and over the
air radio are different when it comes to paying a fee for the right to
broadcast. The important point is this, neither is licensed to
compete as a distributor.
The situation is also more complicated because different
players are pursuing varying approaches. The NAB has joined
with us to suggest two goals should be paramount. One,
addressing the problem of cherry picking songs from a program in
a broadcast, and, two, ensuring that the rollout of HD happens
quickly, worthy goals. We applaud the broadcasters for adopting
this responsible approach. Sirius, here today, sought a license for
its first device, the S50. We hope they view it as a precedent,
though I was troubled when Mr. Karmazin was quoted as stating
that Sirius might adopt the XM tactic, that the device adheres to
the law.
Let me be clear about what unlicensed feature we find
concerning. If radio wants to provide traditional TiVo-like time
shifting of programs, that is not a problem. If radio wants to
provide traditional manual recording features, that is fine too. But
it is not okay for radio to allow cherry picking of individual songs
from a broadcast program without first obtaining a license so that
the songwriter, the publisher, the artist, and the label investor get
their due compensation.
Our members want to license radio. Broadcasters are our
partners. Fans are enriched when broadcasters innovate, when
device manufacturers innovate, and, yes, when creators innovate.
You might say it takes three to tango. As broadcasters,
manufacturers, and creators do their thing, the concept of a level
playing field makes a ton of sense. Platforms should be subject to
comparable content protection requirements when providing
comparable services, and that of course is the objective underlying
the Ferguson bill co-sponsored by Representative Towns, Bono,
Gordon, Blackburn, Waxman, Terry, and Davis.
The bill requires the use of a broadcast flag or similar
technology to provide content protection that is quickly achievable
and not disruptive, allowing digital radio devices to roll out
expeditiously, without making older models obsolete. You may
hear the time isn't right for legislation or that the issue hasn't been
through the rigorous voluntary process that generated the broadcast
flag consensus. Well, there is a reason for that. There is a reason
that it hasn't worked out. Unlike our video colleagues, we have no
performance rights over the air and the license for satellite is
compulsory, so we can't withhold our content if we are not
satisfied with its protection. Our video colleagues could.
If record companies were able to license in the marketplace
like other copyright owners, content protection would be resolved
in these marketplace discussions. There is a marketplace failure
and that is what we are trying to address. Moreover, because of
the limitation on our performance rights, Congress has set up a
system that makes record companies almost totally reliant on
distribution revenue, yet the limitations on performance rights are
now threatening even that revenue stream. That is more than
ironic to us. It is our life blood.
We suffered significant losses in recent years. Our glimmer of
hope for the future and our ability to invest in new music and new
creativity is predicated on the integrity of the emerging digital
marketplace. We are now seeing digital revenues replace physical
lawsuits. That is very exciting. It is very important, but it
highlights why we are so interested in seeing that the problems we
have outlined are addressed. Thank you very much.
[The prepared statement of Mitch Bainwol follows:]
PREPARED STATEMENT OF MITCH BAINWOL, CHAIRMAN AND CHIEF
EXECUTIVE OFFICER, RECORDING INDUSTRY ASSOCIATION OF
AMERICA
As the music industry struggles to emerge from several
difficult years due to online piracy, we are looking to the
success of legitimate digital offerings from services such as
iTunes, Napster, and Yahoo!. The sales from these services
are what songwriters and artists rely on to make a living,
and what record labels rely on to be able to invest in new
music.
New devices and services from satellite and HD Radio
threaten to replace those sales by allowing listeners to
automatically record, sort, label, and store the music they
hear on their radios, just like they can do through online
stores and subscription services, but without having to buy
it.
We truly understand and appreciate the appeal of these
devices and services. In fact, we have no problem with
them in themselves. We simply believe that by using such
offerings to effectively become a distributor of digital
downloads, services should be required to pay the
appropriate distribution license fee. That doesn't mean
getting rid of the devices; it just means paying
appropriately when they are used to transform radio into
download services.
We also do not intend to prohibit any of the activities
listeners have come to expect from radio. Listeners can
still record as they have for generations and can, in fact,
engage in automatic recording (and time-shifting) by time,
program, or channel. We only ask that the line be drawn at
automatic searching, copying, and disaggregation features
that exceed the experience listeners, the FCC, and Congress
expect from over-the-air terrestrial and satellite radio.
Content protection can not only coexist with technological
innovation, it is in many ways necessary to drive it. Today,
we bring music to consumers in a multitude of platforms
and services, all made possible because of the content
protection that defines their parameters and safeguards
investment.
Broadcast flag provisions, including those present in H.R.
4861, The Audio Broadcast Flag Licensing Act, are a
perfect way to balance the interests of technology and
content protection.
Chairman Upton, Ranking Member Markey, and Members of
the Subcommittee, thank you for allowing me to participate today
in this discussion on audio flag. To answer the titular question
posed in this hearing, yes, we believe that content protection and
technological innovation can coexist. And we believe that
implementation of an audio flag is a fair and effective way to
balance content protection and the wide range of new digital
features. But to understand why measures such as an audio flag
are needed, it is necessary to consider how we arrived at this point.
As you are aware, the music industry has faced an immense
challenge in online piracy over the past several years. In addition
to sharply declining sales figures, composers, artists, musicians,
technicians, and a multitude of others engaged in the music
industry have seen their jobs disappear. There are fewer people,
and much less money, to invest in new artists and new music.
Fewer resources to invest in the future, with an impact ultimately
felt by consumers.
In response, we have not sought to stifle new technology, we
have embraced it. Today, consumers have more choices in how
they obtain their music than ever before: online downloads such as
iTunes; subscription services such as Napster and Rhapsody,
including portability features such as Napster to Go, and special
discounted rates for subscription services at colleges; ringtones;
ringbacks; mobile downloads; mobile videos; online videos on
demand; kiosks in retail stores; legitimate peer-to-peer services;
interactive web radio; and instant post-concert recorded CDs are
just some of the new formats in which we are making music
available. These are in addition to new physical formats such as
DVD-Audio, Super Audio CD, and DualDiscs.
Not only does the content protection present on these systems
coexist perfectly with the technology that makes them work, these
new technologies and services are, in fact, dependent upon that
content protection to succeed. Technological innovation requires
financial risk, which relies upon an expected return. Satellite
broadcast services, for example, protect their signal to prevent
others from free riding off their investment. In addition, the
content carried on those signals is just as - if not more - valuable.
If satellite services knew that anyone would be able to offer the
exact same content - including music, sports, and multi-million
dollar radio personalities - at a fraction of the cost (or free), they
would never have invested in it. This is true for any new platform
or service.
As with satellite and other services, content protection has
allowed us in the music industry to innovate in the digital world,
which has presented us with an opportunity to once again grow
after several years of decline. The legal online download market,
in particular, has been growing at a spectacular rate. Authorized
download services such as emusic, Napster, and iTunes have truly
taken root and are, for the first time, promising to offset the loss in
CD sales. This year, we are on track to see close to $1 billion in
legal online downloads - that is, unless we are derailed.
Unfortunately, just as we are emerging from under the cloud of
online piracy, we are facing a new challenge on the digital front.
HD Radio and satellite services have begun, or plan to begin,
offering features and companion devices that enable listeners to
transform the passive listening experience into a download one.
These services allow broadcast programs to be automatically
captured and then disaggregated, song-by-song, into a massive
library of music, neatly filed in a portable device's digital jukebox
and organized by artist, title, and genre. Simply, users can
download music and create a digital music library on their portable
devices, in much the same way that iTunes offers permanent
downloads. Of course, the big difference is that in the case of
iTunes, Apple compensates artists, creators and copyright owners
through a distribution fee.
To be clear: we are in no way against these new devices
themselves. They are undeniably cool and, like everyone else, we
understand their appeal. We are truly excited about the new
opportunities digital radio and these devices will provide to expose
new artists and offer consumers new choices in the way they get
our music. Rather, our concern is when these devices and their
corresponding services change radio into a download store without
paying the fair market price for licensing music that other services
offering the same content must pay. We have no issue with the
convergence of radio and downloads, as long as they are licensed
for that purpose.
We believe listeners should continue to be able to engage in the
kinds of activities they've come to expect from radio, including
recording. In fact, we look forward to users' ability to enhance this
customary recording, by enabling automatic recording by time,
program, or channel, digital read-outs, music purchase options,
time-shifting capabilities, in addition to storage and great new
sound. Given all of these new amenities, our requests are actually
strikingly modest - that the line be drawn at automatic searching,
copying, and disaggregation features that exceed the experience
listeners, the FCC, and Congress expect from over-the-air
terrestrial and satellite radio.
The market for digital music operates on the basis of a
continuum of content ownership. Distributors pay rights holders
based on how much control over the content they give away. At
one end we have radio, where users typically have little or no
control over the content - they listen to whatever comes on. For
offering this service, satellite pays content owners an amount based
upon a statutorily set fee; in the case of terrestrial radio, due to a
statutory anomaly, the broadcaster actually pays nothing. As we
move up the continuum, through customized radio, tethered
downloads, and portable tethered downloads, distributors pay
content owners an increasing amount to be able to give their
consumers greater control. At the other end of the continuum, we
have permanent downloads and other forms of complete
ownership, which give consumers the greatest flexibility in use of
their content. For this, distributors pay a market rate, deservedly
higher than the free or statutory license amount at the other
extreme.
What we are seeing with these certain satellite and HD Radio
services is a gaming of the system as they leapfrog from the
limited control offerings of radio to the greater control of content
offered by download services, but without paying the equivalent
license fee. This not only fails to properly compensate creators, it
threatens the licensed services that are playing by the rules - the
very services we and so many others in the music community are
relying on to deliver us from years of loss due to online theft. (It is
interesting that, as noted above, satellite services guard their
investment by protecting their signal but, in the case of XM Radio,
fail to understand the need to protect the valuable content they
carry. After all, without content protection, there will be less
investment in music; and music is the primary reason why
customers purchase XM subscriptions.)
XM claims that it is already paying content creators. That is
true, but what they are paying for is the performance of music -
the statutorily-based license fee at the lower end of the ownership
continuum. That is very different from (and much less than) the
free-market distribution license required for download services.
One is not a substitute for the other. XM's claim is tantamount to
saying that if someone buys a ticket to watch a movie in a theater,
he's entitled to take a DVD of the movie home with him
afterwards. These are two distinct purchases, worth distinctly
different amounts, and this principle is no less true when found in
the digital world.
The transformation from a passive to an interactive listening
experience without obtaining the proper license to pay the creator
is especially troubling because, again, record labels and artists
receive absolutely no payment from the performance of their works
on terrestrial over-the-air radio. This unfair situation means that
revenue, if any, comes only from the ultimate sale of that music to
listeners. We are told that terrestrial radio's exemption from
paying artists and record labels for the performance of their work
is appropriate because radio serves a promotional purpose. We
fundamentally disagree with this argument (the U.S. is in fact one
of only a few countries not to grant artists and labels a performance
right) but, even if true, it means nothing if there are no resulting
sales. If the broadcast and its accompanying recording and
archiving features replicates the sale it is intended to generate, no
amount of "promotion" will benefit content creators. Simply, we
rely on sales. Without them, we cannot realize the return
necessary to invest in new works and new artists, and songwriters
cannot earn a living to continue writing the songs we all want to
hear.
Fortunately, there are solutions. These are best worked out in
the marketplace, and we have seen progress in that respect on a
couple fronts. For satellite, we have entered into an agreement
with Sirius that will ensure that content creators are properly
compensated for their work. For HD Radio, we have been
engaged in extremely productive talks with the broadcast industry.
These talks certainly are based on our long and positive
relationship with broadcasters, but were facilitated by the request
of Chairman Stevens and Senator Inouye in the Senate Committee
on Commerce, Science and Transportation during a January
hearing on Broadcast and Audio Flag. We have come a long way
since then and remain optimistic that a market-based solution that
will protect content and compensate creators can be found.
Nevertheless, we are mindful that a true marketplace solution is
not necessarily available to us. Unlike our friends in the movie
industry, given our lack of a performance right for over-the-air
radio and the compulsory license granted to satellite services, we
are unable to withhold our content to ensure its proper use and
compensation. Therefore, while we are encouraged that the
broadcasters will continue to negotiate in good faith, we appreciate
the introduction of legislation such as H.R. 4861, The Audio
Broadcast Flag Licensing Act. This bill, introduced by
Representatives Ferguson, Towns, Bono, Gordon and Blackburn,
addresses this marketplace failure by granting the FCC jurisdiction
to promulgate rules regarding content protection for digital radio.
H.R. 4861 requires digital radio services that use the government
spectrum and the government-granted compulsory license to
implement certain content protection technology. The bill also
prevents unfair competition between radio services and download
services by appropriately providing for private market negotiations
of an "audio broadcast flag" that will differentiate between radio
broadcasts and download services, and require a market license
only for download services.
The bill assures that no one device or technology manufacturer
has an advantage over another and will maximize the range of
broadcast receiving devices made available to the public. Further,
it makes clear that the adoption and implementation of an audio
broadcast flag will in no way delay the final operational rules for
digital radio and assures that legacy devices are not affected. By
using broadcast flag technology, devices already on the market
prior to the enactment of legislation will not be made obsolete, but
will remain fully functional.
H.R. 4861 strikes the right balance between creating new radio
services that bring more choices to consumers, and protecting the
property rights of creators. In the meantime, we look forward to
continued discussions with broadcasters and remain optimistic that
we can arrive at an acceptable solution for everyone.
As we celebrate the one-year anniversary of the U.S. Supreme
Court's decision in Grokster, we are reminded that content
protection and technological innovation can, in fact, coexist. But
the success of technological innovation and content creation is
each dependent upon mutual respect for the value of the other. Mr.
Chairman, I am here today in the hope that we can all continue on
in the spirit of that Grokster decision - to recognize the value of
creation and the importance of protecting it. Once again, our
message is simple: radio services should not be allowed to act like
a download service without paying the appropriate license for
distributions. An audio flag, and legislation such as the Audio
Broadcast Flag Licensing Act which implements it, is an effective
way to attain the proper balance of interests. We look forward to
working with you and all of our partners in the broadcast and
electronics industries to ensure a healthy and strong digital radio
future.
Thank you.
MR. UPTON. Mr. Levin.
MR. LEVIN. Good afternoon, Chairman Upton, Chairman
Barton, and distinguished members of the committee. My name is
Andrew Levin. I am Executive Vice President of Clear Channel
Communications. I am here today on behalf of the National
Association of Broadcasters, and I thank you for the opportunity to
speak on this issue. Just 5 years ago free radio faced a major shift
in consumer behavior. Our listeners began to migrate to new
digital music platforms, creating some very daunting business
challenges for us, but we stepped up to the plate because history is
littered with once thriving industries that have failed, some with
their heads in the sand, others trying to deny and even to rail the
changes in technology and consumer behavior around them.
Consumer shifts are never easy for the businesses that have to
adapt to them, but we realize that is the price of admission to
compete, so today Clear Channel finds itself a leading programmer
for the Internet, for cell phones, the iPod, and even satellite radios.
And after nearly 15 years of research and development, countless
hours of technology negotiations, millions of dollars in human
capital and effort, we are successfully rolling out HD radios, the
next generation of free radio broadcasts.
Today, 800 radio stations air their primary broadcasts in HD,
1,200 more will convert in the next year that will cost nearly
$100,000 per station. Industry players will spend $400 million
over the next 2 years just to promote these new services. HD
radios are now shipping from factories, are being sold by retailers
like Radio Shack and Tweeter. BMW is now shipping factory-
installed HD radios in their 5, 6, and 7 series cars. But getting to
this point has been far from easy. Not only has it required a
tremendous amount of investment, but also an enormous amount of
collaboration across a variety of different industries.
We have had some great successes so far, but this massive
rollout of HD digital radio is now entering its most important and
delicate phase. Like all new technologies the success of the digital
radio revolution will depend on whether a critical mass will follow
these so-called early adopters and that will only come if there is
reasonable certainty regarding technological requirements and
consumer expectations.
Any uncertainty about the ability to meet the reasonable
expectations of consumers and the technological requirements that
are at the core of this massive effort could deal a fatal blow to the
most significant innovation we have seen for free radio in nearly
100 years. We believe the biggest threat to the future of free
digital freedom would be pre-emptive legislation mandating a
particular copyright copy protection technology and strict usage
controls for consumers. These actions would create enormous
uncertainty for every major stakeholder involved, including
consumers who will be the ultimate drivers whether this succeeds.
A technological mandate by Congress, at best, would cause a
delay to market of at least 2 years, or more likely the disruption
and business uncertainty would simply kill the plans of
broadcasters, manufacturers, automakers, and retailers, and leave a
wake of stranded investment in its path. There is no reason to
enact a technological mandate at this point and there are several
reasons not to.
First, the affected industries can and will find a solution.
Remember that the final inter-industry consensus on the digital
television broadcast flag was found without government
intervention and without disabling the existing base of digital
televisions, nor interfering with consumer uses inside the home.
Second, talks are currently underway between the NAB and the
recording industry to forge a consensus on digital radio copy
protection. It is still early, but we are confident that if all the
affected players are represented at the table, we will find a solution
that is acceptable to everyone. And, third, litigation is now
pending between the recording industry and XM over the very
issue that is essential to the development of a content protection
scheme, that is, what constitutes fair use by consumers with regard
to today's devices.
Admittedly, it is not easy to adapt to new technologies but that
is precisely what we are doing and the jury is still out on how the
market will develop. It is simply premature to enact a mandate
when we have no idea how the marketplace is going to respond. It
would have to be based on little more than pure speculation. Be
assured broadcasters completely oppose copyright infringement,
but there are a myriad of complex and technical issues at stake,
with enormous consequences for the future of a fledging new
service.
We believe these issues deserve the requisite scrutiny that is
best accomplished through arm's-length negotiations between
private parties. We urge the committee to give us that time to
develop a well-vetted, industry-wide solution that will move the
HD rollout forward while balancing all of the competing interests
involved. Thank you.
[The prepared statement of Andrew W. Levin follows:]
PREPARED STATEMENT OF ANDREW W. LEVIN, EXECUTIVE VICE
PRESIDENT AND CHIEF LEGAL OFFICER, CLEAR CHANNEL
COMMUNICATIONS, ON BEHALF OF NATIONAL ASSOCIATION OF
BROADCASTERS
Summary of Written Statement
Good afternoon, my name is Andrew W. Levin. I am the
Executive Vice President and Chief Legal Officer for Clear
Channel Communications, which operates 1150 local radio
stations, 35 television stations, and 140,000 outdoor advertising
displays worldwide. I am testifying today on behalf of the National
Association of Broadcasters (NAB). NAB is a trade association
that advocates on behalf of more than 8,300 free, local radio and
television stations and broadcast networks before Congress, the
Federal Communications Commission and the Courts.
Free radio is currently investing huge human and financial
capital to complete its own transition to digital broadcasting.
Given the importance of the digital transition to consumers and
broadcasters alike, the design and implementation of an audio
broadcast flag must not compromise reasonable and lawful
consumer expectations, or in any manner impede the successful
rollout of digital radio.
Currently, 824 digital radio stations are on the air and
broadcasters have individually committed to upgrade more than
2,000 stations to high definition (HD) radio technology this year, at
a cost of $100,000 per station in engineering alone. The
possibilities are endless, and drive home the point that we need to
make sure these technological innovations are not stopped dead in
their tracks.
NAB has been diligently working with RIAA to develop and
forge a consensus on a digital radio copy protection system that
will not interrupt the digital roll out or create uncertainty that
would lead to a slow down of adoption rates by manufacturers,
consumers or even broadcasters. Thus, NAB does not believe that
legislation mandating any particular system of digital radio copy
protection is necessary or appropriate at this time. Rather, we
encourage the committee to permit the parties' adequate time to
work through these complicated issues.
There is one type of protection system that has been discussed
that NAB strongly opposes: encryption at the source. No U.S.
free, over-the-air broadcast service, analog or digital, has ever been
required to encrypt its transmissions. Any encryption requirement
would also likely risk stalling the digital radio transition by
requiring a change in the technical digital radio broadcasting
standard of such magnitude that a year's delay and likely more
would be inevitable.
Further, the issue of an appropriate digital audio copyright
scheme has been further complicated by the ongoing lawsuit by the
recording industry against XM Satellite Radio, Inc. The federal
court in that case will be addressing the very issue that is essential
to the development of an audio flag, i.e., what constitutes "fair
use" of a copyrighted work, especially by consumers. Any
discussion about digital audio copy protection must take into
account Congress' long-standing policy of protecting and
preserving the public's right to make home recordings of sound
recordings for personal use.
Nothing in the audio flag discussion is related to nor provides a
basis to support a new performance right tax on broadcasters.
Congress has consistently recognized that recording companies
reap very significant promotional benefits from the exposure given
their recordings by radio stations and that placing burdensome
restrictions on performances could alter that relationship, to the
detriment of both industries.
Finally, NAB believes Congress should legislate specific
authority for the FCC to re-instate its regulations implementing a
broadcast flag for digital television adopted in 2003. Although the
D.C. Circuit Court of Appeals ultimately decided that the FCC
lacked authority to impose regulations, the policy judgments
explained in the agency decision remain valid and should be
implemented. However, NAB opposes any attempt to exempt
broadcasters' news or public affairs programs from the protection
of the flag.
In sum, the deployment of digital radio is essential for
terrestrial broadcasters to better serve their listeners and to remain
competitive in today's digital media marketplace. Because of the
importance of a timely and successful roll out of digital radio, any
system to protect digital content must not impede the transition. In
addition, the issues presented by the audio flag are complicated,
involve numerous stakeholders, including consumers and their
right to "fair use." NAB will continue to work with RIAA to
develop a consensus on digital radio copy protection. Congress
should allow this industry process to continue without the adoption
of premature legislative mandates.
Good afternoon, my name is Andrew W. Levin. I am the
Executive Vice President and Chief Legal Officer for Clear
Channel Communications, which operates 1150 local radio
stations, 35 television stations, and 140,000 outdoor advertising
displays worldwide. I am testifying today on behalf of the National
Association of Broadcasters (NAB). NAB is a trade association
that advocates on behalf of more than 8,300 free, loca4l radio and
television stations and broadcast networks before Congress, the
Federal Communications Commission and the Courts.
Like the television broadcast industry, free radio is currently
investing huge human and financial capital to complete its own
transition to digital broadcasting. Given the importance of the
digital transition to consumers and broadcasters alike, our first and
foremost concern is that any content protection scheme must do no
harm. By that I mean that the design and implementation of an
audio broadcast flag must not compromise reasonable and lawful
consumer expectations, or in any manner impede the successful
rollout of digital radio.
One thing I'd like to make perfectly clear at the outset:
broadcasters oppose piracy in all shapes and forms. But in order to
protect against unlawful uses, we believe that a well-vetted,
industry-wide solution is the key to developing a system that
balances the competing interests of everyone involved. And by
everyone I mean, most especially, consumers who will either enjoy
the great new benefits this technology can bring, or be left behind
with fewer choices and less functionality. Too often it is
consumers who are forgotten in the fractious bickering that takes
place when new technologies are introduced in the marketplace.
We urge this committee to allow the broadcast industry, the
recording industry and other vital stakeholders, including
consumer groups, to continue working toward a consensus on a
digital radio copy protection scheme.
Any System to Protect Digital Content Must Not Impede the
Digital Radio Roll-Out
Digital audio broadcasting will enable broadcasters to better
serve our local communities and to remain competitive in today's
ever-expanding digital media marketplace. But we face many
challenges as we work toward a successful and timely transition to
digital radio. If radio is not allowed to continue this roll out on a
timely basis, and remain competitive with other providers of digital
audio content, the issue of digital radio copyright protection will
quickly become moot. And, as we learned from the broadcast
video flag process, there is no "quick fix" technical system to
provide copy protection for digital media.
The radio industry in America has begun its massive roll out of
digital broadcast transmissions and all-new digital radio receivers.
Currently, 824 digital radio stations are on the air. Broadcasters
have individually committed to upgrade more than 2,000 stations
to high definition (HD) radio technology this year, at a cost of
$100,000 per station for engineering alone. In fact, Clear Channel
Radio itself already has more than 238 stations offering broadcasts
in HD digital quality today, and more are added every day. HD
radio not only offers listeners crystal-clear audio, it also permits
the broadcasting of an additional free, over-the-air program stream
that will bring additional content (including much more local
content) to the public on the radio stations' current allocation of
spectrum.
In fact, the best part is that these additional streams are
currently free of advertising. Clear Channel believes creating new,
compelling formats is essential to the future of free radio. Hence,
our company's Research and Development Group created the
Format Lab in 2004 to create more than 75 brand new niche
formats. These exciting new program formats are fully customized
by our local programmers to meet the specific needs of their
communities and thus create a new radio channel in HD markets
all across the country.
This transition to digital radio will enable other great new
services, including wireless data providing information such as
song titles and artists or weather and traffic alerts. Even more
innovative features are under development, such as program menus
giving listeners instant access to a favorite drive time show, special
music information, news, weather and traffic alerts that are not
only local, but will be interoperable with a listener's in-car
navigation system. The possibilities are endless, and drive home
the point that we need to make sure these technological
innovations are not stopped dead in their tracks. Digital radio will
allow broadcasters to provide tremendous new services to
consumers, and is the only way to remain a vital and vibrant part of
the media landscape of the future.
But beyond thousands of radio stations converting to digital,
the HD radio revolution also involves the consumer electronics
industry and, most importantly, consumers. New digital radio
receivers have been launched in the marketplace across a range of
product categories. Major radio groups are engaged in a massive
marketing campaign to promote digital radio to consumers through
the creation of the HD Digital Radio Alliance. And automakers
and after-market manufacturers are beginning to produce digital
radio products for car sound systems. 2006 and 2007 promise to
be pivotal years for the roll-out of digital radio, with auto makers
signing up for factory-installed radios, retail outlets prominently
featuring many new digital radio products, and hundreds more
broadcasters commencing digital transmissions. Given this
investment by broadcasters and equipment manufacturers and the
benefits that consumers will receive from a successful deployment
of digital radio, it is of paramount importance that any copy
protection mechanism not impede the digital radio rollout.
NAB has been diligently working with RIAA to develop and
forge a consensus on a digital radio copy protection system that
will not interrupt the digital roll out or create uncertainty that
would lead to a slow down of adoption rates by manufacturers,
consumers or even broadcasters. Thus, NAB does not believe that
legislation mandating any particular system of digital radio copy
protection is necessary at this time. Rather, we encourage the
committee to permit the party's adequate time to work through
these complicated issues.
Encryption at the Source Should be Rejected
There is one type of protection system that has been discussed
that NAB strongly opposes: encryption at the source. Such a
mandate would be antithetical to the concept of free, over-the-air
broadcasting. No U.S. free, over-the-air broadcast service, analog
or digital, has ever been required to encrypt its transmissions. Any
encryption requirement would also risk stalling the digital radio
transition by requiring a change in the technical digital radio
broadcasting standard that could delay the digital radio roll-out by
more than one year. Unlike the video flag, encryption of DAB
signals would obsolete receivers now in the field, as well as
receivers and component parts currently in the production pipeline.
Resulting uncertainty in the marketplace and potential loss of
confidence and interest in digital audio broadcasting by
manufacturers now ready to roll out DAB receivers would harm
broadcasters and threaten the public's receipt of digital radio.
The Public's Right to Make Private Copies of Sound
Recordings for Personal Use Must Be Taken Into Account
The issue of an appropriate digital audio copyright scheme has
been further complicated by the ongoing lawsuit by the recording
industry against XM Satellite Radio, Inc. The federal court in that
case will be addressing the very issue that is essential to the
development of an audio flag, i.e., what constitutes "fair use" of a
copyrighted work, especially by consumers. Indeed, any
discussion about digital audio copy protection must take into
account Congress' long-standing policy of protecting and
preserving the public's right to make home recordings of sound
recordings for personal use. The House Report accompanying the
Sound Recording Act of 1971 stated:
HOME RECORDING
In approving the creation of a limited copyright in sound
recordings it is the intention of the Committee that this limited
copyright not grant any broader rights than are accorded to
other copyright proprietors under the existing title 17.
Specifically, it is not the intention of the Committee to restrain
the home recording, from broadcasts or from tapes or records,
of recorded performances, where the home recording is for
private use and with no purpose of reproducing or otherwise
capitalizing commercially on it. This practice is common and
unrestrained today, and the record producers and performers
would be in no different position from that of the owners of
copyright in recorded musical compositions over the past 20
years.
In the Audio Home Recording Act of 1992 ("AHRA"),
Congress definitively addressed the issue of home recording of
sound recordings and musical works, and in section 1008 provided
an exemption for home copying. This Act was intended to be
comprehensive, forward-looking legislation designed to end, once
and for all, the "longstanding controversy" surrounding the home
recording of prerecorded music. Indeed, then-President of RIAA,
Jay Berman, described the bill that became the AHRA as "a
generic solution that applies across the board to all forms of
digital audio recording technology."
The lawsuit against XM raises the question of whether the
recording, downloading and creating of a personal library of
copyrighted music is a permitted "fair use" under copyright law.
The lawsuit centers on a recently released device called the Inno,
which, among other uses, allows consumers to record up to 50
hours of XM's programming. The Inno gives users the option of
disaggregating songs from XM's airing, and storing them on the
device for later playback. Although the songs cannot be removed
from the Inno, the recording industry's suit asserts that the
recording and disaggregating function equates with illegal
downloading, and is therefore a copyright violation. XM has
stated that the device was designed to comply with fair use
principles and the AHRA. The resolution of this lawsuit could
well impact the interpretation of what constitutes fair use and, thus,
how any digital audio copy protection system should be designed
and implemented under copyright law.
Congress Should Reject Efforts to Impose a Sound Recording
Performance Right in Digital Broadcasts
As NAB has stated numerous times, nothing in the audio flag
discussion is related to nor provides a basis to support a new
performance right tax on broadcasters. Throughout the history of
the debate over sound recording copyrights, Congress has
consistently recognized that recording companies reap very
significant promotional benefits from the exposure given their
recordings by radio stations and that placing burdensome
restrictions on performances could alter that relationship, to the
detriment of both industries. For that reason, in the 1920s and for
five decades following, Congress regularly considered proposals to
grant copyright rights in sound recordings, but repeatedly rejected
such proposals.
When Congress did first afford limited copyright protection to
sound recordings in 1971, it prohibited only unauthorized
reproduction and distribution of records, but did not create a sound
recording performance right. During the comprehensive revision
of the Copyright Act in 1976, Congress again considered, and
rejected, granting a sound recording performance right. Congress
continued to refuse to provide any sound recording performance
right for another twenty years. During that time, the recording
industry thrived, due in large measure to the promotional value of
radio performances of their records.
It was not until the Digital Performance Rights in Sound
Recordings Act of 1995 (the "DPRA") that even a limited
performance right in sound recordings was granted. In granting
this limited right, Congress stated it "should do nothing to change
or jeopardize the mutually beneficial economic relationship
between the recording and traditional broadcasting industries."
Consistent with this intent, the DPRA expressly exempted from
sound recording performance right liability non-subscription, non-
interactive transmissions, including "non-subscription broadcast
transmission[s]" - transmissions made by FCC licensed radio
broadcasters.
In sum, the transition of traditional local radio stations from
analog to digital presents no basis to alter fundamentally the long-
standing mutually beneficial relationship between the recording
and broadcasting industries by imposing a new performance right
in digital broadcasts, when one does not exist in analog.
The DTV Broadcast Flag
NAB believes Congress should legislate specific authority for
the FCC to re-instate its regulations implementing a broadcast flag
for digital television adopted in 2003. The DTV broadcast flag
mechanism was developed over many years of intense negotiations
by scores of participants from a wide array of industry sectors.
The purpose, concept and methodology of the DTV flag were then
debated at the FCC in voluminous comments and reply comments
from affected industry and consumer groups, companies and
organizations. Although the D.C. Circuit Court of Appeals
ultimately decided that the FCC lacked authority to impose
regulations, the policy judgments explained in the agency decision
remain valid and should be implemented.
Further, NAB opposes any attempt to exempt local
broadcasters' news or public affairs programs from the protection
of the flag. While broadcasters freely and widely distribute their
news and public affairs programming, NAB believes it vitally
important that broadcasters retain the right to protect their
copyrighted news and public affairs programs, which typically are
the main or only product of local broadcasters. Unauthorized
internet redistribution could well eviscerate the program
exclusivity of news or public affairs programs of stations in local
markets, as well as undermine the original broadcast and its
accompanying revenue by re-distributing programs across time
zones, thus allowing Internet viewing before the original show is
seen on local stations in western U.S. markets. Such results would
wreak havoc on stations' audience ratings and threaten its
continued viability.
Conclusion
The deployment of digital radio is essential for terrestrial
broadcasters to better serve their listeners and to remain
competitive in today's digital media marketplace. Because of the
importance of a timely and successful roll out of digital radio, any
system to protect digital content must not impede the transition. In
addition, the issues presented by the audio flag are complicated,
involve numerous stakeholders, including consumers and their
right to "fair use." NAB will continue to work with RIAA to
develop a consensus on digital radio copy protection. Congress
should allow this industry process to continue without the adoption
of premature legislative mandates.
MR. UPTON. Mr. Harris, welcome.
MR. HARRIS. Chairman Upton, Representative Markey,
Representative Ferguson, and members of the subcommittee, thank
you very much for having me here today to speak on the issue of
protecting the value of the songs I write when they are broadcast
over a digital radio service that enables consumer to keep it
without buying it. First of all, let me say that I love the fact that
new technologies exist that will allow consumers to listen to my
music in different ways on different platforms, but please excuse
me if I insist on being paid for it, even if it is consumed by you in a
new and different way.
I have been fortunate enough to write nine number one songs
by some of today's biggest artists. However, the number of
talented young songwriters who choose to dedicate their lives to
music will decrease even more than it already has with the problem
of massive piracy on the Internet and now XM format. Choosing
to be a professional songwriter has become a risky business.
As a professional songwriter, you are your own business.
There is no health insurance or 401K. You live on royalties from
the intellectual property you create. When I write a song, I get a
royalty when it is performed or when it is played on radio. I also
get a royalty when a consumer buys a copy of it. When you go to
see a concert you pay to listen to the music. When you buy a
download you pay to keep that song.
We are here today because certain digital radio services do not
want to pay for music. By allowing listeners to record broadcasts
and build up entire juke boxes of music on portable devices, radio
services are becoming download services without paying for the
download license. I am not talking about recording off the radio.
Certainly, we have all done that and I have no interest in seeing
that disappear, but imagine my reaction when XM offers a service
that allows someone to get an entire collection of my works
automatically recorded, labeled, sorted, and transferred to them in
pristine, permanent, and portable digital copies without seeing a
cent from the sale in return.
This is not radio. This is Napster, Rhapsody, Yahoo or any
number of other digital music subscription services that pay the
appropriate license for this type of distribution. Those are the
services necessary to make the sales we need to survive. Those
services cannot compete with others that offer the exact same
service without paying the same license. This is a matter of
survival for the creators of music and those who provide legal
downloads. Everyone can win in the digital world if we cooperate
in creating a fair and equitable licensing system. This has been the
tradition since the days of Cole Porter. A song is a commodity like
any other. Attorneys are not working pro bono today. If digital
radio can pay market rates for their technology, equipment, and
legal services, they certainly could pay for the songs because
without the songs there is no artist. Without the song there is no
XM radio.
I applaud Representative Ferguson for introducing the Audio
Broadcast Flag Licensing Act. This allows the songwriters to
receive fair compensation for their work. We are all grateful for
your insight. On behalf of everyone in the music community, I
hope you will support this bill and create for all songwriters a
secure digital future. Thank you.
[The prepared statement of Stewart Harris follows:]
PREPARED STATEMENT OF STEWART HARRIS, SONGWRITER, ON
BEHALF OF SONGWRITERS GUILD OF AMERICA
Chairman Upton, Representative Markey, Representative
Ferguson, and Members of the Subcommittee, thank you very
much for having me here today to speak on the issue of protecting
the value of the songs I write -- my property -- when it is broadcast
over a digital radio service that enables a consumer to keep it
without buying it.
First of all, let me say that I love the fact that new technologies
exist that will allow consumers to listen to my music in different
ways on different platforms. But please excuse me if I insist on
being paid for it even if it is consumed in a new and different way.
I have been fortunate enough to write several #1 songs
recorded by some of the biggest artists. But getting there was not
easy. And the number of talented young songwriters who choose
to dedicate their lives to bringing their gifts to American
consumers will decrease even more than it already has with the
problem of massive piracy on the Internet if they do not get paid as
the delivery of music evolves.
Choosing to be a professional songwriter is a risky business.
As a professional songwriter you are your own small business - in
fact the smallest. You pay your own health insurance and your
own retirement. There is no "flex plan." What you get to live on
are royalties from the use of what you create. From your property.
When I write a song, I get a royalty when it is performed, or
broadcast over radio. I also get royalties when a consumer keeps a
copy of it. Different uses of my songs deserve separate payments.
When you go see a concert you pay to listen to that performance.
And when you buy a download you pay to keep that song. But you
don't go to iTunes and demand a song for free because you
listened to it on the radio or at a concert. Consumers get the
difference. Digital radio services should get the difference too.
We are here today because certain digital radio services do not
want to pay me when they offer a service that allows a consumer to
keep my song instead of having to buy it.
By allowing listeners to record broadcasts and build up entire
jukeboxes of music on portable devices, radio services are
becoming download services - but without paying the download
license.
I'm not talking about casual recording off the radio. Certainly,
we've all done that and I have no interest in seeing that disappear.
I love it when someone runs to the radio to record one of my songs
that has come on. But imagine my frustration when XM offers a
service that allows someone to get an entire collection of my
works, automatically recorded, labeled, sorted, and transferred to
them in pristine permanent and portable digital copies without
seeing a cent from a sale in return. This is not radio; this is
Napster, Rhapsody, Yahoo!, or any one of the number of other
digital music subscription services that pay the appropriate license
for this type of distribution. Those are the services we need to
make the sales we need to survive. But those services can not
compete with others that offer the exact same functionality without
paying the same license.
This is a matter of fairness - to other broadcasters, to download
services, and to all of us making the music for those services. This
is a matter of treating platforms that offer the same services
equally.
I applaud Representative Ferguson for introducing the Audio
Broadcast Flag Licensing Act, that will allow consumers to
continue taping of the radio, but prevent the automatic "collecting"
of my songs with no payment to me. You are directly affecting my
livelihood with this bill and for that I am extremely grateful.
Seems to me that if digital radio services can pay market rates
for their technology and equipment, they can do the same for my
music. After all, without songwriters to write the songs, what is
there to deliver over all that technology?
I always explain it this way: suppose I was a general
contractor and you provided me with all of the bricks I needed to
build my project, and then when it came time to pay I said thanks
and handed you back your invoice. You would probably punch me
in the nose. While I promise there will be no punching here today,
I hope you understand how I feel. I am not a lawyer like these
other guys at the table. I'm just a songwriter. And all I ask is that
when the lawyers for the radio services sitting here get their
paychecks, they urge their companies to reward me for my work,
too.
On behalf of everyone in the music community, I hope you will
support this bill and secure for all songwriters a bright digital
future.
Thank you.
MR. UPTON. Ms. Ziegler.
MS. ZIEGLER. Chairman Upton, Congressman Markey, and
members of the subcommittee, my name is Ruth Ziegler, and I am
the Deputy General Counsel of Sirius Satellite Radio. I very much
appreciate the opportunity to appear today on behalf of Sirius and
its over four million subscribers. Sirius is bringing exciting
technical innovation to American consumers, and at the same time
we are opening enormous new opportunities for the music
industries, paying the millions of dollars in royalties, and applying
strong technological measures to protect their content.
Sirius takes great pride in presenting a breadth and depth of
programming that is unparalleled on radio and gives our millions
of listeners a way to discover and rediscover music and artists. In
less than a decade, Sirius has developed infrastructure necessary to
deliver a national satellite service and we now broadcast over 125
digital quality channels including 67 channels of commercial free
music, plus over 60 channels of sports, news, talk, and
entertainment. Unfortunately, from our perspective, it appears the
music industries have declared a multi-front legal assault on
innovation on well-settled and congressionally recognized
consumer home reporting rights and on legislative agreements they
made and Congress enacted.
I would first emphasize and mention that the so-called audio
flag proposal in substance bears no resemblance to the video flag
that will be discussed by the panel later today. The video flag
seeks to prevent mass and discriminate redistribution of content
over the Internet. Our products already prohibit such
redistribution. Our transmissions are encrypted at the source. In
contrast, the audio flag proposals take as their primary target
consumer home recording, conduct long considered to be fair use.
Moreover, the video flag proposal is the result of years of open
multi-industry negotiations. Nothing similar has occurred in
connection with the audio flag proposal to date, although the NAB
and the RIAA as we have heard have begun discussions.
To be clear, the issue here today certainly with respect to
satellite radio is not piracy or mass redistribution. It is about the
very first copy a consumer makes in his or her own home of
lawfully received broadcasts. Let me tell you a little bit about one
of our innovative products, our portable hand-held device called
the S50. The S50 is a traditional satellite receiver that allows users
to listen live to our programming. It also allows them to save our
programming for listening later while commuting, exercising, or
simply exercising at a time when you can't receive our satellite
signal. The S50 also allows the user to save individual songs from
Sirius broadcasts manually with a push of a button.
Contrary to some reports, the S50 does not provide for any
kind of automated searches, cannot program the device to seek an
individual song or artist. It is our firm view that this ability to
record individual songs and to play them back in any order is
nothing more than a convenient form of the kind of home
recording from radio that the public has been doing lawfully for
decades. In the past, Congress has consistently affirmed and
reaffirmed the rights of Americans to make copies of music they
receive over the air. This right was expressly codified in the Audio
Home Recording Act of 1992, at the urging of the recording and
the music industries. The S50 was designed to comply with that
Act. Songs recorded from the broadcast are encrypted and can't be
taken off the device.
Royalty payments required by the Audio Home Recording Act
are paid for each device and these royalties are shared by the
recording industry and its artists and by the music industry and its
songwriters. Those payments are in addition to the enormous
royalties Sirius pays to those parties for the right to make its
satellite transmissions. Moreover, as you may be aware, despite
our rights under the Audio Home Recording Act, Sirius has sought
good relations with these industries and we negotiate in good faith
and resolve issues related to the S50 with recording companies.
Mr. Chairman and subcommittee members, Congress should
not enact legislation unless and until the recording and music
industries clearly identify what they seek to prevent with this
legislation, carry the burden of demonstrating that they face a
concrete and significant threat, and make the necessary showing
that the technology exists to implement the solution and it will
reduce the threat without unreasonably harming consumers'
values, rights, and innovation, and we are far from that point as we
sit here today. The law as it now exists has been beneficial to
consumers, innovators, and copyright owners. Consumers have
rights to record lawfully acquired content for non-commercial
purposes in their homes.
We have a legislative framework in the Audio Home
Recording Act that protects content and consumers, compensates
copyright owners, artists, and writers, and provides some certainty
to technology companies. There is no justification at this time in
our view to change the successful formula. Thank you for the
opportunity to speak with you today.
[The prepared statement of Ruth A. Ziegler follows:]
PREPARED STATEMENT OF RUTH A. ZIEGLER, DEPUTY GENERAL
COUNSEL, SIRIUS SATELLITE RADIO, INC.
Chairman Upton, Representative Markey and Members of the
Subcommittee, my name is Ruth Ziegler, and I am Deputy
General Counsel of Sirius Satellite Radio. I very much appreciate
the opportunity to appear today on behalf of Sirius, its employees,
stockholders and more than four million subscribers.
Technological innovation and furthering consumer enjoyment
are the core of our business. In less than a decade, we have
developed and launched the infrastructure necessary to deliver a
national satellite service and we now broadcast over 125 digital-
quality channels, including 67 channels of 100% commercial-free
music, plus over 60 channels of sports, news, talk, entertainment,
traffic, weather and data to consumers across the country. We
already pay the music and recording industries millions of dollars
to make these performances.
The audio flag proposal that we discuss today is part of a multi-
front legal assault by the recording and music industries on
innovation, on well-settled and Congressionally recognized
consumer fair-use home recording rights, on legislative agreements
that they made (and Congress enacted), and, specifically, on
satellite radio.
Further, the so-called audio flag proposal, in its substance,
bears no resemblance to the video broadcast flag that also is being
discussed during today's hearing. The video flag seeks only to
prevent mass, indiscriminate redistribution of digital broadcast
television over the Internet. Home recording is not affected. Our
products already prevent Internet redistribution. The audio flag
proposal targets private consumer home recording, long considered
to be fair use.
Congress has consistently affirmed and reaffirmed the rights of
Americans to make copies of music that they receive over the air.
This right was expressly codified in the Audio Home Recording
Act, legislation negotiated by the recording and music publishing
industries with the consumer electronics industry and strongly
advocated by all three of those industries as a complete, forward-
looking "generic solution that applies across the board to all forms
of digital audio recording technology."
Nor has a clear audio flag proposal been offered. Rather, the
proponents have offered vague buzz words, like "disaggregation,"
or have tried to redefine previously well understood terms, like
"distribution." However, it is reasonable to predict that any audio
flag regime will result in the imposition of new encryption
obligations on all in-home consumer devices designed to receive or
playback radio-not only receivers, but complete stereo systems to
which those receivers are attached, recording devices, playback
devices, and even speakers.
It is not appropriate to leave the hard public policy decisions to
the FCC, which is not an agency that traditionally has concerned
itself with copyright law or with consumer fair use rights.
Congress should not enact audio flag legislation unless and until
the recording and music industries (i) clearly identify what they
seek to prevent, (ii) carry the burden of demonstrating that they are
facing a concrete and significant threat that outweighs the threat to
consumer fair use rights and innovation, (iii) propose a clear,
definite solution and (iv) make the necessary showing that
technology exists to implement the solution and can be applied in a
way that is likely to reduce the threat without unreasonably
harming consumers and innovation. We are far from that point
today.
The law as it now exists has been beneficial to consumers,
innovation, and copyright owners. There is no justification for
changing this successful recipe.
Chairman Upton, Representative Markey and Members of the
Subcommittee, my name is Ruth Ziegler, and I am Deputy
General Counsel of Sirius Satellite Radio. I very much appreciate
the opportunity to appear today on behalf of Sirius, its employees,
stockholders and more than four million subscribers. I am
testifying on behalf of Sirius as a company that is bringing exciting
technical innovation to American consumers. We are doing that
while at the same time opening enormous new opportunities for the
music and recording industries, paying them millions of dollars in
royalties and, in addition, applying strong technological measures
to protect their content. Sirius takes great pride in presenting our
millions of listeners with a breadth and depth of musical
programming that is unparalleled on radio and in providing a
means for our listeners to discover-and rediscover-music and
artists. Such a rich and diverse offering of musical choice benefits
all segments of the music industry - today and in the future.
Technological innovation and furthering consumer enjoyment
are the core of our business. In less than a decade, we have
developed and launched the infrastructure necessary to deliver a
national satellite service and we now broadcast over 125 digital-
quality channels, including 67 channels of 100% commercial-free
music, plus over 60 channels of sports, news, talk, entertainment,
traffic, weather and data to consumers across the country.
Unfortunately, the recording and music industries have
declared a multi-front legal assault on innovation, on well-settled
and Congressionally recognized consumer fair-use home recording
rights, on legislative agreements that they made (and Congress
enacted) in the past, and, quite frankly, specifically, on satellite
radio. In addition to lawsuits and threats of lawsuits, this anti-
consumer, anti-competitive front includes advocacy of three
different proposed bills.
In addition to the misnamed audio flag proposal that is the
subject of this hearing, the equally misnamed "PERFORM" Act
and important sections of the Section 115 Reform Act, each seeks
to outlaw long-accepted and permitted consumer recording, for
which the music and recording industries are already paid a
royalty. Each seeks to give the recording and music industries veto
power over technological innovation. Each would renege on the
Audio Home Recording Act deal, made by the recording and
music industries and sold to Congress in 1992 as "a generic
solution that applies across the board to all forms of digital audio
recording technology." And on the promise that "Congress will not
be in the position after enactment of this bill of having to enact
subsequent bills to provide protection for new forms of digital
audio recording technologies."
It is equally important to emphasize that the so-called audio
broadcast flag proposal, in its substance, bears no resemblance to
the video broadcast flag that also is being discussed during today's
hearing. As I will discuss in greater detail, the video flag seeks
only to prevent mass, indiscriminate redistribution of digital
television broadcasts over the Internet. Our products already
prevent all Internet redistribution of SIRIUS broadcasts. In
contrast, the audio flag proposals take several ill-defined forms,
each of which uses recording and music industry buzz words like
"disaggregation" or "distribution," and all of which have as their
primary target consumer home recording; conduct long considered
to be fair use. The battlefield here today is not piracy or mass
redistribution, it is the very first copy a consumer makes in their
own home of lawfully received broadcasts.
Sirius and Innovation
Sirius has built its business on innovation. The company began
with the invention of a new, miniature antenna technology that, for
the first time, permitted the receipt of low power satellite radio
transmissions in vehicles. In the late 1990s, the company paid
almost $90 million to the U.S. Treasury for spectrum rights
auctioned by the Federal Communications Commission. Since
then, our company has invested nearly $3 billion in the complex
infrastructure necessary to run a state-of-the-art satellite radio
company - from satellites to transmitters to innovative new
receivers to the programming of our channels by our skilled and
creative employees.
There is no question that Sirius is changing the way people
listen to music, and for that matter -- sports, news, and
entertainment. Operating from our corporate headquarters in New
York City's Rockefeller Center, Sirius broadcasts over 125 digital-
quality channels, including 67 channels of 100% commercial-free
music, plus over 60 channels of sports, news, talk, entertainment,
traffic, weather and data.
SIRIUS' music channels cover nearly every genre - from heavy
metal and hip-hop to country, dance, jazz, Latin, classical and
beyond. The music on each channel is selected, arranged, prepared
and hosted by SIRIUS staff, all of whom are recognized experts in
their music fields, along with contributing musicians and
performers who lend their talent and expertise. This ensures that
SIRIUS subscribers can regularly listen to unparalleled music
selections, insights and perspectives.
This unique listening experience is available to subscribers
from coast-to-coast in the United States. Our service can be used
in cars, trucks, RVs, homes, offices, stores, and even outdoors.
Boaters around the country, and up to 200 miles offshore, can also
hear Sirius. For a monthly subscription fee, Sirius provides
premium quality programming delivered by three dedicated
satellites orbiting in special orbits to maximize their time directly
over the United States.
The nerve center for SIRIUS operations is at Avenue of the
Americas and 49th Street in New York City, where the company's
state-of-the art studios are located. Artists including Burt
Bacharach, The Beach Boys, Emmylou Harris, Dolly Parton, Yo-
Yo Ma, Phoebe Snow, The White Stripes, Mary J. Blige, Sting and
Randy Travis have visited the studios for performances and
interviews.
Sirius and Innovative Consumer Recording
In addition, responding to the demands of our subscribers,
Sirius has developed a portable, hand-held device called the S50.
The S50 is an intelligent leap forward in Satellite Radio technology
providing integration of both live content and up to 50 hours of
time shifted content storage. The device provides our subscribers
with the ability to enjoy their favorite music-on a time-shifted
basis-while traveling, exercising, commuting or simply relaxing.
The S50 includes several different capabilities. While attached
to its docking station and connected antenna, the S50 receives live
SIRIUS broadcasts and includes a short-term buffer that allows the
listener to pause and replay those broadcasts.
Apart from the replay buffer, most of the recording performed
by the S50 consists of recording the subscriber's three most-
listened to channels, while the device is tuned to one of the
channels, so that the subscriber can have the full SIRIUS
experience while traveling or otherwise away from his or her
docking station. These channels are refreshed on a first-in/first-out
basis.
In addition, the subscriber can program timed blocks of
programming to record and save. These blocks cannot be broken
into individual songs or programs. The device also allows the
subscriber to upload his or her own collection of digital music
files, including MP3 files, from a home computer.
Finally, the device allows the user to save individual songs
from SIRIUS broadcasts, while they are playing. The device
includes a one-touch record function, to make convenient the kind
of home recording that the public has been doing for decades-the
kind of recording recognized by the Audio Home Recording Act to
be wholly lawful. It is this function that has drawn the attention
and ire of the recording and music industries.
The S50 was designed to comply with the Audio Home Recording
Act. Songs recorded from SIRIUS broadcasts are encrypted and
cannot be removed from the device. In other words, there is no
threat of Internet redistribution, let alone "mass, indiscriminate
Internet redistribution."
And, of course, the royalty payments required by the AHRA
are made for each device. These royalties are shared, under a
statutory formula, by the recording industry and its artists and by
the music industry and its songwriters. Those payments are in
addition to the enormous royalties SIRIUS already pays to the
recording industry for the right to make public performances of the
record companies' sound recordings and to ASCAP, BMI and
SESAC for the right to make public performances of musical
works. Moreover, as I am sure you have seen in the press, despite its
rights under the AHRA, SIRIUS has sought good relations with the
recording and music industries. Thus, we have negotiated in good
faith over the S50, and reached an agreement with the record
companies.
The Audio Flag Proposals Advocated by the Recording and
Music Industries Seek To Renege on the AHRA and Ban
Conduct Long Permitted to the Public.
Congress has consistently affirmed and reaffirmed the rights of
Americans to make copies of music that they receive over the air.
This right was expressly codified in the Audio Home Recording
Act, legislation negotiated by the recording and music publishing
industries with the consumer electronics industry and strongly
advocated by all three of those industries as a complete, forward-
looking resolution of home recording issues.
When Congress first granted copyright protection to sound
recordings in the 1970's, it confirmed consumers' historical right
to record radio transmissions:
In approving the creation of a limited copyright in sound
recordings it is the intention of the Committee that this limited
copyright not grant any broader rights than are accorded to
other copyright proprietors under the existing title 17.
Specifically, it is not the intention of the Committee to restrain
the home recording, from broadcasts or from tapes or records,
of recorded performances, where the home recording is for
private use and with no purpose of reproducing or otherwise
capitalizing commercially on it. This practice is common and
unrestrained today, and the record producers and performers
would be in no different position from that of the owners of
copyright in recorded musical compositions over the past 20
years.
Since that Act, Congress has expanded the sound recording
right only sparingly, in careful response to specific and well-
documented threats, all the while reiterating the importance of
preserving the public's right to make home copies for personal use.
When Congress enacted the record rental amendments, for
example, it declined to make any statements or take any actions
regarding home taping, instead referring to its previous statements
in the Sound Recording Act house report, quoted above, and
stating that "no precedential value" with regard to home taping
should be given to the fact of the record rental amendment's
passage.
Congress squarely addressed the issue of home recording of
sound recordings and musical works in the Audio Home Recording
Act of 1992. The bill was negotiated by the recording industry,
music publishing industry and consumer electronics industry, and
was strongly advocated by all three industries as the definitive
solution to the home recording issue.
The Senate Report, which discusses the bill in the form
negotiated by the recording, music and consumer electronics
industries, notes that "the copyright law implications of private
audio recording for noncommercial use have been the subject of
longstanding debate" and states "[a] central purpose of the
[AHRA] is conclusively to resolve this debate, both in the analog
and digital areas, thereby creating an atmosphere of certainty to
pave the way for the development and availability to consumers of
new digital recording technologies and new musical recordings."
The legislative history is not ambiguous. The Senate Report
opens its discussion of the bill with the assertion that "[t]he
purpose of S.1623 is to ensure the right of consumers to make
analog or digital audio recordings of copyrighted music for their
private noncommercial use." This specifically includes "the
making of [a copy] by a consumer for use in his or her home car,
or portable tape player, or for a family member." All are
"protected by the prohibition against copyright infringement
actions contained in" the AHRA.
The same sentiments were expressed in the House of
Representatives. As one co-sponsor in the House explained, the
Audio Home Recording Act was enacted to
make it clear that noncommercial taping of music by
consumers is not a violation of copyright law. The debate over
home taping of records goes back to 1970 when Congress first
extended copyright protection for records but this legislation
will end the 22-year-old debate and make it clear that home
taping does not constitute copyright infringement.
The provision of the AHRA providing the exemption for home
copying, section 1008, was considered "one of the cornerstones of
the bill" because it
removes the legal cloud over home copying of prerecorded
music in the most proconsumer way possible: It gives
consumers a complete exemption for noncommercial home
copying of both digital and analog music, even though the
royalty obligations under the bill apply only to digitally
formatted music. No longer will consumers be branded
copyright pirates for making a tape for their car or for their
children.
The Ninth Circuit confirmed this conclusion in Recording
Industry Association of America v. Diamond Multimedia Systems,
Inc., 180 F.3d 1072 (9th Cir. 1999). There, the court found that the
purpose of the AHRA "is to ensure the right of consumers to make
analog or digital audio recordings of copyrighted music for their
private, noncommercial use." Even in holding that the Rio
device itself did not meet the statutory requirements of the AHRA,
the Diamond court noted that "the Rio's operation is entirely
consistent with the Act's main purpose - the facilitation of
personal use."
Further, the AHRA includes an explicit technology mandate
applicable to home recording-the obligation to use the Serial
Copy Management System on digital audio recording devices. 17
U.S.C. 1002. In imposing this mandate, Congress evaluated the
competing interests and concluded that first generation copies
made by digital audio recording devices should be permissible, and
that technology should only act to stop second-generation copies.
17 U.S.C. 1001(11) (definition of "serial copying"). As the
Senate Report described SCMS, "[o]ne can make an unlimited
number of copies from the original, but one cannot copy the
copy."
The AHRA explicitly addressed home recordings made from
digital transmissions, such as terrestrial and satellite radio. The
key definition of "digital audio recording device" includes devices
with a recording function that has, as its primary purpose, the
making of digital copies "from a transmission." Moreover, the
Act contains rules governing the encoding of SCMS in digital
transmissions intended to protect broadcasters. 17 U.S.C.
1002(e). The Senate Report eliminates any doubt about
Congress's (and the recording and music industries') intent,
explaining that SCMS sets forth rules governing the receipt of
digital broadcasts, and, that "as a result, digital broadcast and cable
transmissions generally will be recordable by consumers, but
second generation digital copies will not be able to be made from
those first generation copies."
Any Resemblance Between the Audio Flag and Video Flag
Proposals Are Superficial and Misleading
The audio flag advocated by the recording and music industries
bears no resemblance to the video flag proposal being considered
at this hearing, either in substance or in the process by which it was
developed.
The video flag proposal is the result of years of multi-industry
negotiations, held under the auspices of the Copy Protection
Technical Working Group, which resulted in a detailed report.
While there was not consensus on all issues, there was broad
consensus on many, including the issue of the scope of appropriate
technological protections. That scope is carefully limited to
preventing mass, indiscriminate redistribution of digital broadcast
television over the Internet. Nothing similar, to date, has occurred
in connection with the recording industry's audio flag proposal.
To the contrary, the audio flag proposal and the restrictions it
seeks to impose, have never been clearly defined by the recording
industry. The proposal has been circulated in various
formulations, which have consistently been wrapped in vague buzz
words, as the recording industry attempts to make it look like the
video flag. Audio flag language advocated by the recording and
music industries has included either undefined, novel terms such as
"disaggregation" (apparently intended to prohibit consumers from
recording programs and listening in an order of their choosing to
the recorded songs) or terms that the recording industry and music
industry are seeking to redefine, such as "distribution," which they
now argue includes home recording. Nor have any candidate
technologies been identified to effectuate the flag regime.
Indeed, there is no evidence whatsoever that either satellite or
terrestrial radio broadcasts are meaningful sources of content used
for mass, indiscriminate Internet redistribution. To the contrary,
broadcasts are a poor source of content for redistribution. They
include music segues and DJ chatter. By comparison, the
recording industry itself provides millions of unprotected copies of
better sources. They are called CDs and authorized digital
downloads that may be copied to CD. If there is any redistribution
problem, the cause is the content sold by the record companies
themselves. Perhaps most perplexing is the inclusion of satellite radio
industry in a proposed audio flag regime at all. The whole purpose of a
broadcast audio flag regime is to provide for encryption of content
transmitted in the clear. Satellite radio content is fully encrypted at
the source, providing the same level of protection against
redistribution as the protection provided by the video flag adopted
by the FCC. Particularly as applied to the satellite radioindustry,
the audio flag makes no sense.
The Audio Flag Proposals Threaten Innovation and Would
Establish the Music and Recording Industries as Gatekeepers
Over Technology
Without a clear proposal from the recording and music
industries it is difficult to assess the full potential impact of the flag
regime they seek. However, some of the likely effects of audio
flag proposals include:
the imposition of new encryption obligations on all in-
home consumer devices designed to receive or playback
radio. The rules would likely affect not only receivers, but
complete stereo systems to which those receivers are
attached, recording devices, playback devices, and even
speakers. Depending on the scope of the prohibitions,
existing systems on which consumers have invested
thousands of dollars could be cut off from radio and
satellite radio - including systems that do not facilitate any
home recording.
The FCC, or even the copyright owners themselves, would
have authority to determine the scope of consumer fair use
rights and to determine which technologies should be
permitted to be made available in the marketplace. Such a
shift of power is not warranted and is certain to only
heighten the lack of certainty for consumer electronics
companies and deprive consumers of innovative new
products and product features.
Innovative devices will need to license technologies
mandated by the FCC. If the radio flag regime ultimately
resembles the video regime, those licenses will include
further restrictions on products that will be subject to
approval from the recording and music industries. Any
device that does not conform to the regime would need
specific approval from the recording and music industries
before it is sold. And if the major copyright owners don't
like a feature, don't like the manufacturer, or otherwise
seek leverage against satellite radio, consumers will be
deprived of the device and potentially desirable features.
That is too much power for the copyright holders and too
high a price for consumers.
Mr. Chairman and Subcommittee members, it is not enough to
leave the hard decisions to the FCC, which is not an agency that
traditionally has concerned itself with copyright law or with
consumer fair use rights. Congress should not enact audio flag
legislation unless and until the recording and music industries (i)
clearly identify what they seek to prevent, (ii) carry the burden of
demonstrating that they are facing a concrete and significant threat
that outweighs the threat to consumer fair use rights and
innovation, (iii) propose a clear, definite solution and (iv) make the
necessary showing that technology exists to implement the solution
and can be applied in a way that is likely to reduce the threat
without unreasonably harming consumers and innovation. We are
far from that point as we sit here today.
The law as it now exists has been beneficial to consumers,
innovation, and copyright owners. Consumers have clear rights
with respect to what they can do with lawfully acquired content for
non-commercial purposes within the privacy of their own homes
and we have a legislative framework-in the AHRA-that protects
content, permits consumers to make first generation copies,
compensates copyright owners, artists and writers, and provides
some certainty to technology companies. There is no justification
to change this successful recipe.
Conclusion
Thank you again for the opportunity to present our views on
this important issue. We look forward to working with the
Subcommittee members and staff to help ensure that traditional
consumer home recording rights are protected, technological
innovation is encouraged and, just as importantly, the creative
works of musicians of every genre are exposed to the millions of
people who have discovered and rediscovered their artistic
contributions on satellite radio.
MR. UPTON. Thank you, all of you. At this point we will take
questions of the panel, each with 5 minutes up here.
MR. SHIMKUS. Mr. Chairman, would you make sure you ask
the panelists to make sure their microphones are moved a little
closer.
MR. UPTON. Yeah, if you would put the mics a little closer.
That happens when you get older, right? I guess the first question I
have, Mr. Harris, is I would like to know your nine number one
songs. That was the first thing that I thought.
MR. HARRIS. Well, it has been over a 25-year period. You can
tell that I have earned the gray hair along the way. I started out,
my first number one song was by a one-hit wonder in 1979, a guy
named Leon Evert from South Carolina. He had a number one on
CBS Records. And it was great for his career and it was very good
for mine. It was my first number one. He had the Hurricane tour
and the Hurricane bus and the Hurricane van. And then it all kind
of disappeared after that. But my next one was Mickey Gilley's
"Lonely Nights." That was in 1982. 1988 was Waylon Jennings'
last number one. It was "Rose in Paradise." Then I had three on a
young guy from Georgia that I went down and wrote with. His
name is Travis Tritt. I had "I'm Going to Be Somebody," "Dream
Off to Dream," "Can I Trust You With My Heart," those three.
And seven other, actually nine other, cuts on his album during that
period of time. Wynonna Judd on her first solo album, I have had
what has now become her signature record called "No One Else on
Earth." And, let's see, Little Texas, "You and Forever and Me."
MR. UPTON. Mr. Barton would like that one, I know.
MR. HARRIS. The band did very well, and John Berry's
"Standing on the Edge of Goodbye." My latest one was a top ten
record in 2000 and topped out in 2002, "Angels in Waiting,"
Tammy Cochran. I also co-wrote the lyrics to America's Funniest
Home Videos. So that was--
MR. UPTON. Actually I knew that one. That is one I did know.
MR. HARRIS. It has been primarily in the country field but
other artists, I have worked out of London, and I worked with Neil
Diamond when he was there on his last album.
MR. UPTON. Ms. Ziegler, in your testimony you indicated you
didn't see a need for legislation, and I guess one of the--as I
wrestle with this issue and as I hear all parties, one of the things
that has been pointed out is that these devices in fact could do
these automatic searches so you could get all of Bruce
Springstein's albums, et cetera, come up with all these different
things. In fact, you indicated that your devices don't allow you to
do that, is that right?
MS. ZIEGLER. That is right. There is no--
MR. UPTON. Is there some intent down the road that they will
be able to have that technology?
MS. ZIEGLER. We have no present intent to.
MR. UPTON. That is another question for Mr. Shapiro, who is
in the audience, one that is on panel two. Mr. Levin, you talked
about one of the things that I felt proud to participate in with Mr.
Tauzin, Mr. Barton, and others, Mr. Stearns, Mr. Dingell, and Mr.
Markey. We had a number of these different roundtable
discussions, you might have even been in those rooms for a couple
of those discussions as we tried to see a private solution to this
versus a government-mandated one.
In your remarks, you in essence suggested that those be given
another chance to give you the time to try and negotiate those. Tell
us what is the progress of these discussions. We have heard about-
-our subcommittee has not been involved like we were once before
but where are things?
MR. LEVIN. Well, I think we have made very productive
progress so far. I think, obviously the issues are extremely
complex. And I was there during the time that you are recalling
where all of these different stakeholders in the video flag got
together and they spent hours and hours and in fact years actually
negotiating out those very complicated issues. And that is
precisely, I think, that this kind of thing--
MR. UPTON. One of the reasons, as I recall, was we didn't
want to go back with the DCR, the data versus--
MR. LEVIN. Exactly. Exactly. I think we were very interested
in making sure that everybody's rights were balanced properly and
that the ultimate technology could provide as many benefits as
possible to consumers while at the same time protecting the
copyright owners. And I think that worked very well, but I think a
key distinction between the video flag and what is happening now
with the audio flag proposals is that the video flag, as some people
mentioned, only dealt with indiscriminate redistribution over the
Internet. That was the primary thing that everybody was
concerned about over those main years, and it took an awfully long
time to figure out just what technology ought to be used in order to
be able to prevent that.
With the audio flag it is much, much broader. It is more vague.
It is overly broad. And we are frankly concerned that it impinges
on consumer's reasonable expectations and lawful uses to a point
that not only hurts consumers, but then in turn obviously affects
our business model.
MR. UPTON. Mr. Bainwol, do you want to comment on the
negotiations?
MR. BAINWOL. Sure. Sure. We began the negotiations in
March. They have been fruitful. We have fundamentally--
MR. UPTON. They haven't or have?
MR. BAINWOL. They have been fruitful. We have
fundamentally agreed on the proposition that cherry picking is
wrong, ought to be dealt with, and that is aggregation of content
and without ever listening to the radio choose the songs you want
to keep. You scroll down the data and say I will keep this one, that
one is Julie Roberts, and that Toby Keith, and this 50 Cent, never
listening. You got them stored in your digital jukebox. The
conversations have been very good. But the point I think that is
crucial here is that we really don't have market leverage. Getting
to yes--we can get to a conversation, it took 3 years to get to the
point where we had folks willing to sit down and that was because
Members of the Congress said you need to.
But getting over the hump to the point where we say solve the
problem, that is an entirely different challenge and we are not
going to get there unless we got something that forces action. Now
there is one other critical point here. Because we don't have the
performance right, we don't have the leverage to move them, but
the other difference with the video guys is this. By the time they
show up on TV, they have already been in theater. They have got
multiple windows of revenue. We sell music. That is what we do.
We derive the bulk of our ability to reinvest in new art from the
sale of music. It is that very window that has been compromised
here. We've got to protect that window or else the venture capital
that goes into creativity will dry up.
MR. UPTON. Mr. Boucher.
MR. BOUCHER. Thank you, Mr. Chairman, and I want to say
thank you to our witnesses for their informative testimony this
afternoon. Mr. Levin, a quick question for you. In my opening
statement I mentioned the rather unique position that iBiquity has
with regard to high definition radio, having developed the
technology and holding today the intellectual property it licenses to
the HD stations. Would you agree that if someday a technical
standard for an audio flag for HD radio was created that iBiquity
through that unique position could implement it without
Congressional action?
MR. LEVIN. I think you are absolutely right on the money.
MR. BOUCHER. And so we should defer to the private sector
entirely with regard to this matter, first to create the flag and the
technical standard to assure that it is effective, and then secondly
through iBiquity for its implementation.
MR. LEVIN. I think that works, and at the end of the day if
there is a need to come to Congress for implementing legislation, I
think the parties can do that without any problem whatsoever. I
think we need to come to a solution though before we come to
Congress.
MR. BOUCHER. Thank you, Mr. Levin. You are just a great
witness. I applaud that answer.
MR. LEVIN. You are a good questioner.
MR. BOUCHER. And we got along this well when he was on
the staff.
MR. LEVIN. It is called good staff work, right?
MR. BOUCHER. Always good staff work. Mr. Bainwol, I noted
with interest your discussion about the progress of the negotiations,
but those negotiations really only include your industry and the
broadcasters. It is my understanding that the device manufacturers
who are in my mind a critical part of this are not at the table. Why
do you not take this conversation over to the well-established
industry forum, which is the Copyright Protection Technical
Working Group, a long-standing organization that has been in
existence 10 years. It meets every month. Per my information,
you haven't been there in 7 years. Why not get the device
manufacturers involved in this conversation, because even if you
and the broadcasters come to an agreement, if the device
manufacturers say, well, this doesn't work for the following 15
technical reasons you really haven't accomplished very much. So
why not take this conversation over to the Copyright Technical--
well anyway.
MR. BAINWOL. The short answer to the last question is
because CPTWG has evidenced no interest in solving this problem.
That is a place for this problem to die, not to be solved.
MR. BOUCHER. Well, they are the ones who created the
broadcast flag.
MR. BAINWOL. Well, that is because there was marketplace
pressure to make that happen. They had no choice.
MR. BOUCHER. They also created the content protection DRM
for DVDs. I mean these are the people who have a great track
record in making this happen. You haven't even been there to ask
them to take it up.
MR. BAINWOL. I have been at the RIAA for almost 3 years,
and about 3 years ago, I went to the FCC to say we have got a
problem here with the emerging roll out of HD radio. And I was
hit on one side by the broadcasters and hit on the other side by the
manufacturers. One said premature, no demonstration of harm, the
other one said too late. And that is the quicksand that we find
ourselves in because we don't have market pressure, we don't have
a market right to force people to the table, not just to the table but
to get the settlement. We have got a real challenge.
Because of Congressional interest we now have a very fruitful
conversation going on with the broadcasters. It is with the
broadcasters because that was the request from the Senate.
MR. BOUCHER. Let me ask you a simple question. I
understand maybe Senator Inouye had asked you to sit down with
the broadcasters. Let me ask you to sit down with the device
manufacturers. I think to make this conversation really effective
you are going to need the people involved in it who at the end of
the day are going to have to pass on whether or not the technical
standard really works and you need their input as that is developed.
So a simple question. If the Copyright Protection Technical
Working Group, I got it right that time, expressed a willingness
and interest in addressing the subject, would you be interested in
taking this conversation to them?
MR. BAINWOL. If they provide you an assurance and us an
assurance that they mean business, that they are prepared to get
ES, that the scope of the problem is not simply with distribution
but also this aggregation, then we will talk to anybody. But let me
make one additional point. iBiquity has said to us this is not
terribly complicated stuff. This is radio science, not rocket
science. What we need help with here is somebody to tell us to do
it because we are not here to do it on our own. We need an
instruction either from Congress or from the FCC.
MR. BOUCHER. Well, my time is up so let me briefly say I
appreciate your expression of willingness to involve the device
manufacturers in this discussion, your expression of willingness
under rather carefully stated conditions to have that conversation
with the group that can make the technical difference. And for my
part, I would certainly encourage all of the interested parties to
work toward an agreement on this. I had some rather critical
comments of the proposals put forward so far, but I think it is in
the public interest for us to develop the DRM technology and then
have that implemented. That provides the kinds of protections that
you are looking for.
And so I share with you the overall goal. I just think
legislation is not needed to get us there, perhaps encouraging all
the parties to work together is, and your expression of willingness
to expand this conversation, I think is a helpful step in that
direction. Thank you, Mr. Chairman.
MR. UPTON. Mr. Barton.
CHAIRMAN BARTON. Thank you, Mr. Chairman. I am really
stunned that Mr. Boucher made a mistake in one of his questions.
You know, I think I know the reason. He got married about a
month ago. He used to be a very boring guy who had nothing else
to do but study for these hearings. Now he has got other outside
interests and he is a much more fun guy, but he slips up every now
and then. He has lost focus which is a good thing.
You know, between Mr. Harris and myself, we have nine
number one records.
MR. UPTON. You had the big Texas hit, right, not the little one.
CHAIRMAN BARTON. If we get this panel right and we get this
hearing right between Mr. Harris and I, we may have one law
passed that solves this problem. So my only real question, I am a
co-sponsor with Mr. Boucher of the fair use bill, and it would seem
to me that technology is converging with political ability and that
we might be able to solve two or three issues at one time. We
could do a broadcast flag, a video flag, and get some fair use
language that help our consumers, so my real question would--I
guess start with Mr. Bainwol. Do you think that is possible? I
have seen some technology that was presented to me by the Disney
folks that would seem to think we could solve all these problems in
one boot, in one swoop. Do you agree or disagree?
MR. BAINWOL. The movie folks have now moved in a
direction in the recording industry where we have for many years
allowed people to make multiple copies of our product. So your
fundamental fair use concern is something that we have
accommodated for a long time. We have concerns about Mr.
Boucher's bill, H.R. 1201, that we fear will have some serious
consequences. If the objective is really fair use for the recording
side, that is being satisfied.
And let me make one other point about fair use. We often hear
about it from the standpoint of just purely what the consumer is
entitled to. The fourth standard in the fair use sequence of four
standards is this: You have to consider the effect of the use upon
the potential market for or value of the copyrighted work. And the
absence of that consideration blows a hole in the digital
marketplace, and whatever we do we need to protect that and that
is precisely why we are here at the table, because the fundamental
value of our copyrighted work, the genius of Mr. Harris, is going
to be compromised because there won't be any basis for
reinvestment.
What you have going on in society is the iPodization of
America. It is all about this device. If you get music from iTunes
you pay for it. If you get music from Creative Zone you pay for it.
If you get it from satellite radio you don't pay for it. You store it.
It says, if you made a purchase of my tunes, Mr. Harris is not being
compensated and neither are we. That is fundamentally wrong.
That violates our standard and fair use. That needs to be dealt
with.
CHAIRMAN BARTON. Well, if we can--for the first time in
about 4 years, I really see that there is a possible convergence. I
want to protect Mr. Harris, and I want to protect the content
providers. They are the geniuses that create the product that you
said we consume, but I also want to protect the consumer so that
you can make a few copies for personal use, and the technology
appears to be there. Now if we can just get the political parties to
agree, I think we have got a deal here that we can work on pretty
quickly, and I think Mr. Ferguson's bill, with some tweaking to
make sure that Mr. Boucher and I are happy, may be the way to do
it. So with that, Mr. Chairman, I yield back.
MR. UPTON. Mr. Gonzalez.
MR. GONZALEZ. Thank you very much, Mr. Chairman. I
alluded in my opening statement regarding technology, and I am
trying to get this all straight and have some working knowledge,
and you all can help me with this. Ms. Ziegler, if I want to
subscribe to Sirius, what does it cost me?
MS. ZIEGLER. $12.95 a month.
MR. GONZALEZ. Now I want--is it the S50? I am not sure.
What is the feature that allows me to basically store, save?
MS. ZIEGLER. The S50 permits you to--you can listen live but
you can also record blocks of recording and you can also, if you
are listening live and listening to the recording, save an individual
song.
MR. GONZALEZ. And how much does that cost me in addition
to my $13 a month, whatever?
MS. ZIEGLER. It costs you $12.95 a month, the same
subscription price.
MR. GONZALEZ. It is a feature that is included in my standard
fee. In other words, it is not something that is added. It is not a
premium that you charge extra for?
MS. ZIEGLER. The device itself, the recording device itself,
will cost you more. The service--
MR. GONZALEZ. So let us say the recording device is $100 or
whatever it is but to have the S50 feature it is now much more?
MS. ZIEGLER. The S50 feature to the consumer is still $12.95.
MR. GONZALEZ. Okay. I guess what I am trying to figure out
is if I am going to have to pay extra in order to have the capability
to save and store music, right? I am trying to figure out how much
extra would I be paying.
MS. ZIEGLER. It is the cost of the device itself.
MR. GONZALEZ. The device itself.
MS. ZIEGLER. So you could buy a very low end receiver and
not have--
MR. GONZALEZ. Now let me ask you, in the marketplace
where do I acquire this device?
MS. ZIEGLER. You can buy it at various retailers, I mean most
large retailers.
MR. GONZALEZ. Because the question really comes I think in
the old days of fair use Charlie Gonzalez goes out there and gets
his cassette, double cassette or whatever it is, and, you transfer it
yourself. What has happened out there in the marketplace
especially with Sirius and such the feature that you are providing
now which is pretty unique, and I guess we get prepared for
expanding that capability for the reasons that digital or HD radio
allows that enhancement and the ability to do these things, quality
and such, you are making the distinction though that what you
really are guarding against really is just the big boogey man of
redistribution.
You hang your whole argument that you should be able to do
this because it is fair use. I am recording it for my own use. And
there is no danger or anything, nothing is happening by way of
redistribution because it is not allowed. The technology that you
utilize is not available for that use.
MS. ZIEGLER. Right. We have brought out the S50 in
compliance on the Audio Home Recording Act of 1992, and that
framework we believe provided a framework that codifies fair use
and is in compliance with that statute.
MR. GONZALEZ. And, Mr. Bainwol, what is your argument on
that particular, I guess, understanding of the present law and where
we are going?
MR. BAINWOL. Let me do two cuts of that. One is, if you take
500 songs and you get them on your iPod or you get them from
Zen, then Mr. Harris is compensated. If you get those same 500
songs, you put them into your radio receiver, which is where you
store your music, you import your other stuff, this is now your hub.
XM calls it the mother ship. It is not a pod. It is the mother ship.
So you've got the same 500 songs and not a dime is going to the
creator for that distribution for the right to have ownership of that
product.
MR. GONZALEZ. This technology is just allowing me an
enhanced way of having better quality, greater quantity, but it is
still fair use.
MR. BAINWOL. It is not fair use because fair use also requires
that the creator be compensated. We have no problem with time
shifting. We have no problem with manual recording. But when
you can replicate the iTunes experience and not pay for it, that will
devastate an industry and that will destroy creativity.
MS. ZIEGLER. Can I comment?
MR. GONZALEZ. Yes, please.
MS. ZIEGLER. Thank you. One part of the Audio Home
Recording Act is that we need to pay a royalty on each device and
that--
MR. BAINWOL. And may I comment on that?
MR. GONZALEZ. I am going to give you a chance. I got about
42 seconds. You take 20 of those seconds.
MS. ZIEGLER. Okay. I just want to say the artists, the
recording labels, as well as the songwriters, are compensated
through that royalty so to say that there is no compensation, there
is.
MR. BAINWOL. The Audio Home Recording Act pays the
industry about $2 million a year. Today in America there will be 2
million downloads or more that will pay the industry about that
today, so the Audio Home Recording Act will starve, literally
starve, creativity. It is not the right answer. It is for serial copying.
It is not for replicating the iTunes or the Rhapsody experience.
MR. GONZALEZ. My time is up. Thank you all very much.
MR. HARRIS. Mr. Chairman, could I comment on that?
MR. UPTON. Go ahead. Why don't you comment, Mr. Harris,
and then we will go to Mr. Shimkus.
MR. HARRIS. I would just like to comment on the fact that by
someone being able to download in this iTunes mode, and we all
have them in the music industry, for instance. But the traditional
way has been performance royalties and mechanical royalties.
This completely takes any kind of mechanical--mechanical is
based on the sale of a record. Every time my song was played on
the radio, I got a royalty. Every time that someone bought a CD, I
got a royalty. Songwriters make pennies on the dollar. We always
have, even since 1928 when they created--1923, excuse me, when
they created the intellectual copyright protection laws.
There is no protection in this way when someone can cherry
pick, download a particular one. There is no need for them to go
out and either buy it on iTunes or to buy the CD itself. There is no
reason for them to do that because they get it free. I have been up
here before not testifying in a committee, this is all new to me, but
lobbying with the National Songwriters Association and the Guild,
but since 1997, I and a lot of others, but I, in particular, because
my accountant gave me the information, I lost about 28 percent of
my income. At my age that is disturbing.
If this goes unchecked without the flag, I could lose another 50
percent on top of that, so that would make it nearly impossible for
me to stay in the industry. And I have done well. There are others
that will just have to go get jobs.
MR. UPTON. Mr. Shimkus.
MR. SHIMKUS. Thank you. And I want to encourage Mr.
Gonzalez and anybody else, this line of questioning and this
discussion that Mr. Gonzalez was addressing was just what we
need to hear and address and talk about. One thing I learned in one
of the private industry junkets to the CEA convention was how
artists really drive technology advancements, and I think it was the
year they rolled out the MP3, and it was people wanted music and
it drove the technology.
You all have a symbiotic relationship that if a part of the chain
breaks everyone is going to get penalized and that is why I think
we are really working hard to try to come to some agreement and
understanding. But this S50 issue is at the heart of I think Mr.
Gonzalez's questions and a lot of our questions. Mr. Harris in his
opening statement talked about how people can get his songs
without compensation--he is not--through your product all his
songs are stored on this device without compensation to him other
than that we just found out through the device. There is what you
would say minimal compensation provided by the device itself but
per song there is not, is that--Mr. Harris, is that what you said, and,
Ms. Ziegler, is that what I interpreted right, and then, Mr. Bainwol,
am I following this debate correctly?
MR. HARRIS. That is correct.
MR. SHIMKUS. Do you agree?
MR. HARRIS. Basically, I would not receive any compensation
with the exception of the performance, which I think has already
been negotiated. But it is when a user--and I understand
consumers. We have had radio for years. We all thought it was
free. I thought it was free when I got in the music business. I
wanted to be in the business when I was a young man because I
wanted to be a star. Now that I understand the industry, that music
was always paid for.
The threat to us now is that it could go out on the airways en
masse. If we had pennies on the dollar as we have always had, it
would be the greatest thing. This is what all songwriters have said.
It would be the greatest thing in the world because then we would
be able to reach some Third World countries. We would be able to
reach countries that necessarily we were not able to reach before.
However, it is such in the psyche of the young generation to be
able to download for free. It took us years to get Napster to pay.
And every day, it is going on right now. It is going on. I am
losing money as we are sitting here because somewhere, somebody
is loving something that I did, hearing it, downloading it on a
device, and I receive no compensation.
MR. SHIMKUS. Okay. I don't want to cut you off but I want to
make sure we got a chance. Ms. Ziegler.
MS. ZIEGLER. We want Mr. Harris to be paid, and we do pay.
We pay two times with Sirius satellite radio. We pay performance
royalties that were negotiated and millions of dollars for all of our
transmissions. In addition, we pay with respect to the S50 Audio
Home Recording Act royalty. That goes directly to artists as well
as to songwriters. In fact--
MR. SHIMKUS. Mr. Harris, how do you see that money?
MS. ZIEGLER. We haven't gone through the year yet so it is
working its way through the copyright.
MR. SHIMKUS. Okay, so he hasn't received any money yet, the
device portion.
MR. HARRIS. I was given some numbers today just for me to
look at and they got $150 million for baseball, $50 million for
Oprah, $600 million for Howard Stern, $3 billion for technology.
These were just numbers that I had, but am I correct, Mr. Bainwol,
in that ours is somewhere around $2 million?
MR. BAINWOL. On the audio side, that is about right.
MR. HARRIS. Yes.
MR. SHIMKUS. And we don't want to beat up on Ms. Ziegler
because you are here and you are making a good faith effort to
work on this. Other folks aren't here.
MS. ZIEGLER. Just to be clear. Performance royalties are in the
millions. It is a part of a confidential deal, an arm's length
transaction 5 years ago with the label, so that is not a $2 million
deal. The Audio Home Recording Act fees, frankly, the S50 just
came out and that is just entering the market and those fees are just
beginning to be paid. But we do pay. We pay twice. In addition
to that, obviously we did sit down and then do a deal with the
recording industry.
MR. SHIMKUS. Mr. Bainwol, and then I will--
MR. BAINWOL. You have an anomaly in law. We get paid for
distributions on phones like the one that went off, on iPods and on
subscription. We don't get paid for the distribution. We get paid
for the performance, for the broadcast. We don't get paid for
distribution when it comes to satellite. S50 has negotiated a
private deal, but as a matter of policy, there is a competitive
breakdown in the legal structure here, and what radio is doing is
exploiting the loophole in the law and that is what needs to be
fixed.
MR. SHIMKUS. That is why you guys need to fix it because if
you ask us to, it is going to be a disaster.
MR. BAINWOL. But we can't get them to the table to get to yes.
That is the challenge.
MR. SHIMKUS. I yield back.
MR. UPTON. Mr. Gordon.
MR. GORDON. Thank you, Mr. Chairman. Earlier, Mr.
Gonzalez mentioned that it took 25 years to find a consensus and a
compromise for the Wright amendment. What he didn't mention
is it was phased in during over an additional 9 years. So Mr.
Harris, despite his pleas, probably can survive that but the next
generation of writers can't. And when the music stops that is the
foundation of the entire industry and the whole ball of wax
collapses, and that is why I think we really have to keep that in
mind.
Following up on this most recent sort of trial log, I guess, that
was going on, Mr. Bainwol, what is different about the satellite
services, new devices, and consumers taping off the radio as they
have done in the past and why is it different than say a TiVo
device?
MR. BAINWOL. What they used to do in terms of manual
recording we are fine with and moving that into the digital age is
fine. It is different than TiVo. We are fine with TiVo time
shifting. What we are not fine with is this aggregation of a
program. When you take out individual songs on an automatic
basis, without ever listening to the radio you have fundamentally
transformed what radio is. That is not old-fashioned recording off
the record. That is replicating either the iTunes experience or the
subscription model and just avoiding payment to the creator.
MR. GORDON. And do you believe that the Audio Home
Recording Act of 1992 was intended for digital audio tape players
only?
MR. BAINWOL. It was certainly not intended to cover what we
are seeing today. 1992 was before the iBiquity of the Internet, it
was before broadband surge. Napster had never been conceived.
Peer to Peer was a notion that meant something entirely different.
Satellite radio was nowhere near rollout, if it had been conceived.
It was a totally different world.
You can have lawyers debate whether or not the AHRA covers
it, and one lawyer will say yes, another lawyer will say no because
we don't think you threaded the needle just right. But as a matter
of just basic common sense, as a matter of policy, should you be
able to get away with this modest fee to allow you to replicate an
iTunes model and a subscription model that is the foundation for
reinvestment and creativity, the answer is obviously no.
MR. GORDON. Anyone want to have a comment to that?
MS. ZIEGLER. I have a few comments. As to the Audio Home
Recording Act, yes, you can debate it both ways but I think that
there were many statements made at the time it was entered into.
First of all, it was a private negotiation that was then brought to
Congress. It was a deal that was cut. The recording industry was
at the table, quotes at the time it is a generic solution that applies
across the board to all forms of digital audio recording technology.
In fact, what has happened is we have finally exploited that. A
technology company has come up and exploited a particular
legislative framework, and we get to market and suddenly we hear,
oh, that wasn't enough money. That is not enough money. That is
not the right framework. We need something new. It is in fact the
framework that is there today and it is the framework that we relied
upon and we do pay under it.
The other thing that I would just like to discuss for a moment is
what we do in fact--
MR. GORDON. Keep it back to this subject. Okay. Mr.
Bainwol, would you want to have any rebuttal to that?
MR. BAINWOL. Yeah, just a simple point. If you get 1,000
songs, 5,000 songs--1,000 songs, let us say, you put 1,000 songs
on radio, you have not paid a dime for the distribution for the right
for ownership. You do it from iTunes. You do. There is a basic
question of equity here and no amount of fancy kind of legal
footwork gets you through that fundamental point of equity. We
have got to deal with the reality here that you got a wave of new
devices coming that we are perfectly happy to license, but we are
not happy to have our shirt taken off our back.
Sirius went nuts when people were able to go and tape Howard
Stern, so you could access Howard Stern without being a Sirius
subscriber. That is how we feel. It is the same thing. We are
having our content taken from us without there being a
compensation for it. That is absurd. And legal niceties, legal
loopholes are interesting legal arguments, but they miss the
fundamental point of equity here. Creators are being victimized
here, and we need to deal with it.
MR. GORDON. I yield back the balance of my time.
MR. UPTON. Mr. Ferguson.
MR. FERGUSON. Thanks, Mr. Chairman. Mr. Levin, welcome
back.
MR. LEVIN. Thank you.
MR. FERGUSON. I wasn't here when you were here, but you
obviously have a lot of fans up here so welcome back.
MR. LEVIN. I hope I can keep them.
MR. FERGUSON. My bill, the Audio Broadcast Flag Licensing
Act, requires that the implementation of a broadcast flag, not
encryption at the source, would be privately done through licensing
agreements. It cannot make obsolete legacy devices or slow down
the roll out of HD radio. In addition, we have taken great pains to
make sure that fair use is protected. These elements seem to
comport with the requirements that you lay out in your testimony.
Why do you still oppose my bill?
MR. LEVIN. Well, I think that there are a number of things in
your bill that obviously will stimulate discussion in a positive,
constructive way.
MR. FERGUSON. They seem to have.
MR. LEVIN. Yes. There are a few things though that we are
concerned about. Some of the terms are undefined. You give the
FCC authority to implement rules, technology prescriptions
without really setting out the parameters of what consumers and
broadcasters should be entitled to do. You talk about the fair use,
laying out the fair use principles that mandate that they must be
complied with, but it is very unclear what they are right now.
So I think my main position is that it is simply premature. We
are waiting on a court case, the XM court case, to determine what
the court believes fair use principles ought to be in this context.
And I think, you know, I did want to just mention that Mr.
Bainwol's point about the last prong of the fair use requirements
that are in law that the content owners be considered in the
equation is extremely important but that just reinforces how
difficult the debate is.
If it was all one-sided, it would be easy. When we bring in
both sides that is when it gets harder so to legislate that would be a
very difficult thing.
MR. FERGUSON. And you have talked about how we need
more time, the private sector should handle this.
MR. LEVIN. Right.
MR. FERGUSON. It seems that the negotiations didn't really get
started from what it sounds like. It didn't really get started until
there was a threat of legislation. iBiquity, my understanding is that
iBiquity itself which holds the patent on this technology to begin
with, they have asserted all along that they need legislation or
regulation requiring them to include content protection so it just
seems to me this might be exactly how these negotiations can
move forward. Mr. Bainwol, you said before, when were the
negotiations first begun?
MR. BAINWOL. The actual face to face contact didn't begin
until March of this year, but it took us 40 months to get there.
MR. FERGUSON. You said '03, did you say '03?
MR. BAINWOL. We started certainly since I began in '03 and
then effort began at that point and it was fruitless.
MR. FERGUSON. Mr. Boucher and others have said we've got
to let the marketplace or we've got to let these negotiations
happen. Delay helps your side, Mr. Levin, it advantages your side
and disadvantages the other side.
MR. LEVIN. I am not sure I would agree with that.
MR. FERGUSON. Talking about bringing new people to the
negotiating table, all that is real nice, but the fact remains that
today there are devices on the market that allow the abuses that we
are all talking about that we think are a bad thing.
MR. LEVIN. Well, Mr. Ferguson, I do want to make the point
that there are no HD radio devices today that can record a single
song. The HD radios that are being sold at Radio Shack and
Tweeter and that are in the production pipeline do not record, and
they don't go further to permit people to search for particular songs
or do all the things that Mr. Bainwol is concerned about. So I
don't really think there is a problem today with free radio.
MR. FERGUSON. I am very short on time. Do you want to
comment on that?
MR. BAINWOL. I am just curious whether Andy would be
willing to commit to a date certain for closure on this--
MR. FERGUSON. Mr. Levin, how long do you need?
MR. LEVIN. It would be nice to be able to predict how long we
need to do it. One of the problems is that we--
MR. FERGUSON. I am willing to give you more time. Do you
need a year?
MR. LEVIN. I can't say precisely how long, but I do know that
there are all the affected parties at the table. We can't agree to put
mandates on device manufacturers without them sitting at the
table. I mean it is just not--
MR. FERGUSON. What if they won't come to the table? We are
hearing that they won't even come to the table. I think it is a lame
argument to say we really need to negotiate this out. We really just
need everybody at the table, and as soon as everybody is at the
table we can figure this out. If some people are not going to come
to the table, that doesn't cut it to me.
MR. LEVIN. Well, I think the recording industry would prefer
that the consumer electronics manufacturers--
MR. FERGUSON. Chairman Barton wanted me to ask you if we
schedule a markup on my bill next week will everybody be at the
table tomorrow?
MR. LEVIN. I would hope so.
MR. UPTON. I am in Michigan, I just want you to know. Are
you coming to Michigan?
MR. LEVIN. Mr. Ferguson, we have asked for CEA to be
represented at the table ever since day one--
MR. FERGUSON. My time is up, Mr. Levin. I suspect that until
we start marking up this legislation or have some other direction as
Senator Inouye has kind of directed this, that frankly it is to your
advantage to not talk. It is to your advantage to delay. It is to your
advantage to say, yeah, we should really figure this out and we are
going to do it in due time. But until there is a threat of you being
forced to do it, my guess is, and this is just a hunch, is not going to
happen.
MR. LEVIN. Well, I would like the opportunity to talk to you
more about it because--
MR. FERGUSON. I would be delighted to.
MR. LEVIN. --I disagree with that.
MR. FERGUSON. It sounds like you want to talk a lot but it
sounds like we don't want to solve the problem.
MR. LEVIN. We do. We are content owners ourselves. It is
our interest to have content protection.
MR. FERGUSON. I am all for talking but I am also for action,
and it seems like the action isn't going to happen.
MR. LEVIN. Well, if Mr. Bainwol's laundry list wasn't this big,
we might get something done.
MR. BAINWOL. Our laundry list is not that big. I mean the
default position right now is for artists and creators to be
disadvantaged and that is not fair, and it is the default position that
we have no market leverage. We need to force action. It isn't that
complicated. iBiquity has said to us this is simple. Just give us an
instruction to do it. So we made it sound like it is building a ship
to go to the moon, but it is not. All you have to decide is what
those user rules are going to be and then the implementation of it is
very simple. And we are not that far apart on usage rules, and I am
happy for Gary to be involved in that discussion. He had to be
involved, but we need to know that Gary and CEA will say to the
question will you support getting to yes, will you deal with the
cherry picking problem. Broadcasters have said yes. The satellite
folks, it is not clear. And I haven't heard anything near that from
CEA.
MR. FERGUSON. Mr. Chairman, my time is up. I think this is a
very constructive conversation going on. I thank you and I thank
Chairman Barton.
MR. UPTON. I am just glad Mr. Shapiro came early to the
hearing so that he will be prepared to answer that question when
his time comes up shortly. Mr. Inslee.
MR. INSLEE. Thank you. A small technical question. Mr.
Levin, you said there is nothing in the market that can record these
songs. Mr. Bainwol made reference to the mother ship. Are you
guys talking about the same thing?
MR. LEVIN. No. I think he is talking about XM satellite radio.
MR. BAINWOL. Yeah, that is correct. You have the satellite
devices in the market. Sirius has a device which has been licensed.
XM has a device which has not been licensed. They refer to that
as the mother ship. It is not a pod, it is the mother ship. The HD
rollout is behind that. They are comparable issues. It is radio
morphing into a distribution service to compete with iTunes and
compete with Rhapsody. It is part of this competition.
MR. INSLEE. So, Mr. Bainwol, in regard to that let us assume a
consumer gets the mother ship, would want to use it as a
replacement iPod essentially is what you are talking about and how
they use that infinite number of replays for personal use. What is
your position on compensation in that situation?
MR. BAINWOL. What you call personal use here is replicating
purchases. When you can automatically cherry pick--this is not a
manual record. This is taking a block of programming, scrolling,
not live, scrolling through the meta data and saying I want this
Toby Keith, I want this Travis Tritt, and that is going to get Mr.
Harris, I want this 50 Cent and I want this whatever. That is
replicating a sale that is draining our one window of revenue and it
is a challenge for us.
MR. INSLEE. Any other comments?
MR. LEVIN. That can be done today. That can be done today
by recording off the radio. That can be done today by buying a CD
in a record store and making a copy of that and copying that onto
your iPod. You can develop a library of music on your iPod
through other means. And it appears that they don't want to be
able to--
MR. BAINWOL. So let us just let it get worse. Let us go ahead
and--
MR. LEVIN. Well, but you don't have any copy protection in
the audio CDs that you sell. You know that this is a tough nut to
crack because we saw with the Sony experience that as soon as
they started to put copy protections in the Sony audio CDs there
was a huge consumer backlash and they backed up. But there is
nothing to stop record labels from protecting their own content
and, instead, we feel that they are trying to shift the burden to us
along with the expense, and in effect dampen the appetite for
consumers for our products.
MR. BAINWOL. So the consumer is left with a choice. I want
to get these ten songs. Do I go to iTunes and make a purchase or
do I go to the mother ship and just simply tag them, keep them, and
not pay a dime to the creator. A rational consumer will do exactly
that, but it is certainly not fair.
MR. INSLEE. Yes.
MR. HARRIS. If I may, they really have referred to this. I
didn't realize it wasn't licensed yet, but if this is the mother ship if
you would, please, when it comes time to look at this bill, just
imagine the songwriter as the wind beneath the wings because that
is basically what this is. We will lose tremendously if some kind
of agreement, and we are all for it as creators because, frankly, we
would like to get on with the business of creating for the future,
and this could be to our advantage too. But we do need a license
that will guarantee us that when this is downloaded on satellite we
have the equivalent of a sale.
MR. INSLEE. Did you write Wind Beneath My Wings, Mr.
Harris?
MR. HARRIS. No, sir. I have two good friends that wrote that
song and I have told them never to do that without me again.
MR. INSLEE. I think the rule is if they are your friends it is not
a copyright violation so we will let that one go.
MR. HARRIS. It is not in this context.
MR. INSLEE. Let me ask generally to each of you to describe
philosophical, however you want to describe this, who should have
the economic burden of protecting intellectual property here
between the three points of the stool. How should that be looked
at? Should we look at ease, should we look at it as fairness so that
everybody has got the same share? Give me your best arguments
that somebody else should do it, I guess is what I am asking.
MR. BAINWOL. Do you want to start?
MS. ZIEGLER. I think that it is a shared burden but certainly we
as content distributors take very seriously protection of the content
that we put out over our broadcast as well as what is into our
product. Our content is all encrypted at the source. It is decrypted
when it comes into the receiver. So we take that very seriously and
we don't believe that we have any significant issues with respect to
piracy with our content.
MR. HARRIS. I am going to respectfully bow out on that and
just say that we trust that something can be done for this and that
the songwriter would appreciate it very much.
MR. LEVIN. I think it is--I agree with Ms. Ziegler that it is a
shared burden. The radio industry has content that it produces that
is proprietary, and we also have an interest in protecting that. But
at the same time, Congress and the courts have for decades and
decades and decades recognized the rights of consumers to record
free over the air broadcasts, and so we want to make sure that we
do nothing to tramp on those rights.
MR. BAINWOL. We think it is a shared burden, but we think
that Mr. Ferguson's bill hits the nail just perfectly. What it does is
it says release these devices, don't impede rollout, go ahead and let
consumers do what they do in a customary way in terms of home
recording. Just don't put the burden on the creator to allow this
automatic cherry picking until there is a deal.
MR. INSLEE. Thank you.
MR. UPTON. Mrs. Cubin.
MRS. CUBIN. Thank you, Mr. Chairman. I think I have kind of
made up my mind as to which way it ought to go as far as whether
or not the artist should be compensated in this situation more than
they are, but when Andy was talking and you were talking, Mr.
Bainwol, Andy said you have a laundry list about this long and you
said you didn't. So besides the issue of the payment, what are the
other items that are on your laundry list?
MR. BAINWOL. It isn't even really the payment. The question
that I think Andy was referring to is the question of what are the
usage rules. And that is something I think our folks have met on a
number of times and my sense of those discussions is that they are
very productive and these usage rules are very close, that we do
need to bring in CEA and others, but I think the usage piece of this
is not that complicated. I think it is a false premise to suggest that
this is just an enormous challenge. It isn't. You agree on what
they ought to be and the fundamental point is don't allow
automatic cherry picking which is something that the broadcasters
have already said I think is a foundation of the argument, and then
you implement it with play.
MR. LEVIN. I think the conversations have also been very
productive, and while we agree in concept to the notion of no
cherry picking there are nuances to that that still need to be worked
out. I think that the recording industry's view at this point is fairly
broad with regard to what that means and it would in effect turn
back the clock on what is already lawfully used by consumers. So
to the extent we were to agree to all of the recording industry's
demands, the consumer is the one that gets left out in the cold.
So I think that we really need to take a hard look at just what
consumers are entitled to and what their expectations are before we
agree on usage rules that get memorialized in any kind of statute or
regulation.
MRS. CUBIN. Well, it is certainly those users that elect me to
my seat but I don't think that their expectations are that hard-
working people shouldn't be paid for what they do. And it just
seems--
MR. LEVIN. Absolutely. I am sorry. I didn't mean to interrupt
you. But we are talking about things like making a recording off
the radio and being able to retransmit that recording through a
home network and be interoperable with stereo equipment, existing
home audio equipment that is in the house.
MRS. CUBIN. But that isn't what is costing the artists the
money.
MR. BAINWOL. And those are issues we can solve.
MRS. CUBIN. Pardon me?
MR. BAINWOL. Those are issues we can solve. That is not the
problem. And the Ferguson bill says this, that the implementation
shall not be consistent with customer use of broadcast content by
consumers, period.
MR. LEVIN. But that is customary as of the date it is written.
MR. BAINWOL. But what we are trying to do is preserve
customary practice. This isn't about winding back the clock. This
is about devastating the property right of the creator.
MR. LEVIN. But it is also about making sure the consumers can
take advantage of the new capabilities and technology that comes
down the road.
MR. BAINWOL. But if technology in effect--
MRS. CUBIN. Well, my time is just--
MR. BAINWOL. I am sorry.
MRS. CUBIN. Well, we are just going in a circle. And so I
think that if it comes to this committee, this committee, I think that
they will probably take some kind of action and it is kind of the
motto of Congress, if it is worth doing, it is worth over-doing, so
that is not good. So I hope that it can be worked out, but if it can't
be, I think, we are ready to get to work and fix it. So I thank you,
Mr. Chairman.
MR. UPTON. Mr. Engel.
MR. ENGEL. Thank you, Mr. Chairman. I have been listening
to the back and forth, and this has been very helpful to me because
rarely do we have hearings where you actually have the back and
forth, people answering other people, and it really presents both
side of the issue, and, frankly, both sides make good points. I
mean for me, and I think for all of us really, it is the issue of
fairness because we want people to be compensated. We don't
want them to feel they are having this stolen from them.
On the other hand, we want to do what is best for the consumer
as well, and so I think it is kind of a delicate balance. Mr. Levin,
let me ask you, first of all, how does it feel to be on that side of the
table?
MR. LEVIN. It was a lot comfortable up there, more
comfortable.
MR. ENGEL. I testified at another committee about 2 weeks
ago, and I didn't realize how daunting it was to face all of us. I
want to ask you how long did it take for consensus of the video
industry to develop before a workable video flag standard was set,
how many years was that?
MR. LEVIN. About six.
MR. ENGEL. About six. To develop an audio flag, do you
think it will take 6 years?
MR. LEVIN. No, I don't. I don't think that the issues are as
complicated as they were, and I think that based on the work of the
video flag, if we narrow down the issues to be akin to what was
addressed in the video flag rules, I think we could do it tomorrow.
The video flag, don't forget that is just about indiscriminate
redistribution over the Internet, that is what the film industry was
concerned about, broadcasters, all the content owners at the time.
Now it seems that the concerns have expanded beyond that.
If we were back on that, we would say as broadcasters
absolutely, we will put a flag in and we will protect indiscriminate
redistribution tomorrow. It is agreeing on all these other usage
rules.
MR. ENGEL. So you have been saying that we need more time
to work this out, and the other side has been saying, yeah, but you
can't work it out forever because you keep talking and talking.
What do you think is a reasonable goal? What are we talking
about here in terms of working on it, another year, another 6
months, another 2 years? What do you think is a reasonable or
would be a reasonable time?
MR. LEVIN. I would say that we have got two groups. We have
got the Audio Flag Task Force that looks at the policy, what the
policies are to be, and then we have another group, the Technical
Implementation Working Group, that looks at whether or not it is
technologically feasible to do what the policy agreements have
been. I think if we get the right folks on both of those task forces
that we should be able to do it in 6 to 12 months. We should be
able to have some kind of an agreement nailed down. I am hopeful
that it could be sooner than that but I hate to be late.
MR. ENGEL. So in your view Congress shouldn't rush into
anything because you think that in a reasonable amount of time--
MR. LEVIN. Well, that is right. And there is another thing, Mr.
Engel, we don't know how the marketplace is going to react to HD
radio. We don't believe that recording off the radio or certainly
what the recording industry is calling downloads is the killer
application in HD radio. That is not why we are developing it. We
think the killer application of HD radio is the improved quality and
the improved programming that we are going to be doing. You
have to remember radio is different. It is not a pristine copy or
recording that is made of a CD or a download from Sirius or
iTunes or anyone else. You know, you still have the DJ banter.
You still have the looping over of one song into another. You have
a lot of things that are endemic just to the radio industry. That is
the kind of entertainment promotion that we do on radio. So I
don't think that it is going to displace sales, but we don't know yet,
and I think that is really the key.
MR. ENGEL. Mr. Bainwol, you seem to be jumping out of your
skin.
MR. BAINWOL. Yeah, I am, through my suit. If it is not the
killer ap, then why not go with the Ferguson bill which gives us
plenty of time to work out this aggregation place, this so-called
non-killer ap. Why is it so vital that they have to have that for the
rollout?
MR. LEVIN. Well, for one thing what you all want to do is to--
really you say you are not against the TiVo-like device but in
actuality it does become a prohibition on a TiVo-like device
because it is not just about prohibiting--it is not just allowing time
shifting. What it would do when you say disaggregating with
TiVo you are effectually disaggregating.
MR. BAINWOL. You are not watching the monologue when
you tape Leno.
MR. LEVIN. You are not watching the monologue. You are
specifying which programs you want to watch, and those are the
ones that come up on your TiVo. And, frankly, history has shown
that when people can do that it hasn't displaced sales, it has
increased sales. You go into any video store or Best Buy and all
you see are lines. They can't keep enough Family Guy on the shelf
or Simpsons or other serial programs that are on television. These
sales have skyrocketed despite TiVo.
MR. ENGEL. Mr. Bainwol, let me ask you. Isn't a lot of this
compensation too? The Audio Home Recording Act, that would
not be at the jurisdiction of this committee from what I understand.
Isn't a lot of things you are talking about a need to from your point
of view renegotiate fees under that Act? Would that not be better
than you to do it in legislation here?
MR. BAINWOL. Some of our satellite friends said this is about
leverage in the discussion about the performance rate, and that is a
totally separate question and that is a flawed diversionary
argument. This is simply about our one window, our primary
window, of deriving the revenue which would reinvest new
creativity which is sales. The XM device slogan, it is the mother
ship, it is not a pod. What that means is you get content for free.
They are giving away our stuff in order to make their service more
viable. And I understand why, but it is not fair.
MR. ENGEL. But is it not true, and I would just like to give Ms.
Ziegler a chance to respond to that, but is it not true if I purchase
Sirius and I record stuff on the S50 and then I cancel, I lose that
stuff, don't I?
MS. ZIEGLER. Currently, no, only because we couldn't
technically implement it. It is true, all the XM devices and any
future device, it should be tied to the subscription, you are correct.
I would like to make that distinction. Mr. Bainwol talks about it as
a download, it is the same thing. We are much more. We are
recording of a transmission that comes from radio. When you get
a download, what you want, when you want it. It is available to
you. When you record off the radio it is whatever the DJs happen
to play, whatever you are there to listen to. The quality is just
simply not the same.
There is DJ talk over their segways. There are things in there.
It is a much, much lower rate. But most fundamentally what you
are talking about, you can only listen to it on one device. If you
owned a download you could listen to it on your computer, you
could burn it on to CD, you could listen to it on another device.
The ownership right is very, very limited. It is just the ability to
listen to it on one particular device, and as you are saying it is tied
to the subscription. So to talk about it as a complete replacement
for a download those are two different experiences, two different
products.
MR. UPTON. The gentleman's time has expired. Mr. Bass.
MR. BASS. Thank you, Mr. Chairman. I just have one
question. I have been following this discussion, and as others have
said I think this is very informative. Can somebody clarify for the
record the difference if there is a work out on the video flag but not
the audio. If the video flag is okay, what is wrong with the audio
flag as well, and why is it different?
MR. LEVIN. The video flag, and it is a great question, the video
flag prohibits indiscriminate redistribution over the Internet. That
was what all the content owners were very concerned about several
years ago and that is the extent to which the video flag regulates
the content, the distribution. The audio flag, depending on what
proposals you look at, could very likely affect how the content is
distributed within the home, what people can do with it, whether
they can take it from their home to the car to the beach to the gym.
There are an awful lot of open-ended questions with regard to
these proposals that were not a part of the flag.
MR. BASS. Ms. Ziegler makes a point that on the what are
being called the S50 the content is lost when you stop subscribing.
Is the same true of the iPod?
MR. BAINWOL. In the case of the iPod you don't have to
subscribe. You are actually moving--it is total ownership. There
is a continuum here. In the old days, you had a radio which you
listened to and you had ownership where you bought either an
album or a cassette or--
MR. BASS. Mr. Bainwol, are you willing to concede that the
quality or the ownership of the material in the S50 is not as good or
not the same as the iPod?
MR. BAINWOL. There are two different issues. There is
ownership and quality. The quality relative to the iPod for most
applications is virtually indistinguishable.
MR. BASS. The voice-over question is when it is vastly
overblown?
MR. BAINWOL. This is nitch channeling where it is
commercial free. I listen to XM all the time and you get lots of
pristine quality. It is not a problem. The ownership question I
think is a more complicated one. There was a continuum of
ownership in the radio. Now you have all these different elements
along the continuum including subscription and this is--
MR. BASS. When that subscription expires there is nothing
whereas on iPod when there is no subscription essentially, if the
iPod breaks you still have the music on your main storage in your
computer. Now you can't use the iPod--is there a difference in
quality of ownership between--
MR. BAINWOL. There is a difference in control, correct. We
would say that in terms of the user, while they have the
subscription, it is very much like the iPod, but in terms of enduring
it is closer to the subscription model. It is like Rhapsody. It is like
a tethered download that when your subscription expires you have
lost. We are not suggesting that this has to be a one for one like an
iPod. We are suggesting that you are deriving some control and
there should be an additional--
MR. BASS. So there should be some compensation. It doesn't
necessarily have to be equivalent. Fair enough. I will yield back,
Mr. Chairman.
MR. FERGUSON. [Presiding] I think Mrs. Blackburn is next.
MRS. BLACKBURN. I was trying to be certain that Ms. Bono
was not overlooked. She and I kind of like this issue a little bit.
We kind of like this legislation so I wanted to be sure that all of
you heard from both of us on this. Mr. Harris, I want to say a
special welcome to you. I am sorry that I was not here at the
beginning--
MR. HARRIS. Thank you.
MRS. BLACKBURN. --of the hearing, but we appreciate your
being here. And I understand what while I have run to the MPAA
meeting on behalf of some of my constituents that we had a
discussion of what you are paid when you have a paid for
performance and comparing that with a download.
MR. HARRIS. Congresswoman, basically under the present
format if something can't be worked out I basically will not be
compensated at all, which would if you compared it to mechanical
royalties as I have received for quite a few years now and
performance royalties, those mechanical royalties are basically
gone. They are history. And in my case, this varies from writer to
writer, but in my case my mechanicals, which are sales, and my
performances are approximately equal, I found this out, in sales.
So I would be losing at least half of my income.
MRS. BLACKBURN. At least half. Well, you know, Ms. Ziegler
said in her testimony that she didn't consider the current situation
to be a serious threat so you would disagree with that comment, I
guess?
MR. HARRIS. It is very hard for me to understand how people
cannot see that as many years as we have been through this in
other forms that this is a continuum but now it is threatening the
livelihoods of not only the songwriters, but at one point I had my
own publishing company in the late '90s and I had secretaries, I
had people that pitched songs, I had people working in the tape
room making copies so those people could go out and pitch the
songs. All these people had to be paid. There are so many--over
half of those--
MRS. BLACKBURN. To a songwriter or a publisher it is a
serious threat.
MR. HARRIS. It is a serious, serious threat. These are things
that are around the songwriter now who independently employ
somebody because things have gotten tighter and tighter and
tighter.
MRS. BLACKBURN. Okay. Mr. Levin, I think I want to come to
you. I found your choice of words, you made a reference to
protecting content and paying for performance, paying those
royalties as a content protection scheme. I found that an
interesting choice of words. You know, I think that the
Constitution is a pretty good protection scheme if that is going to
be your choice of words for being certain that our creative
community in this country are fairly compensated for the works
that they do create.
So I think that they deserve to have that compensation. I have
got another question for you. You know, is Clear Channel or the
NAB working with the device manufacturers to look at the next
generation devices that are going to operate similarly to the XM
and Sirius device, and how do you plan to address the download
licensing issue for that next generation of devices?
MR. LEVIN. I talked to our chief engineer yesterday and asked
that very question, and the answer was that there are no discussions
right now on the next generation devices. Right now all of the
impetus and all the energy is being put into getting first generation
devices produced. It is a market-driven phenomenon unlike the
DTV transition. Consumers don't have to adopt digital radio, and
so we are in a very precarious position in trying to persuade
consumer electronics manufacturers to produce the devices, trying
to persuade retailers to sell them, and trying to persuade auto
makers to stick them in the cars.
It is really a Catch 22 because you need to have consumers out
there who will demand them in order for all of those different
constituencies to agree to produce them. Much different than DTV
where everybody needs to buy a digital television set or a DTV
converter box or they won't get television. Totally different. This
is completely market driven.
MRS. BLACKBURN. Well, my time is up. I have some other
questions. I think we could keep you here asking questions all day
long but thank you for your interest in the issue.
MR. FERGUSON. Ms. Bono, do you have a unanimous consent
request?
MS. BONO. Thank you, Mr. Chairman. Just a UC that I might
be allowed to ask a question since I am not a member of the
subcommittee.
MR. FERGUSON. Without objection. Hush, Shimkus.
MS. BONO. Boy, he is crotchety today. Thank you, Mr.
Chairman, and Mr. Shimkus for allowing me to ask a question.
And I am going to jump ahead, I guess, before Greg if that is all
right. Thank you. Again, being so close to last so many great
questions have been answered and there have been moments I
think between Mr. Levin and Bainwol, you two look like you are
negotiating a prenuptial agreement. It is postnuptial and you are
beginning to say--one of you said we need this, and the other one
argued you don't need it, but if you don't need it as Mr. Bainwol
said then why not go ahead and do it.
And I think the question that was just asked, Mr. Levin also
said no discussions on next generation devices. Then why not do it
anyway? You know, last night I saw a commercial for I think it
was a Nissan Quest, and I talked about this in the last hearing we
had, this Quest, and again it might be another minivan, whatever it
was, it was showing you probably the plug in for the iPod, it was
showing you probably the rear boom box speakers that now lower
down out of the lift gate. It not once talked about the engine that
was beneath the hood, the tires that were on the vehicle, the brakes
that were on the vehicle or the air bags. But it really talked about
iPods and boom boxes.
So clearly there is a value on music in our society that goes
well beyond this discussion today. So when we talk about Mr.
Levin said it is not a problem today, I am one of the first people
who can criticize the music industry for failing to react to the
Internet. I have always said the Enter key is the artist's greatest
tool whether it is your songwriter, performer, whoever it might be.
And now we are simply saying we don't know what the future
holds but we know that the songwriter deserves protection. I think
that is a laudable goal.
MR. LEVIN. I agree with you, Congresswoman Bono, and in
fact we are involved in those discussions, and those discussions do
extend to the capabilities of future devices even though we are not
currently negotiating those kinds of specs with the device
manufacturers.
MS. BONO. But, you know, years ago I sat with the Magineers
from Disney and they talked about the future actually not even
coming into place for the written word. There is no question, we
don't know where we are going to go, and for you to say currently
we are not talking about this, that does not mean innovation nor
high school--I mean college students are going to entirely break
your system and start downloading your HD radio. Even though
you don't think it will happen, we don't know that it won't. So I
am just encouraged to hear my Chairman say let us mark it up. I
was very encouraged to hear him say that.
I would like to go a little bit to a point that he made. And again
I will--and I know with Mrs. Blackburn, Mr. Ferguson, Mrs.
Cubin, a number of us will encourage the Chairman to go ahead
and move for a markup. But I am curious, I would like to actually-
-Mr. Bainwol, he talked about something that is problematic for
me too and that is including H.R. 1201 in that because I still--we
have come a long way and the Chairman believes now that we are
at this perfect point, with DRM, the iPod, that is fair use. How
many devices can you marry now your iPod to--how many--one
computer can support how many iPods, six, five?
MR. BAINWOL. With Apple you have lots of flexibility both
with the number of downloads you make of a single song and the
number of applications that you use it for.
MS. BONO. But again the H.R. 1201 to me, the basis of it is so
we can make it legal to circumvent encryption technologies that
are the very thing that we are touting today as being so good, so
why would we want to marry H.R. 1201 into the broadcast flag?
MR. BAINWOL. I think Mr. Barton, Chairman Barton, was
referring to a desire to make sure that there can be backup copies,
and the music community is long past the point where we have
made that available. The challenge we spoke about at some point
before in terms of copy protection was about copy protection. It
was about allowing multiple copies. We are fine with that. If a
consumer buys Stairway to Heaven and they want to play it in a
cabin and play it in the car and play it at home, that is perfectly
fine.
And I think that is what Mr. Barton wants to see happen across
the content community. I don't know that he necessarily was
making reference to the anti-circumvention piece of this.
MS. BONO. Thank you. Mr. Harris, I just wanted to also let
you know that Mrs. Blackburn and I hosted a town hall meeting in
Nashville about 2 weeks ago during Fan Fare Music Fest. We had
a very constructive dialogue with a number of songwriters, and I
just wanted to actually take this opportunity to point out what a
champion Marsha Blackburn has been. And as we were in
Nashville, we had a songwriter talk about the INO, which we
haven't talked about the INO devices much today as we should
have. But this songwriter was actually in tears when she said that
her livelihood, that her mother--she saw this device, the
advertisement for it and she told her mother, Mom, my future has
just been written out, that I no longer have the opportunity to make
a living to take care of my children. So, Mr. Harris, if you want to
make any last comments--oh, I have got 9 seconds. It is all yours.
MR. HARRIS. I would only thank you for that story, that it is
just one in literally thousands over the last little bit, and as I was
saying to Congressman Blackburn, they come in all forms,
songwriters and all of the support people that go along with the
fact that these songwriters can no longer make the kind of living to
even have publishing deals and publishers are cut way back, so all
of this has transpired since about 1995. That is when it really
started to go down the hill. We had been on a roll prior to that.
But it is quite sad and what pains me when I was growing up, I
listened to Cole Porter, I listened to the songs that Sammy Kahn
wrote, and then of course Elvis came along and changed all of that
for me, and moved on into a new genre. But I am desperately
afraid that the talented people that want to make music now if we
don't do something now, if we don't do something at this point, we
will be up here as we have for the last 20 years over and over and
over and over with every new technology.
MR. FERGUSON. Mr. Walden is next.
MR. HARRIS. Thank you.
MR. WALDEN. Thank you, Mr. Chairman. Mr. Levin, there
was some discussion about I think the term was indiscriminate
redistribution on the Internet that either you or Mr. Bainwol have
opposition to some sort of flag to preclude that, is that accurate?
MR. BAINWOL. That is correct. It is not sufficient but it is
necessary.
MR. WALDEN. And obviously I think I am the only person
here that is actually in the radio business so I always just claim that
up front for 20 years. And I thought back to something my father
told me. He started in radio in 1934. When television came along
everybody in radio said, well, that is the end of radio. And there
are those who say with satellite coming along it is the end of radio
or it is the end of something else. And I go back far enough to
remember when we would track albums at night. The recording
industry wasn't exactly excited about that because you would have
the whole album tracked at night.
And that was something that was objected to. I am just trying
to figure out how we roll out a new technology here in HD radio
that still allows for the artists and all to be compensated but also
allows the consumer to take advantage of a new device. I know I
have an iPod. I have one of those gadgets you plug in. I shouldn't
admit this but sometimes I am out of the range of the over the air
broadcast and I refuse to sign up for satellite for different reasons.
But none of those have done away--it seems like we have
enhanced the marketplace and enhances to gather music. Now I
am trying to sort out here. I know when I download or my son
does onto the computer or iPod a song, that remains resident on my
computer. It can be put onto his iPod. We can still use our
computer and connect it into our home audio system, and you
don't have any problem with those uses, correct?
MR. BAINWOL. Correct. That is fine.
MR. WALDEN. So if I have it on my digital player device, you
don't have a problem if I collected that song.
MR. BAINWOL. We want you to. We simply want to license it.
MR. WALDEN. Okay. But today I could collect that audio off
of a broadcast over the air, correct, and put it on some device.
Now the question is quality of that audio.
MR. BAINWOL. Correct. Quality and ease.
MR. WALDEN. Well, now talking about ease.
MR. BAINWOL. What you can do in today's world and the
analog world is press record button as you are listening to the radio
so you are listening, you do have talk over issues, you do have
timing issues. It got to be part of it. This is an entirely different
animal. This is scrolling through and saying by meta data I am
going to keep this one, that one and that one.
MR. WALDEN. All right. But, Mr. Levin, you are saying you
don't have a problem with trying to restrict that, right?
MR. LEVIN. That is correct. The devil obviously is in the
details but, yeah, we don't want people to be able to go out and
cherry pick.
MR. WALDEN. Without listening in order.
MR. LEVIN. Without listening to the radio at all. Obviously,
that would be worse for our business more than anything else. But
there are certain proposals that you have to record, you know,
hours, a big block of time.
MR. WALDEN. Is that what you are saying, Mr. Bainwol, you
got the big blocks?
MR. BAINWOL. We have already, I think, agreed on in terms of
this piece that--am I allowed to say, where are we?
MR. LEVIN. Well, these are private discussions.
MR. BAINWOL. Put it this way.
MR. WALDEN. In the theoretical. Do you have any problem
with recording in blocks of time and then--okay, let me put it this--
I get Led Zeppelin and I have the whole CD, and there is one song
I really like and I want to get rid of the rest.
MR. LEVIN. You can't do that under their proposal.
MR. BAINWOL. That is automatic cherry picking and that we
have a problem with, but a block of programming, time shifting,
not a problem. Manual recording, not a problem. Ability to scroll
through data and say I am going to keep these top 20 hits instead of
going to the store to buy them, that we have a problem with.
MR. LEVIN. So it is like recording three hours of prime time in
the evening just to get one sitcom at 9:00, and you have to listen to
it in order to get it.
MR. WALDEN. But, you know, Mr. Bainwol, you said you
didn't have any problem with TiVo.
MR. BAINWOL. Correct.
MR. WALDEN. With TiVO I can, and I don't have that either,
not that I am technologically challenged, I am actually a HAM
radio operator, but in the broadcast industry the only way we get
paid is through advertising. So what you are saying is it is okay to
have TiVo and zap the commercials and only run the programming
that you want to see. You don't have a problem with TiVo, you
said.
MR. BAINWOL. We are trying to accommodate, and we don't
have a problem with time shifting, but this is different than TiVo
because what you are doing is you are taking the monologue from
Carson or Leno's opening gamut. When you TiVo something you
are getting the whole block of the program. A song is not a
program. The program is a block--
MR. WALDEN. That I can zap and get just what I want and then
only save what I want, can't I?
MR. LEVIN. Yes.
MR. WALDEN. So I can archive only the parts I want, correct?
MR. LEVIN. Yes, but--
MR. WALDEN. So I end up at the same place that you are
objecting to.
MR. BAINWOL. But there is a big difference, and that is they
get paid when they broadcast over the air, we don't, and that is true
over the air and it is not true on satellite.
MR. WALDEN. Well, they are not supposed to localize but
anyway that is another subject for another day because they agreed
never to do that. But anyway, Mr. Levin, do you have any final
comment?
MR. LEVIN. Well, Mr. Bainwol keeps bringing up the
performance rights fee and the fact that radio doesn't pay for it and
says that that is an issue that is completely separate and a red
herring but keeps bringing it up, so I feel like I need to respond to
it. Historically, as you know, radio has been exempt from the
performance rights fees--
MR. WALDEN. Although we pay ASCAP.
MR. LEVIN. We pay ASCAP. We pay the publishers. We pay
all of that. But we don't pay the recording industry for the
performance right. And the reason we don't do that is it is a very--
there are mutuality--
MR. WALDEN. It is a symbiotic relationship.
MR. LEVIN. It is a symbiotic relationship. We provide a
tremendous amount of promotion for those songs which later get
sold and so when we talk about artists being compensated, radio air
play is the number one way that artists make a living because their
music is purchased as a direct result of radio air play and the
record labels agree with that.
MR. BAINWOL. I know this has run long and we cut into
Gary's time and for that I think I should probably filibuster some
more, but let me make two very quick points. One is that it is true
in the U.S., and I think only true in China and Singapore, that we
don't have a performance right. This is not about the performance
right. This is a different fight. But the point is sales is our window
of revenue. Okay.
MR. WALDEN. But nobody has a broadcast structure like the
U.S. has, do they? It is mostly state run and controlled.
MR. BAINWOL. The reality though is that creators have
multiple streams of compensation and, here, the investor and the
artist do not enjoy a right, that is factual. So what they are doing is
they are creating a device that creates promotional value--I am
sorry, broadcast does create interest but they are satisfying that
interest with the very device mitigating the probability of a sale so
they are promoting and satisfying the promotion. That doesn't do
us a whole lot of good. We have one window that generates the
reinvestment and new art, and that window is being compromised
by this device.
MR. WALDEN. But that is not a broadcast device.
MR. BAINWOL. This particular one is not but in a couple of
years we will be right back at the table.
MR. FERGUSON. That is going to have to be the last word. We
have a vote on. Ms. Ziegler, Mr. Harris, Mr. Levin, Mr. Bainwol,
thank you all very much. We are going to end this panel. We very
much appreciate it. This has been very enlightening, I think, for all
of us. We are going to take about a 30-minute break for our vote.
We have a series of votes. We are going to come back. We will
do the second panel in about 30 minutes.
[Recess.]
MR. FERGUSON. We will reconvene. I am sorry. It took a
little longer than any of us thought. If I could ask our second panel
to be seated at the table. We have Mr. Fritz Attaway who is
Executive Vice President and Special Policy Advisor to the
MPAA; Ms. Gigi Sohn, who is President of Public Knowledge;
and Mr. Gary Shapiro, President and CEO of the Consumer
Electronics Association. Welcome to two of the three of you--all
three. Here we are. Mr. Attaway, why don't you go ahead, 5
minutes for your opening statement, please.
STATEMENTS OF FRITZ ATTAWAY, EXECUTIVE VICE
PRESIDENT AND SPECIAL POLICY ADVISOR,
MOTION PICTURE ASSOCIATION OF AMERICA;
GARY SHAPIRO, PRESIDENT AND CHIEF
EXECUTIVE OFFICER, CONSUMER ELECTRONICS
ASSOCIATION; AND GIGI SOHN, PRESIDENT,
PUBLIC KNOWLEDGE
MR. ATTAWAY. Thank you very much. Thank you for giving
me this opportunity to talk about the video broadcast flag, and I
want to emphasize that the video flag is very different from the
audio flag, so take everything that you learned in the last panel and
file it away for a few minutes and focus on the video flag. I also
should mention that the National Association of Broadcasters is
very supportive of the video flag so it is a little different position
that you heard on the audio flag.
You have my written statement in which I have attempted to
set forth a comprehensive view of why the video broadcast flag is
in the public interest. In the few minutes I have here, I would like
to just focus on a couple of key points. First of all, the flag is
narrowly focused to prevent mass redistribution of digital content,
nothing more. The FCC news release when the rule was adopted
makes clear that the flag will not require consumers to purchase
new equipment. It will not in any way effect the ability of
consumers to make digital copies. It will not limit functionality of
existing devices and yet will not affect digital VCRs, DVD players,
computers, or any other device that does not contain a digital tuner.
When the broadcast slide was in effect, only 13 technology
applications were filed with the FCC for certification. These 13
technologies were sufficient to implement the video flag in every
covered consume, device that was scheduled to enter the
marketplace when the flag was to become effective in July of
2005. The claim that the FCC would have to pre-approve every
TV set, computer, and digital video recorder is simply false. The
primary point I want to make today is that the sole purpose of the
flag is to provide a level playing field for off-air broadcasters and
to protect consumers who rely on free off-air TV for entertainment
and information.
I put up a poster there. I know it is hard to read but that is a
listing of all the channels available on one of the major multi-
channel video program distributors. The vast majority of these
program channels are not off-air broadcasts and the content on
these channels can be protected against indiscriminate
redistribution. Many provide protection against redistribution
today, and I point out that at least I am not aware of any consumer
complaints.
Only off-air broadcasters, those few that are highlighted in
yellow, don't have the ability to prevent redistribution over the
Internet and other digital networks. The broadcast flag will give
broadcasters the stability so they can continue to attract high value
content that must be protected against mass redistribution in order
to preserve its value. Eighty-five percent of households subscribe
to a multi-channel service that can require content protection. The
TV devices in those households will have to provide the same kind
of protection that the flag would require.
That is why device manufacturers do not oppose the flag. They
are going to have to build devices that have that functionality in
any case. Whether or not the flag is reinstituted, the vast majority
of digital TV channels received by the American public will be
capable of protecting content against mass redistribution. The
question presented by this hearing is whether free off-air
broadcasters will be able to provide the same protection and
continue to have access to high-value content. I hope that you will
give them that ability to compete on a level playing field by
adopting or reinstituting the broadcast flag. And I also hope that
you will not do that while repealing the DMCA, which is
unfortunately what H.R. 1201 would do. Thank you very much.
[The prepared statement of Fritz Attaway follows:]
PREPARED STATEMENT OF FRITZ ATTAWAY, EXECUTIVE VICE
PRESIDENT AND SPECIAL POLICY ADVISOR, MOTION PICTURE
ASSOCIATION OF AMERICA
SUMMARY
Thank you for giving me this opportunity to speak to you today
about the Broadcast Flag and whether content protection and
technological innovation can coexist.
The short answer is that content protection and technological
innovation CAN coexist, and ARE coexisting. American
consumers, and indeed consumers around the world, have entered
a golden age of access to audiovisual content. Never before have
consumers had so much choice in terms of the movies and TV
shows available to them and the means by which they are
delivered.
Digital rights management (DRM) technology enables secure
delivery of movies and TV shows to consumers, exponentially
expanding consumer choice. The high-tech and movie industries
share a common interest in providing consumers new viewing
opportunities, which will create vast new markets for both
consumer technology and content.
The greatest challenge facing the motion picture industry today
is the widespread trafficking of movies and television shows on the
Internet. Because it is transmitted without encryption or other
technological protections (i.e., "in the clear"), there is no
technological protection against anyone redistributing digital
broadcast television content over the Internet and other digital
networks. By contrast, cable and satellite, and even authorized
Internet, distribution can include protections against such
redistribution. The likelihood of wide-scale redistribution of
content distributed over digital broadcast television creates a
disincentive for program owners to license high value content
through that distribution channel. Without this high-value
programming, local stations would lose viewership and,
correspondingly, revenue. Loss of this revenue would threaten
their continued existence, jeopardizing the source of local news
and public affairs programming for millions of Americans.
In order to provide a level playing field for off-air broadcasters,
and protect the millions of consumers who rely on free TV, the
Federal Communications Commission (FCC) adopted narrowly
targeted regulations allowing digital TV stations to prevent the
indiscriminate redistribution of their programming. The basic
outline of the Broadcast Flag was developed and approved in
principle by a large and diverse group of consumer electronics,
computer technology and video content companies. Use of the
Flag allows broadcasters to offer content creators the same
protection against Internet redistribution that conditional access
systems like cable and satellite can provide. Nothing in the
Broadcast Flag regulation requires broadcasters to embed the Flag
in content; the Broadcast Flag regime merely allows a content
provider to choose whether to include protection against Internet
redistribution.
The FCC certified thirteen separate technologies for
implementing the Flag, including one that provides for remote
access of recorded TV programs. It is important to note that the
Broadcast Flag would have no effect on the copying of TV
programs or distributing protected digital broadcast content within
the personal digital network environment. The Broadcast Flag
solution will have no impact on existing consumer equipment. The
cost impact on affected equipment going forward will be
insignificant.
The D.C. Circuit Court of Appeals, invalidated the FCC's
regulations on purely jurisdictional grounds. Significantly, no
consumer electronics or computer technology company required to
implement the Broadcast Flag challenged the FCC regulation.
It is imperative that Congress act quickly to enact narrowly
crafted legislation to reinstate the FCC's Broadcast Flag ruling.
The marketplace has already anticipated that the Broadcast Flag
will be required and many manufacturers of digital television
devices are now producing equipment in compliance with the FCC
Broadcast Flag regulations. It is worthy of note that there has been
no discernable consumer resistance to these broadcast flag
compliant devices and no surge of consumer complaints.
Let me add one cautionary note. While we strongly support
legislation that will reinstate the Broadcast Flag, we cannot support
legislation that will do that at the expense of the anti-
circumvention provisions of the DMCA. It has been suggested
that HR 1201 be attached to Broadcast Flag legislation. However,
that type of legislation would as a practical matter repeal Section
1201 of the DMCA, would compromise efforts to fight piracy and
inflict devastating harm on an important American industry.
I appreciate this opportunity to discuss these matters of concern
to our industry.
Chairman Upton, Ranking Member Markey, members of the
Subcommittee, thank you for giving me this opportunity to speak
to you today about the Broadcast Flag and whether content
protection and technological innovation can coexist.
The short answer is that content protection and technological
innovation CAN coexist, and ARE coexisting. American
consumers, and indeed consumers around the world, have entered
a golden age of access to audiovisual content. Never before have
consumers had so much choice in terms of the movies available to
them and the means by which they are delivered - theaters, VHS,
DVD, cable, satellite, broadcast TV, Internet, advertiser supported,
subscription, pay-per-view, video-on-demand - the list is long and
growing. And television programming is being made available to
consumers in even more ways (e.g., via mobile phones).
The engine that is driving us into this golden age of consumer
choice is technology. The motion picture industry has
enthusiastically embraced innovative technology to create new
markets and bring new choices to consumers. Here are a few of
the recent announcements:
Warner Bros. partners with Free Record Shop using
P2P distribution
Universal partners with LoveFilm in UK, offering
downloads
CBS and Verizon FiOS TV partner to carry select
programs
Disney offers feature length film on ITunes
CBS delivers college basketball "March Madness"
online
ABC offers free streaming of shows at ABC.com
Disney re-launches MovieBeam as a new digital
VOD distribution channel
NBC Universal launches Aeon Digital set top box
MTV Networks partners with Microsoft to
offer digital music and video downloads via URGE.
MTV Networks offers thousands of free on-demand
videos via its broadband channels, including MTV
Overdrive, Nick Turbo, V-Spot and Motherload
CBS offers select programs on demand
Warner Bros. launches P2P service In2Movies in
Germany
Fox announces VOD and DVD windows collapsed
NBC Universal announces Peer Impact deal
Disney announces download-to-own deal for full-
length feature films with CinemaNow
Google Video beta launched - essentially going
with a wholesale reseller model - creating an
iTunes-like store.
However, technology brings challenges as well as
opportunities. The greatest challenge is to maintain control over
the distribution of movies and TV shows in order to recoup the
cost of production and spur investment in new projects.
Fortunately, technology itself is a big part of the solution to
illegal distribution. Digital rights management (DRM) technology
enables secure delivery of movies and TV shows to consumers,
exponentially expanding consumer choice. The high-tech industry
is our partner in this endeavor. Contrary to the perception of some,
the high-tech and movie industries are not enemies. To the
contrary, we share a common interest in providing consumers new
viewing opportunities, which will create vast new markets for both
consumer technology and content.
The greatest challenge facing the motion picture industry today
is the widespread trafficking of movies and television shows on the
Internet, mostly through so-called peer-to-peer "file sharing." The
term "file sharing" is a popular euphemism for copying, which in
the case of copyrighted motion pictures and TV programming is
stealing.
DRM technology is being employed by movie distributors to
prevent unauthorized reproduction and redistribution of digital
works. However when movies and TV shows leak out of a
protected environment, whether through hacking of DRM
measures, copying through the "analog hole," illegally camcording
off theater screens, or other means, they can be made available to
literally tens of millions of people over the Internet,
instantaneously and with little or no degradation of quality.
Movie studios are actively engaged in finding ways to stem this
leakage, such as through use of more sophisticated DRM
measures. They are also heavily involved in encouraging
awareness of and respect for their rights under copyright laws
around the world, not only through infringement actions, but
through consumer education and working with colleges and
universities to develop codes of conduct for students using digital
networks.
One source of leakage that only can be addressed by the
Congress is digital broadcast television. Because it is transmitted
without encryption or other technological protections (i.e., "in the
clear"), there is no technological protection against anyone
redistributing digital broadcast television content over the Internet
and other digital networks. By contrast, cable and satellite, and
even authorized Internet, distribution can include protections
against such redistribution. The likelihood of wide-scale
redistribution of content distributed over digital broadcast
television creates a disincentive for program owners to license high
value content through that distribution channel.
The effects of this disparity will become yet more pronounced
as more and more consumers access their content from digital
broadcasts, in preparation for the mandated switch-over from
analog to digital broadcasting in 2009. Program owners may
determine that the value of their programming is diminished so
significantly by redistribution over the Internet that they choose to
distribute their programming only through distribution channels
that can offer some protection. Without this high-value
programming, local stations would lose viewership and,
correspondingly, revenue. Loss of this revenue would threaten
their continued existence, jeopardizing the source of local news
and public affairs programming for millions of Americans.
In order to provide a level playing field for off-air broadcasters,
and protect the millions of consumers who rely on free TV, the
Federal Communications Commission initiated a proceeding aimed
at adopting narrowly targeted regulations prohibiting the
indiscriminate redistribution of digital broadcast television
programming. In November 2003, with the purpose of speeding
consumer transition to digital television, the FCC issued a
regulation requiring implementation of the "Broadcast Flag" as of
July 1, 2005.
The basic outline of the Broadcast Flag was developed and
approved in principle by a large and diverse group of consumer
electronics, computer technology and video content companies
participating in the Broadcast Protection Discussion Group, an
informal, open forum created for the purpose of finding a solution
to the broadcast redistribution problem. The BPDG proposed
implementation of a Broadcast Flag as the most appropriate and
efficient solution for the protection of digital broadcast television.
Use of the Flag allows broadcasters to offer content creators the
same protection against Internet redistribution that conditional
access systems like cable and satellite can provide. Nothing in the
Broadcast Flag regulation requires broadcasters to embed the Flag
in content; the Broadcast Flag regime merely allows a content
provider to choose whether to include protection against Internet
redistribution.
Subsequent to its adoption of its Broadcast Flag regulation, the
FCC certified 13 separate technologies for implementing the Flag,
including one that provides for remote access of recorded TV
programs. It is important to note that the Broadcast Flag would
have no effect on the copying of TV programs. The Broadcast
Flag solution will not prevent consumers from making an
unlimited number of physical recordings of DTV programs, or
from distributing protected digital broadcast content within the
personal digital network environment. Furthermore,
implementation of the Broadcast Flag solution will have no impact
on existing consumer equipment. The cost impact on affected
equipment going forward will be insignificant.
Despite the broad consensus in favor of the Broadcast Flag, the
FCC's authority to adopt Broadcast Flag regulations was
challenged before the D.C. Circuit Court of Appeals, which
invalidated the FCC's regulations on purely jurisdictional grounds.
Significantly, no consumer electronics or computer technology
company required to implement the Broadcast Flag challenged the
FCC regulation.
It is imperative that Congress act quickly to enact narrowly
crafted legislation to reinstate the FCC's Broadcast Flag ruling.
The marketplace has already anticipated that the Broadcast Flag
will be required and many manufacturers of digital television
devices are now producing equipment in compliance with the FCC
Broadcast Flag regulations. Moreover, consumer equipment that
includes one or more of the same 13 content protection
technologies approved for use under the Flag regime is already
being deployed, so most manufacturers will be building equipment
that will work seamlessly under the Broadcast Flag regime in any
event. It is worthy of note that there has been no discernable
consumer resistance to these broadcast flag compliant devices and
no surge of consumer complaints.
Let me add one cautionary note. While we strongly support
legislation that will reinstate the Broadcast Flag, we cannot support
legislation that will do that at the expense of the anti-
circumvention provisions of the DMCA. It has been suggested
that HR 1201 be attached to Broadcast Flag legislation. However,
that type of legislation would as a practical matter repeal Section
1201 of the DMCA, would compromise efforts to fight piracy and
inflict devastating harm on an important American industry.
Chairman Upton, Ranking Member Markey, members of the
Committee, I appreciate this opportunity to discuss these matters of
concern to our industry and I look forward to answering any
questions you may have regarding what I have just discussed.
MR. FERGUSON. Thank you very much. Mr. Shapiro, 5
minutes, please.
MR. SHAPIRO. Thank you for this invitation to testify on behalf
of the technology industry. We represent 2,100 companies and
$180 billion, and we believe that we are igniting the greatest
explosion of human creativity since the Renaissance and it is
driving America's rise to global leadership and innovation and
ingenuity. We believe that the rationale actually for the video flag
is debatable and for the audio flag it is actually non-existent. The
fact is that both of these bills would involve taking rights away
from lawful consumers and giving it to the content industry.
That is why if the committee chooses to move forward on
either of the flag bills we would hope that it should also protect
consumers by putting H.R. 1201 as part of the package. Let us
review the facts. We have a symbiotic relationship between the
content and technology industries. We need each other and in the
long term we do great things for each other. The problem is in the
short term the content industry reacts to every new technology with
fear, apprehension and cries for government intervention. The
track record is unbroken. They opposed the player piano, FM
radio, television, the cassette recorders, the VCR, the MP3 player,
the TiVo, and I could go on and on and on. But again and again
the content industries come here to Congress asking you to stop or
limit technologies. And most of the time you have chosen the free
market over regulation, and what has happened? Well, somehow
the sky doesn't fall. New revenue streams are created and the
economy and consumers have benefited.
The new villains today at this hearing are digital television,
digital radio or HD radio, and satellite radio. Right now we are
barraged by bills and lawsuits that would impose government
mandates on our products and limit private non-commercial
activities of consumers. The television broadcast flag and audio
flag are two such proposals. They are radically different in terms
of technology, implementation and impact on innovation and
consumers, and that is why we have two separate panels and that is
why I urge you to consider them separately.
The television broadcast flag emerged from a very rigorous
multi-year, multi-industry technical process. It was implemented
by the FCC and was only addressing redistribution over the
Internet. By contrast the audio flag bill, H.R. 4861, is aimed to
stop the copying, in other words, non-commercial recording inside
your own home. The bill targets unauthorized copying, not illegal
copying, but just unauthorized. And, secondly, no audio flag
actually exists. Unlike the video flag, the audio flag was not the
result of an industry process. The RIAA does not even have a
technical proposal. Instead, they come with a theoretical mandate
and so they come with a theoretical mandate and ask you to
legislate on it.
The audio flag bill also contradicts the Audio Home Recording
Act. Congress challenged us to come make a deal with the
recording industry. We did. It said digital audio recording
products shall not be restricted except by the law that was already
in there so you cannot make copies of copies and royalties shall be
paid and then they shall be produced. But yet here they are with
legislation and lawsuits. Also significant, a flag would bring
digital radio transition to a halt. The only way to accomplish the
bill's ban on copying is through an encryption scheme which
would obsolete all existing digital radios notwithstanding the
prohibition in the legislation.
Basically the RIAA is showing up very late to the party. They
ignored the CPTWG, they ignored the FCC. They have no
evidence of real harm and they are demanding that everyone bring
their lawful businesses to a full stop. The bill's proposal to lock
down satellite radio is even more outrageous. Exciting new
products are being sold by XM and Sirius that allow consumers to
record lawfully acquired material recording off of radio. They
comply with the Audio Home Recording Act. They cannot be
used for piracy and all digital recordings are locked into the device.
There is no demonstrated problem and there is no evidence of
harm to music sales.
These proposals are merely the latest step in a long-standing
attempt to tip the balance of copyright. We always hear about
balance, but we never hear about consumer rights and consumer
balance. The lawsuit provides an example that you should focus
on how much copyright has spun out of control. The record labels
have sued XM radio for these devices. They are suing for statutory
damages of $150,000 per song. That translates into $115 million
per XM device already sold. That liability against five devices
would exceed XM's 2005 revenues. Against 100 devices it would
exceed the entire revenue of the recording industry and if the INO
just becomes one-quarter as successful as the iPod, claim damages
would exceed the gross domestic product of the United States of
America.
This is all for a product that merely allows private recording. I
can't imagine a stronger disincentive to new innovation, but for the
RIAA, that is exactly the point. In the past two decades Congress
has passed some 20 bills expanding copyright owners' rights and
restricting consumer rights. That is why if Congress chooses to
give even more powers to the copyright owners, it must protect the
rights of consumers by passing H.R. 1201. It balances the
copyright laws and it allows the real pirates to be put in jail. It
codifies the Supreme Court Betamax decision and allows
consumers to bypass technical protection measures to exercise
their fair use rights. It is tough on pirates.
In conclusion, I ask you to be suspicious of claims that
government limits on consumers and innovation are necessary to
protect the content industry. Perhaps they are finally right. Maybe
this time the sky is really falling. But I believe you have earned
the right to be skeptical.
[The prepared statement of Gary Shapiro follows:]
PREPARED STATEMENT OF GARY SHAPIRO, PRESIDENT AND CHIEF
EXECUTIVE OFFICER, CONSUMER ELECTRONICS ASSOCIATION
Chairman Upton and members of the subcommittee, thank you
for inviting me to appear today on behalf of the Home Recording
Rights Coalition and the Consumer Electronics Association. At
CEA, we have more than 2,000 corporate members who contribute
more than $120 billion to our economy and serve almost every
household in the country. We thus believe it is vital to preserve
the innovation, integrity, and usefulness of the products that our
members deliver to consumers. The Home Recording Rights
Coalition was founded almost 25 years ago, in response to a court
decision that said copyright proprietors could, via a lawsuit, stop
the distribution of a new and useful product - the VCR. Even the
motion picture industry has admitted that it is glad that the VCR
was allowed to come to market. Congress should be very careful
not to impose any mandates that would be regretted later.
Before discussing the advisability of any sort of "flag"
legislation, I want to emphasize that both CEA and the HRRC
share and applaud Chairman Barton's and Mr. Boucher's
determination that if the Congress should find it appropriate to
proceed, it should do so only while enacting H.R. 1201 at the same
time. We believe this legislation, as formulated and introduced in
this Congress, would protect consumers without threatening any
legitimate service. It would not remove any tools against pirates.
It has been unfairly caricatured by some, and deserves
consideration on its own merits.
On the subject at hand, we have grave concerns. While the
rationale for a video flag is questionable, we have not seen any
rationale whatsoever for an "audio flag," nor have we seen any
actual technical proposal on the subject. Moreover, based on
experience this year, we are deeply concerned about how the
entertainment industry will interpret, tomorrow, the legislative
language that it accepts today. These industries are turning now to
both the Congress and the courts to seek new, damaging, and
unreasonable interpretations of legislation which, in retrospect, we
were perhaps na�ve enough to join them in supporting.
We worked closely with the music industry and this Committee
to help draft and enact the Audio Home Recording Act of 1992.
The music industry, then, agreed with us, and told the Congress,
that the AHRA was forward-looking legislation that would cover
all digital audio recorders, even devices that recorded music from
digital cable, satellite and terrestrial radio services. What they told
the Congress then is not what they tell you now; nor is it what they
tell the courts. The music industry no longer agrees that a
consumer's right to make a first generation copy of a song includes
the right to play it back when and how the consumer wishes. Nor
do they any longer agree that the words "No action may be brought
under this title alleging infringement of copyright ." have the
meaning they told the Congress they had in 1992. (They do seem
still to appreciate the word "royalties" - though apparently they are
becoming ever more fond of the word "damages.")
We worked with this Committee and the motion picture
industry on the Digital Millennium Copyright Act of 1998 (the
"DMCA") as well. Yet, we have also been surprised at some of
the later interpretations of this law, and at the reluctance of some to
consider the clarifications proposed by Chairman Barton and
Congressman Boucher. We therefore are very cautious in
discussing any legislation that may impose a mandate on new
technology and consumer devices. Both of today's subjects have
that potential.
Any "Flag" Provision Should Be Proven Necessary And
Accompanied By H.R. 1201
The most vital requirement is that the legislation be necessary
in the first place. There has been much discussion and review on
this subject by the FCC with respect to the Video Broadcast Flag,
which addresses only the mass, indiscriminate redistribution of
content over the Internet. There has been no such focused
discussion about an "audio flag" because we have not yet seen any
actual proposal for such a "flag." It seems evident that addressing
"mass, indiscriminate redistribution" is very far from what the
recording industry actually has in mind when it asks for a "flag."
The Video Broadcast Flag, as promulgated by the FCC, assured
consumers' rights to record from broadcast television. The
recording industry seems intent on targeting, and preventing or
taxing, consumers' rights to record from terrestrial and satellite
radio.
Concerns About Technical Mandates In General
Hard experience counsels that you establish some touchstones
before even considering any such legislation. First, given the
inherent difficulty of anticipating the timetable and course of
specific technological developments, it should be shown
unequivocally that the drastic step of a technology mandate is
necessary. In addition:
Any technical terms, and their consequences, must be
absolutely clear and well understood before legislation is
passed.
The mandated technologies, their effects in the marketplace
and on consumers, and the entire terms under which
technology would be available to makers of the covered
products must similarly be subject to a clear, common, and
immutable understanding.
Mandating the use of the technology should not harm
technological progress or unduly burden legitimate products.
It is no longer enough that, as we have previously insisted,
a mandate must be accompanied by affirmative language that
protect a consumer's right to make private, noncommercial
recordings at home. It is now clear to us, as I discuss below,
that any mandate legislation also needs to protect,
specifically, the consumer's right to search for, index, store,
and play back any home recorded content, in the desired
order, and to shift content in terms of time and place -- just
as consumers lawfully do with their personal video and
audio recorders today.
This Hearing Is About Very Different Subjects
The first thing our experience teaches us is that the issues
noticed for this hearing are very different subjects. If I can
emphasize one fundamental point, it is that these subjects should
not be conflated or confused. Each is a separate and distinct issue,
whether perceived from the content side as a "problem," from the
"technology" side as a potential "burden," or from the consumer
side as an obstacle to convenient and quiet enjoyment of products
and services at home.
The "Broadcast Flag Authorization Act"
The proposals for a "broadcast flag" emerged from two forums
in which CEA, the HRRC, and various members have been very
active - the Advanced Television Systems Committee (ATSC) and
the Copy Protection Technical Work Group. In ATSC
committees, members of the content community for years pushed
for a "descriptor" for the purportedly limited purpose of marking
content, for possible control over mass Internet transmission.
Members of the consumer electronics industry were greatly
concerned that such a "flag" might be abused or used for other
purposes, resulting in unwarranted control over consumer devices
inside the home - something that had never been imposed on free,
over-the-air commercial broadcasting. In response to these
concerns, the content and broadcasting representatives agreed to
clarify that the flag was meant to govern not transmission, but
retransmission, outside the home.
Our members led in forming a Broadcast Flag work group at
the CPTWG, and in drafting a final report. While the concept of a
passive "flag" proved simple enough, the digital means of securing
content, in response to such a flag, and the potential effect on
consumers and their devices, proved highly controversial and
contentious. The pros and cons finally were sorted out in the FCC
Report & Order, which specified that the Flag was meant solely to
address "mass, indiscriminate redistribution" of content over the
Internet. This is the Order that the Court of Appeals nullified on
jurisdictional grounds, and which, we assume, any "flag"
legislation would reinstate.
While our members have a variety of views on the FCC action,
CEA and HRRC have a couple of very clear concerns:
First, we have been disappointed to see the "ATSC
Descriptor" show up in a number of standards proceedings,
proposed by the content industry for uses that go well
beyond those originally described to the ATSC.
Second, some of the legislative language that at times has
been circulated and attributed to the Motion Picture
Association of America and its members would go well
beyond the FCC's "mass, indiscriminate redistribution"
standard, and could be interpreted as constraining
distribution on networks inside the home.
Third, the flag regulations were invalidated before they ever
took effect. It should be clearly understood that, if
legislation is enacted that would put the FCC regulations
into force for the first time, manufacturers must be given a
commercially reasonable period of time to manufacture and
include the necessary circuitry in their devices.
Fourth, exceptions for consumer fair use, news and public
affairs programming, and distance education, as we
proposed to the FCC, should be part of any legislation
addressing this subject.
The "Audio Flag"
It is hard to think of a phrase that has been more abused in
Washington this year than the words "Audio Flag." From the
context of the "Video Broadcast Flag" discussed above, one would
naturally think that "audio flag" represents some proposal that:
(a) refers to some known technology
(b) is aimed only at "mass, indiscriminate redistribution of
content over the Internet, and
(c) is not aimed at restricting consumers' in-home use of
content that they have lawfully obtained.
Unfortunately, this is not the case.
Most Proposals Are Not For "Flags" At All
Flying generally under "flag" colors in both bodies this year,
either legislatively or in the PR wars, have been proposals that
would govern the playback of lawfully received satellite radio
content, require a license for and then deny it to music services
that are deemed to encourage lawful home recording, define a
"flag" as pertaining to music "distribution" rather than to the
public performance in question, or require a radio service to stop
consumers from "disaggregating" music by playing back the songs
they lawfully record at home in the order they choose.
While we would have very strong concerns over legislation - if
there ever really is any - that would propose an "audio flag" that is
remotely similar to the Video Broadcast Flag, I wish to emphasize
that the sorts of proposals I have described have nothing to do with
a "flag" and are inherently unfounded, unreasonable, and
objectionable for a number of reasons.
First, there is no established basis whatsoever for congressional
or FCC meddling with home recording from the ongoing satellite
radio services, or with the terrestrial digital audio broadcast
services that are just being launched. Whatever consumers will be
able to do with these services in the future - including the
recording, indexing, storing, and compilation of playlists -- it has
been equally feasible for decades to do the same things with
existing FM radio service, with comparable quality. Yet, every
time the Congress has reformed the Copyright Act, it has declined
to grant phonorecord producers any right or control of whether
their albums are broadcast in the first place.
There is no demonstrated problem, and there is no reason to
take control of these services away from broadcasters and satellite
radio providers, or to interfere with the customary enjoyment of
these services by consumers, and put those controls solely in the
hands of the record companies or music publishers. The Congress
has consistently declined to do so. As a result, the United States
remains a world leader in developing new broadcast and consumer
technologies and services.
Second, the Congress did address the advent of digital
recording, by passing a law in 1992 that went in a different and
opposite direction. As you know, the Audio Home Recording Act
provides for a royalty payment to the music industry on Digital
Audio Recording devices and media. While the AHRA addressed
devices' ability to make digital copies from digital copies, it never
imposed any constraints on the "first generation" copies that
consumers were explicitly allowed to make in return for that
royalty payment. Yet, several legislative drafts now interpret the
AHRA as saying: "Sure you can make the recording, you just
can't always play it back!"
Apparently the Recording Industry Association of America,
which took the lead in working with us on the Audio Home
Recording Act, has forgotten that the AHRA exists. In 1991, Jay
Berman, then head of the RIAA and later head of the industry's
umbrella organization, IFPI, told the Senate that the AHRA -
". will eliminate the legal uncertainty about home audio
taping that has clouded the marketplace. The bill will bar
copyright infringement lawsuits for both analog and digital
audio home recording by consumers, and for the sale of audio
recording equipment by manufacturers and importers. It thus
will allow consumer electronics manufacturers to introduce
new audio technology into the market without fear of
infringement lawsuits .."
Yet, on May 16, the major record labels filed suit against the
XM satellite radio service, explicitly based on its support of a
royalty-paid device, covered by the AHRA, that in addition to
allowing consumers to make home recordings (that cannot be
output from the device), allows consumers to choose the order in
which the recordings are played back. According to the labels,
apparently such consumer choice violates the law. Moreover, they
apparently see no relevance to the legislative language they agreed
to in our joint support of the AHRA in 1992:
1008. Prohibition on certain infringement actions
No action may be brought under this title alleging
infringement of copyright based on the manufacture,
importation, or distribution of a digital audio recording device,
a digital audio recording medium, an analog recording device,
or an analog recording medium, or based on making digital
musical recordings or analog musical recordings.
In addition to establishing a royalty fund, the AHRA gave
technical oversight authority to the Department of Commerce.
Proposing an overhaul of the laws regarding recorders from
satellite and terrestrial radio services without addressing or
amending the AHRA is like moving city hall without telling the
mayor.
HRRC And CEA Oppose H.R. 4861
H.R. 4861, though styled as the "Audio Broadcast Flag
Licensing Act of 2006," actually addresses both "redistribution"
and the "unauthorized copying" of content. Although the language
"unauthorized copying and redistribution" might be deemed
simply ambiguous, if this legislation were aimed solely at
"redistribution," it would be irrelevant whether the prior in-home
copying had been authorized or not. In other words, a true "flag"
bill would be aimed at mass, indiscriminate redistribution -- it
would not matter whether the copy that was "redistributed" had
been lawfully made or not.
This legislation, therefore, although styled as a narrow bill
giving the FCC 'limited authority' to impose licensing conditions
on new HD radios and satellite radios, actually is a fundamental
attack on traditional home taping practices that consumers have
engaged in since the first analog cassette recorder reached the U.S.
market in 1964, and the reel-to-reel recorder decades before. The
bill would give the FCC remote control over consumers' rights to
engage in reasonable and customary "unauthorized" recording,
even in the privacy of their homes for noncommercial purposes.
Virtually all home recording is "unauthorized" by copyright
owners. But as the Supreme Court held in the Betamax case, that
does not make it unlawful. Exercising their "fair use" rights under
the law, consumers have lawfully been making unauthorized tapes
of music off the radio for more than 50 years.
In Congressional testimony earlier this year, the head of the
RIAA said that "the one-way method of communication [enabled
by HD radio] allows individuals to boldly engage in piracy with
little fear of detection." In other words, the RIAA believes that
when Members of Congress, their staff, and their constituents tape
a song off the radio they have engaged in piracy and ought to be
criminally prosecuted. This subcommittee ought not consider any
legislation that proceeds from the premise that Americans listening
to broadcasts at home are actually "pirates evading detection."
We Have Not Seen An Actual "Flag" Proposal Because No
Such Thing Exists
Perhaps one reason we have not seen any legislation addressed
strictly and only to mass, indiscriminate redistribution over the
Internet is that we have also not seen any technical proposal, from
the music industry, that would be so limited. Unlike the video
Flag, the "proposal" made by the RIAA to the FCC in 2004 was
aimed, instead, at frustrating the long-accepted, reasonable private
and noncommercial practices of consumers inside the home. As to
distribution outside the home, the RIAA never explained to the
FCC how it could accomplish its objectives in a non-intrusive
manner, and we are still not aware of any such technical proposal.
The FCC's Digital Audio Broadcast proceeding was begun by
the Commission in 1999 and its initial emphasis was almost
entirely technical. Nevertheless, neither the RIAA nor any other
music industry interest ever made a single filing in that proceeding
until 2004 - and even then it did not disclose or propose what
specific technology would be imposed on consumers. But no
matter what technology ultimately is chosen, there has simply
never been any case made for the need of an "audio flag." A
mandate in aid of one would be an unwarranted, unnecessary, and
probably unworkable intrusion into consumer use, and into the
very viability of the new digital radio format on which so many
have worked so long and hard for so many years.
The proposal to suddenly lock down satellite radio comes even
more "out of the blue." There is no indication that the new devices
being rolled out by these services depart from the requirements of
the Audio Home Recording Act, most of which were drafted by the
music industry itself. Indeed, the products that form the basis of
the record labels' suit against XM do not have any outputs, other
than a headphone jack, via which music from the satellite
broadcast content can be obtained. It is true that, in theory, the
output of a headphone jack can be digitized and potentially sent to
the Internet. Is it the music industry's "flag agenda" to impose
some copy protection scheme on all headphone jacks and other
analog interfaces of all music players and stereo system
components? If so, they should say so, and return to the multi-
industry Copy Protection Technical Working Group (which they
left 6 or 7 years ago) for such an idea to be given appropriate
consideration in the private sector.
In short, we see no justification to undo the provisions of the
AHRA and the DMCA that specifically were enacted by Congress
to address digital and satellite radio services. There is no reason
for the Congress to give further consideration to an "audio flag" or
to any of the very restrictive legislation, aimed at "distribution" or
"disaggregation," which are also thinly veiled attacks on lawful,
private, noncommercial, in-home consumer recording practices.
Instead, we respectfully urge that this subcommittee give renewed
attention and impetus to protecting consumers, libraries, and
educators by taking affirmative action on H.R. 1201.
* * *
Finally, we must not ignore the overarching issue of
technological progress and U.S. competitiveness. While other
countries are busy developing their technology industries in order
to compete more efficiently with the United States, we face
proposals from the content community to suppress technological
development on arbitrary or insufficient bases. This is a trend that
ought not to be encouraged.
Again, thank you, Mr. Chairman, for the opportunity to appear
before this Subcommittee to address these important issues. We
appreciate being asked to be here today and look forward to
working with you and your staff as you examine the important
issues that have been raised for discussion today.
MR. FERGUSON. Thank you. For our third panelist on the
video flag panel, Ms. Sohn.
MS. SOHN. Thank you for inviting me to testify here today to
give a consumer perspective on the broadcast flags. We are living
in a digital gold age and consumers, your constituents, are the
beneficiaries. Consumers have numerous choices for buying
digital content and for buying devices on which to play that
content. They have never had so much flexibility and so much
opportunity to be creators themselves.
New opportunities in the content industry to profit from these
digital technologies arise every day. Sales of DVDs continue to
generate enormous revenues. In just months, iTunes sold 12
million video downloads for use on its video iPod. The broadcast
networks, ESPN and Warner Brothers, are making for pay and
advertiser-supported content available either through streaming or
as downloads over a variety of on-line platforms. As the content
industry has ramped up on-line delivery of content, it has been
testing a variety of protection measures that provide both security
for the industry and flexibility for consumers.
So to answer the question, can content protection technological
innovation coexist? It is a resounding yes. Look at the robust
market for on-line content distribution facilitated by the
technologies and networks consumers love. But apparently
success is not enough for the content industry which is asking you
to interfere with this market and impose two technology mandates
that could bring this technological and artistic renaissance to a
grinding halt.
The first to reinstate the FCC's vacated broadcast flag rule,
Public Knowledge opposes this rule first and foremost because it
would give the FCC unprecedented and broad control over
technological design. On this point the D.C. Circuit emphatically
agreed. Moreover, the rule would allow the agency to set the
limits of consumers' rights and the copyright law. It would
prohibit lawful uses of content, including use of broadcast TV
excerpts on-line and for distant education.
And let me clarify with all due respect to my colleagues on the
first panel while the broadcast flag purports to be about
indiscriminate redistribution, it also prohibits discriminate
redistribution. So if you, Mr. Chairman, would like to send a clip
of you appearing on broadcast news to your home office in New
Jersey, you wouldn't be able to do that under the broadcast flag
scheme. The flag scheme will also cause great consumer
inconvenience, confusion, and cost, which will slow rather than
expedite the transition to digital TV.
Again, with all due respect to Mr. Attaway, flag-compliant
devices may not work with non-compliant devices, making
millions of obsolete legacy machines. Digital media recorded on a
flag-compliant device may not play on a non-compliant device
meaning that the DVD that you burn in one room of the house may
not play in a DVD player in a different room. In addition, TV flag
scheme will increase consumer cost because none of the 13
technologies the FCC has certified work with each other.
Therefore, if you have a Phillips flag-compliant TV set, a
consumer must purchase devices from that same manufacturer.
This is profoundly anti-competitive and anti-consumer.
And with your permission, I would like to submit for the record
some diagrams that demonstrate how devices become obsolete
when you mix flag-compliant and non-compliant devices.
MR. FERGUSON. Without objection, we will include those.
[The information follows:]
MS. SOHN. Nevertheless, if Congress decides to impose a TV
flag scheme, it must also ensure that consumers' rights under the
copyright act are preserved. Thus, any broadcast flag legislation
must be coupled with legislation that would permit circumvention
of technological protection measures for lawful uses. We are
grateful that Chairman Barton has recommended that any flag
legislation also include H.R. 1201. In addition, any TV flag
legislation should have meaningful exemptions for news and
public affairs programming, distant education, and public domain
programming. The former is particularly important as news
programming is the public's compensation for permitting
broadcasters to use the public airways for free.
We have similar concerns about the audio flag which are
discussed in detail in my written statement. Proponents of the
audio flag do not even purport to be concerned with so-called
indiscriminate redistribution of songs. Instead, they want to
extinguish the long-protected consumer right to make personal
home recordings of radio transmissions. There are far better
alternatives to the heavy-handed technology mandates being
discussed today. As Mr. Markey said, they include a multi-prong
approach of consumer education, enforcement of copyright laws,
and use of technological tools developed in the marketplace which
Public Knowledge supports.
The Grokster decision and the Family Entertainment Copyright
Act are just two of several new legal tools that the content industry
has at its disposal to protect its content. Members of the
subcommittee, the TV and audio flags are controversial and do not
reflect consensus. That is another myth. I am confident that you
will conclude that the Federal Communications Commission
should not become the Federal Computer Commission or the
Federal Copyright Commission, and that the marketplace, not the
Government is the best arbiter of what technologies succeed or
fail. The flag rules place unacceptable limits on innovation,
competition and consumer rights. I urge you to reject them.
Thank you.
[The prepared statement of Gigi Sohn follows:]
PREPARED STATEMENT OF GIGI SOHN, PRESIDENT, PUBLIC
KNOWLEDGE
Chairman Upton, Ranking Member Markey and other members
of the subcommittee, my name is Gigi B. Sohn. I am the President
of Public Knowledge, a nonprofit public interest organization that
addresses the public's stake in the convergence of communications
policy and intellectual property law. I want to thank the
subcommittee for inviting me to testify on the audio and video
broadcast flags. I specifically want to focus on the impact of these
technological mandates on consumers.
I served as counsel to the nine public interest and library
groups that successfully challenged the Federal Communications
Commission's (FCC) broadcast flag rules in the United States
Court of Appeals for the District of Columbia Circuit. My
organization financed and coordinated the case, which is titled
American Library Association v. FCC, 406 F.3d 689 (D.C. Cir.
2005). I have attached a copy of the court's decision in the case,
and I respectfully request that it be placed into the record of this
hearing.
Introduction
This is the digital golden age for consumers. They have
numerous choices for buying digital content and for buying
devices on which to play that content. Far away from the
copyright and technology battles in which we engage in
Washington, newly forged partnerships between technology
companies and content companies are revolutionizing the way we
view and listen to digital media. Here are just a few examples:
New versions of Microsoft's Media Center software enable
the playback of a consumer's favorite media, whether on
the individual's home office monitor, living room
television, or PDA. The company has also developed a
new music service in conjunction with MTV, VH1, and
CMT music channels.
Innovators like DigitalDeck, NewSoft, SlingMedia, and
Sony each have developed competing technologies that
allow consumers to remotely watch the television playing
in their living rooms on a laptop, mobile phone, or portable
gaming console.
Yahoo! has developed software and services that enable
consumers to view, create, and share content between their
mobile phones, computers and living rooms, all using the
Internet.
Google has developed a distribution system to allow
anyone to provide videos for free or for sale, and allow
others to download that content to a computer, Apple iPod,
or Sony Play Station Portable (PSP). Google has
announced content distribution agreements with large
content providers like CBS and the NBA. This follows the
recent success of NBC, ABC, and ESPN, which distribute
programming in partnership with Apple's iTunes.
TiVo's most recent software update makes it simple for
consumers to watch their favorite television shows on
popular players like the iPod and PSP. And soon, the next
generation TiVo recorder will help consumers record over-
the-air high-definition television.
Together, XM Radio and Pioneer developed an innovative
portable satellite radio player that, like a TiVo, allows
consumers to automatically record their favorite songs or
shows while they are being broadcast. A consumer's
preferences are stored on the radio, and when connected to
a computer, XM's software helps the consumer to find
more information about the artists, purchase music through
the new Napster, and discover other songs and shows by
similar artists.
These and many other examples demonstrate that the market
for delivering content digitally over new technologies is working.
Consumers can watch and listen to the content they purchase
anytime and anywhere they want. Some of that content will be
protected, and consumers can decide whether that protection is
flexible enough. All of these great developments happened
without government intervention.
The public appetite for buying individual TV shows and songs
online is growing by leaps and bounds. There are more ways than
ever to watch TV and movies and listen to the radio. Here are
some of the newest legal services that offer consumers the
opportunity to view, either for free or for a charge, content
provided by the TV networks and Hollywood studios:
Last winter, CBS Sports and the NCAA announced that
they would stream the NCAA tournament for free over the
Internet. Over the course of the tournament, they served up
a record 268,000 simultaneous streams, with a total of 14
million streams served and 4 million unique visitors.
The iTunes Video store, launched in October 2005, now
carries television programs from ABC, NBC, Fox and CBS,
along with many cable networks. In its first five months of
operation, the movie store sold more than 12 million videos
at $1.99 a piece.
In May, ABC began offering downloads of many of its
most popular shows, including Lost, Alias, and Desperate
Housewives for free on a trial basis. Last week ABC
reported that more than 11 million viewers used the service
in the first month of operation.
Services like CinemaNow and WorldCinemaOnline allow
consumers to download Digital Rights Management (DRM)
protected movies and TV shows to their computers.
Consumers can opt for a limited time rental, or choose to
keep the movie for a higher price.
Akimbo and MovieBeam use a special set-top box that
enables the user to download and watch movies on demand,
with variable pricing based on the length of viewing.
Warner Brothers has entered into a partnership with
BitTorrent to provide DRM-protected media using
BitTorrent technology. This innovative model will use
BitTorrent's distributed model to provide high speed
downloads, and shared compensation for the content
owners.
Yet even as innovators in the motion picture and recording
industries promote these alternative distribution models and the
technologies that facilitate them, their colleagues in Washington
are asking Congress to step in and give them protection from the
vague threat of massive copyright infringement the industry says
these new technologies could facilitate. Let us be clear. The
content industry has not shown that any infringement has resulted
from these technologies. And it certainly has not shown that
government technology mandates will work to stop actual
copyright pirates rather than prevent ordinary consumers from
engaging in lawful activities.
The content industry is asking Congress to impose three
technology mandates: the TV broadcast flag, an audio broadcast
flag, and an end to the analog hole. Each mandate 1) injects
government into technological design; 2) restricts lawful consumer
activities; and 3) increases consumer costs by making obsolete
millions of digital devices. Once consumers start to purchase
devices that are compliant with these technology mandates, the
costs will be enormous. For example:
A consumer would not be able to record over-the-air local
news on her broadcast-flag compliant digital video recorder
in her living room and play it back on a non-compliant
player in her bedroom (broadcast flag).
A member of Congress could not email a clip of his
appearance on the national news to his home office
(broadcast flag).
A student would be prohibited from recording excerpts
from a DVD for a college Powerpoint presentation (analog
hole).
A consumer would be unable to record individual songs off
digital broadcast and satellite radio (audio flag).
Current versions of TiVos (and other digital video
recorders), and Slingboxes may not work with analog hole
closing compliant devices, rendering them virtually
obsolete (analog hole and broadcast flag).
A university could not use digital TV video clips for
distance learning classes (broadcast flag).
I urge the Committee to think very long and hard about trying
to fix what is not broken. Ask yourselves, in light of recent
marketplace developments, is it good policy to turn the Federal
Communications Commission into the Federal Computer
Commission or the Federal Copyright Commission? Is it good
policy to impose limits on a new technology like HD Radio (that
unlike digital television, consumers need not adopt) that may well
kill it? Is it good policy to impose technological mandates (like the
broadcast flag and closing the analog hole) that would result in
consumers having to replace most of the new devices that they just
purchased?
There are better alternatives for protecting digital content than
heavy-handed technology mandates. An effective multi-pronged
approach would utilize consumer education, enforcement of
copyright laws, new business models for content distribution and
the use of technological tools developed in the marketplace, not
mandated by government. The recent Grokster decision and the
passage of the Family Entertainment and Copyright Act are just
two of several new tools that the content industry has at its disposal
to protect its content.
Technology Mandates Harm Innovation and are Costly and
Inconvenient for Consumers
For Public Knowledge, its members and its public interest
allies, the impact of the D.C. Circuit's decision vacating the
broadcast flag rules goes far beyond citizens' ability to make non-
infringing uses of copyrighted material they receive on free over-
the-air broadcast television. Equally as important, the decision
limited the power of a government agency that, in the court's own
words, has never exercised such "sweeping" power over the design
of a broad range of consumer electronics and computer devices.
This hands-off approach has fostered a robust market place for
electronic devices that has in turn made this country the leader in
their development and manufacture.
For this reason, any attempt to portray legislative reinstatement
of the broadcast flag rules as "narrow" should be viewed with great
skepticism. The rules put the FCC in the position of deciding the
ultimate fate of every single device that can demodulate a digital
television signal. The broadcast flag rules require the FCC to pre-
approve television sets, computer software, digital video recorders,
cellphones, game consoles, iPods and any other device that can
receive a digital television signal. Thus, the broadcast flag
scheme places the FCC in the position of dictating the marketplace
for all kinds of electronics.
The agency has neither the resources nor the expertise to
engage in this kind of determination. This type of government
oversight of technology design will slow the rollout of new
technologies and seriously compromise US companies'
competitiveness in the electronics marketplace.
Some argue that the initial FCC certification process worked
because all thirteen technologies submitted to the agency were
approved. That is a very superficial view of that process. First, it
is widely known that several manufacturers removed legal and
consumer-friendly features of their devices before submitting them
to the FCC, largely at the behest of the movie studios. Second, the
changing nature of the FCC and its commissioners is likely to
make for widely varying results. Given the fervor of then-
Commissioner Martin's dissent to the Commission's approval of
TiVo-To-Go, it is unlikely that such technology would be certified
today under Chairman Martin's FCC.
The certification process also exacerbates equipment
incompatibility problems caused by the broadcast flag scheme.
Not only will the scheme prevent consumers from making copies
of a TV show on one system and play it on another, none of the 13
different technologies approved by the FCC in its interim
certification process work with each other. This means that a
consumer who buys one Philips brand flag-compliant device must
buy all Philips brand flag compliant devices. This raises consumer
costs, and also raises serious questions about competition among
and between digital device manufacturers.
Proposals to mandate content protection for digital broadcast
and satellite radio would similarly place the FCC in the position of
mandating the design of new technologies. For example, H.R.
4861, the Audio Broadcast Flag Licensing Act of 2006 ("Ferguson
bill"), gives the FCC the authority to promulgate regulations
governing "all technologies necessary to make transmission and
reception devices" for digital broadcast and satellite radio. In the
case of so-called High Definition (or HD) Radio, this could
destroy this new technology at birth. Digital broadcast radio
benefits consumers through improved sound quality (particularly
for AM radio) and gives radio broadcasters the capacity to provide
additional program streams and metadata. Unlike digital
television, however, consumers need not purchase digital broadcast
receivers to continue receiving free over the air broadcast radio.
Certainly, if digital radio receivers have less functionality than
current analog radio receivers, consumers will reject them and the
market for HD radio will die.
In the case of digital satellite radio, mandated radio content
protection has the potential to cripple this increasingly popular, but
still nascent, technology. XM Radio now has more than six and a
half million subscribers, and Sirius Radio last year passed the four
million subscriber mark. Consumers are buying all types of
receivers for those services, based in part on the new flexibility and
features the equipment offers. The type of content protection the
recording industry seeks would likely slow this incredible growth.
The Content Industry Has Not Justified the Need for
Technology Mandates
Hollywood's core justification for imposition of the TV
broadcast flag scheme can be paraphrased thusly: if the threat of
indiscriminate redistribution of "high value" high definition
television content is not reduced, broadcasters will not make that
content available, thus slowing this country's transition to digital
TV.
One of the most vocal proponents of this argument was
Viacom, which told the FCC in 2002 that "if the broadcast flag is
not implemented and enforced by next summer, CBS will cease
providing any programming in high definition for the 2003-2004
television season. And without the security afforded by a
broadcast flag, Paramount will have less enthusiasm to make
digital content available."
Viacom never did carry out its threat to withhold HD
programming, and the argument that the broadcast flag is
necessary to encourage the broadcast of high value content and the
orderly transition to digital TV transmission has been repudiated in
the marketplace. First, broadcasters are making "high value"
content available for HDTV or, "in HD": 50% of TV shows,
including 66 % of prime time programming, is broadcast in high
definition. A number of "high value" sports programming
broadcasts, including Monday Night Football, the Super Bowl, the
NBA Finals, the NCAA Final Four college basketball
championship, the FIFA World Cup, Major League Baseball's All-
Star Game and World Series games, all NBC NASCAR races, the
U.S. Open golf tournament, and the Olympics, are broadcast in HD
along with many other select sporting events throughout the year.
Second, the country's transition to digital TV is accelerating, not
slowing down, as sales of digital TV sets continue to increase.
According to the Consumer Electronics Association, sales of
digital TV sets grew 60% to $17 billion dollars. According to
Forrester Research, 16 million American homes have digital
television sets. In 2006, that number is expected to rise to 26
million, or one in four households. Indeed, the case could be
made that rather than accelerate the DTV transition, the broadcast
flag could slow the transition when consumers discover that
expensive new television sets have less functionality than their
current sets.
The recording industry has similarly not demonstrated that an
audio flag is necessary. The industry does not cite to even one
instance of a digital broadcast or satellite radio transmission being
copied illegally or retransmitted over the Internet. Indeed, RIAA
chief Mitch Bainwol's testimony and comments on the subject
make clear that the real rationale for seeking radio content
protection is not copyright infringement, but the recording
industry's displeasure over the licensing fees it receives from
broadcast and satellite radio broadcasters. The recording
industry does not even pretend that audio flag legislation is
intended to do anything other than stop personal home recording.
Video and Audio Flag Schemes Will Transform the Federal
Communications Commission into the Federal Copyright
Commission
Despite the FCC's protestations to the contrary, any video or
audio broadcast flag scheme will necessarily involve the agency in
shaping the rights of content owners and consumers under
copyright law. Making copyright law and policy is not the FCC's
job. It is Congress' job.
While it is true that the TV broadcast flag scheme does not
completely bar a consumer from recording her favorite TV show, it
does prevent consumers from engaging in other lawful activities
under copyright law. For example, as the D.C. Circuit noted in
ALA v. FCC, the broadcast flag would limit the ability of libraries
and other educators to use broadcast clips for distance learning via
the Internet that is permitted pursuant to the TEACH Act, Pub. L.
No. 107-273, 116 Stat. 1758, Title III, Subtitle C, 1330, amending
17 U.S.C. 110, 112 & 882 (2002). See ALA v. FCC, 406 F.2d at
697.
This and other examples highlight that while proponents of the
flag may justify it as prohibiting only "indiscriminate"
redistribution of content over the Internet, flag-compliant
technologies actually prohibit any and all distribution, no matter
how limited or legal. For example, if a member of this Committee
wants to email a snippet of his appearance on the national TV news
to his home office, the broadcast flag scheme would prohibit him
from doing so. Video bloggers and other TV watchdogs would
similarly be unable to post broadcast TV clips on their blogs. For
example, the Parents Television Council, which rates television
programs according to how child friendly they are, would be
prevented from posting clips from those programs for parents to
see.
The fact that the broadcast flag will limit lawful uses of
copyrighted content was detailed in the Congressional Research
Service Report entitled Copy Protection of Digital Television: The
Broadcast Flag (May 11, 2005). CRS concluded there that
While the broadcast flag is intended to "prevent the
indiscriminate redistribution of [digital broadcast] content over
the Internet or through similar means," the goal of the flag was
not to impede a consumer's ability to copy or use content
lawfully in the home, nor was the policy intended to "foreclose
use of the Internet to send digital broadcast content where it
can be adequately protected from indiscriminate
redistribution." However, current technological limitations
have the potential to hinder some activities that might
normally be considered "fair use" under existing copyright
law. For example, a consumer who wished to record a
program to watch at a later time, or at a different location
(time-shifting, and space-shifting, respectively), might be
prevented when otherwise approved technologies do not allow
for such activities, or do not integrate well with one another, or
with older, "legacy" devices. In addition, future fair or
reasonable uses may be precluded by these limitations. For
example, a student would be unable to email herself a copy of
a project with digital video content because no current secure
system exists for email transmission.
Proposals for an audio flag for broadcast and satellite radio
similarly, and perhaps even more directly, place the FCC in the
position of determining consumers' rights under copyright law.
For example, the Ferguson bill gives the FCC authority to issue
licenses for satellite and digital broadcast radio transmission and
reception devices that must
include prohibitions against unauthorized copying and
redistribution of transmitted content through the use of a
broadcast flag or other similar technology, in a manner
consistent with the purposes of other applicable law.
Under this proposal, the FCC is placed in charge of
determining both 1) the extent to which unauthorized copying
(which is legal is some circumstances) of digital broadcast and
satellite radio content is permitted; and 2) determining what kind
of copying and redistribution of audio content is permissible. In
other words, the FCC is given the power to control the extent to
which consumers can engage in personal copying.
Not only does this language give the FCC power to set
copyright law, it also directly conflicts with current copyright law,
specifically the Audio Home Recording Act - which explicitly
gives consumers the right to record digital radio transmissions for
noncommercial use.
Any Broadcast Flag Legislation Must Be Coupled With DMCA
Reform and Include Public Interest Exceptions
As discussed above, Public Knowledge believes that
technology mandates like the video and audio broadcast flags are
misguided industrial policies that would constitute a radical
expansion of the FCC's powers while radically diminishing
consumers' rights. If the first rule for policymakers in technology
and copyright debates is "first do no harm," then your course of
action should be to let an already thriving market continue to grow.
Nevertheless, if Congress decides to impose flag schemes for
digital television and/or digital radio, it must attempt to ensure that
consumer's rights under the Copyright Act and the public interest
under the Communications Act are preserved. The latter is
particularly critical given that Hollywood seeks to limit access to
free over-the-air broadcasting, which by law exists to serve the
American people with, among other things, local news and public
affairs programming. Thus, any broadcast flag legislation must be
coupled with legislation to permit circumvention of technological
protection measures for lawful uses and must include meaningful
exceptions for 1) news and public affairs programming; 2) distance
education; and 3) programming in the public domain.
DMCA Reform
We urge Chairman Barton to keep his promise to consumers
that the full Energy and Commerce Committee will not approve
any broadcast flag legislation unless it is coupled with legislation
to permit circumvention of technological protection measures for
lawful uses. Because of broadcasting's special role in American
society, it is imperative that consumers be able to circumvent
technological protection measures like the broadcast flag in order
to engage in lawful uses of that content. This is particularly
important as more and more people use weblogs to comment or
criticize our culture.
Public Knowledge is grateful that Chairman Barton has co-
sponsored H.R. 1201, the Digital Media Consumers Rights Act.
H.R. 1201 would provide an exception to the anti-circumvention
provisions of the Digital Millennium Copyright Act (DMCA), for
lawful uses of copyrighted content. We believe that it is a narrowly
tailored law that will preserve fair use rights for the digital age.
Critics contend that H.R. 1201 is an invitation to piracy - but
determined pirates do not need or use fair use to engage in illegal
activity. H.R. 1201 only permits lawful activity. Those who flout
copyright law will continue to be subject to all the penalties that
the law permits.
News and Public Affairs Programming
Under the Communications Act of 1934, broadcasters are
tasked with serving as public trustees in exchange for the free use
of public spectrum. As part of that duty, broadcasters are tasked
with providing news and public affairs programming which serve
the needs of the local communities that they serve. This
programming, in essence, is payback to local viewers for the right
to use a valuable resource: the public airwaves.
Broadcast news and public affairs programming is also a
common source of comment, criticism and follow-up news on a
variety of digital media. Websites and weblogs abound with fair
use clips of such broadcast programming. Such comment and
criticism would not be possible under a broadcast flag scheme.
For these reasons, any broadcast flag legislation should exempt
news and public affairs programming. To the extent that the
studios claim the need for a broadcast flag to protect secondary
markets for programming, there is no such market for news and
public affairs programming, since it is outdated soon after it airs.
The exceptions language included in the broadcast flag
provision which is part of the pending Senate telecommunications
reform bill, S. 2686, is wholly inadequate. That provision exempts
news and public affairs programming "the primary commercial
value of which depends on timeliness." However, it is entirely up
to the broadcaster to decide whether that test is met. Undoubtedly,
the studios will pressure the broadcaster to decide that the primary
commercial value of such programming does not depend on
timeliness - ensuring that most, if not all, news and public affairs
programming is flagged. This is an exception that swallows the
exception.
Distance Education
Any broadcast flag law must also exempt distance learning for
non-profit and for-profit libraries and higher educational
institutions. As more and more Americans receive their educations
online, those institutions must be able to redistribute broadcast
programming that is part of a distance education curriculum. For
non-profit higher education institutions, the ability to do so is
guaranteed by the TEACH Act, Pub. L. 107-273. While for-profit
educational institutions are not protected by the TEACH Act, there
is no rationale for treating these institutions differently than non-
profits. Both are dedicated to distance education and both use
broadcast programming to engage in that activity.
The broadcast flag provision in the Senate telecommunications
reform bill also is inadequate to protect the rights of libraries and
universities to engage in distance learning. Under that provision,
libraries and universities must seek FCC permission before they
can engage in a task that is critical to their mission, and at least
with respect to non-profit libraries, protected by law.
Programming in the Public Domain
The public domain is the reservoir of creative works that are no
longer protected by copyright. Thus, they are free for the public to
use in whatever way they please. As such they should not be
subject to technological protection measures like the broadcast
flag. To the extent that content owners consider the public domain
to be a dumping ground of works with little commercial value, it is
unlikely that this exemption will be used very often. Moreover, if
content owners are concerned that a program under copyright that
only uses a small bit of a public domain work would be required to
be exempted, the legislative language or legislative history can be
drafted to emphasize that only that programming which primarily
consists of public domain materials should be exempted.
A Technology Mandate to Close the Analog Hole is
Unnecessary and Would Cause Great Consumer Confusion,
Cost and Inconvenience
While this hearing does not specifically address the content
industry's efforts to close the so-called analog hole through
legislative means, those efforts are closely related to the broadcast
flag and radio content protection initiatives, and are therefore
worthy of mention.
As many of you know, a bill was introduced in the House of
Representatives last year that would mandate that all digital
devices read and obey two specific technologies - an encryption
technology called CGMS-A and a watermarking technology called
VEIL. The content industry claims that both of these technologies
are necessary to ensure that analog content cannot be captured and
digitized for possible indiscriminate distribution over the Internet.
I will not mince words - a government mandate to close the
analog hole would be profoundly anti-consumer and a radical
change in the historic copyright balance. Closing the analog hole
would immediately restrict lawful uses of technology and make
millions of consumer devices obsolete. It would not be far-fetched
to predict that closing the analog hole will cause a consumer
backlash with ramifications for device manufacturers, retail stores,
content producers and Congress.
Moreover, Hollywood has not clearly defined the problem it
wants to fix. They have provided no evidence that use of the
analog hole has resulted in any significant copyright infringement.
The mere fact that a consumer can buy an analog to digital
converter device is not evidence that such a device is being used
illegally any more than the sale of kitchen knives indicates that
they are being used for stabbings. If the concern is that certain
individuals are taking analog content, digitizing it and placing it on
peer-to-peer networks, then the answer is not to close the analog
hole, but to use the many legal, technological and marketplace
tools the industry has at its disposal to combat illegal use of those
networks.
Specifically, the proposed legislation suffers from a number of
important substantive flaws. Here are just a few:
The analog hole technology mandate would be more
intrusive than the broadcast flag: The content industry's
proposal mandates that each and every device with an
analog connection obey not one, but two copy protection
schemes. Thus, while the broadcast flag would put the
FCC in charge of design control just for technologies that
demodulate a broadcast signal, the proposal would put the
inexperienced and overworked Patent and Trademark
Office in charge of mandating the design of every device
with an analog connector, including printers, cellphones,
camcorders, etc. Like the broadcast flag, it sets in stone a
copy protection technology for technologies that are always
changing.
The analog hole mandate would impose a detailed set of
encoding rules that would restrict certain lawful uses of
content. The House bill includes tiered levels of restriction
based on the type of programming (e.g., pay-per-view,
video on demand) that limit lawful uses in a manner that
ignores the four fair use factors of 17 U.S.C. 107. This
upsets the balance established in copyright law between the
needs of copyright holders and the rights of the public by
placing far too much control over lawful uses in the hands
of the content producers.
The mandate would eliminate the DMCA's safety valve.
This Committee has been the leader in ensuring that the
anti-circumvention provisions of the Digital Millennium
Copyright Act do not unintentionally impinge on fair use.
A common justifications for limitations on fair use imposed
by the DMCA is that individuals who want to use excerpts
of digitally protected content like DVDs can copy snippets
using the analog outputs on a TV set or by recording the
screen with a video camera. An analog hole mandate
would eliminate this safety valve.
The bill would mandate and unproven and disputed
technology. While the CGMS-A + VEIL technology was
discussed at the Analog Hole Reconversion Discussion
Group, a standards group with both industry and public
interest participation, it was quickly dismissed as not
worthy of further consideration. Thus, this technology has
not been fully vetted by industry and public interest groups.
If Congress feels it must do something about the analog
hole, at a minimum it should refer the technology back to
industry and public interest groups so CGMS-A + VEIL
can be thoroughly analyzed for its impact on consumers and
the cost to technology companies. In the complete absence
of any such review, the one-sided imposition of such a
detailed technology mandated would be unprecedented.
The Proper Balance Between Content Protection and
Consumer Rights Should Be Set by Copyright Law and
Marketplace Initiatives
I am often asked the following question: if Public Knowledge
opposes the broadcast flag, radio content protection and closing the
analog hole, what are better alternatives to protect digital television
and radio content from infringing uses? The best approach to
protecting rights holders' interests is a multi-pronged approach: by
better educating the public, using the legal tools that the content
industry already has at its disposal, and the technological tools that
are being developed and tested in the marketplace every day. In the
past eighteen months alone, content industry has used and won
several important new tools to protect content, including:
The Supreme Court's decision in MGM v. Grokster and its
aftermath. The Supreme Court gave content owners a
powerful tool against infringement when it held that
manufacturers and distributors of technologies that are used
to infringe could be held liable for that infringement if they
actively encourage illegal activity. As a result, a number of
commercial P2P distributors have gone out of business,
moved out of the U.S., or sold their assets to copyright
holders.
Lawsuits against mass infringers using P2P networks. Both
the RIAA and the MPAA continue to sue individuals who
are engaged in massive infringement over peer-to-peer
(P2P) networks. By their own admission, these lawsuits
have had both a deterrent and educative effect. The RIAA
now characterizes the P2P problem as "contained."
Passage of the Family Entertainment and Copyright Act.
The FECA gave copyright holders a new cause of action to
help limit leaks of pre-release works and made explicit the
illegality of bringing a camcorder into a movie theatre. It
also provided for the appointment of an intellectual
property "czar" to better enforce copyright laws.
Agreements by ISPs to pass on warning notices. The war
between Internet Service Providers and content companies
has begun to cool. Last year, Verizon and Disney entered
into an agreement by which Verizon will warn alleged
copyright infringers using its networks, but will not give up
their personal information to Disney. Verizon officials
have told me that they intend to enter into similar
agreements with other content providers.
Increased use of copy protection and other digital rights
management tools in the marketplace. As discussed above,
there are numerous instances of the use of digital rights
management tools in the marketplace. iTunes Fairplay
DRM is perhaps the most well known, but other services
that use DRM include MSN music and video, Napster,
Yahoo Music, Wal-mart, Movielink, CinemaNow and
MovieBeam. The success of some of these business
models are a testament to the fact that if content companies
make their catalogues available in an easily accessible,
flexible and reasonably priced manner, those models will
succeed in the marketplace without government
intervention.
These tools are in addition to the strict penalties of current
copyright law. To the extent that the content industries are looking
for a "speed bump" to keep "honest people honest," I would
contend that many such speed bumps already exist, while more are
being developed every day without government technology
mandates.
Finally, by far the most effective means of preventing massive
copyright infringement involves the content industry doing what it
took the music industry far too long to do - satisfy market
demand by allowing consumers to enjoy fair and flexible access to
content at reasonable prices (inevitably produced in a free market).
DVDs are the best example of the market working. There, a
government mandate -the Digital Video Recording Act--was
rejected and an industry-agreed upon fairly weak "keep honest
people honest" protection system was adopted. Despite the fact
that the protection system was defeated long ago, the DVD market
has grown at an astounding rate - from zero in 1997 to
$25,000,000,000 in sales and rentals last year. Moreover as I
noted above, many other new digital music and video distribution
models, developed with content industry support and industry-
agreed upon content protection, are emerging in the market. We
believe that these efforts make government intervention in the free
market unnecessary.
Conclusion
The content and technology industries are moving forward,
together, to provide the digital content and the digital machinery
that consumers are buying and enjoying. Technology mandates
like the broadcast flag and radio content protection are a step
backward from this progress, limiting both innovation and
consumer choice while increasing costs to innovators and
consumers. I urge the subcommittee to look at recent marketplace
developments and consider whether government action here would
do far more harm than good. Thank you.
MR. FERGUSON. Thanks very much to all three of you. I will
begin the questioning. Mr. Attaway, will video content providers
be less willing to invest in digital content absent a broadcast video
flag and why or why not?
MR. ATTAWAY. Absolutely. Ms. Sohn just said that she
supports the use of technology to prevent content. Well, we are
using technology on the vast majority of the services you see on
that chart to protect our content against redistribution. Only over
the air broadcasters lack the ability to do that because they
broadcast free in the clear. They are not encrypted. What we are
trying to do is get broadcasters on a level playing field by using the
same technology that all these other services are using to protect
against redistribution. If broadcasters can't do that, it is axiomatic
that the owners of valuable content, if given a choice between
licensing the services that protect against redistribution and those
that don't, are going to license to the ones that protect the content.
They have to. They have to protect their content against--they
have to protect their markets.
So absolutely, yes, without reinstituting the broadcast flag,
high-value content is going to migrate away from over the air
broadcasters to cable and satellite services, where it could be
protected.
MR. FERGUSON. Ms. Sohn, the FCC, and I want to make sure I
get through my questions here, the FCC adopted broadcast flag
rules that by many accounts were fair. They are workable for
content owners. They are workable for manufacturers, for
consumers. Those rules were struck down but not on substantive
grounds. They were struck down on jurisdictional grounds. Why
shouldn't Congress just grant the FCC authority to implement the
rules that have already been sort of vetted through this whole
process?
MS. SOHN. Well, because they are profoundly anti-consumer
and they put an agency--
MR. FERGUSON. We sort of went through this long process that
everyone says was a great process, it was an important process,
sort of common ground was found, it was vetted through all sorts
of players, everybody at the table, how many years it took to do it,
and then it was struck down again. Not because of the content of
the agreement but just because they didn't have the jurisdiction to
do it.
MS. SOHN. Well, except that the court said that the FCC had
never exercised such sweeping powers. I mean, yeah, it was a
jurisdictional--
MR. FERGUSON. But again that has nothing to do with the
content.
MS. SOHN. What is that?
MR. FERGUSON. That has nothing to do with the substance. It
just says it is a jurisdictional issue.
MS. SOHN. Well, unless you believe that the FCC, a
government agency, should have power to dictate technology
design for every single device that demodulates a television.
MR. FERGUSON. But this is something that has gone through
this incredible vetting process. All the court said was Congress
hasn't given FCC the power to do that. Why wouldn't we just do
it if it has gone through this process?
MS. SOHN. Because it is anti-consumer and it does obsolete
devices. And the notion that there was a consensus is way
overblown. So the FCC certified 13 technologies but--
MR. FERGUSON. We had folks who were on your side of this
argument on a previous panel saying this was the model, this is
Utopia, this was the Nirvana of coming up with a solution.
MS. SOHN. But if there is consensus--
MR. FERGUSON. You are telling me that they were just wrong?
MS. SOHN. Well, if there is consensus then why do we need
Government to act? Then let them just do it.
MR. FERGUSON. Because the court said jurisdictionally they
kind of found this technical jurisdictional issue. We've got a
solution for that. The Congress has a solution for jurisdictional
issues. We just grant them the authority to implement something
which all the players have already worked out.
MS. SOHN. Well, again, the reason even if you construe this as
a narrow jurisdictional decision the broadcast flag scheme would
place the FCC as an arbiter of what technologies come to market
and what don't. It would be bad for the lawful uses that consumers
make of technology, and it would also be bad for cost and the
digital television transition purposes.
MR. FERGUSON. Mr. Gonzalez.
MR. GONZALEZ. Thank you very much, Mr. Chairman. I will
just go back to some basics so I can try to get an understanding of
what this whole thing is all about. And that is you have the content
people. They actually have the product. Then we have
broadcasters that deliver the product. Then we have manufacturers
that obviously manufacture all the equipment to accommodate all
that, that whole scheme. But in that mix we have certain legal
principles, certain rights that are recognized since time and
memorial, the royalty scheme, copyright scheme and such, and I
don't ever want to toss that away. Something that is always
predominant of course is the consumer, the customer, the citizen,
and what we are getting out there, when we get it, is it fair, it is a
level playing field and so on.
And I said this earlier, the big boogey man has always been
redistribution because one of the principles that I think we are
always going to adhere to is fair use. When I got to this committee
it was I love all these concepts but fair use. What is fair in any
particular context depending where technology is and so on kind of
changes. It is not what it used to be with the Xerox machine and
so on which we have gone over. But it is still there and we have to
either expand it, narrow it, or whatever we are going to do. Part of
the solution appears to be this flagging system.
But it seems to me that as technology moves forward, the
business concerns that used to come under the heading of
redistribution are now coming under the heading of distribution.
And what I mean is Sirius is a good example of that. That is you
don't have an individual that is just going to go and record one or
two songs and eventually one or two films or whatever it is for
personal use or to go to the lake house or back home and one up
here in the district when we come up. It is totally different.
And if you listen to Ms. Ziegler and what they are providing it
is fairly extraordinary, and that is for a fee and the right equipment
you have a whole library that if you think in terms of numbers and
you think in terms of royalties and copyrights and all of that, these
are conceivably, and I am not saying that the sky is falling with
every technological advance, but I think we do have to recognize
that at some point you could reach where the distribution system
itself equates to or is equal to what we are trying to avoid in the
redistribution system.
And I don't know if I am making myself anywhere near clear
on this thing but I think if you are a business person out there--and
I am not sure, Gary, that I am making myself too clear on this
thing, but are we reaching a point where technology in a business
model when it comes to the product itself, the content people, what
they are putting out there, is going to be so distributed without
recognizing, let us say, the royalty payments, the artist, the writer,
Sony or whoever it is. Are we reaching that point? Is that
possible?
MR. SHAPIRO. It is a good point and I do applaud you for
recognizing the difference between redistribution and what is in
the home. The broadcast flag for the most part is about
redistribution on the Internet and it is a potential problem. There
was a lot--it took 10 years of discussion. It is a technical solution
which definitely works. There needs to be exceptions. There
needs to be other things. And it is very different than when we are
talking about the audio broadcast flag.
When you are talking about the audio broadcast flag, first of
all, we cut a deal. Congress sent us away 10 years ago or so and
said come back and solve this problem. We came back. We
agreed to pay royalties for every digital audio recording product.
We are paying those. The products are just being introduced. It is
a hefty royalty. I think it is about $10 or $12 a pop. We are also
paying--we have also agreed to design the devices in a way we can
never make copies of copies. That is the Audio Home Recording
Act. And in turn we got the right to produce audio home recording
products.
Now what you are saying, as I hear you, is that because
technology is advancing, consumers are being able to exercise their
fair use rights established by Congress repeatedly. The right to
record off radio has been recognized over and over again by
Congress. But what you are saying is technology is advancing in
such a way that maybe that is not a good idea anymore. I think
what the prior panel totally missed was the concept if Congress
wants to take away the right that consumers have to record off the
radio, they should say they are doing that because that is what
Mitch Bainwol is arguing for.
It wasn't about redistribution over the Internet. It was the fact
that consumers are exercising their rights and technology is
allowing them to do it easier and easier. They paid for the right to
their fee. They paid for the royalty manufacturer. The devices are
restricted. But the test really should be a cynical one, as I said
earlier, by Congress. It should be really an effect on innovation
and creation. And I think if you look at what has changed in
society dramatically in the last 20 years with the digital revolution
is we made every American a creator, and we have to stop
measuring our creativity by the financial results of 10 companies
that compose the MPPA and the RIAA.
I think we have to measure by the fact that there is all sorts of
new creativity out there, and if you listen to the content community
we would have shut down the iPod, we would have shut down all
these new services, we would have shut down the VCR, and that is
why you have to be skeptical. And what I heard in the prior panel
to be so dangerous you have the broadcasting industry, radio
broadcasters only, not the satellite people, negotiating with the
RIAA over how satellite radio will be regulated and how devices
will be regulated. And that is considered negotiation.
Hillary Rosen, the President of the RIAA, Jack Valenti, the
President of Motion Pictures Association, and I created the
CPTWG, the Copyright Protection Trade Working Group, and the
RIAA was part of that. We created a DVD standard together. We
created the broadcast flag. The RIAA walked away. They said we
have nothing to do--digital radio went through the FCC. The
RIAA had nothing to do with it until 3 years ago, Mitch comes in
and said, my God, we have this huge problem with digital radio,
and now they are killing the product that radio broadcasters need
and are threatening satellite radio.
And what is the result? It will be a doubling or tripling of price
for satellite radio subscribers. Ten million subscribers are going to
have to pay a lot more.
MR. GONZALEZ. And I know I am over my time but would you
indulge me, Mr. Chairman, to allow the other two witnesses to
respond on this particular point or anything else that they feel they
need to address?
MR. FERGUSON. I would just ask that they do it very briefly.
Mrs. Blackburn is here and it is her turn.
MR. ATTAWAY. Thank you. I just want to respond to the point
that Mr. Shapiro was making. He accused us of being Chicken
Little but yet he is the one that is saying that if you protect content
it is going to stifle innovation and bar technology. Well, the facts
show that that simply isn't true. Movies are available today in
more venues, on more different types of devices than ever before
in history, and it is the movies, it is the content that is driving this
new technology. The studios are at the forefront of using new
technology to offer consumers greater choice. We are not Chicken
Little.
MR. FERGUSON. Ms. Sohn, very briefly.
MS. SOHN. Yeah. Mr. Attaway just undercut the answer to
your question, Mr. Ferguson, to the extent he said movies are
everywhere. Okay. So they are making high quality content
available. Sixty-six percent of prime time programming is in HD,
high definition, so the notion that they are not going to make their
content available if they don't have this flag is belied by the facts.
In 2002, Viacom threatened to not do any HD programming unless
they got a broadcast flag. Well, guess what? CBS is doing tons of
high definition broadcasting.
MR. FERGUSON. Mrs. Blackburn is recognized for questions.
MRS. BLACKBURN. Thank you all. Thanks for staying here for
the afternoon. Not any of you probably thought that you were
going to be spending the afternoon with us but this is always a
good debate and being certain that we protect all of our content
creators is a discussion that I am enjoying having on an ongoing
basis with Mr. Shapiro.
He has great innovators that are members of his organization.
So, Mr. Shapiro, let us continue our dialogue, how about that?
And go back to Mr. Ferguson's bill, and you are critical of the bill
and there are some--and I appreciate being invited to speak to your
groups and sometimes there are some that will say we are trying to
confuse the issue or that you guys are trying to confuse the issue
by saying that new devices from XM will comply with the Audio
Home Recording Act, and we have great discussions about it.
Some people think this is a red herring because the fee paid is
minimal and it is not sufficient for the download service that they
are providing, and we have our entertainers that, basically as we
heard Mr. Harris say that some of these devices, his revenue is
going to be gone, and he is not going to be making revenue. So,
don't you think there ought to be some kind of new services
compensation for the songwriters so that they are being
compensated? Don't you think there should be a way with these
new devices that they are going to be compensated?
MR. SHAPIRO. Well, thank you, and thank you for coming
back and I was looking forward to the moment you had your voice
back. The last time I was up here, I was terrified when you didn't
have a voice.
MRS. BLACKBURN. Oh, I made sure that I was ready for today.
MR. SHAPIRO. What you are asking as I hear it, is because
technology is changing there must be new ways to compensate
creators, and what I would ask you to recognize is we did cut a
deal with the music industry as Congress asked us to. We came
back, and that deal is kicking in now because every one of these
devices that they are so concerned about, as a result there would be
an enormous royalty paid. That is why when they say it is only $2
million, yeah, because they haven't been sold yet.
Now if they will be sold, well, depending on what happens
with the lawsuit obviously, there will be significant amounts of
money.
MRS. BLACKBURN. Let us qualify that because it is fractions of
a penny.
MR. SHAPIRO. No, let me--can I just explain?
MRS. BLACKBURN. Okay. Go ahead.
MR. SHAPIRO. I need some help here. I think it is $8 to $10
per device sold goes directly to the music industry, and the reason
it is very--this is just per device.
MRS. BLACKBURN. Yes. Yes.
MR. SHAPIRO. In addition, there is the monthly fee which they
get a very large cut of. I understand Sirius and XM are the largest
payers of royalties to the music industry. And then there is also the
fact that we are by law, the deal we cut with the music industry at
the request of Congress, we have agreed to restrict every device so
that it may not make copies of copies. So essentially the sky is not
falling.
MRS. BLACKBURN. We are here for the flag.
MR. SHAPIRO. Yes, we all are.
MRS. BLACKBURN. And we all support a flag.
MR. SHAPIRO. And I think it is good to talk about--we want
this great creativity, but I think the fact is that we believe the
devices encourage great creativity by everyone. I think what I
would like to do is define the difference that we have because I
think we do have a difference. And I think what I have heard you
say earlier today is that you do not think that consumers in all
cases should have the right to record from radio and aggregate it,
and that is what Mr. Bainwol is asking to change and that is why
there is this proposal out there.
And that is where the difference is right now, and the question
is do consumers have the right to record off of radio or at least off
of satellite and HD radio, and that is the question. And if it is a
TiVo in the broadcast world they do with TiVo because the video
broadcast flag is just about sending stuff over the Internet, and if
we want to talk about sending stuff over the Internet, we want to
negotiate about a flag, let us do that. We have been asking the
RIAA to talk about that for years. But talking about what
consumers do in their home is what we are focused on here.
If Congress wants to take away the right that consumers have
to record off the radio that is what Congress has the right and
privilege to do, but that is what this is about.
MRS. BLACKBURN. Well, I think that what we have to look at
there too is--and all of that sounds good but, Mr. Shapiro, if you
can sort a file and you can store that file and then you can
redistribute that file you are playing with something that is a horse
of a different color, and that is where we have such a difference of
opinion. And it works out, when you look at what is paid by radio
there is very little that ends up going to that songwriter on that
royalty, very little on per song but, we have--
MR. SHAPIRO. Excuse me, could I just correct one thing? The
redistribution is not permitted with these devices so what you are
talking about is recording in the home. Every device--
MRS. BLACKBURN. In a perfect world.
MR. SHAPIRO. No, that is what we are talking about today.
MRS. BLACKBURN. Mr. Chairman, my time is over, and I will
yield back.
MR. FERGUSON. Thank you, Mrs. Blackburn. I have one
follow-up question with Ms. Sohn. When we are talking about this
video flag provision, I believe your organization and perhaps
others have argued for a news exception, and I just want to explore
that a little bit. Now obviously broadcasters and others have talked
about without this content protection they have less of an incentive
or less of an ability to protect their intellectual property, their
investment and their product, et cetera.
Obviously news organizations do the same thing when they
produce a product, when they produce a newscast. They have
invested resources to produce that news content. If the FCC's flag
rules still allow personal copying and limited Internet sharing, why
is there a need for a news exception, and how do we define what is
news?
MS. SOHN. Well it doesn't allow limited Internet sharing. That
was the point I made in the testimony is that broadcast flag not
only prohibits indiscriminate redistribution over the Internet, it
prohibits all distribution over the Internet so that is number one.
Number two, news and public affairs programming, the thing
about news and public affairs is that the day after it plays it doesn't
have any value, all right, and I have heard some people say, well,
we might want to sell DVD sets of Meet the Press. Well, if that
was the case why don't we see it on the shelves already?
So one of the rationales for the broadcast flag is that, well, if
our movies are pirated then we are not going to be able to put them
on DVD. We won't be able to have secondary markets for them.
Well, that is clearly not the case. Nobody really wants to buy the
7:00 news on DVD. That is number one. The second point is to
the extent that broadcasters get free use of the public air waves,
they do so because they are supposed to provide news and public
affairs programming, and that is the type of programming that
people blog on, they comment on, they criticize on-line.
So to take that away from the American public is basically
saying, okay, you can spend your taxpayer dollars and give them
all to the broadcasters for nothing and get absolutely nothing in
return.
MR. SHAPIRO. Can I just add to that?
MR. FERGUSON. Forgive me. How do we define news
content?
MS. SOHN. It is actually defined in the Communications Act.
The exceptions to Section 315, the equal time rules, is defined
there and there is a whole--
MR. FERGUSON. Not all of us have read 315.
MS. SOHN. Those are the exceptions to the equal time rule.
There are certain occurrences for news and documentary
programming where you basically don't have to follow the equal
time rules. The FCC has a huge body of law defining what is, and
I will say as somebody who lost many of these cases when I was at
Media Access Project, the definition actually is not too broad but
somewhat broad. It would cover enough to make us comfortable.
MR. FERGUSON. It just seems that that is a sticky area
particularly with the way coverage today and broadcasts today are
changing. I mean you could flip through the channels at any point
during the day and find news coverage when it just sort of seems to
me that those lines are blurring a little bit and that might be a
difficult exception to both define and enforce.
MS. SOHN. Well, again, like I said, the FCC has a very large
body of law in that area so it not like they are going blind. And I
also think that the broadcasters are pretty smart. They know what
news and public affairs programming is. Now I do have a problem
with the Senate provision and the telecom bill because it basically
allows the broadcasters to have the exception swallow the
exception. They obviously have to have some discretion but the
FCC has to be able to also enforce any concerns that the public has
with them defining news and public affairs programming too
broadly.
But under the FCC's case law, I don't think it is a problem
actually.
MR. FERGUSON. Does 60 Minutes fit under that?
MS. SOHN. I would think so, yeah.
MR. FERGUSON. So that would be considered a news--
MS. SOHN. News and public affairs programming, probably. I
would have to see what the FCC has decided as far as equal time
rules are concerned but is anybody selling 60 Minutes reruns on
DVD?
MR. FERGUSON. Yeah.
MR. SHAPIRO. Mr. Ferguson, can I give you a real life
example?
MR. FERGUSON. Sure.
MR. SHAPIRO. I assume you are running for re-election in New
Jersey and you have an opponent, I don't know. But the opponent
runs an attack ad on your local television station against you which
is totally unfair and your staff is incensed about it. And they call
you up in Washington--
MR. FERGUSON. Any attack ads somebody would run against
me would be terribly unfair.
MR. SHAPIRO. Then you want to see it. Here you are in
Washington. Under today they could basically copy it and send it
to you over the Internet. No broadcast flag. In fact, as was said
earlier, there is no exceptions. If this all passed as proposed, I
don't know what would happen. They would probably have to
Federal Express it, a hard copy, so you lose 12 or 24 or 36 hours
waiting for that Fed Ex to actually see how bad it really was.
There are a lot of exceptions like that which come in, and
which is why the exceptions are important. And I don't know if
that would qualify as news and public affairs. I don't know if
attack ads are actually news. But it would affect--and there are a
lot of real life situations like that.
MR. FERGUSON. Can you comment on that?
MR. ATTAWAY. That is simply not true. The FCC rule does
provide--
MR. FERGUSON. You have a disagreement?
MR. ATTAWAY. --for discriminate redistribution and in fact
one of the 13 technologies that was certified by the FCC would
permit you to get your attack ad sent from your district to your
office here in Washington. I just don't understand why I keep
hearing this that the rule would prevent all redistribution when it is
just simply not true, and the technologies certified by the FCC
would permit it.
MS. SOHN. But what the rule says and what the technology
allows you to do, Fritz, are two separate things, okay, so the FCC
kept saying, well, we are not changing copyright law and this is
only about indiscriminate redistribution. They can say that all they
want but the technology does not permit what Gary just talked
about.
MR. FERGUSON. When we are talking about Dateline or, what
do you call it, 60 Minutes or Newsmakers or some of these other
programs which seem to kind of blur the lines a little bit that is
where I was going. I appreciate your varied viewpoints on this.
One thing we have heard today is a lot of varied viewpoints. I
know there was some comment from some of you on my bill
which we discussed at the first panel. I know, Mr. Shapiro, you
were cautioning against sweeping generalizations and Chicken
Little and the sky is falling, and I would just respectfully ask that
you not practice that either.
MR. SHAPIRO. I would never do that.
MR. FERGUSON. In your description of my bill or whatever Mr.
Bainwol or someone else was saying, my sense is that there is
certainly a reasonable common ground solution that folks if they
just get to the negotiating table can come up with. It has happened
before. It can happen again. I don't happen to believe that
government and the Congress getting involved in every problem is
necessarily the solution, but when it seems like folks aren't
necessarily perhaps negotiating effectively and one party is
severely disadvantaged by the lack of a negotiation that seems to
me to be a market failure as someone said earlier today, and that is
frankly the goal of my bill.
Thank you all, all three of you, very much for being here today.
We appreciate it very much.
MR. SHAPIRO. Thank you for listening.
MR. FERGUSON. You are welcome. And we will adjourn this
hearing.
[Whereupon, at 5:53 p.m., the subcommittee was adjourned.]
Atlantic Recording Corp., et al. v. XM Satellite Radio Inc., Docket No. 06 CV 3733 (S.D.N.Y.).
H. Rep. No. 92-487, 92d Congress, 1st Sess. at 7 (Sept. 22, 1971) (emphasis added).
See S. Rep. No. 102-294, 102d Cong., 2d Sess. 30, 51 (June 9, 1992).
Hearing Before the Senate Subcommittee on Communications, S. Hrg. 102-908, Serial No. J-102-
43, at 111 (Oct. 29, 1991) (statement of Jason Berman, President of RIAA) (emphasis added).
See, e.g., S. Rep. No. 93-983, at 225-26 (1974) ("The financial success of recording companies and
artists who contract with these companies is directly related to the volume of record sales, which, in
turn, depends in great measure on the promotion efforts of broadcasters.").
S. Rep. No. 104-129, at 15 ("1995 Senate Report"); accord, id. at 13 (Congress sought to ensure
that extensions of copyright protection in favor of the recording industry did not "upset[] the long-
standing business relationships among record producers and performers, music composers and
publishers and broadcasters that have served all of these industries well for decades.").
17 U.S.C. 114(d)(1)(A).
Audio Home Recording Act of 1991: Hearing Before the Subcomm. on Patents, Copyrights, and
Trademarks of the S. Comm. on the Judiciary, S. Hrg. 102-908, 102nd Cong., 2d Sess. 111 (Oct. 29,
1991) (statement of Jason S. Berman, President, Recording Industry Association of America). Mr.
Berman also argued "[m]oreover, enactment of this legislation will ratify the whole process of
negotiation and compromise that Congress encouraged us to undertake." Id. at 120. There could be
nothing more deleterious to that process than allowing the recording industry to renege on the
legislative deal that it made.
Contrary to what some may have heard, the S50 contains no automated search function. You
cannot program the device to seek individual songs or artists, period.
House Judiciary Committee Report No. 92-487, 92nd Cong., 1st Sess. at 7 (1971).
Record Rental Amendment of 1984, Pub. L. No. 98-450, 98 Stat. 1727 (1984).
See H.R. Rep. 98-987 (Aug. 31, 1984).
See, e.g., S. Rep. 102-294, 102nd Cong., 2nd Sess. 33 (June 9, 1992).
S. Rep. No. 102-294, 102nd Cong., 2nd Sess. 51 (June 9, 1992) (emphasis added).
S. Rep. 102-294, 102nd Cong., 2nd Sess. 30 (June 9, 1992); id. at 51 ("key purpose of [AHRA] is to
insure the right of consumers to make analog or digital recordings of copyrighted music for private,
noncommercial use").
Id. at 51.
138 Cong. Rec. H9033 (daily ed., Sept. 22, 1992)(Statement of Rep. Moorhead).
138 Cong. Rec. H9029, H9033 (daily ed., Sept. 22, 1992)( Statement of Rep. Hughes, emphasis
added).
Diamond, 180 F.3d at 1079, quoting S. Rep. No. 102-294 at 86.
Id. at 179.
S. Rep. 102-294 at 36. Congress chose SCMS as a pre-approved technology because "SCMS has
been subjected to extensive review by the affected industries and relevant international scientific
standards bodies," H.R. Rep. No. 102-873 Part 1 at 19. Further, Congress explicitly granted
regulatory authority to the Secretary of Commerce, not the FCC, to approve technological protection
measures other than SCMS, subject to the requirement that they have the same functional
characteristics of SCMS. 17 U.S.C. 1002(a)(3).
Although the Act uses a set of nested definitions that are somewhat complex, it defines a "digital
audio recording device" as a device "the digital recording function of which is designed or marketed
for the primary purpose of making a digital audio copied recording for private use." 17 U.S.C.
1001(3). A "digital audio copied recording" is, in turn," a "reproduction in a digital recording
format of a digital musical recording, whether that reproduction is made directly from another digital
musical recording or indirectly from a transmission." Id., 1001(1) (emphasis added). A "digital
musical recording," in turn, is material object in which are fixed, in a digital recording format, only
sounds, and material, statements, or instructions incidental to those fixed sounds, if any."
S. Rep. No. 102-294 at 66.
The "Perform Act," H.R. 2466, would require any device that can record from a satellite radio
service to play back songs only in the order transmitted on a particular channel -- not in the order
desired by the owner of the device.
The "Section 115 Reform Act," H.R. 5553, would revoke the necessary license in the case of any
service that "takes affirmative steps to authorize, enable, cause, or induce the making of
reproductions of musical works by or for end users that are accessible by such end users for future
listening" - "future listening" meaning even the type of time-shift recording that the Supreme Court
protected as fair use in the Betamax case.
The "Digital Audio Broadcast" provisions of S. 2686, telecommunications reform legislation under
consideration by the Senate Commerce Committee at the time of submission of this written
statement, would require the Federal Communications Commission to impose regulations governing
such purported "distributions" - apparently, by implication, reclassifying broadcast performances as
"distributions" and so by implication amending copyright law.
This was contained in a minority discussion draft of the legislation referenced directly above.
The Audio Home Recording Act of 1991: Hearing before the Senate Committee on the Judiciary,
S. Hrg. 102-98 at 115, October 29, 1991, written statement of Jason S. Berman.at 119. Mr. Berman,
in fact, emphasized that the comprehensive compromise nature of the AHRA was a reason for the
Congress to pass it: "Moreover, enactment of this legislation will ratify the whole process of
negotiation and compromise that Congress encouraged us to undertake." Id. at 120.
http://www2.ncaa.org/portal/media_and_events/press_room/2006/march/20060320_mmod_rls.html
D.C. Circuit Court Judge Harry Edwards noted this reach at oral argument when he said,
"You're beyond transmission.I mean you're out there in the whole world regulating****I mean, I
suppose it will be washing machines next." ALA v. FCC, Oral Argument Transcript at 31.
For a detailed analysis of the flaws of the FCC's certifications process, see Center for
Democracy and Technology, Lessons of the FCC Broadcast Flag Process (2005), found at
http://cdt.org/copyright/20050919flaglessons.pdf
For a detailed discussion of these issues, see
http://www.publicknowledge.org/content/presentations/bflagpff.ppt
I say "so called," because calling a digital radio broadcast signal "High Definition" is quite
misleading. Whereas in the television context, High Definition connotes a far clearer and sharper
picture, an HD radio signal simply raises the quality of AM radio to FM standards, and permits the
reception of broadcast radio in places where an analog signal would get cut off, such as in a tunnel or
at a traffic light. Indeed, an "HD" quality signal is not even a CD quality signal. See, Ken Kessler,
Digital Radio Sucks, it's Official, found at http://www.stereophile.com/newsletters/.
See In the Matter of Digital Broadcast Content Protection, FCC 03-273, 18 FCC Rcd 23550,
23553 (November 4, 2003).
See Comments of Viacom In the Matter of Digital Broadcast Content Protection, MM Docket
No. 02-230 at 12 (December 6, 2002).
D.C. Circuit Judge Edwards also rejected this argument. See ALA v. FCC Oral Argument
Transcript at 32 (Judge Edwards: "This in no way -- what you do here or not in no way impairs the
ability to . . . stay on the digital deadline. . . . In no way.").
http://www.ati.com/products/hdtvwonder/
For the week of Jan. 19 to Jan. 25, ABC broadcast 13 of 32 prime-time shows in HD. During
the same week, CBS broadcast 31 of 34 prime-time shows in HD; NBC broadcast 32 of 50 prime-
time shows in HD during the same period. For all 3 networks combined, 76 of 116 (66%) prime-time
shows were broadcast in HD for one week in January 2006.
http://www.cnet.com/4520-7874_1-5119938-1.html
http://www.ce.org/Press/CurrentNews/press_relesae_detail.asp?id=10913
See, http://biz.yahoo.com/prnews/051220/nytu017.html?.v=36
See testimony of Mitch Bainwol before House Committee on the Judiciary, Subcommittee
on Courts, the Internet, and Intellectual Property for the hearing on "Content Protection in the Digital
Age: The Broadcast Flag, High-Definition Radio, and the Analog Hole," November 3, 2005 at 4,
found at http://judiciary.house.gov/media/pdfs/bainwol110305.pdf; and Mitch Bainwol, Out, P2P
Paranoia, In: Platform Parity, Billboard Magazine, January 7, 2006 at 4.
See www.parentstv.org.
CRS Report at 5.
17 U.S.C. 1000-1010.
One MPAA executive stated at a recent public forum that the studios opposed such an
exemption because they wanted to reserve the right to sell boxed sets of shows like Meet the Press.
This strains credulity, since if there was a secondary market for public affairs programming of this
type, then the studios would already be selling it.
H.R. 4569: The Digital Transition Content Security Act of 2005, 109th Cong. 2005. Found at:
See Testimony of Dean Marks, Senior Counsel Intellectual Property, Time Warner, Inc., and
Steve Metalitz, Representing Content Industry Joint Commenters, before the Copyright Office in
Rulemaking Hearing: Exemptions From Prohibitions On Circumvention Of Technological Measures
That Control Access To Copyrighted Works, May 13, 2003 at 60-61: "I think the best example I can
give is the demonstration that Mr. Attaway [MPAA Executive Vice President for Government
Relations and Washington General Counsel] gave for you [Marybeth Peters, Registrar of
Copyrights] earlier this month in Washington in which he demonstrated that he used a digital
camcorder viewing the screen on which a DVD was playing to make a excerpt from a DVD film and
have a digital copy that could then be used for all the fair use purposes.." (Mr. Metaliz at 60.) "I
agree with everything Steve has just said about fair use copying or taking clips . with digital
camcorders and analog camcorders being widely available ." (Mr. Marks at 61).
Jefferson Graham, RIAA Chief Says Illegal Song-Sharing "Contained", USATODAY.COM,
June 12, 2006, at: http://www.usatoday.com/tech/products/services/2006-06-12-riaa_x.htm.
See Keynote Address of Edgar Bronfman, Chairman and CEO of Warner Music at
http://www.tvworldwide.com/events/pff/050821/agenda.htm. "The Music Industry, like almost
every industry faced with massive and rapid transformation first reacted too slowly and moderately,
inhibited by an instinctive and reflexive reaction to protect our current business and business
models."