High Tech vs. Hollywood on Capitol Hill


By Jane Black Few Washington lobbyists would willingly engage in head-to-head battle with Jack Valenti. As president of the Motion Picture Association of America, Valenti has been one of the town's premier power brokers since the mid-1960s. But Valenti's latest crusade, to use technology to rein in digital piracy, has raised hell among a usually more subdued group in Washington: the high-tech lobby.

At first, the techies were complacent (see BW Online, 3/27/02, "Guard Copyrights, Don't Jail Innovation"). Now they're pulling out the stops to beat back Valenti & Co. The MPAA is backing a bill, introduced by Senate Commerce Committee Chairman Ernest "Fritz" Hollings (D-S.C.), requiring that copyright-protection mechanisms be embedded in PCs, handheld computers, CD players, and anything else that can play, record, or manipulate data.

Tech's big guns came out on Apr. 8, when an op-ed piece by Intel Chairman Andy Grove was published in The Wall Street Journal that warned the legislation could sabotage the Digital Age. That same day in Boston, Marc Andreesen, the creator of the first Internet browser, told a packed hall at the annual National Association of Broadcasters convention that even the best copy-protection scheme can't prevent piracy. And two days later, PC maker Gateway ran prime-time TV spots on NBC advocating consumers' rights to use and record digital media.

"WRONG-HEADED." So far, the campaign appears to be working. Copyright bills must be approved by the Senate Judiciary Committee. And its chairman, Senator Patrick Leahy (D-Vt.), has publicly come out against the Hollings proposal. Leahy says he believes a government-mandated solution to a technical problem is "wrong-headed." With no companion bill in the House, it's unlikely the Hollings' bill will even be put to a vote this year.

Beating back Valenti and the Hollings' bill seems to have served as a rallying point for the industry. After the dot-com bubble burst, several high-tech titans scaled back their representation inside the Beltway. "The Hollings' bill helped us focus. We are ready to strike back," says Harris Miller, executive director of industry trade group Information Technology Association of America (ITAA).

Miller admits that the technology lobby's decision to ignore Senate hearings on the Hollings bill in Febuary was, in retrospect, "a bad tactical decision." The South Carolina senator has never been much of a friend of the high-tech industry. But he does hold sway over many areas important to it, including telecom and emerging communications channels such as broadband. "We should have got more in Jack Valenti's face," Miller muses. "We thought they would play fair. They decided to go to war."

Now tech is returning fire. The strategy, lobbyists say, is twofold. First, the industry is trying to isolate Hollings. In private meetings, lobbyists say they have convinced Senate Majority Leader Tom Daschle (D-S.D.) and Senator Maria Cantwell (D-Wash.) among others, to oppose the legislation.

HIP-HOP HOLSTEIN. High-tech companies are also aligning themselves -- albeit cautiously -- with consumer groups. It's an effort to reframe the issue, which Hollywood claims is an all-out war between honest, upstanding copyright holders and merciless pirates who have been enabled by the Silicon Valley elite. "High-tech companies have simply lectured us that they have no obligation to help solve what they describe as 'our problem,'" Walt Disney CEO Michael Eisner proclaimed in his testimony before the Hollings subcommittee in February.

That attitude has infuriated even the most mild-mannered high-tech CEOs. Technology companies lose about $12 billion to piracy each year, compared to Hollywood's loss of $3.5 billion, according to Intel CEO Craig Barrett. So the techies are trying to position themselves as the consumer's best friend. Take Gateway's new marketing campaign. In its latest TV commercial, CEO Ted Waitt and the company mascot, a Holstein cow, sing along to a catchy hip-hop tune, which users are encouraged to download from Gateway's site and burn onto a CD. "Gateway supports your right to enjoy digital music legally," the ad says.

At the same time, the high-tech lobby is trying to disabuse the public of the notion that everything on the Web should be downloadable for free. "The tech community doesn't want willy-nilly copyright violations. We support strong intellectual property laws," says Ralph Hellman, senior vice-president for governmental affairs at the Information Technology Industry Council.

NO RESONANCE. Many analysts and activists think aligning with consumer groups is a smart strategy. The entertainment industry's calls for cracking down on copyright pirates doesn't particularly resonate with the public. By contrast, standing up for the consumer is usually a winning proposition.

Although the Hollings' bill likely won't take flight this year, Hollywood, led by the masterful Valenti, will undoubtedly keep up the pressure. Says Joe Kraus, founder of Excite.com and executive director of DigitalConsumer.org, a new consumer advocacy group: "Hollings is a wake-up call that technology is not immune to changes that would dramatically alter the sector's future."

High tech is stocking its arsenal, because this battle is far from over. Black covers technology for BusinessWeek Online in New York


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