Copyright Issues May Stall Digital Videodisc Debut

The planned fall launch of the digital videodisc--a major new consumer electronics technology that the industry hopes will eventually supplant the VCR, the music compact disc and the computer CD-ROM--may be delayed until next year because crucial copyright protection issues have not been resolved.

Such a delay would be a significant setback for electronics manufacturers and retailers, who hope DVD machines will invigorate the industry in the way CD players and VCRs did in the 1980s. Hollywood movie studios, record companies and developers of multimedia computer software would also be forced to put some major new-product plans on hold.

Although an agreement on copyright and other issues is still possible, industry executives are growing increasingly pessimistic about the chances of resolving those issues in the next few weeks. And most agree that if a deal isn’t reached by the end of June, DVD products will not be hitting the market this year.

The problem, in the eyes of the film and record industries, is the ease with which perfect copies can be made from the new DVDs, which are the same size as traditional CDs but have about seven times more storage capacity. DVD images and sounds could easily be copied and distributed over the Internet, for example, and DVDs could also be copied onto VHS tapes and sold overseas.

The Motion Picture Assn. of America and the Consumer Electronics Manufacturers Assn. had been working on a legislative proposal requiring both DVD software and hardware to incorporate special encryption technology to thwart piracy. But the computer industry--stung several years ago by a consumer backlash against anti-copying technology--opposes any mandatory scheme.

Now a number of trade associations are working together to come up with a compromise proposal.

“The problem is settling on language that satisfies everyone,” said Jan Goebel, director of communications for the Information Technology Industries Council, a Washington trade group that represents a number of computer hardware manufacturers and is working with the MPAA and CEMA to hammer out proposed legislation.

Goebel said that although it is likely a form of encryption can be agreed upon to curb digital-to-digital copying, finding technology to prevent digital-to-analog copying has proven more difficult.

“It will be very tough for DVD to be launched if there’s no agreement on both the technical and legal ends,” said Larry Pesce, a DVD product manager at Thomson Consumer Electronics. Thomson, which markets products under the RCA and ProScan brands, and Toshiba had targeted a Labor Day debut for DVD movie machines.

Although legislation would probably not be introduced in Congress until next year, industry executives say a working agreement would make it possible to move ahead with the launch. The industry organizations are meeting weekly, including today in Washington, trying to resolve the issues.

DVD movie machines are expected to retail at between $500 and $1,000, and though they will not be able to record at the outset, they should offer better picture quality than a VCR. And with discs likely to be priced at less than $30, studios hope consumers will buy, rather than rent, their movies.

Warner Home Video President Warren Lieberfarb, DVD’s chief cheerleader in Hollywood, said the studio is “watching the progress” of DVD copy-protection talks before publicly announcing which movies it will release in the new format and when. But he professes confidence that the issues will be resolved in time for DVD’s scheduled fall launch--and a good bet is that Warner Bros. mega-hit “Twister” will be among the first DVD offerings.

Lieberfarb said Warner Bros. has the technical ability to produce 250 titles to accompany the DVD launch--including about 75 from his company. However, the other major studios--including Walt Disney, Twentieth Century Fox, MCA/Universal and Paramount--declined to discuss their DVD plans.

DVD-ROM drives for PCs, due to be released two to three months after the DVD movie machines, are expected to retail for between $400 and $600, and they’ll be able to play conventional CDs as well. DVD allows multiple-disc CD-ROM titles to fit comfortably on a single disc and speeds up the transfer of data, resulting in faster game play and more flexibility in using real video and advanced graphics.

“DVD breathes new life into the products,” said Craig Alexander, general manager of Sierra On-Line, a Bellevue, Wash., publisher. Sierra On-Line is preparing to release at least four titles on DVD, including a version of its hit multiple-disc CD-ROM Phantasmagoria, and the sequel.

The record business, for its part, is enamored with DVD because it sounds better than current CDs and offers plenty of room for alternate tracks and other enhancements.

Many executives involved with DVD say Silicon Valley rather than Hollywood has the most to gain at the outset. Pesce said industry analysts project 100 million PCs will be sold worldwide by 2000--and that if even half those are equipped with DVD-ROM drives, that would exceed the 35 million to 40 million DVD movie machines Pesce expects to be sold in that period.

“It’s going to be a greater challenge to evangelize the [movie] consumer about DVD than the PC market,” said Robert Kotick, chairman of Los Angeles-based PC game publisher Activision. His company plans to re-release three of its popular CD-ROM titles--Zork Nemesis, Spycraft: The Great Game and “Muppet Treasure Island”--on DVD.

Kotick said the titles will be bundled with DVD-ROM drives, not sold in stores. That’s because he predicts widespread acceptance of DVD-ROM is a year or two down the road--and retailers are unlikely to clear much shelf space for it in the meantime.

Industry observers say the real DVD boon will occur in a couple of years, when DVD machines will possess features allowing for movies, music and games to coexist on one disc and be played on one machine. However, for that truly versatile disc to hit the market, complex negotiations will have to be held on the part of film, game and music companies owning the copyrights--and DVD may find itself back at the bargaining table once again.

Jane Greenstein is senior editor of Video Business magazine, a weekly trade publication.