A Jan. 8 CES panel session on digital downloads showed there is no love lost among large studios, artists and systems makers.

"The days when there was a select group of artists, created by the studios, up on top are over, because today anyone can create anything," said Chuck D, an independent music maker on the panel. "The studios put all their money into Britney Spears, and they tank if she doesn't have a good year. Meanwhile there's a whole field of Britney Spearses out there."

SonicBlue Inc. chairman and chief executive Ken Potashner was equally vitriolic. His company has been sued over its Replay 4000 personal video recorder, which makes it easy for users to automatically skip commercials and send favorite shows over the Web to up to 15 people.

"Some of the people who are suing us are the very networks who are our investors," said Potashner. "That's even more ironic, he said, because the company recently won an entertainment industry award for forwarding television. "But apparently we have taken TV further down the road than they were ready to go."

Potashner said the Replay system could spawn new business models, helping advertisers target more well-defined demographic splits of users than broadcasters can define and selling custom ads to those users' hard disks. However, he said, the systems technology was ready to roll before new TV business models were in place.

SonicBlue continues to sell the Replay 4000 absent an injunction. A court review of the suit is expected in late summer.

"Our position as an association is that we know a solution has to be found to providing a secure environment for content," the MPAA's Attaway said during the panel discussion. "We think the best thing is to develop something along the lines of the Copyright Scrambling System that was worked out by various players in the marketplace. But if that doesn't happen, it's hard to see any alternative to a legislative solution."

Others on the panel said it's difficult for key industry players to get together to discuss the issue without raising antitrust concerns among their own lawyers. And any legislative ruling set by Congress would not apply outside the United States.

While the new working group holds some hope for a break in the video logjam, other issues are piling up in the audio realm. In the wake of the demise of Napster, a handful of subscription online music services, such as music.net and pressplay, have debuted with backing from major studios. Online movie services are not far behind.

"We assume there will be a lot of new online music services with a lot of content available shortly," said Andy Schuon, president of pressplay, which was launched Dec. 19 with backing from EMI, Sony and Universal.

But the industry remains skeptical. A separate CES panel on subscription services concluded that few companies have been able to eke out success with subscription models to date. And many people fear the announced music and movie services formed by giant studios will shut out other players. Indeed, the Department of Justice is reportedly investigating some of the collaborations.

"The long-term solution is that rights holders need to set reasonable licensing fees," said David Mandelbrot, general manager of entertainment at Yahoo. "We hope this does not have to be done through legislation."

Mandelbrot related Yahoo's experience with Internet radio. After having secured rebroadcasting rights from the artists and radio stations, it started a service that Mandelbrot claims now broadcasts 10 million hours of streaming audio a month.

Then groups representing the people who created the radio advertisements threatened action against the rebroadcast of their work, forcing Yahoo to take down 70 percent of its Internet radio offerings in April until a workaround could be found.

"Content providers are not embracing these media," he said.

Some blasted the Secure Digital Music Initiative — the Recording Industry Association of America-backed effort that sought to hammer out an architecture for protecting Internet audio copyrights — as a waste of industry resources, because it never came up with a workable solution.

The vigilance of studios over Internet music is duplicitous when those studios ship insecure audio on CDs "by the truckload," Mandelbrot said. But major music studios' plans to start encrypting CDs so they cannot be "ripped" onto PCs are generating other concerns.

"The encrypted CD will be an absolute nightmare," said Hock Leow, chief technology officer for Creative Labs, which sells portable MP3 players. "This will cause a big backlash from consumers."