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Press Release

    Tech Bytes- Tid Bits in Tech News: Jack Valenti's Growth Engine

    04/09/2001

    In Senate testimony last week, Jack Valenti, chief executive for the Motion Picture Association of America, described the entertainment industry as an "economic growth engine" that is "the envy of the known world."

    Threats to copyright should be rejected by the Senate, argues Valenti, because they would endanger the "economic and creative prize" that is the entertainment industry.

    Valenti argues that without copyright, America will "squander our creative future" as private risk capital for international ventures evaporates.

    He recognizes that Hollywood uses copyright protection to cover the fixed costs of a worldwide content empire. Without a monopoly on reproduction and distribution, it would be nearly impossible to recoup the costs--logistics, distribution, promotion and production--of the major media conglomerates.

    But Valenti also contends "creative property is private property. To take it without payment is to renounce "the core values of this society." Yet he apparently doesn't believe that artists have a moral right to copies of their creative expression.

    Valenti is agnostic about whether the actual creator should get paid for the reproduction, but dogmatic in his insistence that unauthorized downloads are wrong.

    To Valenti, the component of the business in need of copyright protection and moral approbation, is not in the creation of the expressive work itself, but the work's worldwide distribution rights, described by Hilary Rosen, president of the Recording Industry Association of America, as "the core distribution right to a reproduction."

    In the current copyright model, the artist provides the content and the industry exposes as many potential consumers to that content as possible. In this way, the music industry grows the pie, so to speak, and generates revenue from markets the artist would not otherwise be able to access.

    The economics of this model are reflected in the paltry take the artist receives from each $15 CD sale ($1.50 on average) compared to that of the record industry ($5-$6).

    However, the Internet offers a different model that provides the same global reach without the fixed costs. This could dramatically increase the artist's take and completely reform content distribution.

    In place of content empires would be the artists themselves as well as low-cost Web businesses eager to cater to individual tastes. If existing catalogs are available to such businesses, the copyright distribution model could quickly become a thing of the past. This "digital music revolution" is what the content-based conglomerates see as the biggest threat to their business model.

    It's worth noting that Valenti and the businesses he represents had similar reservations about the videocassette recorder. It was believed the VCR would make copying movies too easy and cause irreparable harm. Of course, the market developed quite differently than he supposed.

    The VCR presented consumers with a new way to access ever more content. This increased demand for copyrighted products and provided content-based businesses with new revenue streams.

    The music trading service Napster and other software applications hold similar potential. There is no evidence to suggest copyright revenue will contract as consumers gain increased exposure to content over the Internet. In 2000, copyright revenue from CD sales hit a record high, while the number of Napster users grew exponentially.

    It may be difficult to prove Napster use contributes to CD purchases, but equally difficult to prove that Napster has adversely affected them.

    Copyright owners have fought every innovation in the sale or distribution of their copyrighted works. Yet in nearly every instance-- from the phonograph to the Internet--greater access to content has meant greater revenue for content-based businesses.

    Demand for American pop-cultural content continues to expand in every market to which it has been introduced. Evidence suggests increased exposure to free content--through the radio, television or borrowed DVDs-- stimulates demand for paid content and increases the industry's aggregate revenue.

    American content industries, eager to use copyright as a hammer to crush new delivery platforms, should instead embrace Napster's innovation. America's "economic and creative prize" would be well served.

    This article was published on the BridgeNews FORUM, April 9, 2001.