From: Richard Wallace, EE Times

Five years ago in this newspaper, our Internet editor at the time, Larry Lange, broke a story about a little-known extension of an audio-compression technique: MPEG-2 Audio Layer 3. MP3, Lange wrote, had "opened the door to sending large volumes of CD-quality music over the Internet [and] opened the gate on a flood of pirating activity by an underground community of students and hackers.

"Hundreds of MP3 Internet sites have sprung up on which digital music — everything from Mozart to Marilyn Manson — is being illegally reproduced and distributed free," we reported in an industry exclusive story.

The time frame of 1997 was pre-Napster, pre-dot-com and very early days for digital media, but we gave this obscure report page one play because, as electronics industry insiders, it signaled one thing to us: the opening of Pandora's box for the entertainment industry.

The daily newspapers, business press and other media quickly picked up the story from there, and you know the rest. It's a woeful tale of legal wrangling that now involves more lawyers than there are engineers in Silicon Valley. And the issue of "ripping" CD tracks has crossed over to video, where your lawyers are seeking to stop the manufacture and distribution of a new generation of media players capable of zapping commercials and sharing video files.

Last week in Las Vegas at the Consumer Electronics Show, our reporters interviewed scores of semiconductor and electronics industry executives to get their vision on the future of digital media. If college kids ripping CD tracks off the Internet kept your lawyers up at night worrying about copyright and intellectual-property protection, the coming generation of consumer digital media products will surely murder your sleep.

Since the earliest days of radio, TV and motion pictures, your programming content has been distributed and played over passive, "dumb" media devices. Radio circuits still use the superheterodyne receiver principle. Television — for all its picture improvements — is still a one-way, passive, analog medium. And motion pictures still work best on the silver screen. Cable and satellite transmission have improved program distribution, and digital recording has taken the hiss and pop out of vinyl — but all in all, these devices and media are standalone, unconnected boxes.

Brace for explosion

Five years after hackers discovered the magic of MP3, we stand on the threshold of an interconnected digital media explosion that will redefine the relationship among content, programming and the delivery mechanisms and media that will carry your music, movies, shows and entertainment to consumers.

The creative geniuses in your industry like George Lucas, Steven Spielberg and James Cameron were quick to embrace computer and digital production technology for everything from special effects to enhanced picture and sound production. The impact of this technology has been a major factor in soaring box office receipts. Would that your distribution executives were equally enlightened about digital's possibilities.

This digital media explosion — driven by processor, storage, network computer and now Internet technology — is poised to become "the next big thing" in electronics, with the potential to fuel a technology and economic boom like none ever seen before. This is no bubble; we're talking true innovation here and bona fide wealth creation.

But there's a hitch. Your lawyers are in the way.

With a few exceptions, the media industry's mind-set has changed little in the five years since the Recording Industry Association of America first responded to MP3 by seeking temporary restraining orders and preliminary injunctions against renegade college students and upstart businesses like Napster.

OK, some progress has been made with schemes like PressPlay, and a few novel subscription-content plans from the likes of Yahoo have emerged, but is Hollywood really prepared for what's coming? To date studio and network response has been to send lawyers to the parapets to defend the gates against each and every incremental advance in media device and distribution technology.

This strategy is doomed to failure. As we discovered at CES last week, the sun is rapidly setting on the world of radio, television, broadcasting and program distribution familiar to you and to consumers. In a few short years, emerging advances in digital radio will make the analog receiver obsolete, and with it the very concept of what we now think of as radio. In its place will come new boxes capable of delivering not only Howard Stern shock, rock and news, but streaming-data services, Internet access and other media tricks that will make the superheterodyne's frequency-mixing magic look like child's play.

The digital media world of tomorrow has no room for the TV, radio and recording devices of yesterday. Executives at CES talked about a media environment of smart devices, wireless connectivity, integrated media. They used terms like "service platforms" and "digital media platforms" to describe a generation of consumer gear that's poised to make extinct today's TV — including current broadcast, cable and satellite business models. They talked about "DVD everywhere," programmable and "reconfigurable media architectures," "connected TVs," interoperation among media devices. Bill Gates himself spoke of a "virtuous cycle" of hardware and software innovation that will usher in a generation of new-media devices, new-media services and an entirely new business landscape for program and content providers.

Over the next several months we expect to see several industry initiatives advanced by one or more consortia of chip makers, consumer electronics manufacturers and computer/networking systems builders aimed at addressing some of your worst fears about this brave new-media world and the impact it will have on the viewing, transport, distribution, streaming, storage and transmission of your programming content.

Some of these initiatives — such as Philips' digital video platform coalition involving companies like Samsung, Sony, Thompson and Cisco — are specifically targeted at resolving the paralysis that afflicts your industry. They aim at "convincing content owners that there's a way to generate new revenue" in this new digital age, according to one Philips executive.

Lemons or lemonade?

Five years ago, when the MP3 CD ripping issue reared its head, the business and thought leaders in the media, programming and content industry had an opportunity to make lemonade out of the peer-to-peer, Napster phenomenon. Instead, you circled the wagons and called in the lawyers. Big mistake.

Today the stakes are enormously higher. The opportunities for content companies as well as electronics manufacturers to realize the dream — and payoff — of the connected digital media age is within our grasp.

But there is only one way to get there: Keep the lawyers away.

Now is the time for Hollywood's top executives and visionaries at the leading networks and media companies — people like Barry Diller, Michael Eisner and Gerald Levin — to put a check on the lawyers. By all means, do everything to protect your rightful intellectual property. But do more. Come to the table yourself. Take a leadership role in responding to these pending industry initiatives. Help shape the direction of the discussions. Be visible. Speak out. Talk to chip makers, computer makers. Talk to the consumer electronics industry — one on one — without the lawyers. Talk to EE Times.

This discussion is not just about technology, or rights. It's about the future of an enormously exciting opportunity. It's about business. If war is too important to leave to the generals, digital media is too important to leave to the lawyers. It's time to step up boldly, Messrs. Diller, Eisner and Levin. It's time to lock up the lawyers.

Wake up and smell the money, Hollywood.