Cyber pirates roil moguls
Issue dominates over foreign markets, risk-taking
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"It's the elephant in the room right now," declared ICM topper Jeff Berg during a discussion of global media at the Milken Institute conference before about 300 attendees.
Although the title of the 75-minute panel at the Beverly Hilton was "Media: Not the Industry Your Parents Knew," the prospect of Internet-fueled worldwide piracy clearly dominated as the unresolved issue rather than such topics as vertical integration, foreign markets and risk-taking.
Berg admitted it's "problematic" to put the brakes on the estimated $15 billion in annual theft of intellectual property.
"The leakage in the business is greater than the business itself," he added.
Activision topper Robert Kotick declared piracy has become the largest single issue within the media-entertainment biz. With the growth of the Internet and multi-tasking, he noted, media is being "consumed" at a significantly greater rate.
And News Corp. prexy Peter Chernin emphasized that the response needs to be multi-faceted with action on four fronts -- technological, legislative, legal and public relations.
"Copyright has to be sacrosanct," he declared.
Viacom prexy Mel Karmazin indicated the congloms face a daunting PR challenge in blocking piracy of movies due to the widespread belief among teens and young adults that music on the Internet should be free.
"We expect some shrinkage but the Internet creates a new set of circumstances," Karmazin said.
Chernin expressed dismay over the current practice among teen Web users to swap music files routinely without any thought that they should have to pay to do so.
"I'd be horrified if they were breaking into a record store and stealing CDs," he added.
The panelists also noted that the digital TV transition has been hampered in building momentum because the piracy problem isn't being addressed.
But Yahoo topper Terry Semel, former Warner Bros. Co-Chief, noted that the feature film biz needs to do more in terms of planning than the music business has.
"I haven't seen any of your companies get together with a company like mine," Semel pointed out.
And Semel stressed that studios will suffer consequences if they do not move on the issue while they still can have an impact.
"Do you wait until after it happens and then it's so pervasive that you can't stop it?" he asked rhetorically.
Capitol Hill solons introduced legislation last month that would force Silicon Valley giants to load down their ware with technology to stop the downloading of pirated pics from Internet file-sharing sites.
Six major studios and Motion Picture Assn. of America prexy-CEO Jack Valenti announced support for the legislation.
The tech sector has contented that the legislation is misguided, reiterating that there is no one technological solution to curb the swapping of pirated pics on Internet peer-to-peer sites.
The panelistsalso predicted that more mergers and consolidation will occur within the sector as sensible opportunities present themselves.
"I'm not sure bigger is better, but it is necessary," Chernin said.
Chernin also declared no single area should draw the focus in dealing with piracy, adding, "There's no single silver bullet."
Also on Tuesday, Valenti and Recording Industry Assn. of America exec VP and director of anti-piracy Frank Creighton testified at a congressional hearing on the subject.
Valenti, referring to a new economic study showing that the entertainment biz eclipsed all other industries in terms of foreign sales and exports last year, said content must be protected in the digital age and that Hollywood needs Washington's help in enforcing intellectual property laws.
Left unchecked, theft is the "potential undoing of America's greatest export trade prize," Valenti told a House Appropriations Subcommittee that oversees the budgets for those agencies enforcing IP laws.
"We all have to find a way to come together and make sure that we are using the people's resources and the tools of the law in a way that makes sense and gets results," Creighton said.
Chernin will plug the dangers of piracy again Thursday, when he testifies via satellite before Capitol Hill's House Telecom Subcommittee.
Skedded to testify in person are incoming AOL Time Warner topper Richard Parsons, Panasonic chief technology officer Paul Liao and Philips Consumer Electronics CEO Larry Blanford.
(Pamela McClintock in Washington contributed to this report.)
