Cable operators should act jointly and proactively to create a for-profit business model for file sharing before computer users do to the movie industry what they've done to the music business.
Such a strategy won't keep computer users from sharing video files, agreed panelists discussing digital rights management at the Western Show earlier this month, but a file-sharing service for a monthly fee would at least keep honest people honest.
The financial impact of video file sharing could be massive, based on what's happened to music sales. According to panelists, the music industry makes $990 million per month in sales, but sales are trending down at a rate of 2% a year, a decline attributed to music sharing.
Video file sharing would cut into the home-video revenues of Hollywood studios, which currently make have of their global box office take on films from home-video sales and rental.
"If you kill half of the video business, you kill VOD, you weaken your basic business," said Showtime Networks Inc. senior vice president of affiliate marketing Donovan Gordon.
The music industry has tried to shut down file-sharing by suing the services that enabled it, such as Napster and KaZaA, only to have the courts rule that individual consumers and not those companies were in copyright violation. If Internet-service providers can give honest people a way to purchase the files they want, the number of illegitimate end-users will shrink, some of the panelists said.
Technology now exists to identify and track the files that are shared, said Distributed Computing Industry Association CEO Marty Lafferty, but only 1,000 routers are in use today. ISPs are turning their back on this, he added.
Lafferty suggested operators could charge $5 a month for general file-sharing capability, or $1 a month for niche channels. Such a scenario could raise $900 million a month, based on current activity levels.
The DCIA is trying to meet with cable companies to try to convince them to assume a role in monitoring their Internet customers, Lafferty said.
Convincing operators to become gatekeepers could be a hard sell, based on one attorney's comments during a different session. Operators have already fought subpoenas sought by copyright holders seeking evidence for end-user prosecutions.
A consumer's privacy rights under the federal Cable Act trump those of rights holders granted in the Digital Millennium Copyright Act, said Charter Communications Inc. executive vice president and general counsel Curt Shaw.
"We'll be sending a bad message to the public if we don't protect their rights and our competitors do," he said.