Adapting to the demands of the digital era

Date: 29/05/1997

By Chris Johnstone

GIJS Wirtz of Philips is facing one of those historical conundrums which confront fast moving companies at the cutting edge of technology.

What do you do when politicians and lawmakers are so far behind in legislating for your products that they are holding up your plans to put them on the market?

That was a problem which dogged Philips Consumer Electronics as it tried to put its Digital Versatile Disc (DVD), successor to the video-recorder, on sale.

The DVD did everything: provided cinema quality pictures and sound which made you think you were standing next to the actors; allowed viewers to choose from a series of options such as a director's commentary on the film and a range of language subtitles; and offered the opportunity to insert sequences cut from the original film.

But the new product was prevented from entering the shops for months because copyright issues involving the disc were unresolved and Philips risked walking into a litigation minefield if it went ahead regardless.

An agreement was eventually reached with the film companies under which Philips committed itself to technology which allows a copy to made from the original disc, but prevents copies from copies. That permitted the launch of the DVD on the US market last year.

The problem for Philips is that it faces similar difficulties almost daily, with international copyright laws still trying to leave the age of the gramophone and catch up with the digital era.

“You cannot expect firms to invest in an unprotected environment. At the moment it is like the Wild West out there, with no agreed copyright laws,” says Wirtz, general manager of Philips' consumer electronics division.

The European Commission is expected to spell out its thoughts on the issue in July when it follows up on last November's communication on copyright and related rights in the information society.

Part of the challenge for the institution is to try to make some sense of a mixed salad of national rules, some of which tax video-tapes and cassettes, others of which tax recorders, and most of which have different interpretations of what is permissible private copying.

Without broad copyright rules at an international level, Philips will have to stitch up similar deals to that reached over DVD with the film and music industry every time a new piece of equipment comes on to the market with an option for copying.

The limits and costs of this type of approach are clear. With technology now allowing perfect digital copies of sound and images from ordinary personal computers, the need for wider copyright rules is evident for both the manufacturers and the film and music industries - the so-called 'content providers'.

The Dutch consumer electronics giant has been trying to push the argument ahead by breaking down the traditional divide between the producers of equipment, which want to allow their buyers to copy within reason, and film and music companies, which fear wholesale copying and loss of revenues.

“If you just issue a law saying that private copying is illegal, everyone will laugh. Allowing copying is essential to some industries.The video-recorder is responsible for around 50&percent; of film revenues. It is important for film companies that copying continues,” argues Wirtz.

He feels that Philips has done a lot to bridge the gaps, helped partly by the fact that it can see both sides of the argument since it is also the biggest backer of Polygram, Europe's leading film company.

“A couple of years ago, Philips and a few Japanese companies were the only ones willing to talk with the music industry. The film and computer industries did not want to take part. Now everyone is sitting around the same table,” he says.

“We now have a large educated group of people who understand what the problems are. We are not so clearly divided into two camps as we were.”

Philips is backing the idea of a broad deal between content users and providers on copyright issues which governments could sign up to when they get their act together. Ideally, such a deal could be flexible enough to be updated easily.

“One of our ambitions is for framework open legislation. We would like a set of general principles, an agreement whereby some things could be kept open and altered at a later date,” says Wirtz.

However, Philips bosses admit this might be hard to swallow for government lawyers and legislators who like everything neatly tied up with no loose ends.

Nevertheless, Wirtz believes a broad copyright deal between equipment manufacturers and the people who fill the screens and airwaves could be on the cards for the end of the year. Governments will then be expected to catch up.