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Some PCs crashed. Macs locked up and were impossible to reboot, in some cases requiring dealer repairs, according to Apple.

A nefarious new virus? Guess again. The culprit was the European release of the latest Celine Dion CD, which used copy protection to render the disc unplayable on anything but a stereo.

Meanwhile, stateside PC users who like a little background music have been stymied by recent CDs from Charley Pride, 'NSync, and others. Few PCs crashed, but the copy protection on the discs sometimes prevented CD players or car stereos from playing them, as well.

And Hollywood's recent campaign against digital copyright infringement is not limited to music CDs; it affects the way you use your PC as well as the devices that talk to it.

Videotapes, DVDs, and many set-top cable boxes already have copy protection. New bills backed by the $68 billion movie and music industry would extend that and put copy protection hardware on all new PCs and consumer electronics devices, such as stereos and personal video recorders like TiVo (see " Following the Money Trail,"). Also in the works: new laws targeting peer-to-peer file sharing networks like Kazaa, and possible prosecution of individual file sharers.

"All we're trying to do is protect our investment in the digital landscape," says Jack Valenti, president and CEO of the Motion Picture Association of America. "This is the first time we've faced this landscape, where a 12-year-old can copy a movie and send it around the world with a click of the mouse."

But consumers may not be interested in new, high-tech products that do less than the equipment they already own. That fear partially fuels the $150 billion tech industry's opposition to legislated copy controls. It has just gained a powerful ally in the fight: the $350 billion telecommunications industry, which should get lots of broadband business when digital content on the Net is mainstream.

Few people advocate rampant piracy, or dispute content owners' right to fair payment for their works. Still, "The industries that own content need to shift their perspective from viewing consumers as potential pirates to dealing with consumers as potential customers," says Alex Alben, vice president of public policy for streaming media pioneer RealNetworks. He believes most users will opt for legitimate digital content if services offer a big, reasonably priced selection with sufficiently flexible distribution controls to make buying more convenient than illegal copying.

But few such services exist today, and some new ones have been scrapped.

The stakes are high all around: your ability to make copies of (and to use freely) the music, movies, and hardware you've paid for, and tens of billions of dollars in revenue for each industry--not to mention the future direction of digital media and PC and Internet technologies. (See " What Can You Do With Digital Media?" for a rundown on what's allowed today.)

Farewell, Napster

For the entertainment industry, Napster was a loud wake-up call. The online file-sharing service demonstrated that people using readily available equipment could easily download and distribute digital music and movies en masse, regardless of copyright.

Not surprisingly, that sent the entertainment industry into a panic. After all, one theory goes, if you can get digital files for free, why would you ever pay for a movie ticket or a CD?

A lawsuit led by the Recording Industry Association of America shut down Napster, stranding its 70 million users. But other peer-to-peer (P2P) networks, such as Kazaa and Gnutella, quickly took its place. Kazaa alone has been downloaded over 113 million times, according to CNet's Download.com.

The RIAA blames 5.3 and 7 percent drops in the number of CDs sold in 2001 and 2002, respectively, in part on online file trading. To guard its content and avoid further losses, the entertainment industry has hastened to employ copy protection and digital rights management (DRM) technology.

Unfortunately, such technology doesn't affect only pirated distribution on P2P networks--it can prevent users from making any copies at all, even ones that formerly would have qualified as fair use. ("Fair use" allows consumers to make copies for personal or scholarly use as long as the copying doesn't affect the work's commercial value.)

"With the possibilities of digital technology, what we're seeing is copyright owners taking the opportunity to try to extend their control," says Jessica Litman, professor of law at Wayne State University and author of the book Digital Copyright.

One of the most powerful weapons in the entertainment industry's arsenal is 1998's Digital Millennium Copyright Act, which makes circumventing copy-protection technologies placed on digital media a federal crime, punishable by up to five years in prison plus a $500,000 fine. "In the old days, the law said you have a fair use to what you've bought--go ahead and do it," says attorney Jonathan Bick, author of 101 Things You Need to Know About Internet Law. "Now it says you have a fair use as long as you don't employ certain technologies."

After its Napster experience, though, the entertainment industry has concluded it needs more than the DMCA to battle digital copyright violations.

The Consumer Broadband and Digital Television Promotion Act, sponsored by Senator Ernest Hollings (D-South Carolina) could strengthen its arsenal. This bill would require vendors to put copy-protection chips in all future PCs and consumer electronics devices. By preventing copying through hardware, it could keep files from getting onto P2P networks in the first place. Combined with the DMCA, it would give companies a nearly ironclad legal and technological defense of their content--but could also let them restrict fair use further.

The tech industry thinks such requirements are too broad and would hobble innovation by tying it to government specifications. "For the government to mandate how the IT industry designs and develops chips--or to try and force agreement for design features--would be ludicrous," Intel executive vice president Leslie Vadasz said in congressional testimony earlier this year. "Irreparable economic damage would result" from such intervention, he added.

Intel has its own solution, code-named LaGrande, due in Pentium chips in 2003. Both it and Microsoft's Palladium security scheme, intended for future Windows versions, are meant to protect PCs against threats like viruses and to make tasks like online banking more secure. But they can also work with DRM to restrict copying or playback.

The entertainment industry is also targeting P2P networks via lawsuits and "spoofing": posting corrupt or misleading files to discredit P2P network files. A bill proposed by Representative Howard L. Berman (D-California) would legalize spoofing and other P2P network attacks and would shield attackers from liability for resulting network damage.

The telecom industry opposes both pending bills. "We're against any kind of government-mandated standards," says Verizon's vice president and associate general counsel Sarah Deutsch. Furthermore, she says, both of the bills run roughshod over carefully constructed compromises in the DMCA that balance content owners' and service providers' responsibilities. The next congressional session's bills need to be negotiated with all stakeholders present, she adds.

Finally, prosecution of P2P file-traders may be in the works. The 1997 No Electronic Theft Act lets copyright holders press charges against those who share copyrighted products valued at over $1000--even if the sharing is done only with family and friends. Guilty parties face a maximum of one year in prison--five years if the traded files are worth more than $2500. Prosecutions have yet to occur, but the Justice Department has said it will use this law against file traders.

While acknowledging that piracy is a serious problem, some vendors feel that the entertainment industry's legal approach is misguided. "Hollywood is focusing all its efforts on complaining to Washington instead of making a sincere effort to compete," says Chris Gorog, CEO of Roxio, maker of the popular Easy CD Creator recording software.

Though legitimate sites with major-release movies are scarce, several fee-based sites--such as MusicNet, Pressplay, and Listen.com--offer music. But these services have flopped commercially, hobbled by much smaller selections than P2P networks offer, and by restrictions on the number of songs users can download and whether users can burn them to a CD. Only in 2006 will paid music services begin to take off, predicts the Yankee Group.

Tracking Your Habits?

Even if legitimate digital media becomes available, the technology has a downside that worries some consumer advocates: It lets vendors track what you watch and listen to.

DRM technologies must be able to identify devices such as PCs and portable players that comply with its rules, and must ensure that you don't misuse the content you've purchased. Does this raise privacy issues? If content owners keep track of their customers' devices and viewing habits, then yes. Most do not, but "there's no magical limit to what could be put into a DRM system," says Steve Canepa, vice president of IBM's global media and entertainment group. (IBM's DRM system tracks keys used to unlock content, not content itself or customers' habits, he says.)

DRM aside, digital media's connected nature makes consumer tracking possible to a degree unmatched in the analog world. Take the case of Sonicblue, maker of the networkable ReplayTV personal video recorder. As part of a suit over ReplayTV's "send to a friend" feature (which lets users send stored TV shows to other local or Internet-connected ReplayTV sets), a magistrate ordered Sonicblue to monitor its users' viewing habits. (This is possible because Sonicblue remains connected to ReplayTV sets to update TV listings or software, and more.) A U.S. District judge overturned that order after consumers and privacy advocates complained. What you watch is your business--for now.

Total control over digital media isn't the only option for content owners. And no copy-protection scheme will be perfect, as even the MPAA's Valenti acknowledges. The content industry's best option may be to compete with P2P networks on their own terms, offering for-fee services with comparable selection but consistent, high quality.

According to Electronic Frontier Foundation (EFF) attorney Fred von Lohmann, the movie industry is already starting to do that by lowering DVD prices. "Why spend hours downloading a crappy version of a movie when you can buy the full version for $9.99 at the supermarket?" he says.

Copyright holders might also have to learn to tolerate some file sharing. Already, some independent labels (and many up-and-coming bands) distribute MP3 files online as a marketing tool. Folk icon Janis Ian credits the availability of MP3s online for her recent comeback tour's success.

And it might even be good for the entertainment industry. "Over 100 years, every single new technology that copyright owners have protested has turned out to make them more money, not less," says von Lohmann. ( Here is PC World's take on one possible compromise.)

But that outcome is far from assured. Groups like the EFF and DigitalConsumer.org have lobbied for fair-use rights, but with limited success.

Ultimately, it's up to content publishers to decide what restrictions they want DRM schemes to enforce, and up to consumers to decide whether they will buy content with those restrictions. One thing is clear: PC users must speak up or risk losing control over their PCs and the media they buy.

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