Copyright and Digital Media in a Post-Napster World - Version 2 - January 2005 Update

Digital technology and the Internet are altering many industries and changing the way people use and enjoy consumer electronic products, media and entertainment. Although beneficial in many respects, this evolution also exacerbates the tension among copyright holders (individual creators and corporate content providers), technology companies and consumers. This three-way tension is an important driver for business. When balanced, it provides all the benefits of a market-driven economy: Products are created, developed and distributed; and consumers choose from a variety of contents and goods while paying a price they perceive as reasonable. However, when some part of this digital media ecosystem gains a disproportionate measure of influence, the system becomes destabilized. In time, the instability may yield a new equilibrium, but its ultimate effects are difficult to anticipate in the short run.

Technological development spurs change today and, as in other technologically turbulent periods, old methodologies and business models persist as new consumer-behavior models develop. In the case of digital media—music, movies and print—the transition to fully formed digital distribution services is now in progress.What happens during this transitional period is important on a cultural as well as a commercial level. In the United States, for example, social values such as allowing access to information and creating an environment that encourages development and creation were important considerations in the codification of copyright law in the U.S. Constitution and later statutes. Digital media policy should respect these values as well as producing economic benefit.The objective of this White Paper is to provide a foundation for evaluating key questions facing copyright holders, technology developers and consumers. These include:• How do we balance the legitimate interests of copyright holders with the legitimate interests of the public in the use and enjoyment of digital media?• Should technology developers be accountable to copyright holders?• What future strategies might compensate copyright holders while also encouraging innovation?The focus of this White Paper is on the issues confronting U.S.copyright holders and consumers. An International Supplement to this White Paper deals with international legal and regulatory issues.