The Voice of Hollywood Shows Signs of Cracking

When an influential U.S. senator introduced legislation last month to help entertainment companies block unauthorized downloading of movies and music, the Motion Picture Assn. of America--the official voice of major Hollywood studios--dutifully presented a united front and endorsed the bill.

Behind the scenes, however, the carefully crafted statement of support was the subject of painstaking negotiations, bickering and a flurry of tense meetings and conference calls by the companies’ chief Washington lobbyists, who were anything but united.

The internal jostling over the copyright bill is the latest sign that the traditional Hollywood alliance in Washington is starting to fray. Major studios, once unified on Capitol Hill, are increasingly at odds over legislative strategies and government regulation and, occasionally, with one another.

“I keep telling everyone that no matter how powerful they are as a company, no one is powerful enough to face the government alone,” MPAA President Jack Valenti said.

The divergent viewpoints reflect the new realities of the entertainment business. Gone are the days when the studios simply made movies. During the last few years, MPAA members have evolved into mammoth media conglomerates with international operations and competing interests beyond their filmmaking operations.

AOL Time Warner Inc., for example, not only makes movies but is the country’s largest Internet company and the second-biggest cable operator. Sony Pictures’ parent also is an electronics giant. Walt Disney Co., Viacom Inc. and News Corp. have substantial broadcast operations. Vivendi Universal is the world’s largest music company.

During his decades-long tenure as the industry’s leading voice in Washington, Valenti never has confronted such fractiousness. His strong personality and stature often have kept the studios from splintering.

“But it’s getting harder,” he said. “No question about it.”

The clashes in Washington are becoming more frequent and public.

Disney, for example, actively lobbied government regulators to kill or modify the AOL merger with Time Warner two years ago, saying the combined company’s cable and Internet operations would give it an unfair advantage.

News Corp., meanwhile, is fighting to kill the attempt by satellite broadcaster EchoStar Communications Corp. to acquire DirecTV, which News Corp. wants to buy itself. That has been painful to Vivendi, now an investor in EchoStar.

When the Federal Trade Commission blasted the industry for marketing R-rated movies to teens, the studios were unable to agree on a unified response and Disney was accused of trying to upstage the others by rushing out with a separate set of marketing guidelines. The disagreement among the companies prompted a scolding from lawmakers during Senate hearings.

“They were all over the map,” recalled one congressional staffer.

The strong personalities of the key entertainment lobbyists--a mix of attorneys and former political aides--also have complicated relations among the entertainment companies.

“We’re a family that can have dysfunctional moments, though I wouldn’t call us a dysfunctional family,” said Matt Gerson, head of Vivendi Universal’s Washington office, who increasingly finds himself mediating among the different factions. Lately that means smoothing clashes between AOL and Disney.

Gerson said many of the companies, including his own, are rethinking old policies and positions as their businesses grow and diversify, leading to some disharmony.

Vivendi’s recent acquisitions of MP3.com and EMusic, for instance, have made the company more sympathetic to calls by other online music providers to streamline music licensing.

“As we get into these online services ourselves,” Gerson said, “it causes a different perspective in how we look at these issues.”

Gerson, a former aide to Sen. Patrick J. Leahy (D-Vt.), often uses his old skills as a political strategist, working behind the scenes, nudging one side or another toward compromise. He also has a special bond with Valenti, thanks to a stint at the MPAA in the early 1990s.

“Jack’s role isn’t so much to be a Michael Corleone. It’s more like Michael Brady,” he said.

Frequently joining Gerson in the role of MPAA centrist is Viacom lobbyist Carol Melton. It may be no coincidence that she and Gerson have sat at the MPAA table the longest.

Melton, who spent a decade at Time Warner before taking the helm of Viacom’s Washington office in 1997, is seen as a focused pragmatist.

“To fight each other on Capitol Hill or any other forum does not increase your chance of success,” she said. “I’ve seen the importance of staying balanced and levelheaded. You rarely accomplish your objectives without building a consensus.”

To help keep peace among the players, Valenti referees a weekly conference call and insists that the entertainment companies come together at least once a month for a face-to-face meeting at the motion picture association’s headquarters. Serving as an inspiration for teamwork, the second-floor conference room is decorated with black-and-white photos of famous Hollywood couples.

Discussions are lively and occasionally heated.

“They’re awful sometimes,” said chief Disney lobbyist Preston Padden, whose combative style frequently puts him at odds with the others. “No apologies,” Padden said when asked about his take-no-prisoners approach.

Some MPAA members were miffed that Padden effectively forced the group to choose sides and confront the sensitive copyright issue by prodding Sen. Ernest F. Hollings (D-S.C.) to introduce the anti-piracy legislation. Others, however, privately expressed appreciation for Padden’s willingness to take on the dirty work.

The bill would require technology firms and entertainment companies to agree upon anti-piracy protections for television set-top boxes and other devices within 18 months. Otherwise, the government could step in and settle the matter.

Disney wants the law passed because the Burbank-based company would be devastated by the loss of its exclusive copyrights to such lucrative characters as Mickey Mouse. Padden urged a quick MPAA endorsement of the legislation.

But AOL Time Warner and Sony Pictures balked, fearing that the measure would give the government too much power to set technological standards better left to the private sector. AOL lobbyists began circulating a rival proposal, which called for a narrower government role.

Disney argued that AOL and Sony could not be objective because of their vast technology businesses, which benefit from the increasing number of people who download movies and music.

But Susan Brophy, a former Clinton administration aide who took the helm of AOL Time Warner’s domestic lobbying office last fall, said her company’s stance was driven not by the technology side of the business but by its studio arm, Warner Bros. She said Warner Bros. has a history of embracing new technologies, advocating DVDs long before other studios, for example.

“It’s not growing pains from the merger,” she said. “It’s growing with the world and trying to break new ground.”

Straddling the middle ground in the dispute were Viacom and Vivendi. News Corp. and Metro-Goldwyn-Mayer Inc. sided with Disney.

But it was Valenti who carried the day with some straight political talk. He argued that it would be unwise to alienate Hollings, chairman of the powerful Senate Commerce Committee. Six of the seven MPAA members fell into line. AOL Time Warner refused to go along, setting up a rare split vote, 6-1.

“It was painful for us to do this,” said AOL lobbyist Brophy.

The turmoil also forced the MPAA into an embarrassing predicament: The group endorsed the Hollings bill without reading it.

When Hollings drafted the copyright bill last fall, his office provided the industry representatives with a courtesy copy, which was promptly leaked to the media.

Unsure whom they could trust among the jockeying lobbyists, Hollings staffers refused to release the final bill to most association members until after it was formally introduced in late March. But Disney and others were pushing hard for an MPAA endorsement to be included with the bill’s introduction.

“I kept saying, ‘Wait. How can we endorse this? I don’t have a copy of the bill,’ ” recalled Sony Pictures’ Hope Boonshaft, who heads lobbying from Los Angeles. “We weren’t allowed to see it.”

Some now regret their haste. The final version included some strong language allowing consumers to make personal copies of movies and music, a provision most lobbyists had not seen before and did not necessarily support.

Valenti, who also did not see the final bill, argued that it was crucial to demonstrate support for Hollings.

“You don’t turn your back on someone who is trying to help you,” he said.

Despite the growing differences among the major entertainment companies in his organization, Valenti insists that they still have much in common, and he takes pride in the motion picture association’s track record of unanimity.

Before the copyright endorsement, the only other split vote he can recall occurred in the 1990s, when Fox fought other studios to relax government restrictions on television broadcasters entering programming. Valenti’s “rule of two”--which permits any two MPAA members to veto an official action--has never been invoked, he said.

Maintaining that record will be a challenge, he acknowledges.

“We’re much more powerful together than separately,” Valenti said. “I have to work hard to smooth out the lacerations so everyone can sign on.”