Hollywood Vs. Compaq in Video Disk Spat

The movie industry is fighting Compaq Computer Corp. and others over digital video disk technology and legislation

Executives from the movie, computer and consumer electronics industries are trying to agree on a technology and a congressional bill that would prevent piracy of movies stored on digital video disks.

Industry infighting over critical anti-piracy technology will likely delay the rollout of DVD technology past the Christmas buying season, postponing what industry executives say will be billions of dollars in new revenue.

However, "there is a slim possibility of an agreement this year," said Tom Polgar, a Washington lobbyist for Viacom Inc., a movie, television and cable TV company based in New York.

Digital video disks have been developed to replace the VHS videotapes used with television video cassette recorders. The disks run on DVD players connected to televisions or computers, just as CD-ROM drives are used by computers. DVDs could generate billions of dollars in revenues as consumers flock to buy the disks and associated hardware that will allow them to view high-quality images in movies and software games, made possible by DVD's massive storage capacity.

During the summer, computer industry officials derailed an anti-piracy device -- and a matching congressional bill -- quietly developed by the movie and consumer electronics industries.

The recommended anti-piracy device demands too much computer processing power and would cripple home computers' use of DVD disks, said Joe Tasker, a Washington lobbyist for Compaq Computer Corp., Houston, which plans to build DVD players by year's end. "They did not design the [anti-piracy] system with us in mind," he said.

Without reliable anti-piracy technology, Hollywood executives fear their latest movies will be flawlessly replicated and widely sold on the black market, cutting profits from the showing of movies at theaters. And without new movies provided by Hollywood, DVD disks won't catch on so quickly with consumers, cutting revenue to all three industries.

There's also the danger that rival industry groups could start marketing incompatible DVD players and disks, further delaying the market's growth. So industry officials are meeting in an ad-hoc working group to discuss a variety of alternative anti-piracy technologies intended to meet the needs of all three industry groups.

Several companies are developing competing anti-piracy technologies, including Matsushita Electric Industrial Co. Ltd., Osaka, Japan. But each industry's demands are contradictory.

Computer executives say they don't want computer processing power hampered by poorly designed anti-piracy technology, nor do they want advances in computer technology hampered by anti-piracy legislation.

Movie executives say the anti-piracy technology need not be perfect, but must delay the widespread piracy of each new movie until the industry has shown it in theaters. "There is always some amount of copying. You can't prevent it," said Polgar.

Also, Hollywood executives want the technology to accommodate the movie industry's segmentation of the world market into various regions, such as the United States, Latin America and Europe. The movie industry sequences the release of new movies into these regions at different times, and wants the anti-piracy technology to ensure that movie-carrying DVDs bought in the United States can't be sent to Europe where they could undermine revenue for movies theaters.

Another problem is that the anti-piracy technology must be backed by a law, said industry executives. The law would punish those who sell technology that circumvents anti-piracy technology. But because of industry's conflicting interests and various anti-piracy technologies, it will be a complex bill, said Polgar.

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