Congressional Entertainment Caucus Los Angeles Hearing
University of Southern California Davidson Executive Conference Center August 6, 2003
Sponsored by Congresswoman Diane Watson The USC Annenberg Norman Lear Center 2 Congressional Entertainment Caucus Hearing
Congressional Entertainment Caucus Hearing
The Norman Lear Center and Diane Watson, chair of the Congressional Entertainment Caucus, held the first Los Angeles Entertainment Caucus Hearing to address issues important to the entertainment sector. Topics included FCC ownership rules, piracy, runaway productions, intellectual property and copyright infringement. Members of Congress in attendance included U. S. Representatives Loretta Sanchez and Xavier Becerra. Local political figures present included Los Angeles City Council members Bernard Parks and Martin Ludlow and Culver City vice mayor Steve Rose.
Expert Panelists: Congressional The Norman Lear Entertainment Caucus Center
Marilyn Bergman, president The Congressional Based at the USC and chair, American Society of Entertainment Caucus was Annenberg School for Composers, Authors and established to engage Communication, the Publishers (ASCAP) members of Congress about Norman Lear Center is a entertainment industry multidisciplinary research Ann Chaitovitz, national concerns. Currently, thirty and public policy center director of sound recordings, members of Congress have exploring implications of the ASCAP joined the Caucus on a non- convergence of partisan basis. The Caucus entertainment, commerce recognizes the economic and society. On campus, the John Connolly, president, and cultural contributions of Lear Center builds bridges American Federation of the entertainment sector, between eleven schools Television and Radio Artists which brought an estimated whose faculty study aspects (AFTRA) $535.1 billion to the U.S. of entertainment, media and economy in 2001 and culture. Beyond campus, it Marshall Herskovitz, vice exports films, music, and bridges the gap between president, Producers Guild of television programs to more the entertainment industry America than 150 countries. Also, and academia, and between Caucus members are them and the public. Martin Kaplan, director, cognizant of the many Through scholarship and Norman Lear Center challenges to the industry research; through its today, such as intellectual programs of visiting fellows, property protection, conferences, public events, Vicki Riskin, president, Writers runaway productions, and publications; and in its Guild of America, west piracy, new FCC ownership attempts to illuminate and rules and the development repair the world, the Lear Steven Rose, vice mayor, City of new digital media. As a Center works to be at the of Culver City way of raising Congressional forefront of discussion and awareness on these issues, praxis in the field. Terri A. Southwick, senior vice the Caucus serves as a president & deputy general clearing house for the counsel, Walt Disney Company dissemination of vital information and as a forum to formulate and discuss Ronald Wheder, vice president, innovative approaches to Fox Pictures Studios the many challenges the
entertainment sector faces.
Lear Center director Martin Kaplan confers with Congresswoman Diane Watson before the hearing. 3 Congressional Entertainment Caucus Hearing
Martin Kaplan: If anyone was betting against an on-time start, I'm afraid you've lost that bet. We're going to begin, and as a consequence of starting on time and staying on time, we're going to be going with the flow. So comings and goings will be part of the morning.
Good morning to everybody. My name is Marty Kaplan. I'm the associate dean of the USC Annenberg School for Communication, and I'm also the director of the Norman Lear Center, which studies the impact of entertainment on society. The Lear Center is honored to be a co-convener of this event. I'd like, in particular, to thank someone who had the original idea of a Congressional Entertainment Caucus. When you think about it now, it makes such sense, but it didn't used to be. It took the leadership of the chair of the Caucus, and so I'm particularly pleased to thank her for her leadership and to salute her, please join me in welcoming Congresswoman Diane Watson.
There are many speakers, as I mentioned, who will be joining us at various times, and I will introduce them as they arrive, and I ask your indulgence as we do a little hopscotch with the agenda to accommodate the changing schedules of those here. Lear Center director Martin Before we begin, I wanted to have a chance to introduce some of the other people Kaplan welcomes who are here, and, in particular, on the dais, representing the L.A. city council district the audience. no. 8, and I say with a touch of chauvinism, the holder of a degree from USC, city council member Bernard Parks. And we also have in the room some other guests, and as the morning moves along, as I said, I'll have a chance to introduce them. Let me start by introducing one of the other elected officials here today, the vice mayor of Culver City, Steve Rose.
Before we begin the panels, and before we interrupt the panels, I will say please turn off your cell phones. Thank you for that cue. And I'd like to ask some of those who are already here on the dais to offer a few remarks, and I'd like to start by asking Congresswoman Diane Watson.
Diane Watson: Good morning. Come on now. You can do better than that. Good morning. All righty! We're going to wake you up today. I first want to say to Marty Kaplan, we so much appreciate all the work you have done in helping us convene the first Congressional Entertainment Caucus hearing outside of Washington, D.C. And as you know, he is the director of The Norman Lear Center, and I want to send my thanks to Norm and to you. We have worked together over the years. I've not seen him in the last few years, but we appreciate all he does, too.
I think many of you are aware that the great 33rd district has in it its starship, USC. It also has at the other end, Hollywood. And over the years, as you know, we have been very much involved with what Hollywood exports around the globe. And now that I am representing it, I thought it would be important to work together with the industry to improve our communications and to plan together so that this $500 billion industry annually can thrive. When the industry thrives, we all thrive. I'm proud to represent Sony Pictures, Capital Records, Raleigh Studios, and some of the other smaller studios within this 33rd District. At a time when the jobless rate is over two million, we want to be sure that we can bolster, in whatever way we can through Congresswoman government, the industry because they employ masses of people. Diane Watson opens the proceedings. Today's forum is representing a culmination of a series of events and hearing sessions hosted by the Congressional Entertainment Caucus over the past half year. We have 38 members who have signed on. You know, they're fascinated when you talk about the entertainment industry in Hollywood. However, this is busy season for all of us.
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This is a month that we have out to work our districts, work in our districts, to travel throughout the world, and so many of them are not able to come. They send their regards. They are loyal members, and they're in Washington, D.C., and so we will move on with whoever's able to pull away some time to come.
And in strengthening the communication between Capitol Hill and the entertainment community, it is in all of our best interest, and we're using this as a vehicle to disseminate and to exchange information from the seat of government to the industry. And as I mentioned, the Caucus now has 38 non-partisan members from across the country. It's sponsored many briefings and events on Capitol Hill for the past several months, and the topics of our Congressional briefings range from intellectual property rights protection in a global market to domestic law enforcement efforts to combat digital piracy, to the FCC media cross-ownership rules, and to the bilateral free trade agreements with Singapore and Chile.
This fall, we plan to focus on several other issues, including runaway productions, artists' rights and empowerment, and minority representation in the entertainment sector. I also am concerned about the images of America and America society abroad. What kind of perceptions do we export, and are these perceptions doing this country harm, or are they doing us good? And it's a timely subject with what is happening in this period of time.
And so the Caucus has worked with various leaders in the entertainment community, including the Motion Picture Association of America, the Writers Guild, the Interactive Digital Software Association, AOL/Time Warner, Sony Pictures Studio, Universal Studios, to just name a few. And so I'm so pleased that several of the representatives from the industry are our panelists today, and we're going to look forward to hearing from them in just a second and a continued relationship with them.
The panel today has been divided into four topics that are reflective of key issues of concern that have been brought to us by the industry itself, and they include runaway productions, intellectual property piracy, the FCC ruling, and independent productions.
Because of the many new digital technologies there are serious questions and there are serious concerns related, and we see the erosion of intellectual property rights in the entertainment sector. This has been happening domestically but very seriously abroad, where countries like Russia and Taiwan have become major hubs of international piracy networks. At the same time, the industry as a whole is navigating carefully the issue of fair use in combating piracy so that the rights of consumers and public entities are not unfairly restricted. So I know, and I hope, our panelists today can enlighten us on the progress being made in combating the digital piracy, while ensuring fair consumer access.
The issue of runaway productions is also a key area of concern. Now, when you have Civil War movies now being made in Prague and movies about New York City made in Canada, you know, there's some peculiarities about that, and we must ensure that the United States is on equal footing with foreign countries in attracting U.S. production dollars. And so I know our panel's going to address that issue.
And, finally, many members of the Entertainment Caucus have received tremendous feedback from our constituencies over the Federal Communication Commission's June 2 vote, and when this vote relaxed the cap, it, in essence, shut out a lot of the local voices that would be heard.
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Here comes our media star right now. I've been hearing her over the radio before I even left home. I'd like you to meet Congresswoman Loretta Sanchez. Loretta, thank you for coming. I know you've been busy.
So with these concerns, we know that you will learn a lot about the industry's feelings about government and the way we can work together. And however controversial the topic might be, let's open it up, lay it on the table, and discuss it. And so we will find an enrichment out of this session this morning, Loretta, because we're going to hear from the people who are actually concerned.
So thank you so much for coming, and let's get on with our panels, and I'm going to call Marty back up, and, Marty, thank you again.
Kaplan: I'm reminded that I had the pleasure of moderating a panel discussion at the Writers Guild that Congresswoman Watson participated in on one of the topics that she just raised. It was called, "We Hate You, But Please Keep Sending Us Baywatch."
It's now my pleasure to call on a couple of the members of the panel to also give their opening remarks, and I'd like to start by doing that by asking councilman Bernie Parks.
Bernard Parks: Good morning. I appreciate the invitation from Congresswoman Diane Watson. Also, I'm glad to see Congresswoman Sanchez here today.
And, also, I want to welcome you to the heart of the Eighth District. This is one of our crown jewels, the USC Trojans. We think it's, if not the best university in the United States, and I'm sure there's others that are here that will dispute that, but we kind of feel fond of this university, and I think from looking around the University, you see what a great neighbor it's been to this community, and being a part of the Exposition Park and a variety of other things. I also think that it's been the home for many of the great discussions about public policy as it relates to local issues or issues on an international basis, and this is just one of many efforts that USC has been a full partner in bringing groups of people together to talk about our future.
I believe in, as we've seen over the last several years, we see very graphically the period that we're going through in state politics, that there is a need to look at issues that impact our budget, how we in the state of California, $38 billion in the deficit, and the city of Los Angeles, as we were briefed yesterday, if we don't watch our Ps and Qs, could be $200 million in the deficit as of next budget year. But at the same L..A. City Council Member time, we hear stories about thousands and thousands of jobs leaving our state and Bernard Parks leaving our city.
I had the pleasure of being in Atlanta, Georgia recently, and every public official that spoke proudly stated that they were the home of over 30 headquartered companies. We don't need any hands to count how many headquarters companies in the city of Los Angeles because there are none, and so these are the kinds of things, I think, from looking at the issues and the areas that have confronted us, to begin to go back and figure out why are we losing that business or those businesses is the first step in correcting the things that have driven them away. The entertainment industry is very important to this country, to this city, to this state, because, as Diane Watson said earlier, it's the best and the largest transporter of our culture and a culture in which we believe, but it also creates a significant revenue stream for the cities in which you choose to do business.
In the city of Los Angeles, we certainly understand that and, hopefully, you were aware that recently our city controller, Laura Chick, enlisted a study about what
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impact the Staples Center has had on the City of Los Angeles, and that study reflected that it has been a tremendous success, not only for the five teams that play there but for the entire economic development of the downtown Los Angeles, that so many businesses and a significant amount of housing is being developed primarily because of that financial engine called Staples Center. And when you can look at the improvements and see the transition in the city and begin to see the economic benefits, people see it's just not the entertainment of going to the show or to the movie or to the play or to the fight or to the basketball game. It truly drives economic development that now there are major restaurants, there are thousands of units of housing being built. And for the first time in our history in the near future, we'll have a supermarket in downtown Los Angeles. And so these are things that clearly reflect that when you construct a business deal that's a benefit to the community, to the business itself, it will thrive. That is why we've made such a great effort to try to bring the NFL to the table to talk about football returning to the city of Los Angeles, and it's been interesting. As people have talked, they've wanted to know how can they get their tickets. We said, "Take a step back and realize it's not the tickets that are important, but if we can develop the Figueroa corridor, the Exposition corridor, the King Boulevard corridor all the way to Vernon Avenue, those are the economic benefits of having football in the City of Los Angeles, where we can begin to see restaurants and hotels and develop an entertainment corridor between Staples Center and the Coliseum is when you begin to see the economic development for the city.
And so these are things that I think are important as you discuss these issues that are confronting you, and certainly there are issues that have placed some limitations on your industry, but I also think that there are no problems in which we as a city and we as a state cannot work through to ensure that this business—again, one of the major businesses in our country—stays within the confines of the United States and the State of California and the City of Los Angeles.
I'd also like to ask you—and I've met with Fox recently in one of our tours, and they did a great job letting us see their facilities—but I think one of the things that our communities have said over and over, they love having the movie and TV industry in their community filming, but they also need to ensure that their concerns are considered, that the interruption of their lives, the issues that impact them in the way of traffic and things of that nature need to be considered, that they should not be ignored as a party in that contract of providing that their city streets have that service and that sometimes it's important for your industry to look at ways in which you might leave some community legacies there that let them know that you are appreciative.
It's also important to think about as you think about the cities in which you're providing this service and using those resources that those intern programs are also a tremendous benefit for young people who have an interest in your industry but have no understanding or idea of how to get involved. And so those high school drama students, those kids that want to learn the industry in front of and behind the camera, are great avenues for you to consider in how do you reach out and lend a helping hand and adopt a high school or adopt an area in which you can draw on the next person that may be a star in your industry, whether it's a writer, whether it's a producer, whether it's somebody that may invent the next technology that's going to accelerate your business.
And so we'd ask that you'd think about those kinds of issues in the sense of how you can be inclusive of the community, how you can develop a stream of new employees, new stars that come in and have an interest in the entertainment field because, as you know, there is no real limit on who might be the next greatest writer in sense of color
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or size or age or gender or what part of the community they may come from. It's a matter of people having ideas. We also know that as our young people that are in school that take an interest in music and the drama and the arts seem not to get in trouble as those who may choose to be at arm's distance from those types of subjects. And so I think, unfortunately, we have a tendency to keep reproving over and over those principles that we've known, but we have to remind ourselves that these are very, very big parts of our community and our life and our history and our legacy, but that we should ensure that we not ignore the cultural benefits of including all communities as it relates to those types of activities.
And so I'm here today to just say welcome to the Eighth District and certainly hope that you have a great conference. I have a job now, so I have to go to the City Council in a little bit. And so it is important that as you sit here today and I say the same thing to each and every conference that I speak before, although it's great to come to these conferences and listen to the speakers, but the greatest benefit of being here is you talking to each other, that you have the ability to change cards, exchange information so that when you go back to your workplace, you now have another group of people that helps you do your job and you can then help them. If you all came together and sit next to each other and never cross-pollinate with each other, you don't have a greater vision or view of what you can do for the future. And so I'd just ask as you sit here and listen to the panelists, you also realize that there's a great deal of information and resources sitting in the audience that you need to tap into, also, and I would hope you take advantage and full advantage of those opportunities. Thank you very much, Congresswoman, for inviting me, and I'm going to run out of here so I can beat Martin to the City Council. Thank you very much.
Kaplan: I'd like to acknowledge the arrival of another member of Congress, who is in California's 31st Congressional District and who represents USC's neighbors, if not USC immediately itself. Please welcome Congressman Xavier Becerra.
And as you have seen and now will hear, I'd also like to welcome from not the Eighth District but the 10th Council District here, a member of the L.A. City Council, and he, too, will have to run out and take his day job. We're happy to have him here for a bit, so please welcome Martin Ludlow.
Martin Ludlow: Thank you, Dean Kaplan. I appreciate it. It's an honor to be here. I always love following Bernard. I usually try to figure out how to lower the podium a few inches. I'm just really thrilled to be here this morning, and I just mentioned to the Congresswoman that I stepped out of a committee hearing to come in to greet you, and I did want to take a moment to really acknowledge the leadership of Diane Watson. She's really been a role model and a mentor for me for many, many, many years, and obviously, now being able to work officially as elected colleagues, it's a real honor, and I appreciate the fact that you've brought this distinguished leadership here together today. And, obviously, welcome to the Entertainment Caucus. For those of you who are arriving in Los Angeles, welcome to L.A., and for those of you who live here, I’m sure it's good to be back home.
A couple of things. I am thrilled that this year we started a debate—as soon as I got elected on May 20, I started a discussion with the members of the Los Angeles City Council, and that discussion really did focus around when are we going to move the issue of the entertainment industry and the business enterprise community at large to the forefront of a discussion in Los Angeles City Hall? As you all know, we have 15 members of the L.A. City Council, and we have 15 standing committees in Los Angeles. They range from budget and finance all the way to commerce, the committee that oversees the port of Los Angeles, L.A. International Airport,
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Department of Water and Power. But there essentially are 15 standing committees by charter.
The question for me was did we have the right mixture of committees and was there one we should try to create that may be missing? And I'm just blown away that not only did 15 or 14 Council members agree with that, but they were also willing to create a committee that I think is long, long overdue in Los Angeles, and that is a committee of Tourism, Convention, Entertainment, and Business Enterprise, which includes the sporting industry. Yes, absolutely. And the committee, as we're beginning to work on the creation of it, became obviously something of excitement for a lot of members, and I was, next, very humbled that Council president Alex Padilla named me chair of that committee, and so that's something that I am really looking forward to working with each and every one of you in terms of shaping what that committee ought to look like and what that committee ought to do.
But let me just say a couple of things. I grew up in the Midwest. I grew up in a small place called Cleveland, Ohio, and I know that Cleveland has a warm place in its heart for the IA members, with sort of the home of your international president. But more importantly, what I remember as a child growing up in the Midwest in a steel town, in L.A. City Council member an auto town, is the pictures of families that went through the devolution of the auto Martin Ludlow industry in cities like Detroit. And when I look at the incredible role that the entertainment industry has played in the construction of Los Angeles and really being the signature industry of Los Angeles, it reminds me of the movie, Roger and Me. It reminds me of what happened when industry left small and medium-sized cities throughout the Midwest. And if you haven't seen that film, Roger and Me, which obviously has its own sort of poetic moment here, it is something that you should see because it speaks volumes to what happens when industry—the heart-and-soul industry of a city is driven out for a variety of reasons. Could be corporate greed, could be governmental regulation, could be a combination of both. It could be just ill- advised public policy. But the end result was an incredible level of alcoholism, divorce, suicide, violence, and then, obviously, just the devastation of the economy and that's in those cities.
I think we have a great opportunity to say to the entertainment industry, both the worker and the owner, both the stagehand and the shareholder, that Los Angeles loves you as an industry, we want you here, we want you to stay here, and we want you to continue to be able to thrive in L.A. This is the greatest city, I believe, in the world. We want you to know that this is a city that is built on the industry and that the people who live in the communities in which I represent, council member Parks represents, your members, your workers, your owners, your customers are our constituents, and so there is that symbiotic relationship that Bernard mentioned just a minute ago that we've got to be able to find that middle ground.
One of the things that I am going to be really looking for advice from you all is how we can quickly move the discussion forward on the EIDC. I do believe that the EIDC has an opportunity to become the promoter of Los Angeles. We need to begin to look at how Canada is treating your industry. We need to look at states like Illinois and Arizona in terms of tax incentives based on wages. These are opportunities that Los Angeles really needs to step up and take a look at.
But, finally, obviously, there is that dynamic that happens within our neighborhoods. There is that dynamic that happens with the residents of the city of L.A. And I think that wherever there has been throughout American history conflicts and challenges between industry and cities, leadership has always been what brought it together and made the solutions visible, and that is, in fact, what I hope to provide in this discussion
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is to provide leadership that moves the agenda forward quickly but respectfully of all who are concerned, and I just think that today's hearing, today's discussion, is such a warm and welcome and long overdue discussion. I really want to commend the Congresswoman and all the members of the Entertainment Caucus who are here, and I thank those of you who are here from the industry, and I thank those of you who are here from labor. You all are doing some great things right now. In fact, I will close with this. Probably the greatest partnership that I have seen between labor and ownership and management has been the partnership that I have seen over the last month with the working group that has been formed between the industry executives and the leadership of the labor organizations. I think it is such a great model for all of LA's industry to look at, and I really applaud you in what you're doing and look forward to being a strong supporter of that effort. So, again, welcome, thank you. I look forward to your suggestions and involvement in this great new committee that we've formed in the city of Los Angeles. Thank you all so much.
Kaplan: Thank you. I'd like to introduce our next speaker first by saying that I want to put any doubts to rest. I am not a candidate for governor. And I only wish I could get the attention for not being a candidate that others might get. It's a great pleasure to welcome a member of the Congressional Entertainment Caucus. She represents Garden Grove, Anaheim, Santa Ana, and a number of other Orange County cities, the 47th California Congressional District. Please join me in welcoming Loretta Sanchez.
Loretta Sanchez: Thank you, and good morning. I'm going to try to be short, believe it or not, because I see the people we have in front of us, and I know how important it is that we hear from you, and you really are the stars here today. And also, I ran into a young man as I was walking in who works, I think, in production or stage, and he told me that he had taken half a day off of work to be here because he felt it was such an important issue. In particular, he was talking about runaway production. So in order to make it worth your time, because you took the time, I want to be short here.
Listen, all of this important—film, TV, music, sports. I mean I get to represent the still- world champion Angels. And I love it all the time when I come up to Los Angeles because, of course, people always think that Orange County is treated like the stepchild of the whole thing, but we are important to you, too. I mean this is a region. This is an industry that is regional for us. And the multiplier effect, the number of jobs that are created because of the film industry or because of the sports industry or because of the music industry is important throughout our region. Your makeup artists live in my district. They spend their money in my district. I care about that. They drive up here. Luckily, it's crazy hours, so they don't hit the really, really bad traffic, but we are a part of what is going on, and these industries are important to us.
Loretta Sanchez, Member And you have your own issues going on without the issue of what we're doing or of Congress, CA 47th what we're not doing to keep you here. I mean the issues of the Internet, the issues District of new technology, the piracy issues that go on. I can guarantee you that if my colleagues go to China or to Vietnam or to Taiwan or any of these places, when we meet with officials of those governments, the first thing out of our mouth is, "What are you doing about piracy?" You know, if we do normal trade relations with China, why are they taking our high-end product and allowing it to be used like that? Of course, their answer is, "No, we don't. We try to stop it." But it's out there. Do a disc today here and you release it, and tomorrow it's back here, it's been dubbed over in Vietnam and selling right here for five bucks. And it's undercutting our jobs; it's undercutting your profits; it's undercutting the people who live in my district who work on your product. That's why we care about this.
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So it's not just the whole issue of piracy and intellectual property and how do we protect, and I hope you'll give us some ideas to that. Technology might be a piece of it, but we need to stand up, especially as Congress members, to do something about this or try to do something about it. We need to help you. We need to help you with runaway production. You need to help us understand it better. I've been working on this issue for two or three years now, and I still don't believe that the legislation that we have, headed up by Mr. Berman, while it's a good piece, is not really going to hit the whole issue of what has happened in Canada, and their industry is getting better and better and better everyday, and pretty soon we are going to get priced out of here. Or what's happening now in Poland and the Eastern countries and other places, so please tell us. I want to hear what we can do. And then I want you to also hear what I have to say. Ownership is a very important piece of what's going on in this industry. We need your ideas about what consolidation is really doing and what that does to not only the creative process but what that does to the real dollars that are generated here, the real ownership of this industry, and, in particular, how it hits something very important to me. You know, before George Lopez, I doubt that I really saw a Latino on primetime TV that I could say really does his own show. So help us to understand that, also, and what you think you're doing as an industry to help us with that. Thank you.
Kaplan: Thank you. I'm glad there's no passion in this room! I'd like to introduce another member of the Congressional Entertainment Caucus, who, because he represents the 31st Congressional District of California, also represents the neighborhood that USC is so proud to be a part of. Please welcome again Congressman Xavier Becerra.
Xavier Becerra: Martin, thank you. Good morning to everyone. To Congresswoman Watson and to all of my colleagues at the various levels of government, we're very pleased that we have this opportunity to convene this session. To all the folks—and it's an impressive panel of people who've come to Los Angeles or are taking the time to be at this particular setting—we want to thank you very much for the words you're about to give us. And to all those who have expressed an interest and are sitting, also listening and watching and hopefully will comment as well, we thank you very much for that.
I want to also just make note of someone I see in the audience who I greatly respect and who has a great deal of knowledge on this, and I hope she will comment. That's Sandra Ortiz, who's worked immensely on many of the issues, especially media consolidation, has worked here at USC, has been with Fox, and someone who I deeply respect and obviously has a lot to offer us, so, Sandy, I hope you have an opportunity to make some comment.
Listen, you're touching on some very important subjects. I will tell you this. With regard to media consolidation, I'm concerned. In a conversation I had with Peter Chernin at Fox the other day, I got the impression that what we're seeing is the Members of Congress Becerra and Watson chat demise of free broadcast television. In essence, what Peter and others have said, and I before his remarks. think there's a lot of logic to what they're saying, in order for the networks to compete in broadcast television, they have to get bigger, and they have to own a lot of the television stations themselves because that's where the money is. So unless they're allowed to consolidate and have this opportunity to go where the money can be made, the network level, where all the production takes place, which is a loser, a net loser in the billions, they're out. And so the theory is that unless they're allowed to gobble up the local stations, which still make money, they're not going to have an opportunity to be networks to offer free broadcast television, which, as I said, has some logic to it. But the difficulty for me is a lot of folks in my district who probably still can't afford to pay for pay television. And so my question would be, if that's the course we're running down, how soon will it be? Because it didn't seem to me that
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that would save us from losing free broadcast television; it just seemed to stave off the date when it would occur, when free broadcast television would be gone. Either that, or it would there be poor quality free broadcast television, for which you'd have half as much time spent on commercial time as you would on the actual broadcast itself to try to pay for itself.
So for me, I hope you can somewhat answer that question. Where are we heading? If it's allowing you to consolidate so you can continue to offer free broadcast television, tell me what we're going to get as consumers in return for allowing the media giants to become even bigger? If we won't allow you to get bigger, and it looks like Congress is on the way to trying to force that through, even though President Bush has threatened to veto any legislation that would deny the media consolidation to occur as the FCC has moved forward, then tell us, where can we head? Where is the happy medium so that consumers know that they will get something at the same time that we can continue to see the networks offer free broadcast television?
On runaway production, listen, there's only one Hollywood in this world; we should keep it that way. Every time we see billions of dollars leave to Canada, Australia, England, we lose jobs not just in the media industry but the guy that makes the lunch, the person who builds the stages, and what we have to do is struggle to make sure that we keep those jobs here. To some degree, the falling value of the dollar has helped us compete because it's easier now to compete against the Canada, but I don't think any of us wants to rely on a falling dollar to be able to compete to keep Hollywood here in Hollywood.
And, finally, I will say this with regard to piracy. We just passed the Chile and Singapore free trade agreements, which had some very, very strong provisions on piracy, which we should all be very proud of and supportive of. And I hope that we can replicate those provisions with regard to piracy because we can't continue to lose $4 billion in revenue from piracy that occurs throughout the markets in the world. But at the same time, none of us will agree with the president's policy of trying to replicate the accords with Chili and Singapore, not just on intellectual property, but on issues as important as labor and in the environment because they are wholly deficient in those areas. It just so happens that Chile and Singapore are pretty decent countries with regard to their treatment of workers and the environment. But if we extend that same type of prototype, that template, for a trade agreement that we have with Chile and Singapore to other countries, I've got to tell you, we're going to fail. And as much as we want to protect our product, intellectual property product, from being pirated abroad, if we can't come up with a bipartisan effort on trade, we will flounder. And the last thing, I think, the industry need is for us not to continue to extend the good provisions in the Chile and Singapore trade agreements with regard to intellectual property into other accords. But I've got to tell you, there will be many of us who will fight tooth and nail against any further future trade agreements unless we deal the same way vigorously on issues of labor and the environment as the administration is willing to fight on the issues of intellectual property.
And I guess what I'm pleading of those of you in the industry is that, please, don't just worry about your particular provisions. Understand that this whole thing could fail when it comes to other trade agreements unless we start to deal with the fact that workers should be treated as well, with the same amount of dignity, that we treat capital and intellectual property. If we can't tell a human being who produces that intellectual property or the person who helps dig up that capital that we're going to provide you with the same type of protection we provide things that are innate, then we don't deserve to have future free trade agreements. So I hope that you all will
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help us push an agenda when it comes to the issues of free trade and trying to protect our intellectual property that will also allow us to preserve and protect the rights of workers and the environment into the future for all the countries.
With that, I hope to hear what you all have to say, and I’m pleased that you all are here. Thank you very much.
Kaplan: They said we couldn't run on time, but we are. And with that, I'd like to introduce the members of the first panel, who are ingeniously are already seated on the dais. They're all friends, and I'm proud to know all of them. We are honored to have the president of the Writers Guild of America, west, who's also a talented writer and has a career in addition to that in the realm of therapy, which I think we all could use a bit of. Please welcome Victoria Riskin. Vicki, I’m going to introduce everybody first, okay.
A triple or quadruple threat, Marshall—I'm not sure how many—writer, producer, director, television, film, vice president of the Producers Guild of America, a wonderfully talented person, please welcome Marshall Herskovitz.
And a leader of the American labor movement, who's also an actor and so knows whereof he speaks in the fields in which he toils, the national president of the American Federation of Television and Radio, fresh off a plane, John Connolly.
And I’m going to attempt a hat trick of welcoming myself as a speaker on the first panel in a moment.
What I'd like to suggest for our panels is that people speak from their places if that's okay. And so, Vicki, if you'd begin, all the panelists will make their comments, and then following that, the members of the Caucus will have a chance to ask questions. Later on in the day, those of you who are not here will also have a chance to add questions and comments. So, Vicki, would you begin?
Vicki Riskin: Thank you very much. It's a great pleasure for me to be here today. I don't usually have this deep voice, but I cultivated it for this morning. I did get my doctorate in psychology, and I, for a number of years, did have a practice as a psychotherapist. So when I transitioned into the film industry, I said that I went from treating the mentally ill to working for the mentally ill.
I want to thank Congresswoman Watson and Marty for putting this together. I had the great pleasure of meeting the Congresswoman the night that we did this event at the Writers Guild, which Marty alluded to earlier—“We Hate You, But Please Keep Sending Us Baywatch—which was a scintillating evening talking about the effect of American entertainment overseas and what our responsibility might or might not be. And the Congresswoman's remarks were extraordinary and had a long-lasting impact. Congress recently voted to roll back the sweeping deregulatory changes that were announced by the FCC in June this year. The FCC's rulemaking sparked the most remarkable outpouring of concern, outrage from the public, with the liberal and conservative interest groups singing the same song. Too much media concentration in the hands of too few is not good for democracy. I never thought I would see the day where I would stand shoulder to shoulder with the National Rifle Association, with the Christian Right, as well as Common Cause and my other guild leadership friends. It was an extraordinary moment in history because it seemed for a very long time no one, no one, was paying any attention.
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In my judgment, the FCC applied the most deregulatory interpretation to the 1996 Telecommunications Act, perhaps because that's Chairman Powell's orientation. He viewed the Act as calling for the complete elimination of rules unless they're absolutely necessary. But at the same time when he initiated studies to justify or examine rules, they were woefully inadequate. In fact, the woman who did the study on diversity later criticized the FCC for misinterpreting her conclusions.
The airwaves—we have to remember this—the airwaves belong to the American public, not to the media companies who use them. The media companies are the guardians, and they must act responsibly as guardians. Congress has the oversight to make sure there's a healthy balance between that guardianship and a competitive marketplace and the public interest. So I thank those of you who participated finally, at the final hour, even after the final hour, in re-examining regulation.
The Writers Guild has seen the serious consequences of deregulation over the last 15 years since the elimination of financial interest and syndication rules. Basically, they said that you could own a network, but you could not own and control all content. Those rules were eliminated, and in the year since, we've seen the near-extinction of truly independent producers, many of whom are writers who brought to television some of the best programming and made television successful. Vicki Riskin, president, Writers Guild of America, Twenty years ago, networks were restricted in their ability to own and distribute their west own programming. Today, they can own 100% of everything on television, own the distribution and all the creative control. I ask you, is that a good way for these public airwaves to be served? Last season, 75% of the shows on television were produced by the networks or their affiliated companies. Fifteen years ago, there were 15% that were in-house productions. The scale has tipped so dramatically in the wrong direction. 50 to 100 medium-sized companies have gone out of business. They're just simply not able to compete in the marketplace. The five big media conglomerates now own all of cable, too, so that promise that we had of multiplicity of channels and access is simply an illusion. Now, almost invariably, for writers and producers to get their work on television, they must cede creative and financial ownership to the networks. They must cede control, and it's had a chilling effect on the kinds of programs and the way in which we bring programs to you. It is simply not the same thing to be an employee of a network, as opposed to being an owner of your own company and driving your own creative vision. It is no surprise to me that there hasn't been a new hit program on television in comedy for almost seven years. Consider that. Consider what we're doing to this wonderful goose that is laying this golden egg that is no longer shining. Voices are closed out in the process. It is not good for creativity. It is not good for this town square that we call media because access has been foreclosed. And it is not right, in my mind, for the networks or the companies, media companies, to ask for more station ownership, as you were describing, to ask to own more of the distribution channel and have 100% control over ownership of the content. Where does that take us?
The Writers Guild has asked for not a return to the financial interest in syndication rules as they once were, but we have asked for a reasonable carve-out that will guarantee independent production and some diversity of voices in the marketplace, and we hope to have your support on this. Senator McCain and Congressman Tauzin have agreed to host the meetings with the networks to sit down and say, "Can we find a private sector solution to this? Can we have a common definition of what is independent and what is independent?" We don't agree with what the networks feel about how they describe independence. So anybody who happens to get a credit on a show is not an independent. And we hope to have your support for those meetings and to tell the networks, "This is serious. We don't want to have to come back and
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beg you for legislation. Let's solve the problem within our own family and make television again a vital and open marketplace."
There's another issue that's about to come up, and I hope you all will be vigilant. But soon the FCC is going to make its decision about lifting the caps about cable. Cable companies are capped at 30%. The leak coming out of the FCC—and actually the leaks have been pretty reliable—Is that they want to move it up to 45%. They're holding back on issuing that rulemaking because of all the conflict over their past decision, but think about this. Consider this. What if soon a single cable company will have 45%, almost 50% of the entire cable households in the United States? Are they not going to have complete control over pricing about what you pay for cable? And I don't know what you're paying for cable, but I’m paying quite a fortune just to get cable into my household. They will have market control. But they will also have market control on the content side. And here the studios or the networks, I think, are in sync with us at the Writers Guild because we feel we want to make sure that there is again open access and fair pricing, competitive pricing, when we go to put our work on cable. I have one last little request from members of the Congress on copyright. We came to you during the period of copyright extension, and we said, "Okay, let the studios have another 15 years of copyright on films." But we asked that in that windfall that you all have given to the studios that we get some residuals for our old folks who were in movies or television before 1960. And we got some language in that legislation that called for the studios to sit down and negotiate with us. Their offer is 1.2% of gross beginning in the 75th year. So if I'm an actor or writer and I wrote something when I'm 30, I will be 105 before I ever see any money. We need your help. We need the pressure to get a reasonable deal. Thank you.
Kaplan: Marshall?
Marshall Herskovitz: Thank you. Thank you so much for having this hearing and for allowing all of us to have a say because that's what this is about. Pretty soon in the future, we might not.
Let me say, first of all, that my business as a television producer has been irrevocably changed by the changes in the television business in the last 15 years. However, I don't even think that's the biggest part of this. I think what we all need to understand is that every industry has particular responsibilities to the culture at large. The auto industry has responsibilities of safety and pollution that don't concern those of us who are tailors or grocery store owners. And those responsibilities in the auto industry cannot be left to market forces to determine, and the government has accepted that long ago because market forces will never compel a corporation to make a safer car or a cleaner car. The particular responsibilities in media are greater, I think, even than safety and pollution. They concern the defense of the first amendment to the Constitution. This responsibility can also not be left to market forces. And what's happening now, not just in the television business but across the board in media, is that the consolidation of ownership is threatening the very discourse with which we try to understand ideas in this country and try to make decisions about our future.
Marshall Herskovitz, vice The biggest danger in the FCC changes that I can see does not even concern how president, Producers Guild many television stations a network can own but the cross-media ownership of these of America huge corporations, that pretty soon, according to these new rules if they were to go through, you could have one large corporation owning the only newspaper in the town, owning the top television station in the town, owning the cable company in the town, and owning five to eight radio stations in the town. The implications of that are truly horrifying.
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I just want to read to you what you may or may not have heard of. This is an incident that actually took place several years ago in a little town called Minot, North Dakota, where a train containing hundreds of thousands of gallons of toxic ammonia derailed at 1:30 in the morning. Town officials tried to sound the emergency alert system, but it wasn't working. Desperate to warn the townspeople about the poisonous cloud that was bearing down on them, they called all of the local radio stations to get them to broadcast an emergency signal, and no one answered the phone at any of the radio stations—all of the radio stations had been bought by Clear Channel, which now owns 1,400 around the country, they had all been automated, and there was nobody there. That's where we're heading in terms of the media for the entire country.
The implications to this are not just about loss of creativity, loss of diversity. This is something that concerns me deeply but finally is an artistic issue. I think the larger issue is the loss of truth. What Vicki was referring to in her comments had to do also with the fact that 30 years ago, 40 years ago, every television station, every network had to prove to the FCC every two years that they were worthy to stay in business and worthy to keep their license to broadcast. Those rules have been done away with. They were done away with years ago. There are no responsibilities whatsoever mandated by the government that any television station or network have to follow in order to stay in business.
Right now, there are no rules to govern the notion that on CNN they could decide to give good reviews to the movies done by Warner Brothers and bad reviews to the movies done by Fox or Universal—we are headed toward a situation where you have five or six media empires that control the truth for whoever listens to them, and I don't think that we can allow that kind of power to rest in these corporations. I don't think their motives will ever be the same motives that we as citizens have for our children or our communities, and I think it's the role of the federal government to keep that from happening. Thank you.
Kaplan: John?
John Connolly: Thank you. Good morning, everybody. I started this morning very early indeed, with a wake-up call at 3:50 a.m. in Chicago. I was at the AFL-CIO executive council meeting, where last night I was happy to witness the opening volley of the 2004 presidential season, where the AFL-CIO sponsored a forum with all the leading Democratic Party contenders for president and took questions from working people from all over the country. It'll play on C-SPAN. It'll play all week. I hope folks have a chance to see it.
I wanted to get up at 4:00 this morning—no, I didn't, not at all, but I did want to be here so I did. I really appreciate this beginning dialog on a key series of issues in one of the key industries in the American economy, and I truly appreciate being on this panel with our colleagues and having members of Congress here in the caucus and Congresswoman Diane Watson's leadership here.
I was sitting in John McCain's office a couple months ago, and he said to me, "You know, when I had those hearings about Clear Channel radio, it suddenly hit me. It was the canary in the coal mine." That's what began to turn this issue from an esoteric, narrowly discussed public policy issue into, if not a mass movement, certainly one of the most amazing coalitions of citizenry that has ever come together in the last 50 years in our country, and I’m grateful to be a part of it, as are my colleagues, I know.
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I want to thank the House of Representatives of the United States Congress for voting 400 to 21 to turn back the foolish rulings of June 2. I read some of the transcripts from the debate on the floor of both the main motion and the amendments, and I must say I was amazed at the extraordinary depth of understanding that our members of Congress had of what is, in fact, a pretty esoteric issue at first glance.
I also wanted to thank the City Council of Los Angeles, who's prescient enough to pass a motion unanimously some weeks ago asking Congress to roll back those rules, and that was done by councilpersons Parks and Zine and on the motion of Tom LaBonge, so I was really pleased that that happened, and Martin talked about that this morning when he was here.
It's so tempting to talk about everything at once when you're talking about the media because it's so important. It's certainly important to me, and it's more important to the American people, but I'll try to focus on three issues that I think are important in big-picture ways. The concentration of the media, whether you began 15 or 20 years ago are the real starting gate.
The '95/'96 changes in the laws on ownership production following through to these June 2 changes by the FCC have engendered a massive concentration of our media in fewer and fewer hands. This has produced the illusion of diversity. In fact, what it has produced is incredible quantity with very little diversity. So on the face of it, in terms of the public interest of the American people, media concentration hasn't worked. Twelve, fifteen years ago, Bruce Springsteen wrote a song called “57 Channels and Nothing On.” Little did he know that he was underestimating the situation. The breadth of opinion, the range of opinion in news and commentary in John Connolly, president, the United States has not broadened, it has narrowed, and I think that's demonstrably American Federation of true, and I would like to see some great institution of learning do some research on Television and Radio Artists that, and I think, in fact, this institution has.
The copycat instinct in entertainment production is clear. All you need to do is introduce one sitcom, and you get 15 copycats of descending capability and interest; same with reality programming, same with our dramas. And, in part, this goes directly to the problem that Vicki raised, which is the destruction of the independent production industry in television. If everybody has to be a minority partner of the networks, you lose your independence, you lose your ability to make programming that speaks from your heart. Your perspective becomes stamped out by what corporate expectations are, and we've seen that happen.
Second, media concentration has not only accelerated both the narrowing of opinion and a decisive shift to the right—you may applaud that, you may not, but it needs to be acknowledged—in the political spectrum available on television and radio so that what formerly would've been conservative or right-wing opinion is now moderate opinion, and what might've been centrist at one time is now described as wildly leftist. So that has narrowed, I believe, and I think it's a detriment to our public debate and discourse.
And in news, there has been a growing influence of the business side of the operation on news judgment. This is a serious problem which only becomes apparent incrementally and, therefore, almost invisible. How often are serious City Council debates in Los Angeles reported on most of our television news? If there's a car chase available, forget about it. There are some exceptions, some honorable exceptions, and some of that is in the public broadcasting arena.
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Apart from the challenges that working people have in this great industry, which media concentration also affects very directly—and we can talk about that another time because there's a million things to talk about there and perhaps some of our colleagues can talk about it later—there's another, I think, problem. For communities of color, people have been excluded from the mainstream of our society. The price of participating has just gone up. The capital requirements of buying a television station or a radio station have gone through the roof because the concentration of ownership has also produced massive debt, which has to be serviced by the owners of the stations and the networks themselves. The prices go up. The price of admission goes up. Fewer voices can afford to work their way in. How many labor shows are there on radio or television? So I think these are some of the hidden costs in our society, and I think they should be examined over time.
One other thing that wasn't mentioned earlier—not only is the FCC dealing in the broadcast and newspaper medium but it is also now beginning to address cable ownership rules. Well, this works two different ways. It's the ownership of the actual infrastructure of cable television on the ground—the pipes, the districts, how much of the population you can service.
Also, cable is a production entity. And when the networks were whining about the unfair competitive advantage that cable had because it got both subscription fees and advertising, it whined for a while and then figured out it should just buy them, and they did. And that is what has happened across the media, whether it's motion pictures, recording industry, radio, television, newspapers.
So there are real big-picture questions here which I think go to the heart of the fundamental assumption in the 1934 Federal Communications Act, which is one of the few pieces of genius that government has produced since our founding days, and that is the assertion in black and white in the law of the land that the airwaves belong to the people, and that in return for letting the broadcast industry use the airwaves, there is a core requirement and, therefore, a right of the people to demand public service. And I think since the American people own the airwaves, it's high time that they took them back.
In just a moment, I'll be finished. One of the interesting things about this entire period of time for me as an artist and a trade union leader has been the extraordinary movement that this question has produced from out of nowhere, it seemed. A year ago, you couldn't get a hearing on this issue, and we tried. Couldn't get an ear. Couldn't get anybody's interest. People didn't know what you were talking about. So what do you do? Do you give up, or do you turn into Don Quixote? We tried the "Don" route. So you just keep tilting at the windmill at the top of your lungs, and eventually, people started hearing what you had to say, and Minot, North Dakota helped out. The irresponsibility represented by the evils of media concentration undermined the case for it. And I just want to point out that of the 500,000 Americans who commented on these potential rule changes to the FCC, the highest number of comments they have ever had on any issue, they've only been able to catalog 200,000 so far, but of that 200,000, some 99% were opposed to the rule changes. So the word got out, and what has come together in this not-quite movement but certainly a coalition, anarchic as it is, is an interesting movement designed to turn this around with the help of the American people and our colleagues in Congress and also a movement of such breadth and oddity as to make Teamsters and Turtles both gasp. Thank you.
Kaplan: Thank you, John. I'd like to admonish myself to be brief.
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Two weeks ago, I had the privilege of testifying at the Senate Commerce Committee to Senator McCain and his colleagues on the topic of the public interest obligation, what is it that broadcasters owe the public in exchange for their licenses, the very question that's been asked today and has been pointed out. The tendency of the Federal Communication Commission since the early 1980s has been to eliminate any requirements. We used to have what was known as the public trusteeship model. The public owns the airwaves and the broadcasters monitored by the FCC then serve our interests.
That was replaced by a pure market model, "Let the market deliver." And one of the things that I've been doing here at the Lear Center since 1998 has been actually studying what it is that the market delivers. This is not an easy thing to study because the stations don't have to provide any information to make your study possible. This kind of study is done by having people sit with video recorders or DVD recorders in markets all over the country, and then you have to get graduate students to stay up all night with pizza and stale beer doing the analysis of it. But it is, nevertheless, Lear Center director Martin doable, and despite my comment about the stale beer, it's actually scientific. And Kaplan presents Lear Center what I'd like to do is to tell you the results of our latest study. findings on local broadcast coverage of the 2002 In the 2002 mid-term elections, we studied the content of local news broadcasts on elections. 122 stations around the country in the top 50 media markets. And on each of those stations, we recorded and analyzed the highest-rated half hour of early news and the highest-rated half hour of late news. So over 10,000 half-hour broadcasts of news were analyzed. And what we looked for was coverage of the campaigns. And by campaigns, I mean any campaign—dogcatcher, supervisor, school board, Congress, Senate, governor. And we looked at every one of these and did an analysis. And what we discovered when you looked at all of these broadcasts was—I thought we'd be looking at the quality of coverage. Turns out you need to hire someone from the FBI to find the coverage. Of those 10,000 broadcasts, 56% had no coverage of any campaign whatsoever. That's how the current marketplace is fulfilling its public interest obligation.
And when you look at what little coverage there is, here's what you find. Most of the campaign stories that did air, aired during the last two weeks of the campaign. Used to be the campaign season was Labor Day to Election Day. Now, it's only covered during the last two weeks of the campaign, basically. And almost half of the stories that did air were about the horse race and strategy and polls and not about issues. And of the stories that aired, less than a third of them ever had a candidate say anything in the course of the stories. Again, all candidates, all races, all the top-rated shows. Twelve seconds long was how much a candidate spoke when a candidate did speak in the under 30% of the stories in the four out of ten that did run. And if you ask what they covered, which races, it turns out that the short end of the stick was local races. Even when you count a race for the House of Representatives as a local race and put all other local races together, of all the coverage, only 14% was local coverage. So at the same time, stories about campaigns were outnumbered by ads for the campaigns by nearly four to one. Eight out of ten broadcasts contained at least one campaign ad. Almost half of the broadcasts contained three ads. There are lots more data, but I see my own yellow light flashing.
So all I'm going to do is point out that there are differences among stations, even in the same market. Some stations did a much better job than other stations on all the different things that we measured. If you'd like to learn more about the report or if you'd like to see any of the stories that did air from around the country, every videotaped story and the analysis of them is now available actually for the first time ever online. You can go to www.localnewsarchive.org, and you can search them by
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keyword, by station ownership group, and do your own research to see what is there all around the country. You can ask, for example, how much Iraq was a part of the mid-term election, what the top issues were, what the bottom issues were, what key images were used. All of that's now available online, and there is a difference in quality from station ownership group to group on many of these dimensions, which you'll see.
I'd just like to, since I see my light almost red, close with a thought about how people in the industry respond when they hear it, and their response tends to be politics is a ratings killer, covering campaigns is boring, people vote with their clickers, and they won't watch the stuff if we put it on. My response to that is, first, that's empirically not true. Many, many of the stations that we found that did do a good job are also ratings leaders in the market. But in addition, let's not blame the audience for what appears on local television. Programmers aren't delivering what people want. They are also accomplices in manufacturing what people want. Americans aren't just consumers, they're also citizens. Broadcasters have more than an obligation to make money; they have an obligation to inform us. That's what they promise in order to get their licenses. Today, the enforcement of that promise is alarmingly inadequate. Right now, the ability of the American people to get the information they need from the sources they turn to most about the most important choices they make together as citizens. Today, that ability depends on a marketing culture that too often puts sensationalism ahead of substance, fear ahead of reason, and dollars ahead of democracy. Surely, Americans deserve better from the industry they've entrusted with their airwaves and from the agency they've entrusted with marketing it. Thank you.
I'm now resuming a position of neutrality and also announcing a slight change in our program. In order to keep the program moving forward, I have a request of the members of the Congressional Caucus, and that would be, would it be all right with you if we continued with our panels and collected all the questions from the members of the Caucus until after we've had a chance to hear from the panels? Thank you.
So I'd like to thank every member of our first panel, including, I guess, me. And may I ask the members of the second panel to bring their tent cards and join us on the dais?
A vice president of Fox Studios will be speaking. Ron Wheder, who is the senior vice president of content protection for the Fox Group, will be speaking. Please welcome Ron. Ron, raise your hand. There you are. Also, from Disney, we are very happy to have the senior vice president and deputy general counsel. Please welcome Terri Southwick. Terri, I worked at Disney for 12 years, and so I have great condolences on your stock options. We are fortunate to have from AFTRA, in addition to John Connolly, the national director of sound recordings, Ann Chaitovitz. And we are very fortunate to have someone who is a gifted artist, and she and her husband are an amazing composer/lyricist combo. I'm proud to have her as a friend. In addition to all that, she's also the president and chair of the American Society of Composers, Authors, and Publishers. Please welcome Marilyn Bergman.
Marilyn Bergman: Thank you. I want you to be aware that the news flash is that Democrats in California have to talk to each other. So that's why you saw members running towards the door, and I must go, too. We have a conference call about the recall, and it's a serious matter, and we need to put our heads together as to what position we all must be in. And we have just a few more hours, maybe 48 hours, before decisions are made, so if you will forgive us, we'll step out to be on that call, and we'll return as soon as the call is finished.
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Kaplan: Thank you. And may I say to the panel that your remarks are being taped and transcribed so that the members who haven't had a chance to hear it in the flesh will have the ability to hear what you've said. Thank you. Marilyn?
Bergman: Thank you, Marty, and thank you, Congresswoman Watson, for convening this very important council.
I have prepared remarks, but I have to preface them by reacting to some of the things that I've already heard this morning. The interconnectedness of all of these issues is so clear. We're talking about, to me, the very fundamentals of a democratic society when we talk about the consolidation of media being pushed forward. People cannot like what they don't see or they don't hear, so that the very measurement of the popularity of something is false, I believe.
To begin, I always think about, for example, what radio was like before the advent of the pushbutton radio, where you would have to use a dial tuning and accidentally you might hear a point of view that you wouldn't have gone to on your pushbutton. You might hear Mozart, you might hear country music; you get the point. So I think the filters and the obstacles that are put in the way of an open media discussion or environment are so threatening and so repressive that I was so grateful to hear that the House of Representatives in its wisdom voted as it did.
I watched those hearings angrily, wanting to throw things at the screen at various points. In the area of music, for example, I was appalled at the testimony of the owner, I think, of Cumulus Radio, when he tried to wiggle out of a terrible position that they took on the Dixie Chicks issue, for example. I mean that's unheard of. That's horrendous. And he kept trying to say that the decision was not coming from the top down, that they were not a network, they were a loose confederation of stations. I don't know how he characterized this operation, but the fact still remains that they pulled the album of the Dixie Chicks because of a remark that one of the women made in criticism of the Bush policy on the war, and they had a vent in the parking lot outside of one of the stations where they literally had CDs of the Dixie Chicks rolled over by trucks and smashed. This is ominous. It sounds like book burnings, and it sounds like a lot of other things that some of us are old enough to remember. I think it's a caving in to greed, which is a word that I've not heard but which is the thread that I think goes through most of what we're talking about. But since I'm supposed to talk about copyright, we start from the premise virtually universally held, I think, in civilized society that the creator should be able to control and be remunerated for the use of their works.
Each of the technological developments, which have occurred over the last 100 years, posed new challenges for creators of artistic works, indeed new challenges to the basic premise itself. For example, when radio broadcasting first developed in the United States, the mainstay of a radio program was copyrighted music, and indeed that continues. The U.S. Copyright Act then in effect granted the copyright owner of a musical work the exclusive right to perform that musical work publicly and for profit. When composers and lyricists, whom I'm proud to represent, tried to enforce their rights and be paid for the radio broadcasters' use of the creator's property, the broadcaster showed their own creativity by resisting at every turn. They claimed that they were not performing as the renditions were merely being carried by electromagnetic waves. They claimed their performances were not public because they were given to invited studio audiences and received in the privacy of people's homes. They claim they were not operating for profit because no audience member was asked to pay to receive the broadcasts. They sought legislation to exempt their
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uses from any liability. Fortunately, the courts rejected all these specious claims, and the legislature was not persuaded that authors' rights should be disregarded.
The same holds true for all new technological advances, from the invention of the phonograph to motion pictures. In each case, users of copyrighted works claimed that their uses were somehow new, somehow different, somehow of such a nature that the old rules and the basic principles underlying those rules should not apply. Again, fortunately, both the courts and the legislatures rejected those claims. Indeed, one of the most common claims and one of the most odious was that authors should somehow be grateful for the uses that were being made, for those uses benefited the authors to such an extent that it was unfair to ask for payment. And along came the record companies, which said to the songwriter, "You should be grateful to us for making and selling recordings of your songs because you'll earn royalties from the public performances of your songs when our records are played on the radio." The radio broadcaster said to the songwriter, "You should be grateful to us for broadcasting your music because you will earn royalties from the increased sales of records that will result from our performance of the record." That's a little amusing to me. Fortunately, those arguments did not carry the day.
Now, a technological development in the late 20th century, the computer, and the digital electronic realm in which it functions, has once again challenged authors' rights, and the arguments made by those who use copyrighted works in this environment have an all-too-familiar ring. Certainly, there are elements of this new technology that are different from what we have seen before, but, as noted, the same may be said for each and every new technology that was developed over the last century. Those who attack authors' rights in this new realm say that the Internet is so different from everything that has come before it that it needs entirely new rules. Those rules include nothing in the way of authors' rights and everything in the way of users' rights. And, indeed, the newest notion they seem to have is that users have rights over the use and exploitation of something they did not create. The relations between record companies and songwriters were of no great interest to the general public when people were completely divorced from the workings of the distribution mechanism, which got those recordings to them. But the digital environment, the Internet, plays very differently with the public. Napster's popularity, in large part, I believe, resulted from the fact that every person using in it became, in essence, a record manufacturing plant. People liked that ability to control the process.
I would venture to guess that if one took the average person and said to them, "You can go into that clothing store across the street, take as many shirts as you want off the shelf, walk out without paying for them, and I guarantee you won't get caught," the average person would respond, "No, that's theft, and I'm not a thief." But when you take that person and say, "You can press this button on your computer, download copy, and listen to all the music you would like, not pay for it, and I guarantee that you will not get caught," the typical response will sadly be something like, "How many times can I press that button before my fingers get cramped?"
One of the most important tasks of this new century is to reverse that public attitude. I think some initial and successful steps have been taken. Interesting move, though, these modest successes have been generated not by the big commercial interests who own copyrights, but by individual artists speaking out—composers, authors, performers, and so forth. Their efforts must continue and must be intensified. That means that authors themselves, and not just a few, must come forward to be counted and heard. My experience is that when legislators hear from those who create our works, they are far more likely to listen then when they hear from some—excuse me—business executive or lawyer or lobbyist carrying the flag of authors' rights.
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Copyright, because it deals with intangible rights, easily transcends both natural and manmade boundaries, and in the Internet, we have a realm which has no boundaries at all and which is truly global. Perhaps it is, therefore, time once again to examine the protection of rights in this global arena. Certainly, we have taken steps to do so through international treaties like, but it may be that more is necessary.
Performing rights organizations are attempting to construct a system of global, rather than national, licensing from the Internet. That may be a model and a harbinger of what is needed on a broader scale. The challenge before us, I believe, is to apply copyright law to this relatively new medium and to apply it creatively, flexibly, and fairly. Technology is not inherently bad; it is, rather, the illegal use of it. With each technological innovation, traditional copyright values are questioned. But with each advance comes a new way for the law to adapt to it, perhaps not always as smoothly or as swiftly as we would like, but the basic principles survive, and the new technologies thrive. Sophisticated technologies, as we speak, are providing protections, which are being incorporated into copyrighted works. We must continue to educate, to speak as clearly and concisely as possible in our explanation of these complicated principles of why it is essential, as the Constitution says, to promote the progress of science and useful artistry by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries. The mission is to spur creativity and to ensure that the creators of the future can earn a living from their labors. Technology will be part of the solution, the law will be part of the solution, and I believe we will all benefit. Thank you.
Kaplan: Thank you, Marilyn. Terri, before we turn to you, just a couple of announcements. One is we're fortunate to be joined by a guest of Congresswoman Watson. She is the elected Labor member for the northwest of England to the European Parliament. Her district includes Manchester and Liverpool. Please welcome Arlene McCarthy.
And, also, just to make clear, Elvis may have left the building, but the Congressional delegation has not. They are here. They're on a conference call. They are expected back in just a few moments, and they will rejoin us. With that, Terri?
Terri Southwick: Thank you. I'd like to thank Chairman Watson and the other distinguished members of the Congressional Entertainment Caucus for inviting me to participate in this first Los Angeles hearing on the issues important to the entertainment industry. On behalf of the Walt Disney Company, let me express our appreciation for their efforts in organizing this caucus and bringing forward the issues that affect us most.
Very few issues affect our company in such a significant way as the one I've been invited to speak on today, which is copyright piracy. Piracy has always existed. There was a day when piracy was a problem that was confined to street corners and mail order catalogs, backrooms of video stores and flea markets. Those problems have not gone away, but we now look back on those as the good old days.
Today, the reality is that piracy has reached pervasive levels. Names like Kazaa, Grokster, eDonkey, Nutella, and Morpheus, and the names of other so-called filing sharing networks have entered the common lexicon of millions of people. Go online at any given moment, and you will find millions upon millions of people plugged into these networks, nearly all of them looking to do nothing more than to get free and quite illegal copies of their favorite music, movies, videogames, and software.
The most well known of the currently available programs, Kazaa, is now the most downloaded program in the history of the Internet. More than 230 million copies were downloaded just from the download.com site in the last year.
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People think of this problem as one that affects primarily the music industry, and it certainly does. CD sales are down yet again for the third consecutive year. But some would be surprised to hear that today an estimated 400,000 to 600,000 movies are being downloaded illegally every single day. Unfortunately, the number of people this surprises is growing smaller each day as movies now appear on the Internet within days of their releases to theaters.
Also unfortunate is the fact that this increasingly widespread conduct is increasingly being engaged in without regard to its legality or its impact on the legitimate rights and interests of others. In fact, just last week, the Pew Internet & American Life Project estimated that two-thirds of the Americans who use these so-called file- sharing programs don't care whether they're violating the law. To my mind, this is a serious societal problem. Some, of course, attempt to rationalize their conduct by suggesting that making one copy of a few dozen movies can't cause much harm. The lost profits from the sale of those movies won't be missed. But this just isn't so. Whether it's a few dozen pirates making millions of illegal copies, as in the good old days, or millions of downloaders each making a few dozen illegal copies, if my math is correct, the resulting harm is the same. In fact, because we now have both problems, the harm is doubled and growing every day as compression technologies get better and bandwidth gets broader.
Other users rationalize their actions on a Robin Hood principle, saying that the so- called file sharing only affects big Hollywood corporations or overpaid stars. But the truth of the matter is that while piracy certainly does affect these companies in a significant way and even affects the high-profile talent, those that will be hit hardest by the effects of piracy are the below-the-line workers, the set and costume designers, lighting specialists, make-up artists, electricians, and others. After all, Tom Cruise will survive if he gets paid fewer dollars for his next movie, but if piracy means that Disney ends up making five fewer movies next year, that's five fewer productions producing jobs for these below-the-line workers.
According to the latest statistics available, there are some 143,000 people employed in California alone in production, distribution, exhibition, television broadcasting, cable television, and home video, with nearly $11 billion in wages at stake.
So what can be done to stem piracy? My time is short, but let me suggest a few things that can be done and should be done.
First, we have not given up on education. Although it is unlikely that many people are unaware that downloading unauthorized copies is illegal at this point, some may not be aware of the extent of the harm that it causes, both to those who rely on the industry for their livelihoods and to the public at large. Therefore, the Motion Picture Association has just launched an anti-piracy education campaign with television spots and theatrical trailers now airing on all the major networks and in theatrical venues. As a part of this campaign, MPAA has established a Web site, respectcopyrights.org, where you can go for information and see the spots, and I encourage all of you to take a look.
Second, Disney is doing what it can to try to get out ahead of the problem by providing consumers with compelling alternatives to illegal file sharing. We recently signed a deal to distribute our movies on the online Movie Link service, and we have also announced a new digital video-on-demand service called Movie Beam, which we'll be unveiling in test markets in the fall. But the problem with this is that these
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legitimate businesses are being forced to compete head-to-head with illegal downloading that provides the same product for free.
So third, and perhaps most importantly, we must find a way to keep illegal copies off of the Internet. This will require a multi-faceted approach. It will require technological solutions to protect copyrighted works against piracy. That means, for instance, adoption of the broadcast flag to prevent the unauthorized uploading to the Internet of digital television programming. It also means fighting back attempts to weaken the Digital Millennium Copyright Act's prohibitions on circumvention of technological protection measures. And because no content protection will ever be fail-safe, it will mean adoption of additional measures to thwart piracy when illegal copies do leak on to the Internet. That will involve both technological solutions, which Congress should have a strong interest in facilitating, and improved enforcement.
On the enforcement side, Congressmen Smith and Berman have introduced an enforcement bill that is expected to be taken up in subcommittee in September. Congressmen Conyers and Berman have introduced a separate bill with some additional ideas, such as a federal anti-camcorder statute and increased funding for the Department of Justice Enforcement. We believe there are some useful proposals in both bills that we hope will be taken up and passed.
My time is up. Let me just say thank you again for having me here today and to the Caucus for taking an interest in our problems. Thank you very much.
Kaplan: Thank you, Terri. Ron?
Ronald Wheder: Thank you. Good morning, ladies and gentlemen, and thank you to Representative Watson for inviting my company to participate in today's hearing and to give us a chance to offer our perspective on the important issue of copyright infringement and piracy. I'd like to begin by echoing pretty much every word of what Terri just said. Our company sees the piracy problem in pretty much the same dire straits as hers and supports the legislative and other initiatives she talks about. As a matter of fact, Fox was the studio that actually produced the PSAs that she referred to that ran on the networks and the studios. So I think we take a back seat to no one in supporting those efforts, and we're working closely with Disney and the other studios on them.
I'd just like to take my time to add a few points to the ones that Terri made so ably. One would be to start with my company's business perspective on the Internet because there is a positive side to it, I think, that sometimes gets lost in the debate over piracy. The rise of the broadband Internet and the other digital technologies actually provides us with tools of unprecedented flexibility that we are only just now beginning to fathom. My company's already harnessing those technologies and distribution methods on an unprecedented scale, whether it's the Fox network, television programming, including wide-screen digital programming, which is now seen by much of the country. The studio's home entertainment company is releasing hundreds of DVDs packed with extras. Also, we are one of the few studios releasing in the high-definition digital DVHS format, which produces 1080i content, for those of you who know what that is. That's really good quality high definition content. And as with Disney, we also are releasing our movies on the Internet through the CinemaNow video-on-demand service.
However, as Terri outlined so ably, we do strongly believe that the great promise of all these new technologies won't be achieved unless we're able to get our hands around the piracy problem. We're certainly doing our part, as Disney is, to try to protect our
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content from piracy. We work very closely with pay cable and satellite operators and the DVHS manufacturer, JVC, to secure the content that is released in those channels. And, in fact, the Internet, both the Movielink service that Terri mentioned and the CinemaNow service that I did, are actually reasonably secure ways of distributing content that you mean to distribute on the Internet through digital rights management technologies that are from Microsoft, Real Networks, and other companies. We see the digital rights management industry as actually a potential growth industry for this country that we can lead the world in, exporting sophisticated high technology to the rest of the world.
I would like to focus on a few legislative initiatives that my company's intensively interested in. One you've already heard about is the broadcast flag. I just want to explain a little bit, for those of you who aren't as familiar with it. As it currently stands, cable and satellite systems have a competitive advantage over over-the-air broadcast digital television due to the closed nature of those cable and satellite systems that allow them to encrypt the signals that are delivered to people's homes and to control the operation of the set-top boxes and TV sets that receive those signals.
DTV, on the other hand, is not encrypted for public policy reasons and, therefore, does not enjoy the same protections and control over receiving devices. However, my company, in working with the MPAA, has been able to identify this broadcast flag that works without encrypting the DTV signal. In other words, the signal is not changed in any way other than to add the broadcast flag to it. Once the signal is added, that signal can be detected in receiving devices, and those receiving devices, as Terri mentioned, would then be obligated to protect the content from being redistributed on the Internet. It's important to understand—there's been a lot of misinformation about this—that that is the only impact the flag would have. There would be no impact whatsoever on the ability of consumers to make personal copies of their favorite TV shows. That's something that hasn't been as widely reported as it should've been.
Over the past year-and-a-half, the broadcast flag idea has gained substantial consensus. In June of last year, the preliminary proposal emerged from the Ad Hoc Broadcast Protection Discussion Group with the support of a wide number of companies from all three industries and consumer groups that are most closely affected.
Two months later, last August, the FCC issued a Notice to Proposed Rule Making seeking comment on whether the FCC should enact the broadcast flag as an FCC regulation. In response, a multi-industry coalition of the MPAA studios and the so- called 5C companies—Sony, Matsushita, Intel, Toshiba, and Hitachi (spelled SMITH if you want a pneumonic)—submitted a detailed joint proposal for an FCC regulation last December. This past February, the FCC's NPRM process closed with reply comments suggesting that while differences do definitely remain to be resolved on the implementation details of the regulation, a wide consensus exists that some sort of broadcast flag regulation should be enacted. All that remains now is for the FCC to take the final step to ensure that all this progress is translated into a working broadcast flag regulation so that over-the-air DTV can finally achieve the parity with cable and satellite distribution that will foster the DTV transition for all Americans. So we urge the members of the Entertainment Caucus and all members of Congress to encourage and support the FCC in this effort.
But, turning to a different matter that's pending before the FCC, we urge a different result with respect to the so-called cable plug-and-play regulation recently proposed
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by the Consumer Electronics Association and the National Cable Television Association. As I indicated previously, cable and satellite distribution differs fundamentally from over-the-air DTV distribution insofar as cable and satellite operators have the ability to control those devices that receive their signals, while over-the-air broadcasters do not. While both types of devices have raised the same piracy concerns, over-the-air broadcasters are unable to address them, as I've indicated, because of the lack of control over the receiving devices. So in that case, there cannot be a market-based solution to piracy concerns, and a government regulation is required, and that's what the broadcast flag regulation is all about.
By contrast, there are market-based solutions to piracy problems in the cable and satellite area. The control that cable and satellite operators have over their receiving devices means that those concerns can be and are today amply addressed, though not always to our liking, in license negotiations, in terms that do not adversely affect cable and satellite customers. I'm not talking about the rates now, I'm just talking about the piracy aspects of it. The fact that government has mandated that cable-receiving devices be plug-and-play compatible all over the country doesn't change this one iota, it simply requires that such devices be compatible with each other, which is something that the studios support.
And on content protection issues, it adds an additional negotiating party to the mix, a cable industry group called Cable Apps. Because the market can and does work well in this particular arena, proponents of government regulation, like the CEA and the NCTA, bear a very heavy burden of showing that the market has failed or will fail and, therefore, government regulation is required. In the case of the proposed regulation they have proposed to the FCC, they have not come close to meeting this burden. Thus, there's no reason for the FCC to regulate in this area. The current market-based system ain't broke and should not be fixed, and if it ever does break, there'll be ample time to fix it then. So we urge members of the Caucus to oppose this unnecessary FCC regulation even as they continue to support, as do we, plug-and-play compatibility of cable-receiving devices.
I want to close with a discussion of one other threat to the security of content. Into the foreseeable future, we'll still need to deliver content to consumers in analog form, even as we roll out these wonderful digital services I mentioned. After all, hundreds of millions of TV sets can only accept content in analog form. Unfortunately, analog content can easily be converted into unprotected digital content that, in turn, can be copied or redistributed without authorization over the Internet and otherwise. This is called the analog hole, a lovely phrase, one we've all learned to love. I'm pleased to report that the motion picture studios, in concert with our colleagues in the consumer electronics and information technology industries, are developing a plan to plug the analog hole that includes harnessing right signaling technology that would prevent such conversions from being used to avoid content protection obligations. We're working on securing inter-industry consensus on such a proposal as we speak, and we welcome your assistance in encouraging all relevant parties to make this happen. Once that consensus is reached, we will approach Congress and hope to have that solution quickly ratified.
In that regard, it really is critical that Congress play an active role, ensuring that parties to these piracy debates and these technology debates about the Internet and otherwise reach a consensus on how to solve this problem as quickly as is technologically possible. These are Internet problems, and they need to be solved at Internet speed. We really need Congress's help to make that happen. And as with the broadcast flag and analog hole solutions, we will need Congress to codify this solution or solutions to the illegal download problem.
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At the end of the day, if we do not find creative solutions to this real and growing threat, consumers will be the ultimate losers. While some may see a short-term gain in obtaining free unauthorized Internet material, the long-term result will be less consumer choice and stunted American technological growth and development. Thank you.
Kaplan: Thank you. The analog hole joins the Medicare prescription drug donut, the social security notch, and SMITH is a good one—Sony, Matsushita, Intel, Toshiba, Hitachi. Thank you. Ann Chaitovitz?
Ann Chaitovitz: Hi. First, I'd like to thank Congresswoman Watson and the Entertainment Caucus for their work on these important issues. I'm here to talk about piracy, and as I work with sound recordings, I’m going to focus on music.
I want to start by saying technology is not bad and it's not the enemy. We must harness the opportunities of technology and minimize the threats. That's something that the music industry was unable to do. Like radio was a canary in the coal mine for media consolidation, music is the canary in the coal mine for Internet piracy. Because of the limitation on bandwidth and compression technologies, music was one of the first types of work to be susceptible to Internet piracy. But as those limitations are disappearing, other types of work are also now becoming vulnerable.
So why did so many people turn to illegitimate music piracy? I'm going to try to look at the causes so we can learn from the lessons.
Music piracy, I believe, is largely a reaction to problems in the music and radio industries because of the inadequate servicing of fans who want music. At the same time as this technology was developing, the labels were eliminating cassettes and singles. That was the first thing that brought young children into the stores. It was their first experience. It's how they learned that you bought music. Then that was cut out. At the same time, the labels were stopping artist development. At the same Ann Chaitovitz, time, they were focusing their demographics on the 12- to 25-year-olds and ignoring national director of those over 35. And at the same time, which I believe is critical, the music industry sound recordings, tried to freeze the existing paradigm and keep control over the distribution ASCAP mechanism and not use any of these new opportunities presented by technologies. They did not work with any technologies or offer any legitimate services. So that forced people who wanted to take advantage of the opportunities that were presented by new technologies to use illegitimate services and critically and drastically what it's done is created a whole generation of people who now think music is free, and we now have to go and educate them. I'd say re-educate them, but I don't think they started to learn ever that music is a creation and you buy it.
I also believe that everything we've talked today is so intertwined. I think one of the greatest causes for music piracy is radio ownership consolidation. It has resulted in homogenized and repetitive play lists so that listeners who wanted to hear something new were forced to go to new ways and try and find them. But there weren't any legitimate services offered, so these listeners who were looking for some new music had to go and use illegitimate services. So now we're in this situation where piracy threatens the music industry.
I have some statistics for you. Users now download more than 2.6 billion copyrighted files, mostly songs, each month. Kazaa's adding new users at a rate of 13 million a month. That's 270 new users a minute. And blank CDs now outstrip the sales of music CDs by more than a two-to-one margin.
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Piracy hurts the artists. It hurts the songwriters. It hurts the music industry. And it hurts the public. It affects the artists' ability to earn a livelihood and to continue honing their craft. It affects their ability to earn health and retirement, which may then force them to go on public assistance, hurting all the taxpayers. There's less investment in new music now, and, you know, music is one of the few areas where we have a positive balance of trade. It's one of our good exports. And there's an economic impact. You need broadband and consumer access to be able to download songs. Those tend to be more prevalent with middle and upper classes, so the lower classes, which often don't have access to those services, have to now pay higher rates when they purchase CDs to subsidize the wealthier people, who are just downloading the CDs. So now we're playing a giant game of catch-up, and we have to offer legitimate services. That's starting slowly, but it is starting, and I think that it took Steve Jobs to show the music industry that something can work. Once he showed them they're really getting on board, realizing there's a profit dollar to be made.
We have to educate the public about intellectual property and its value. We have to undo the problems created by radio consolidation. You know, XM and Sirius are great starts. They're wonderful stations. You can hear lots of music. It's wonderful. But it's not free, so not everybody has it.
We need legislation to educate the public and clarify the law. There are two pieces of legislation that Terri mentioned that are very good, and they recognize this need. They give the government power to educate the public, to start deterrence programs, and to enforce the law. Music owners must also sue the services that are making money off of the infringement.
And we may have to even sue individuals. The District Court here in California just ruled in the Grokster decision that you can't sue the company—you can't sue the software service for what the individual is doing. It's the individual who's violating the law. You have to sue the individual. That's distasteful. But, you know, it may have to be done. It may also have to be done for the deterrence effect. You've already heard retailers coming forward saying that since the RIAA started subpoenaing users, they've seen a market increase in people shopping in their stores. People are back in the stores since an announcement that they were getting subpoenas. So I think the other industries need to pay attention to the lessons to be learned from new technology's impact on music piracy. They need to learn from these lessons and not act like the FCC, who ignored all the lessons from radio consolidation when they just decided to further consolidate the media. So I thank you for listening.
Kaplan: Thank you. As you can see, I’m still not running for governor, but I would like very much to thank all members of the panel. Please join me in thanking them. And if I could ask the members of the third panel to bring your cards and swap places with the members of the second panel. Thank you.
Our third panel is about runaway production, and there's a slightly different line-up than was in the materials you have, and so I'll explain the differences and the similarities.
First, you met earlier, and so I'll reintroduce him, please welcome the vice mayor of Culver City, Steve Rose. From the Film and Television Action Committee, we have a board member—please welcome Tim [McCue][ph]. And we have a guest who is not listed on your roster but we're very happy to have him. He's a working member of the Directors Guild, and he brings an additional important perspective. Please welcome Don [Newman][ph]. And, again, you understand that affairs of state are
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being conducted somewhat beyond our immediate reach, and we will hear more about that, and they will hear more about what's been transpiring in their absence.
But in the interest in staying on schedule and making sure that everyone has a chance to hear from everyone else, I'd like to start. Steve, maybe you could start off?
Steve Rose: Thank you very much for inviting me. I'm the replacement for the mayor of Culver City, who had to be out of town. I'm here to really discuss what the effects of runaway production means on the local economy. But before I get started, let me just tell you a little bit about Culver City and our rich film and entertainment industry. The city of Culver City has a saying, "We are the heart of Screenland." We have over 30,000 residents in just under five square miles. In our early days, we had movie studios in Culver City named MGM, RKO, and Desilu, where such movies as King Kong, Wizard of Oz, and Gone with the Wind were filmed. We now are the home of Sony Pictures and Entertainment and the Culver Studios.
The discussion today about runaway film and television production was prompted by an increased number of films that are being shot outside of California, and in some cases outside of the United States. These films, known as the economic runaways, depart in part to achieve lower production costs. And on the other hand, you have creative runaways that depart because the stories that they're trying to tell, that the places that they need to shoot cannot be duplicated anywhere else. In 1998, it was Steve Rose, vice estimated the economic runaways, moved abroad, was a loss of approximately $10.3 mayor, City of Culver billion $2.8billion attributed to direct production loss, $5.6billion to multiplier effects, City and $1.9 million to tax losses.
That multiplier effect is really what I’m here to talk to you about—the restaurants that are empty when production crews leave, the local hardware stores that lose sales, the local merchants that are affected by the loss of retail sales, the hotels where the production crews stay when they're offsite doing productions, those are the economic impacts that affect each individual and our local economy.
The state over the years has tried passing legislation of film first in California and other types of initiatives. I also believe that we, as a local city, a local municipality, need to be aware of what restrictions we put on the motion picture industry as they attempt to film in our streets, in our businesses.
Some of the effects and the costs that we put on them are very burdensome. Let me just give you one requirement that is a huge cost that we need to take responsibility for. In the city of Culver City, there's a memorandum of understanding with our police and fire that production companies that are filming in the streets of Culver City must hire off-duty Culver City police officers to stand duty at a certain rate. Whatever happened to the ability of letting the economic world dictate prices instead of having the government controlling that type of a cost?
There's the process, also, of the way we administer our film permits, so we as a city need to look at the way we're doing business, and that might encourage our own economic growth by allowing Sony and the production companies that work under Sony and production companies from other areas of the state to come and do more and more and more business in our city and other cities.
Kaplan: Thank you very much, Steve. Tim?
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Tim McHugh: Thank you. I'm speaking on behalf of FTAC. Our Chairman, Brent Swift, is here today and sitting down in front. He's a little under the weather, but you can certainly talk to him, and he has the handouts.
Members of the Congressional Entertainment Caucus, members of the film industry and chairperson Watson, thank you for this opportunity to address you today. My name is Tim McHugh. I've been in the motion picture and television business for 25 years. I'm a member of the International Cinematographer's Guild Local 600, the Academy of Television Arts and Sciences, and, more importantly today, a board member of FTAC, the Film and Television Action Committee. I own a small business in Burbank, California that produces visual effects and animation. I received three Emmy nominations, the most recent a couple weeks ago, and I was part of the team that won the Emmy award for visual effects in 2001. One year ago, my company had 16 full-time employees and three independent contractors. Today, I have two employees.
Founded in 1999, FTAC is an all-volunteer organization comprised of industry professionals who saw their careers vanishing across the border into Canada, a border that some were allowed to cross at first but which has become increasingly closed to American workers. The cruel irony is we were allowed to train the people who have now replaced us. I will not detail the economic damage done to our industry's workers by Canadian subsidies. We would not be here today if the United States Congress did not see the need to take some action on behalf of the American workers who have been and continue to be displaced.
The important thing to realize is that a runaway production is not an unstoppable force of nature. It is an economic policy that serves a specific purpose. The corporations that own the studios are the architects and the beneficiaries of runaway production. These corporations are represented by the MPAA, the Motion Picture Association of America, although three of its seven members are no longer owned by Americans. Sony is Japanese, Fox is Australian, and Universal is French, at least this week.
The Canadian subsidies were originally created to encourage domestic Canadian production, but they soon figured out that the fastest way to grow their industry was to acquire ours, at pennies on the dollar. The studios have been more than willing to give up the manufacturing business. Like Levi's, Lifesavers, and Crayola, the studios are now merely the distributors of foreign-made product, and in clear violation of our trade agreements, that product is being made by subsidized labor.
In 1999, 14 members of the U.S. Congress drafted a resolution, HR384, to request the United States trade representative negotiate the end of the predatory Canadian subsidies. FTAC's attorneys have suggested that we file a 301(a) petition on behalf of the injured industry workers, which will accomplish the same end. Because of the time limits within this Section 301(a), the trade rep could negotiate an end to runaway production within eight months of the filing and at no cost to the American taxpayer. In contrast, HR715, the federal subsidy bill, could easily cost out at over $1 billion. Coincidentally, the headline of yesterday's Daily News proclaims Disney's domestic box office already passing the $1 billion mark this year, with five months yet to go. But at some point, the American people will have to decide whether record profits justify record unemployment. And who will pay for the workers' fall from payroll to unemployment to welfare as Hollywood, once the entertainment capital of the world, becomes the new Flint, Michigan?
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I'm here today to request that you ask the tough questions, that you look into the business practices that have allowed a few select people to acquire wealth beyond belief, while the very workers who built this industry are left out in the cold, that you examine the problem from all points of view and not just those of the paid lobbyists.
When the MPAA pleads for your inaction to protect the foreign markets they claim pay our health and pension plans, ask them what percentage of our workers actually qualify for these plans, and ask them to project how many in their business today will hold on long enough to ever see retirement benefits. Ask them how many times in the last 10 years the MPAA has received refunds from the plans as the number of qualifying members plummet.
When the union officials tell you to ignore trade remedies as a solution, ask them to poll their membership to see how many are willing to rely solely on HR715 to restore the film industry to 1996 employment levels. And while you're at it, ask the IATSE, of which I've been a proud member since 1979, how they can be busy organizing Canadian workers and yet remain free of any conflict of interest. Most importantly, please do not let our future and our industry die in committee. Thank you.
Kaplan: Thank you. Don?
Don Newman: I feel honored being here, especially following the studios talking about piracy and technology. I wonder if piracy is a plug for Disney's Pirates of the Caribbean. If I may thank the members of the Congressional Entertainment Caucus, the members of the film community, and Congresswoman/chairperson Watson, thank you for the opportunity to address this audience today.
I also want to take the quote from one of the studio representatives talking about the 143,000 below-the-line people. This is their number. I've been a member of the American film community for 30 years and a member of the Directors Guild for 25 years. With great concern, I appear before you today. I have watched with dismay the gradual erosion of our film work since the 1980s, first, to Canada, then Australia, New Zealand, and then to the rest of the world. First, it was a trickle, then it became a torrent, coming with the enactment of the federal and provincial Canadian subsidies. I've seen the impact of runaway production destroy marriages, force people to sell their homes, watch businesses close, then go bankrupt, children and the elderly denied medical treatment because they have not qualified for that period to get into the health plan, then go bankrupt, all because of this migration of work. I've seen the quality of life change in towns across America that were dependent on film production. This is not a Los Angeles issue, not a California issue, but an American issue. This is an issue of job loss through foreign intervention, through foreign subsidies. We've all seen the financial destruction of towns like East Lansing, Michigan, Bethlehem, Pennsylvania, Birmingham, Alabama, and Burbank, California when Lockheed pulled out. When major companies pull out, the tax base dries up and disappears. The quality of life, the quality of living, the education, the police, and fire department all disintegrate.
Today before you, a unique situation unfolds. Today, labor, today, the people, the rank and file middle class, not the companies, have come before you today to ask the members of Congress for help to roll back and eliminate these foreign subsidies. We only ask you to enact and enforce existing trade laws. These laws are not protecting us.
We are asking you to support our resolution for the initiation of the 301(a) action to the United States trade representative regarding runaway production and the
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economic incentives countries are using to entice filmmakers abroad. By doing this, we hope the issues surrounding economic runaways would be addressed.
The purpose of the 301 is to obtain compliance by a U.S. trading partner with the trade agreements to which the partner and the U.S. have mutually agreed. Canada's subsidies have violated Article 5 of that agreement, whereby Canada, the U.S., and the other 143 countries that are members of the World Trade Organization agreed not to cause adverse effects to the interest of members through the use of a subsidy. Thus, the purpose of the 301(a) action against the subsidies given by Canada to film production in Canada would be obtained compliance by Canada.
We wish only to be allowed to continue to work in our basic crafts, to continue to lead productive lives. You, the members of Congress, are our only hope. We have little hope that the Lincoln bill, House Number 715, will be too little too late. The bill is still in committee. The bill is being introduced in a climate of extreme budget deficit. The bill has never been cost out. More important, the bill only addresses movies up to $10 million. The average cost of films today is $40 million. Even if the bill is enacted, it will take time to be funded. In the meantime, in anticipation, Canada has already raised their subsidy to American filmmakers. Earlier this year, they raised the subsidy by 46%. Certainly, this is beginning to look like a subsidy war. What is needed now is fast-track remedy. The 301 can be implemented within eight months, while the Lincoln bill languishes in committee, while the California First bill is dead. The DGA and IA must only look at their employment statistics of their membership to realize that we must utilize all measures and means at our disposal. Talk of trade war is merely a fear tactic. In reality, we have been in one for the last six years, and we are losing the battle. The French, according to the Commerce Department, are our ninth largest trading partner. Figures for foreign trade for the year 2000—we bought $29.5 billion worth of French products, while France only bought $19.5 billion from the U.S. Canada exports 90% of its foreign trade to the U.S. We are clearly the consumers and will continue to do so. The MPAA talks about the 301 causing trade wars, but it was the MPAA who, in the past, had filed numerous 301 on behalf of its members without starting any trade wars.
It is important to understand the make-up of the MPAA. According to MPAA documents, the MPAA is made up of Sony, Disney, Fox, MGM, Paramount, Universal, and Warner Brothers. These are the major studios. Three of the studios are foreign owned. They are Sony, Fox, and Universal. The other American companies—Warner Brothers owns studios in Australia and England, Disney for years has been producing its Disney channel and ABC movies in Canada. Paramount, which owns Showtime, produces much of Showtime's programs, also in Canada.
According to the MPAA press release dated May 1, 2003, it applauds the decision by the United States trade representative in their special 301 annual review, stating that, "It gives the U.S. an effective tool in dealing with nations that impose barriers against U.S. film. Clearly, the MPAA acknowledges the validity of the 301(a)." The MPAA represents financing, producing, and distribution entities. It does not represent the rank-and-file members who are losing their jobs. I have seen the signatures of thousands of workers who have signed on to the 301 petition. They are the rank and file who are desperately seeking your help to stem the flow of U.S. jobs abroad.
In July 2003, CBS News reported the disappearance of the middle class. The report indicated the loss of three million jobs in the next three to five years. Who is going to buy the products? What will the standard of living be? How high will the trade deficit be? Companies in computer and steel industries face intense offshore competition so they must outsource or manufacture abroad. But domestic film
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industry, represented by the MPAA, has no foreign competition. It is neither a case of dumping by cheap foreign labor, nor a case of survival by competition, but a corporate decision based on profit only. No one can make American films like American studios. Profit should be the issue, but destroying an American institution and an American way of life should not be.
Members of Congress, hear our plea. The people here today are taking their pleas directly to their government for help. I am an American worker asking for help. Let us not watch another fabric of American life be torn and destroyed. Our choice is to take action, stop the destruction, or to sit back and watch it unfold on our TV screens. Thank you.
Kaplan: Thank you, Don, and, again, please, a round of applause for the entire third panel, whom I’m going to ask to stay in your seats. We're going to have a slight logistical change. I'm going to ask the other panelists who are still with us to join us up here. So Marshall and John and Ann, if you could come back up. Ron, could you join us back up here? And you are all now deputized as members of the Congressional Entertainment Caucus. And in that, what I'd like to do is to ask you to be the people who ask questions and make comments, although ideally if you have a comment, try to disguise it as a question. Are we all up here? Great. And in a dream world, the members of Congress will conclude their phone call and rejoin us and chairs will miraculously appear at the right moment.
So there is a mic there, and for those of you who would like to speak, I'd welcome you to go to it.
I'm going to ask, in particular, whether Arlene McCarthy could perhaps take the first shot at making comments from that microphone if that's okay. And as she gets up there—and anyone please feel free to line up or leap in at the right moment—what I'd like to do is also take a moment to thank some of the people who made today possible.
From Congresswoman Watson's office, a number of people have been involved behind the scenes. I won't mention all of them, but I would like, in particular, to thank Lois Hill Hale and Sean Chang. And from the Norman Lear Center, three colleagues of mine are here, but in particular, I'd like to thank Kira Poplowski.
And also, my colleagues from USC, the University Relations and Governmental Affairs Office have been very kind enough to help with their support of the event. So thank them in their absence.
Would you like to take the mic? Terrific.
Arlene McCarthy: I’m here today to listen and to learn, and I'm learning a lot actually. I'm doing some tours of your studios. I'm also meeting with some of the music industry people here. You have a lot of creative content here, particularly in the LA area, and as I think one of your previous speakers said, you're exporting a lot of that into Europe. So much of European content, in fact, originates here from Los Angeles. I'm learning, also, a lot about your political process. I have to say as a Labor member of the European Parliament—so Democrats are my sister party, if you like, in the U.S.—I'm following very closely your recall campaign, and for me it's a brand new experience because I always thought that when I was elected for a five-year term, I was elected for a five-year term. And one of my British colleagues said to me, "Well, you know, Arlene, I don't know. Where does this all end? I don't understand the process." And
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I said, "Well, if they're not careful, it will end in Total Recall with Arnold Schwarzenegger. So that's your decision, though, nothing to do with me. I don't have a vote here.
Let me just tell you a little bit about what I do very briefly. I am a member of the Judiciary Committee, the equivalent of your Judiciary Committee, in the European Parliament. Many of you know there are 15 member states that are members of the European Union, so I sit in a committee with 14 other representatives from around the member states, and our job as a small committee is to deal actually with intellectual property issues.
I was responsible for drafting the European Union's copyright law, which is still being put into operation across the EU, and some member states have implemented it, others have not been very quick in implementing, and we are chasing them up on that issue to make sure that we do protect authors' rights and to protect our creative content industries. And I have to say it was probably for me, as a Parliamentarian—I've been in the Parliament nine years—it was probably the most lobbied piece of legislation I have ever dealt with. And we had something like 400 amendments to the bill. We had lobbying from the telecoms, we had lobbying from the content industry, and it was a very difficult job for us to get the balance right. And what I said in a press conference—we don't want to criminalize consumers. That's not our agenda because we were being accused of that, particularly related to Internet downloading. But neither do we want to legitimize piracy because that ends up in a situation where we undermine the very content industries that create the jobs and, in fact, put revenue into the finance ministries across the European Union. And we've now got to a situation in the EU where piracy has reached such epidemic levels that we are now dealing with an enforcement director in my committee, and I personally, with five other members of European Parliament, cross-national and cross-party members, put down a written declaration of the Parliament asking now for our legislative bodies, which is the ministers across Europe and indeed the European Commission, which is a legislative organ of the European Union, to come forward now with urgent action, immediate action, for us to deal with the problem of piracy.
If I can just give you some figures, between 1998 and 2001, we had a 900% increase in terms of pirated goods coming into the European Union. Those were the figures we were given, so our enforcement directive is not just to vote digital content or content industries. It's about pharmaceuticals. It's also about toys, food safety, food products. We have, and many of you may be aware of this, a big problem with Poland, particularly. What we're trying to do is to get this legislation on the statute book before the Poles join the European Union. They will join in May, 2004. They have been given the go-ahead to join the European Union. They will come in next year, and if we don't have this legislation statute, we fear that we cannot get their law enforcement agencies and their police to deal with the very severe problem that we have, particularly with Poland being a real hotbed for piracy activities.
If I give you one example, there is a former football stadium in Warsaw. Many of you may have heard of it in the press, who are actually there in that football stadium, 100,000 people a day come and buy and sell pirated goods. So it's really an area where you can buy anything, from music to DVDs, to Nike football boots to anything. You can buy all kinds of textiles, clothing, pharmaceuticals. I even read the story of a British couple who went and bought what they thought was a puppy, a small dog, a white fluffy dog. They took it to a vet, and it turned out to be a bear cub, and they had to get rid of it very quickly. I'm not sure whether that's an urban myth, I have to
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say, but it was in the Financial Times, so I always believe what I read in the Financial Times.
I was very fortunate to meet Congresswoman Diane Watson in Rome as part of the USEU Parliament Delegation. We found that we have a common interest in the issue of piracy, and she very kindly invited me when I was in LA this week to come along to your event. I think it's an excellent opportunity to exchange views. I've already picked up lots of ideas actually from the meetings on some initiatives that we want to take in the European Parliament and to work jointly with your legislators here in the U.S. because this is a global problem. It is not a problem that is restricted to national sovereign boundaries. It is an issue where we have to work very closely together. We're also finding increasingly, particularly from the statistics and facts that are given to us, that there is a lot of organized crime related to piracy as well. And, recently, I had a presentation that shows us that in Italy, for example, there was a very big raid on an Internet pedophilia ring—and is another area that I have a lot of interest in my own region in the U.K—is that that Internet pedophilia ring was using peer-to-peer music files to put their pornographic child abuse images into the general public. So, these are the issues that we have to deal with. We have to find a way to make technology accessible. But when there is a legal content there, we really have to deal with it, and we have to find both regulatory mechanisms and DRMs, as we call them, technological options, to try and find solutions really for the industry to be able to sell its content legally.
So I’m looking forward to, and I've very much enjoyed, the interventions that I've heard so far. I'm looking forward to continuing to work with Congresswoman Watson and her colleagues on the Entertainment Caucus, and I think that we can do some very good work in trying to support your industries here and to support the consumers in getting access to legitimate content. Thank you.
Kaplan: Thank you. Let me also recognize while I have the floor a couple other people who are here. Saundra Davis? There's Saundra Davis. Saundra Davis, Board of Education, Culver City. Thank you for being with us.
So as I mentioned, you are all deputized to join the conversation at the microphone, but while I have it, let me ask members of this now super-panel if anyone on it would like to comment on something else that you've heard during the course of the morning? A free question, which John Connolly must accept.
Connolly: No, it's so dangerous of you to say that because it's so tempting to do so, but I think it's probably a better thing to be restrained and listen to the questions from the house.
Kaplan: All right. Yes, sir, please identify yourself.
Guy Aoki: Thank you, Congressman Watson, for this wonderful thing. My name is Guy Aoki. I'm a past board member of the Screen Actors Guild. I'm the president of MANAA, which is the Media Action Network for Asian Americans. I have two questions.
In relationship to runaway, of course, SAG has put out figures of almost $11 billion that we've lost over several years, but primarily Canada, which you were talking about, is just one of the elements. Some of the things that I’m concerned about as a person is the European Union in relationship to now they're doing international subsidies, for example, between England and other countries. They're not being able to formulate that concept. Also, they're talking about gap financing. So it's not only
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Canada. It's become bigger than Canada now. So would you make some comments on that, please?
Newman: In terms of the Film and Television Action Committee's 301(a), first of all, you're absolutely right. This is an international problem. It is not just Canada. But in using the 301(a), we have to basically pick one at a time to do. So the idea being Canada was the first and foremost, the devastation that hit this town started with the outflux of work to Canada, so that's why FTAC chose Canada. And we're hoping that it is on a country-by-country basis, but if we are successful and if we can get the United States trade representative to successfully get their Canadians to pull their subsidies, that will set the rest of the world on notice that the American workers are finally waking up and we're finally going to take some action against them. So you're absolutely correct, but just due to the legalities, we have to approach them one country at a time.
Aoki: Okay. The other question, in relationship to piracy, when I was at SAG, we had invited the Chinese foreign delegation to come to Screen Actors Guild, and they had no idea of what royalties were. I mean we took him down to the residual department at 5:30 where they were still working, and, "What is this?" And you're looking at a tremendous population that pirates a lot of things. But one of the interesting things, and for the record business in Australia several years ago, they had hired some effective law enforcement to stop music pirating, and after three years, piracy went down from 50% to like 25%, and then they figured it was all over, and then they fired those people and went back up.
So the question here is legal ramifications in terms of enforcement, and I would like someone to discuss because we don't have that here in this country or anyplace, why can we not develop it? This is a crime, and it's terrible, and we're losing billions of dollars, and it's theft. Why can't we not get law enforcement involved in helping us to resolve this issue? Thank you.
Kaplan: Want to take that, Ann?
Chaitovitz: I think first we have to talk about the two different kinds of piracy. One is the piracy of hard goods. And law enforcement is, at least in music, involved. Every time you read they found a new big duplicator that they shut down and they raided, and law enforcement is very involved in that.
Now, the second question then is online piracy and how do you go after that. And, clearly, it is a crime. Now, so far, there haven't been cases yet brought—I use yet as an operative word here—against individuals for uploading. There have been some cases filed against individuals for creating networks on universities. And there have been cases brought against services, and I think that soon we will see cases brought against individuals. But there are also these two pieces of legislation that we've discussed that really make that important that we'll increase funding, that it has DOJ put in actually investigators, trained people in intellectual property theft. For music, they have to come up with guidelines so you can put a warning on it. Like every time you put a DVD in your system or a VCR, you first get a warning it's for private use only. It will enable records to do that, too. So there is also new legislation being proposed to increase the enforcement and deterrents, which is something that definitely needs to be done.
Aoki: So the question here is if I’m a person and I’m manufacturing a DVD, I'm also not only stealing, I'm stealing the intellectual copyright of the singer, the composer, the producer, as well as the manufacturer. So we're hand in hand together, and I don't
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think we should separate it. I think we should go full-steam ahead and say, "This is theft. You are stealing not only the physical end of it but the intellectual end of it."
Chaitovitz: That's been actually happening, especially in the physical goods age for decades, and there are raids and…
McHugh: Just going to say that the main physical problem is outside the United States at this point in time. So it's about getting law enforcement in China and other places, and you can understand why it's difficult for them to devote large amount of resources to copyright infringement in their country. On the other hand, they need to because they've joined WTO and they want the benefits of being a member of the world trading system. So it's slowly happening. I think in this country there is a lot of cooperation among everyone who's affected by physical hard goods, and I think the online aspect of it, as Ann mentioned, is in the process of being addressed.
One individual thing I'd say about movies is camcording at a theater, which you might think is so obviously horrible and illegal and there are phalanxes of cops everywhere, no, there aren't. There are only four states in the country where it's illegal to camcord a movie in a theater. It's a scandal. Well, the MPAA is working very hard to rectify that. We're actually making some progress in our great state of California to raise the penalties for camcording in a theater. So we are working on that, but there are resource problems that we all have to just work with.
Kaplan: Brent Swift has risen.
Brent Swift: Yes, I have. I'm sorry that I didn't get on the panel today, but I have been feeling a little under the weather and never knew whether I could talk or not, but I'm going to try. One thing, I wanted to say thank you very much for bringing this panel together because I, as the Chairman of the Film and Television Action Committee, have been for four years now since films started going north, working tirelessly to find the solution to bring our films back. And this solution we have come up with, as has been stated, was a 301(a), and I think that all of you panelists have a booklet that we had handed out, and if you don't, you're welcome to get one from us. That basically is a CD-ROM of all of the things that have happened in the last four years, the reports that have come out, the statistics, and what's going on in the film business and why the 301(a)'s going to work to bring us back.
I agree that there is a problem with piracy. I mean all of us do, and I'm sure that there's no problem with that. But what I disagree with what Terri said is when she characterized the people that benefit from no piracy are the workers, and that's not true because what's actually happening is that, yes, maybe they can do five more films if there isn’t piracy, but where are they going to do those films? I don't believe it's going to be in America. I don't believe it's going to be in America because history shows us that the companies have been leaving town and taking all the revenue and taking our jobs away. And I mean we're in the bottom line. We're the below-the-line workers on the bottom line that are living paycheck to paycheck, that don't have the revenue and resources to be able to exist without jobs. So I just wanted to bring that up.
One thing that I want to make sure that Congress does understand is that who speaks for the industry? I'm saying the studios do not speak for the industry; I'm saying the studios speak for themselves. They speak for their profit motivations. They don't speak for the workers. They don't speak for the rank and file. I will bring that up to John Connolly. If you're interested in what the rank and file want to know and what the rank and file want and what your people want, poll your people, ask them if they
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want to go for a 301(a), if they want to get rid of the subsidies, if they want to bring things back, and I think you'll find they do because we have thousands and thousands of signatures from the rank and file in this group. And so I think that Congress has to be careful. When they want an answer to what's going on in the film business, don’t just go to the studios, don't just go to the unions or the union hierarchies. Go to the people because we are the ones that are affected. We're the ones that spend the money. We're the ones that go out and get a new car and we can't afford to do that right now. We're the ones that built the houses, that buy the houses. You know, so you've got to go to the right people, and that's the rank and file as far as I’m concerned, and that's the movement that we have tried to start, that we're beholden not to the studios, not to the unions. We're beholden to the people that are hurting in this industry, and there's a considerable amount of them that have even left the business, very talented people, because they can't support their families.
And I think that it's America. Robert Reich, secretary of labor, I believe, for Clinton. And he came out, and he finally said what's happening in this country—and we're just a microcosm of it—is the outsourcing of jobs. And we've lost millions of jobs already. The blue-collar jobs are all gone, or darned near. They're working on the white collar jobs now, and they're all outsourcing to the point, and he said that basically he figures another three million jobs will be lost in the next few years, and he also said that basically with the advent of that, the middle class is disappearing, which I think most of us have seen that it is, and it comes down to the point that in a few years from now if this continues, they can make everything they want in China for 25 cents, but when they bring it back here, nobody's going to have any money to buy it. And that's what's happening. And I'm hoping that that gets solved.
And I just wanted to ask John that question about polling his membership, finding out what your members actually want, not just what the hierarchy of the union wants, not just what the studios want because right now the line that I know that AFTRA has taken is the line of the MPAA, which is basically, "We cannot get rid of the subsidies." We have to come up with subsidies of our own, and I don't believe that this country can afford a billion dollars a year to subsidize films when actually the subsidies aren't working. They won't work because they're not big enough because Canada keeps raising them.
Kaplan: Thank you, Brent.
Audience Member #1: Hi. I want to thank you so much for having this caucus. It's been so badly needed for such a long time. In addition to what Brent was saying, I'm a member of AFTRA, Mr. Connolly, and I'm on the sets all the time, and I talk to other people who are union, non-union, etc. I carry around copies of the international trade agreement. What's the point of having a trade agreement if we don't use it? Isn't that the whole purpose? And it says so clearly that it's business as usual until the injured parties step forward and file requesting an investigation. And so to you, Mr. Connolly, I have to ask, what is wrong with observing this trade law and getting the two trade negotiators together and showing the preponderance of evidence so that we can have this thing resolved and we can get the Canadians to rescind their subsidies? You're a very powerful man. I wouldn't have joined AFTRA if I didn't see a future, but please! I'm begging you! As a member of AFTRA, please help the workers, and please don't look at what is happening with the upper echelon. The big boys who make the money, who take advantage of that subsidy money, they keep it. It doesn't come to me. I can't go to Canada and work. Thank you.
Connolly: Well, far be it for me to speak for the MPAA, and despite what my friend Brent says, we do not carry out the line of the MPAA, and Jack Valenti would be kind of surprised
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to hear if I did. The truth is, I think that there is a serious discussion which is taking place, and FTAC is playing a role, an important role, in it about what are the correct tactics and strategies for working people in dealing with international trade issues. This is the kind of issue which we've just spent three days talking about at the AFL- CIO executive council. It's a huge challenge for working people in every part of the globe, and the challenge for working people, I think, is twofold:
First, is to be able to develop a trade policy which is not based on xenophobia, which divides working people in one country from those in another. Basically, it's easy enough to blame the Canadians for all our ills. Not true. They don't make the decisions. The decisions, truthfully, are made right here about where things get produced and in New York and the other big centers of industry. That's where the decisions get made. We need to be able to address the people who make those decisions, and I know that your effort is part of that.
The second thing is we have a huge organizing job to do right here in the United States. One of the effects of the expansion of delivery systems in the media industries is there's been an increase in production, a huge increase in production, but half of it is non-union. We need to organize and reorganize this industry. From the point of view of working people, that's one of the tasks we have to undertake. And when you have big corporations, which, quite frankly, are double-breasted, have traditional union signatory operations and non-union operations under the same corporate structure, you've got a problem right here at home, and we need to address that. We need to address the fact that this could be the center of Spanish language production, a huge and growing market. So I think we have to take a holistic approach to this, and indeed, there are methodologies to bring up and discuss these issues inside our union, which is run by rank-and-file-elected performers, not by bureaucrats. That's what I do for a living, act.
Kaplan: Could I ask the next three speakers if it's okay with each of them to keep their remarks to the headlines of what they're going to say rather than the jump of the story? Thank you.
Jaleesa Hazzard: Hello, my name is Jaleesa Hazzard, and I'm from Workplace Hollywood. I'm the executive director. And earlier today, you addressed the idea of conglomerates and the lack of diversity in ownership. But our mission is also to deal a little bit with the lack of diversity in the workforce and the preparation of a qualified and diverse workforce in this industry. And what we're looking at when you talk about being the center of Spanish language production here in Los Angeles or other diverse populations here in Los Angeles that have been totally connected in communities in Los Angeles that are really not connected to this industry at all, I'm wondering, are there going to be any incentives? Or is the Caucus interested in finding what incentives could be made available for training a more diverse workforce for this industry, I think, that would be more reflective of the communities that actually go out and purchase and view this product once it's completed? So, really, I guess my question is, are there any ideas about what can be done here or at this time will that be addressed, how to really create a more diverse workforce for the industry? Thank you. Watson: Let me respond by saying we hope in our continuous meetings and discussions this will be one of the issues, and if you go over and see Lois Hill Hale and give her your name, we'll notify you, and maybe you can come and testify.
Hazzard: Okay, thank you.
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Audience Member #2: I'd like to say that that's very intertwined with the media consolidation. There was just a study that came out last week that shows since consolidation there are more minority journalists on the air, and there's also now legislation afoot because Congress and the FCC lumps the Spanish language media markets in with the rest of them. And because it's not segregated out as a separate market, the NBC can own virtually every way Spanish speakers can get their news and their news in a market. So there is legislation afoot right now, I believe, that would change that and separate the Spanish language media out. So it has a different market definition.
Kaplan: Thank you. Next speaker, please?
Earl Brendlinger: Thank you very much. Good afternoon. Congresswoman Watson, I sincerely want to thank you for convening this caucus today. My name is Earl Brendlinger. I'm the business manager of Studio Utility Employees' Local 724 located in Hollywood here. It's a union for over 70 years in the industry that's represented workers here. We work in the construction of sets. Our members work when the shows are done in town here. And when I came into office back in 1995, the industry here was in an unprecedented boom. In fact, in the period from 1992 to 1996, the entertainment industry was single-handedly credited for bringing California out of its recession.
But Councilman Ludlow's comments at the beginning of the program today, talking about de-evolution in the industry is something that I have seen in the last five years as my members have continued to struggle with less and less work opportunities in town here. And we've had representatives from the Department of Commerce, from the International Trade Commission just two Christmases ago, come out here to investigate the impact on runaway production. We've also had a number of reports done by various organizations not only documenting the loss of jobs but also documenting the terrible impact on the economy not only in the state, in the country.
My question for Marshall is what kind of dialog is taking place in the Producers Guild as far as keeping films or doing films not only in California but in this country, and what kind of pressures are being put upon you as a producer as to where you shoot your films?
Herskovitz: It's a good question. I think the first part of it, the Producers Guild is still trying to consolidate its position in the industry and trying to legitimize its position with the studios and with the production companies, and I don't think the Producers Guild as a guild is able to apply any pressure, any meaningful pressures yet, on such an important issue as this in terms of where the studios are going to spend millions of dollars to put their productions. That's the honest answer to that.
Nevertheless, it's a huge issue to all of us in the industry and something we talk about a great deal, and the Producers Guild has joined with the other guilds whenever it's been in the industry and something we talk about a great deal, and the Producers Guild has joined with the other guilds whenever it's been possible to make a joint statement of support of any measure that will help to keep production here because we are citizens and members of this community as well.
Kaplan: Thank you. And could I ask the next three speakers to share five minutes? So that puts each of you on an honor system. Thank you.
Ira Zimmerman: Naturally, you would give that instruction to a person who stutters. Thank you very much. My name is Ira Zimmerman. I have been a member of an organization called the Media Image Coalition, which is a project of the Los Angeles County Commission on Human Relations. And for the past 11 years, we have been trying to get the help
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of the Hollywood industry to help us try to fight hate crimes and discrimination against minorities and other groups because of their differences. And I was wondering how you see this new Caucus serving as a liaison or a place that we could perhaps horse trade, you know, what the industry wants, certain new legislation with regards to media ownership, privacy, the public, who are targets perhaps of the media portrayals of us, also have our interests that we'd like to get to help in understanding of the media with our problems and which are, in part, caused by the media films. So I guess my question is whether this new caucus can help horse trade?
Watson: I think that you have outlined the agenda for this caucus, and as was said on this panel, there are hundreds of issues. This is a beginning of having this dialog and trying to identify those most pressing issues and what steps we should take once we all agree and have a consensus. The purpose of today's hearing was to hear from you and our panelists, and we have done that. This session has been recorded, and it will be the substance of future caucus meetings. So thank you so very much.
Kaplan: Thank you.
Jodie Hummer: Hello. Good afternoon/morning to everyone. Thank you to Congresswoman Diane Watson and honored members of Council and our film industry. I'm here with my colleagues. My name is Jodie Hummer. I'm a location manager. We're here on behalf of location managers, scouts, and assistants of the motion picture industry. We're the people who come knocking on your door and ask you if we can make a movie in your house or business. We figure out how to make our films in the real world, and we bring the revenue and the goodwill to our communities.
We've been troubled by the news in the press and on the streets about the problems with filming. Now, these are problems that we can have no matter where we shoot our movies. Los Angeles is a model of what can happen anywhere as our projects get bigger. Well, we will not let our industry go the way of the steel industry. We will do everything we can to help. We offer our expertise as a resource for you. We created this for your consideration—four ways to make filming better. It's our best hope for the industry and the neighborhoods where we film. You know, we make our movies out of air, out of thin air. As Vicki Riskin said, we can solve the problem within our own family and neighborhoods the same way we make our movies together. Our goal is to start an industry-wide brainstorm to find every new idea we can to make filming better. Here are four ways to start. We'd like to share it with you and ask for your help.
Kaplan: Thank you very much. This will be the last question. Saundra, I'm so sorry to --
Saundra Davis: It’s not a question, just a quick comment.
Kaplan: You’ll follow the gentleman.
Audience Member #3: Diane Watson, I'd like to show appreciation to this panel for addressing the issue of runaway production and how it affects the film industry. Currently, runaway production has created a multifaceted problem where our pension plans and our medical plans are in jeopardy. Now the MPAA and their studios have run up to Canada to produce films there that would normally be done here. In addition to that, what they also receive besides the monetary compensation with tax incentives and credits is they're also receiving socialized medicine, which also adds to the basic problem to our pension plan and medical plan. Since we have no workers from Los Angeles area or the West Coast area working up there, none of the monies get paid into these funds, creating a deficit. And what we're starting to see now is the cost
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burden being shifted onto the employees below the line, which further exacerbates the problem. When that fails it's going to be shifted to the state and local governments. So this is an issue that we need to address.
Kaplan: Thank you. Saundra, inspire us.
Davis: I really want to thank and praise Congresswoman Watson because she brought this forum together. But when when I got a letter saying inviting me to the forum, I wondered what entertainment has to do with education? And the more I sat here and listened, the more I realized—everything. I said our kids aren't educated, number one, as far as the entertainment industry goes. We have a partnership with Sony in Culver City that's just really a close-knit partnership, but how long will that last if we have all the pirating and all of the things that you've been talking about here? It's been very enlightening to find all these things out. And then I thought about how she is always looking for solutions. She didn't call us here to complain. She called us here to resolve the issues. And one of the things that I realized that I could be doing as a member of the Board of Education is educating our students. Somebody here said that Kazaa or one of the Web sites was one of the most accessed Web sites and our kids are downloading everything off these Web sites. Well, do they understand that they're stealing?
Audience Member #4: They don’t care.
Davis: It's up to us to make them care. So if there's an issue, it's up to us to take care of that and to get out there and as a Board of Education member, I need to be saying to our kids, "Do you know what you're doing? Do you know the ramifications of this? Do you know all the way down the line what this is going to cause?" So I just thought it was real important for me to kind of stress that. I hope that was motivating enough for you.
Kaplan: That was good. Thank you, Saundra.
I have three things I need to do. One is to ask the audience to applaud itself and the panel. The second is to announce that I am still not running for governor. And the third is to give the floor for the last word, the force and the reason that we have convened here today, and to thank her for doing it and bringing us together, Congresswoman, Entertainment Caucus Chair Diane Watson.
Watson: You always need a Marty Kaplan. He's a kind of bambino that you can depend on, can take over at a time of crisis, and we're in a crisis right now, and see that we move towards our goal. But most of all, it would not have been worth it if we had not had the expertise given from our panelists and an audience to receive it and respond.
I think you have gotten the idea of what this entertainment caucus is all about. I think Saundra capped it off very well: it's education. And when we had the executives from the major industries meet at Sony weeks back, it got down to the bottom line, education. I was listening to the gentlemen talk about the jobs and so on. You know, how are you going to educate your children beyond elementary school and post-secondarily if you don't have the job? And so there are so many linkages to the entertainment industry, and we are now starting to identify those.
And what roles should government play? You are telling us every time we meet and we exchange these dialogs and have this conversation, you are telling us what our role is. We cannot assume that we can carve out our role and impose it on you if it's going to be fair, if it's going to be effective, and it is going to benefit all of us.
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And I'm so glad you have pointed out the role that the consumer must play, the role that our children must play, the fact that we have to do character building, don't you think? In today's society, you know, you're cool if you know how to hack in, and you can cut those discs, and you can sell them on the streets. It's a different society.
So what do we have to do as a society at both ends, the end that is a public consumer end and the end that is private and governmental, etc.? We don't have the answers. If we did, we wouldn't be holding this hearing. We'd just do it from above, and you'd have to live with it. And I want you to know as long as I'm involved, I will always come to you because our role in government is to represent the people. That's why we're called United States representatives. So I've got to come back and check with the people if I’m going to be representing you, and that's what this is all about.
Congresswomen Watson and Sanchez confer during I think this industry is the lifeblood of this region and this country, and it extends the hearing. around the globe. And I just got off a conference call that leaves me very, very sober, and we're talking about California's leading industry, the entertainment industry, and it looks like more people are moving now to Las Vegas for the price of homes and also for the entertainment and gambling and so on, and we're losing revenues. And this telephone call, this conference, leaves us feeling very troubled, and I can't get into the detail, but….
Audience Member #5: Come on!
Watson: It’s classified! But unless the people take charge and direct their representatives, we're going to be living in complete chaos, and that's a message I can give you. And I can tell you a recall election is the most disruptive policy because we're dealing with just hours.
Decisions have to be made before Friday, and I want you to know the person who leads the largest state in the union, 35 million people, with the largest number of immigrants and emigrants, people moving across the nation, will lead this country and the world. Understand that. And we've had several people go from the governorship to president. This is my little political speech to close this out. But you have to understand how we're all connected. And, you know, I like the village concept. What happens to our industry impacts on us and impacts on our economy, and the decisions that are made in the political arena touch all of us. And when California makes a policy—let me give you an example, the anti-smoking policy—and we said there would be no smoking in California air space, 24 states immediately followed. And it has now started to impact the globe because most major airlines do not allow smoking, just a few. So what we do here impacts on everyone. The leader of this state will impact on everyone. And, please, I beg you to make your decisions with that in mind. We are seen as capitalist, but there are people who are saying, "The big ugly giant has to be brought down." That's what 9/11 was all about. Understand it. Follow the money. And you're talking about taking our jobs offshore. I was so glad to have the young lady who deals with locations. My brother has a home in the next block, and they're at his door all the time. I'm glad because he has eight kids, and some of them are going to USC.
Kaplan: Hear, hear.
Watson: So please, please keep knocking at his wooden frame house. But to close this out, we're onto something, and what we're on to is collaborative. And what we want to do is bring government, the industry, the consumers, and the people together so
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that when a policy made, it is fair, it will enhance, it will support the economy, and it will do no harm.
So when you go away from here, feel good. I didn't feel good coming off of that call I was just on, but I’m going to get out, and I’m going to say, "Vote no on the recall because it's costing us between 30 to 35 million dollars. We have a $38billion deficit. We only have 60 days, and it is part of a strategy to throw us into chaos in California because my party in November won all of the Constitutional offices. And in 2004, there will be a presidential election, and they are getting ready to identify their base, and they're throwing millions of dollars in to disrupt California's process for elections. Understand that. And so the outcome will impact on you greatly. So I hope you will join me, and I hope I can throw this huge cloud off that just fell.
Anyway, I want to just end by saying thank you, and this is only the beginning, and Congresswoman Watson closes the hearing. your voices will be heard. Thank you so much.