Thank you, Patrick, for the introduction, and for the opportunity to appear before you today.  It is a pleasure to be asked to speak to members and guests of the Media Institute – an organization whose commitment to the First Amendment guarantees of free speech and free press has been unwavering.

            Today I’d like to talk about a related constitutional right – copyright protection -- one that’s been put in jeopardy by the rapid spread of digital technology – and that’s been further undermined by attacks in the media over the past couple weeks.  Copyright protection can be traced back to Article One of the United States Constitution, and has served ever since as a bedrock principle on which much of this country’s prosperity – and culture – have been built.  But the right to hold and defend a copyright is being wholly disregarded as digital pirates steal content with the click of a mouse, as the rollout of broadband technologies makes unauthorized downloads easier and quicker and as our opponents provide skewed justifications for outright theft.

            I thought I’d take the chance today to rebut these strange justifications and refocus this crucial debate over digital copyright infringement on the truth.  The truth is that stealing is stealing.  Unauthorized use and illegal ownership ought to be no more permissible online than they are on the street.  Swiping a movie with the help of digital technology is no different than snatching it from the local video store. 

            The truth is also that this digital theft is a serious threat to the entire content community.  Creative content industries find ourselves at the mercy of illegal downloads and unauthorized file sharing while remaining unprotected by adequate legislation or technology.  We are being deprived of the fundamental trade of any business:  the right to attract and satisfy paying customers and thus be rewarded for our work. 

            And the truth is that no twisted logic or incorrect accusations in the media can make this potentially devastating problem go away. 

            The argument that’s been put forth to condone digital piracy – and to counter the content industry’s right to protect its content – is based on three mischaracterizations of media providers.  We have been accused of woefully lacking a viable business model for marketing our movies and TV shows in the Digital Age.  We have been called anti-technology.  And we’ve been accused of aiming to restrict consumers’ fair use of content.  Each of these characterizations is misguided and misleading.  And the blame-the-victim argument they support is yet another obstacle in the way of our urgent work, as part of a multi-industry coalition, to find a resolution to the threat of digital theft.

            First, the claim that content providers like News Corporation are devoid of a digital business model shows a bizarre ignorance of our achievements over the past several years.  We haven’t just incorporated digital technology into our businesses; we’ve embraced it to enormous success.  More than 50 percent of television households are now able to receive our FOX programming in digital format – including, a couple months ago, the first-ever all-digital, widescreen Super Bowl.  Our DVD sales at Twentieth Century Fox were up more than 150 percent over the year 2000 as our digital video business has become a durable powerhouse; this year those sales are forecasted to grow another 50 percent.  BSkyB is the most admired digital satellite TV platform not only in the U.K. but across Europe, operating with an efficiency and at a level of customer satisfaction that are the envy of the industry.  We make our movies available in theaters.  We sell them on VHS and DVD.  We rent them, too, on VHS and DVD.  Consumers can buy 60 to 70 per month for a subscription to HBO.  And, finally, we make them available for free on advertising supported networks and basic cable channels.  To say we don’t have a multi-pronged and variably priced business model is laughable.

            We know how to do digital business.  We also know that even greater success will come with our development of other pieces of that business.  We hope to soon be rolling out our video-on-demand service, Movies.com and other digital products and services that make moviegoing a fully interactive experience.  We’re on our way to perfecting video-on-demand service across our worldwide television platforms and to releasing Fox movies in high-definition digital VHS format.

            We don’t claim to have mastered every aspect of the new digital marketplace.  I think the threat of digital piracy is proof that we have a ways to go.  No business model can be created and maintained alongside the practice of unfettered stealing.  But we have been busy proving that our excitement about the ongoing technological revolution is solidly grounded in our own digital success.

            Which leads me to the claim that we are against new and innovative technologies.  I would offer, as evidence to the contrary, not only the success and promise that we’ve demonstrated as we’ve transformed our leading content services to digital – but the fact that many of those new and innovative technologies are being developed by us. 

            NDS, our digital television system and software company, is the world’s leading supplier of conditional access systems for digital TVs.  About 40 percent of the world’s digital satellite pay-TV subscribers benefit from the inventions of NDS – including programming security systems, set-top box software, interactive applications, video-on-demand and smart card technologies, and digital personal video recorders.

            The innovations of our company Gemstar/TV Guide have made it one of the most important and successful entertainment technology providers in the industry.  Gemstar/TV Guide’s television guidance products are licensed to about 180 companies, from consumer electronics manufacturers to ISPs.  The Interactive Program Guide is used in more than 12 million American homes and its service is expanding at a rate of 15,000 households a day.  The company’s VCR+ technology, which helps people select and record TV programming, has been adopted as a standard feature by virtually every major consumer electronics manufacturer in the world.  And we are the world leader in electronic digital publishing through our e-book subsidiary.

            In other words, we don’t fear technology.  We actually invent it.  We welcome the sort of technological advances that have made our lives, our free time and our businesses richer and more robust.  In fact, we’re not asking for less technology but for more – enough to protect ourselves and our content against theft, and thus be enabled to share in the phenomenal promise of this Digital Age.

            Finally, the idea that we have any interest whatsoever in constricting consumers’ right to fair use is just plain wrong.  We continue – as we have all along – to vigilantly support the right of consumers to legally copy content for use in their homes. Fair use, however, is not a license for consumers to loot online. 

            If use of intellectual property is to be considered truly “fair,” content providers must be treated as fairly as content consumers.  That means balancing the public’s fair desire for access to a vast array of content with companies’ fair need to protect their content from piracy.  That means offering the maximum number of top-quality movies and television shows in the most advanced format using the most exciting technologies – all while maintaining the sort of basic protections that ensure such a rich selection of content will be offered five years from now. 

            Because the theft of copyrighted material is threatening not only the present trade of content providers but the future availability of desirable films and programs, the quality and volume of creative content will diminish as it becomes more and more difficult to safely supply digital content to consumers.  If the Internet and other new digital media cannot be made secure avenues for the marketing of intellectual content, the providers of that content will take their business elsewhere – leaving the public with a dearth of high-quality digital options.

            The effort of content providers to viably supply consumers with our media products is where our insidious plot begins and ends.  We have no ambition to limit our customers’ rights to fair use of our content, to oppose the advent of the sort of innovative technologies that we’ve been employing – and inventing – for years, or to desperately flail for an improvised business model when we’ve been doing successful business in the digital world for years.  Our goals are the control and curbing of digital theft – because it’s wrong; because it could devastate the entertainment industry by robbing it of its fundamental trade; and because it is a problem, despite a lot of hard work and some progress over the past couple years, that remains dangerously unaddressed,.

            The urgent work of our coalition is to find ways to safely reach our customers while avoiding digital theft.  For example, while pay cable, direct broadcast satellite, D-VHS and even the Internet are content distribution channels to the home that provide a basic level of security, digital over-the-air broadcast TV, or DTV, does not.

            News Corporation, in partnership with our industry colleagues, has recently identified a technological solution that will put DTV on a level playing field with cable, DBS and D-VHS.  It involves the insertion of a "broadcast flag" in digital broadcast signals that can be detected upon receipt by a DTV set.  We are confident that our ongoing negotiations with the consumer electronics and information technology industries – referred to as the “5C” negotiations – will lead to the adoption of this technology.  There are no rational impediments to achieving a fair and equitable solution to broadcast protection in a digital world.

            The threat of analog theft also continues to be a gaping hole in our defense of our content.  Despite the efficiency and popularity of digital technologies, the presence of hundreds of millions of non-digital TV sets means that we will need to deliver content to consumers in analog form long into the foreseeable future. Unfortunately, analog content – including protected digital content converted to analog for viewing purposes – can easily be converted into an unprotected digital format that can in turn be copied or redistributed without authorization.  This is known as the "analog hole" in digital content protection schemes.  The industry is now developing a plan to plug the "analog hole" that includes harnessing watermark technology.  However, we have yet to reach consensus on this plan. 

Another major threat is the practice of unauthorized “peer-to-peer” file sharing on the Internet.  What makes this problem so hard to address is the growing number of ways that unauthorized content can be distributed on the Web, from high-quality digital recordings made on camcorders in theaters to the swiping of prints that are distributed over the Internet before a movie’s opening night.  It is estimated that every single day, in these and other ways, hundreds of thousands of copies of movies are being downloaded without compensation to their copyright holders.  And the problem’s getting worse.  The number of unauthorized downloads is growing in tandem with the rapid rollout of broadband Internet and its increased downloading capabilities.

            These are the challenges that still must be answered through our 5C negotiations and with the help of our concerned allies in related industries and in the government.  I’d especially like to express my gratitude to Chairmen Hollings and Leahy and Senators Stevens and Hatch for their leadership on this important issue.  Our united front is key to our success – which makes the recent publication of misleading interpretations of the content community’s goals, in national press such as Newsweek and The Wall Street Journal, all the more disappointing.

            In closing, I’d like to try to cut through the vitriol and rhetoric and return our conversation to the basics.  This is not a debate about business models, about the value of new technology or about the fair use rights of consumers.  What we are fighting to prevent is the stealing of valuable content. 

            Because there’s a lot more at stake than a few swiped movies.  Our American entertainment industry, with its four million workers and $65 billion in exports, is firmly based on the security of copyrighted content.  And countless related jobs, businesses and revenues are based in turn on American entertainment.  To render our industry suddenly impotent would create an economic trickle-down effect that would be truly devastating. 

            Whatever our innovative services and new business models, one fundamental truth cannot change.  It’s paying customers – or the lack thereof – that have always determined the success or failure of any business.  That shouldn’t change now.  We must be enabled to try and attract customers – and to be rewarded for our efforts and products – without the constant nullifying threat of theft. 

            Surely we can find a way to offer customers the traditional media they demand in the new formats and through the new digital services we all admire.  Surely we can agree that stealing is stealing; that theft – whether with two hands or the click of a mouse – cannot be condoned; and that the promise and excitement of our digital revolution is all the greater with guarantees of fairness. 

            Thank you.