Media Alert: Hauling down the flag: what next?

The decision handed down last Friday by the U.S. Circuit Court of Appeals in Washington DC that ruled against the FCC`s mandating of the digital `broadcast flag` has fascinating implications for the entertainment industry.

Oyster Bay, NY - May 9, 2005 - The decision handed down last Friday by the U.S. Circuit Court of Appeals in Washington DC that ruled against the FCC's mandating of the digital "broadcast flag" has fascinating implications for the entertainment industry.

"We can find nothing in the statute, its legislative history, the applicable case law, or agency practice indicating that Congress meant to provide the sweeping authority the FCC now claims over receiver apparatus," the three -judge panel said.

The case, brought by a group of eleven consumer advocacy and freedom of information groups, affected the FCC's broadcast flag rule that was to have gone into effect in July, preventing most forms of copying content received via most forms of digital distribution media.

While the consumer groups (and smaller consumer equipment makers) effused over the decision, Hollywood studios, and the Motion Picture Association of America and the National Association of Broadcasters expressed their disappointment in no uncertain terms, saying they would go to Congress to ask for legislation to accomplish the same end, and warning that consumers could lose out if studios became so afraid of piracy that they stopped licensing high -value content for distribution.

But ABI Research's director of broadband research, Vamsi Sistla, points out that not licensing such content for digital distribution would diminish its commercial value. "This isn't really about piracy," he said. "It is about the content industry's desire to monetize their content as far as possible. The sleeper is that they need to be able to 'shut the gate'. Unless they do that, they cannot sell the product."

He acknowledges that content owners need to generate repeat or continuous revenues from their stock in trade, and suggests that instead of federal legislation reintroducing the broadcast flag, a fruitful approach might be a levy on the equipment used to copy and store such content, similar to the proposal many years ago to add a surcharge to the cost of blank audio cassettes, to be distributed to content owners to compensate them for repeated copying.

Journalists and other representatives of the media are invited to contact ABI Research to learn more about this significant development and to discuss its implications with our industry analysts. Please call Beth Schechner at +1 -516 -624 -2542, or email

For more information about ABI Research please visit

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