Address Before Members of the United States Congress

Michael Eisner, Chairman & CEO, The Walt Disney Company

June 7, 2000

[Preamble: Eisner spoke about some of Disney's movies, finishing with Dinosaur]

I'll resist the temptation to go on and on about the countless ingenious tricks that our animators and technicians devised to make this film, because my point isn't to promote the film. My point is that we have created a movie that took four years to make, during which 45 million megabytes were crunched – or enough data to fill 70,000 CD-ROMs – all to generate the necessary data for an 80-minute film – which , were it to get in the wrong hands, could be compressed onto a single DVD disk in a matter of minutes and instantaneously put on the Internet while the film is still in the theaters....

I'm not talking about the comical characters sailing the high seas...the Pirates of the Caribbean. Rather, I'm talking about an underground of secretive and sequestered Pirates of Encryption – the hackers who shamelessly assert that anything they can get their hands on is legally theirs.

You may be familiar with the recent controversy over a company called iCrave.com, which claimed the right to pluck television signals off the air and stream them on the Internet for all the world to see. You may also be aware of software programs like "Napster," "Wraptster", "Freenet" and Gnutella," which allow college kids to build vast music collections on the hard drives of their lap top computers without ever buying a single CD.

These Internet programs enable the piracy of intellectual property. Their use is rapidly escalating, with a potential impact on our culture and our economy that is comparable to other Internet-related issues that many of you have expressed concerns about – such as cyber-security, credit card security and the safety of your children's Web surfing.

There is no question that the Internet is an exciting and dynamic new force in commerce and entertainment. But so were, in their time, radio and television. And they had to play by the same boring old rules involving copyright infringement.

Today's Internet pirates try to hide behind some contrived New Age arguments of cyberspace, but all they are really doing is trying to make a case for Age Old thievery. When they hack a DVD and then distribute it on the Web, it is no different than if someone puts a quarter in a newspaper machine and then takes out all the papers, which, of course, would be illegal and morally wrong.

The pirates will argue that this analogy is unfair, maintaining that all they're doing is cracking a digital code. But, by that standard, it would be justifiable to crack a bank code and transfer the funds from someone else's account into your own. There's just no way around it – theft is theft, whether it is enabled by a handgun or a computer keyboard....

The fact is that nobody signs up for the Internet because of the elegance of its routers. Nobody logs on because of the micro-chip inside. No, they use the Internet in ever-growing numbers because of the content. Right now, that content is largely information. But, increasingly, it will also be entertainment. The growth of bandwidth will increasingly make possible full video experiences. But, this expansion of Internet entertainment will stall if the creators of the content cannot enjoy the full rights of ownership of that content.

It does not take a CPA to figure out that a movie like “Dinosaur” does not come cheap. However, it is an investment worth making if there can be substantial reward in success. But, if this reward is allowed to be pirated away, then the creative risk-takers will put their energies elsewhere, and the Internet will become a wonderful delivery system with nothing wonderful to deliver.

One of the fallacies of the intellectual property debate is that it's really just a conflict between the pro-technology members of the “New Media” against the anti-technology members of the “Old Media.” As I hope I made clear with the discussion of “Dinosaur,” this characterization couldn't be more wrong. At Disney we embrace technology. And we always have.

Throughout his career, Walt Disney recognized new technology as the friend of the story teller. He kept pushing the envelope with the first sound cartoon, the first color cartoon, the first use of the multi-plane camera, the first use of stereophonic sound, and the development of robotics for his theme parks. Walt was also almost alone among movie studio chiefs in the 1950's when he recognized television as a new opportunity and not a threat.

At Disney today, we are not only seizing the tremendous possibilities offered by technology in movies, as with “Dinosaur” – we are also active participants in the expansion of the Internet with our GO.com family of sites, such as Disney.com, ESPN.com, ABCNews.com, ABC.com and Family.com. And, we believe we are helping to pioneer the convergence of the Internet with television through the development of Enhanced TV, which allows viewers to become active participants in the programming, accessing stats during a football game, playing against the contestants on “Millionaire” and guessing the winners on the Oscars.

We intend to continue to pour resources into the Internet – but not if this requires surrendering the rights to things we own.

Just as our society is beginning to address other security threats posted by the Internet, we must address the security of copyrights. With this in mind, our company is undertaking a wide-ranging strategy to make the Internet truly secure for intellectual property. This strategy consists of five main elements.

First of all, we are turning to our representatives in Washington....

We ask you to begin to explore with us legislation that would assure the efficacy of technology solutions to copyright security. As we seek to develop measures such as watermarking, we need the assurances that the people who manufacture computers and the people who operate ISP's will cooperate by incorporating the technology to look for and respond to the watermarks. This same mandate could be part of the solution to a host of other Internet security issues as well.

The second element of our strategy to protect intellectual property is to work with governments around the world to respect our rights. We are actively involved in the Global Business Dialogue on E-Commerce, and our company is serving as chair of the Intellectual Property Work Group. The Internet is international. The issues involving it cannot be viewed with a myopic American eye....

The third element is education. Most people are honest and want to do the right thing. But they can't do the right thing if they don't know that they're doing a wrong thing. I am always amazed when I walk the streets of New York and stroll past an open fruit stand. Thousands of people go by each day respecting the fact that if they want an apple they need to pay for it, even though it would be incredibly easy to just take it. When it comes to the Internet, most people simply aren't aware that the same issues apply. According to a recent Newsweek cover story, college kids are simply oblivious to the legal and oral implications of downloading copyrighted material off the Internet. Working with Jack Valenti and the MPAA, we are advocating a more aggressive campaign to make people aware of intellectual property rights on the Internet, in much the same way as the FBI warning at the front of videotapes.

Fourth, we believe that the entertainment industry as a whole – and I mean all the companies with a stake in the e-future – should take meaningful technological measures. To an extent, piracy is a technical problem and must be addressed with technical solutions. The studios, broadcasters and record companies – working in cooperation with the technology companies – need to develop innovative and flexible watermarking or encryption systems that can stay one step ahead of the hackers.

The fifth and final of our initiatives is economic. History has shown that one of the best deterrents to pirated product is providing legitimate product an appropriate prices. In the music industry, we have already seen that most people will gladly pay fair prices for legally-produced product even when it can be easily reproduced and unlawful copies can be easily acquired. I am certain that the same person who pays a reasonable price for an apple at his local fruit stand will pay a reasonable price for a video on his local hard drive.

All we need is for this basic rule of society to be acknowledged and enforced in the cyber world as it is in the real world. If this can be achieved, then the possibilities of the Internet – for communication, for education, for entertainment and for commerce – will be as limitless as the lightspeed at which it has brought the world together.