Dan Glickman, CEO of the MPAA has an editorial running on news.com entitled: Why the broadcast flag should go forward. I urge you to go read it and think about it.
A federal appeals court ruled that when the FCC mandated that all manufacturers of digital video equipment must implement and support the use of a Broadcast Flag by July 1 of this year, they considerably overstepped their powers granted to them by Congress. The FCC took the rather shocking stance that there powers are implied, rather than enumerated by Congress, and that they were free to effect mandates without legislative oversight, permission, or the involvement of the public.
The court naturally held a dim view to this interpretation, and rightly struck down the Broadcast Flag requirement, stating that the FCC did not have statutory authority.
Of course the MPAA is in support of this legislation. Despite Glickman's claim that this is to "protect the magic of the movies", it is really quite simple: they want to limit the ability of the public to trade in what they view as their property. For decades, individuals have had the right to record programs and play them back at a later time, or to send these tapes to their friends who may have missed them. They have had the right to record them and amass large tape libraries of shows. The MPAA views this as potential lost revenue, and they want it to stop.
Our companies want to continue to show their movies and television shows to viewers who don't or can't subscribe to cable or satellite systems. But without the broadcast flag, that option will look less and less appealing.
By "less appealling", he means "we will make less money". This strikes me as similar to the arguments presented before the Sony case. "The videotape recorder will end movies." "The entertainment industry will go bankrupt!"
The entertainment industry thought that the glass was half empty. In fact, it wasn't just half full, it was entirely full. This FUD surrounding the broadcast flag is just more of the same.