WASHINGTON — A new canyon has opened in Hollywood and it’s called the Digital Divide.
What’s at stake? How and when studios will release their movies and other valuable programming digitally, the next great migration.
Breaking ranks with the other Hollywood majors, Warner Bros. and Sony Pictures Entertainment are on the brink of signing a sweeping licensing agreement with the five major electronics companies for digital cable transmission.
The other studios, who oppose the pact, say the protection provided by the agreement should include over-the-air broadcast, as it does for cable and subscription programming. They insist it doesn’t go far enough in protecting digital broadcast programming from being copied endlessly by consumers or pirated by Internet bandits.
The decision by the two to go forward comes in the wake of this week’s congressional hearing, convened to address the troubled transition to digital TV. Panel heard from a range of witnesses representing the movie, TV and electronics industry. Key issues holding up the rollout are copyright protection and whether cablers should be forced to carry a broadcaster’s multiple digital signals.
Warner exec veep and chief technology officer Chris Cookson testified Thursday that the agreement with the “5Cs” — Intel, Matsushita, Toshiba, Sony and Hitachi — is the best deal to be made, and one that is essential to get digital TV up and running. Pact is being brokered by DTLA, licensing org for the manufacturers.
Warner and Sony, which signaled their tentative approval of the licensing pact last fall, will soon close the deal, Cookson said.
“We recognize that we don’t have a perfect world … but the perfect world is often the enemy of the good,” Cookson said during his testimony before the House Telecommunications Subcommittee.
For nearly four years, the majors had presented a united front during four years of negotiations with the consumer electronics congloms over copy protection and digital TV.
Late last year, Sony and Warner informally said they were ready to move forward, while Disney and the other majors were still not satisfied.
Under the deal hammered out by Sony and Warner, broadcast programming passing through cable lines would be encoded so that it couldn’t be uploaded to the Internet. Disney, Fox, Paramount, MGM and Universal want all over-the-air broadcasting encoded, whether it passes through cable wire or not.
Cookson said as of yet there is no straightforward technology to address this concern, pointing out that Warner Bros. doesn’t relish the idea of its hit broadcast shows being linked from the TV to the Internet.
“We wish there was a silver bullet technology to protect broadcast transmissions — but we haven’t been able to find one to date that doesn’t create more problems than it solves,” said Cookson, who is widely respected for his techno knowledge.
Another area of disagreement is whether broadcast programming should be copy protected, as is the plan for cable programming.
Warner and Sony have argued that it would be unfair to restrict how many times a consumer can copy over-the-air broadcasting, since it’s free by definition. Cable, on the other hand, is a fee service.
Fox and Disney say no content provider will want to license programming to a broadcaster if there are no assurances a movie or show won’t be made into a perfect copy and pirated around the globe.
In an age of consolidation, the varied interests of the empires coming to the table aren’t lost on Washington lobbyists, or Hollywood execs, for that matter.
Sony’s interests also include electronics manufacturing — in fact, they are one of the 5C companies. Warner Bros. is owned by AOL/Time Warner, the country’s largest Internet service provider. Disney owns ABC.
CBS exec veep Martin Franks testified at the hearing that it is imperative that broadcasting programming be protected to much the same degree that cable and subscription channels are. He said he in general he sympathized with the argument that consumers should remain free to copy any broadcast program for their home use.
“However, without some measure of copy protection that makes unlawful piracy, particularly over the Internet, more difficult, we fear that premium content, whether it is ‘Titanic’ or ‘Survivor,’ will not be made available to over-the-air broadcasters and will instead migrate to cable and satellite where its airing is more secure from piracy,” Franks said.
While the hearing itself was relatively low-key, there was a flurry of activity behind the scenes.
On Wednesday, the licensing org serving as the go-between for studios and the 5Cs sent a letter to Federal Communications Commission chairman Michael Powell stressing that the agreement struck with Warner and Sony is a sound one.
“We submit, therefore, that DTLA should not be blamed when certain studios belatedly add new technical requirements that the technologies were not intended to perform, and insist that DTLA modify its licenses in ways that potentially could run afoul of antitrust and unfair competition law,” DTLA policy chairman Seth Greenstein wrote.
Greenstein was rebutting a March 2 letter sent to Powell by a group of influential lawmakers, including Rep. W.J. “Billy” Tauzin (R-La.), chair of the House Commerce Committee, and Rep. Fred Upton (R-Mich.), chair of the telecom subcommittee.
A clear victory for the Mouse and Fox, the March 2 letter said it’s crucial that broadcasting programming be protected. Otherwise, it will be Napster all over again.
Franks commended Upton and the other lawmakers that sent letter, saying it has re-opened negotiations with some representatives of the 5Cs.
Likewise, Greenstein stressed in his letter to Powell that the door is still open to the other studios, and that they would still be eligible to use some of the copy protection provided by the agreement with Warner and Sony.
Meanwhile, the National Assn. of Broadcasters and the Assn. of Local Television Stations followed up Thursday’s hearing with a filing to the FCC asking the agency to reconsider an earlier ruling regarding digital TV receiver standards. They also want the FCC to loosen the deadlines by which stations must choose their permanent digital channels.