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6/29/2006
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The Complicated Web Of Content Licensing

The movie industry is afraid--very afraid--as it ponders the functionality promised by new technologies hovering on the horizon, and that fear could be trouble for Apple.

Hollywood is deathly afraid of the possibilities that new technology offers consumers, and this is going to dramatically impact Apple's ability to deliver the same experience in the living room that it has on the iPod.

"Companies in dominant positions are generally afraid of disruptive technologies, and today's content producers are no exception," says Fred von Lohman, a senior staff attorney with the Electronic Frontier Foundation. "Such products tend to reorganize markets and turn today's leaders into tomorrow's has-beens." That being the case, the vision of consumers being able to access, copy, and move commercial content they've legally purchased however they choose is currently wildly optimistic.

"The system for monetizing content is not yet in place," says Joe Marchese, head of the online practice group at Bainbridge Inc., a research firm. "Consumers need to be able to store, repurpose, move around, and share their personal media, or the digital living room simply won't happen. Yet the new media value chain has not yet worked out a process that works for everyone concerned."

Content producers profess to being worried about the rampant piracy that already exists on the Internet. Cable, satellite, and network affiliate companies are proving extremely loathe to give up the control they have over what gets viewed and where. There are lawsuits pending--most notably, the case against Cablevision's remote digital video recorder, or DVR, by Time Warner, Fox, NBC Universal, CBS Paramount, and Disney/ABC.

Then there are the proposed bills that would throw a monkey wrench into everyone's attempt to make the digital living room a reality (see related article).

"The way the television and movie industries are headed, if there ever was an Apple DVR, it would probably be crippled in some way to prevent recorded content [from being] transferred to the iPod and elsewhere," says Tim Deal, a senior analyst with Technology Business Research. "That's not going to go over well."

Phillip Swann, president of TVPredictions.com, gives the example of Apple creating a Video iPod capable of downloading content off a TV set-top box attached to the TV. "It gets very complicated," says Swann. "The networks could well say, 'Every time someone moves that content, we get a fee.' In their eyes, every time a piece of media is distributed, it's another chance to get some money."

Apple has pulled some muscle in forcing the record companies to agree to the $0.99 pricing per song, but they're not happy about it, as it doesn't provide them with much flexibility, according to Mike Wolf, a principal analyst with ABI Research. "Are the movie guys going to jump on board? I don't think so. It's much more of a Wild West scenario than the music business."

"DRM [digital rights management] is the big question mark," agrees Marchese.

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