Spoken Testimony Before the United States Senate Committee on Commerce, Science and Transportation by Michael D. Eisner Chairman and CEO of The Walt Disney Company

Thank you Mr. Chairman. I want to thank you, Senator McCain and all of your colleagues for inviting us to discuss the distribution of creative content over digital Broadband and digital Broadcast distribution systems.

I am here today representing not only the shareholders of The Walt Disney Company, but also the hundreds of thousands of people all across the country who participate in the creation of American filmed entertainment. I am talking about directors, writers, animators, actors, editors, electricians, truck drivers, laborers ... the list goes on and on. They work on TV shows and movies. On many film projects, they work as long as four years until it is ready for the theaters.

If the result of their efforts can be digitally stolen, copied and distributed around the world before the first ticket is purchased on opening weekend, then these people will no longer be able to earn their livelihoods because there will simply no longer be a movie business to employ them.

Consider the impact on assembly line workers if the latest model Chevrolet were to be mass-produced and given away for free before the car even got to the showroom. You may think this is unimaginable ... but it is exactly the prospect that is being faced by our industry.

I know this sounds alarming. It is. And it should be. For, make no mistake -- This is not just about entertainment; this is about the economy. U.S. creative content industries, which produce such distinctly American product as films and TV shows, lead the U.S. economy in contributions to job growth, Gross Domestic Product and foreign sales and exports. In fact, creative works account for a larger percentage of U.S. foreign sales and exports than most other sectors of our economy, including automobiles, aircraft and agriculture.

But, all of this success is threatened by digital piracy, or, what we would commonly call -- theft.

To be sure, piracy has always been with us. But, digital piracy is different. In the analog world, each successive copy degrades in quality and sharing a copy requires one consumer to physically relinquish that copy to another person. In digital, each copy is perfect. The one-millionth copy is identical to the original. And, because of the ubiquitous nature of the Internet, perfect, but unauthorized, copies will be able to be transmitted instantaneously all over the world with no regard whatever for the rights of the content owners. For a chillingly real depiction of where we are headed, please take a look at this clip from a year-old "NightLine" program in which 15-year-old Benjamin illustrates his ability to take -- for free -- any motion picture or television program of his choice. (Play "NightLine" clip)

We know that we can never achieve -- and do not expect -- 100% content security. But, there must be a reasonably secure environment to prevent widespread and crippling theft of the creative content that drives our economy. As Benjamin clearly demonstrated, today, we are not even close. One research firm, Viant of Boston, estimates that more than 350,000 illegally pirated movies are downloaded from the Internet every day. In fact today, you can go to the Internet and find illegal copies of brand new films such as "Harry Potter," "Lord of the Rings," "Monsters, Inc." and "Ocean's Eleven."

Just take a look at this excerpt from a recently downloaded pirated copy of "Black Hawk Down."

(Play "Black Hawk Down" clip)

There are several key considerations that should be a part of the solution to this pressing problem.

First, in addition to being in the interests of the creators of content, it is also in the interests of consumers, content owners and device manufacturers that there be common technological standards.

Second, the technological standards should not be dominated by any single company and should be open so that consumers have convenient access to all content from all producers.

Third, the private sector should be given every reasonable opportunity to develop appropriate means of protection and to adopt common open standards for use in a wide variety of delivery devices, such as television, computers, Palm Pilot-like devices, or anything that can receive audio-visual works. Only in the event that the computer companies, consumer electronics manufacturers, software companies and content providers fail to act should the government set standards. But the pressure of a timeline for eventual government action is critical to getting the private sector to do what is needed. And, let me add that we're delighted that yesterday eight companies offered to get to work immediately, so any time period you put into legislation -- whether 18 months, 12 months or six months -- should begin today.

Fourth, the standards that we seek must be consistently adaptable, by being renewable, upgradeable and extendable without the necessity of time-consuming bureaucratic processes in either private sector, or government, standards-setting organizations.

Fifth, once standards are set, they must be mandated for inclusion in all digital media devices that handle creative content.

Finally, it is critical that the government act now to help achieve appropriate solutions. The digital pirates are not waiting to act. Neither can our government.

Of course, any legislative solutions must be vetted by all the appropriate committees of the Congress. And, legislation will enjoy smoother sailing if it proceeds from agreement among the affected industries, consumer groups and others with a stake in the digital future. Given the complexity of the situation, we also acknowledge the need to avoid unintended consequences of any legislative intervention. But, the time to solve this problem is running short.

There are those who argue that it is unprecedented to have government involvement in the mandating of technological standards. This is simply incorrect. There are numerous precedents for a government role here, such as the All-Channel Receiver Act, which mandated VHF and UHF tuners in all TVs, and the Digital Millennium Copyright Act of 1998, which mandated macro-vision copy control technology in all VCRs.

Others claim that Disney and other content owners are seeking to stop home taping or eliminate "fair use.' So, let me state for the record that we are not here to hinder libraries and college professors from using portions of creative works for scholarly research ... nor are we here to interfere with consumers who wish to timeshift television programming.

Finally, the most outlandish mis-statement I have heard is that content providers want to stifle innovation, experimentation and research by our nation's vibrant high-technology companies. This is ridiculous. At Disney, we embrace technology. Continued innovation in high tech is necessary for our company to evolve and grow.

In short, all we are asking is that the government facilitate the creation of standards to enforce current intellectual property laws. Providing a more secure environment for content is the single most important step the government can take to stimulate Broadband deployment and the digital television transition. And, beyond this specific benefit, the protection of copyrighted works will make it possible for millions of Americans to continue to partake of the extraordinary economic benefits that result from our nation being the pre-eminent content producer of the world ... and it will allow the hundreds of thousands of artists -- and would-be artists in high schools and grade schools -- to continue to have something to aspire to.

I thank you again for the opportunity to testify here today and I would be happy to answer any questions that you might have.

--Posted February 28, 2002

Source: The Walt Disney Company Press Release