Subscription Porn Site SLAPPed Down After Suing RedTube For Undermining Its Business Model

from the competing-isn't-undermining dept

We've joked in the past about how many of the complaints we see from companies about new, more innovative competitors, is that they somehow represent "felony interference of a business model." Some companies, it seems, like to believe that if they have a successful business model, any new competitor that changes the market around must be doing so illegally. Eric Goldman points us to just such a lawsuit in California, where the proprietor of a subscription based porn website sued RedTube, one of many, many porn-focused free streaming video sites, and many of RedTube's advertisers, arguing unfair competition. Basically, the argument was that by setting up a website and offering these porn videos for free, while making money on the advertising, RedTube was effectively "dumping" its product on the market below cost in order to harm the market and make money elsewhere.

RedTube, in response, filed an anti-SLAPP claim, saying that the lawsuit sought to silence RedTube exercising its First Amendment rights of speech. While a lower court mostly agreed, it did leave open one small piece of the unfair competition claim, related to the issue of the claim that someone at RedTube's parent company signed up for the plaintiff's subscription website, downloaded the videos, and posted them on RedTube. However, the California state appeals court rejects the lower court's argument, and agrees that even this claim should be tossed out, because it's only unfair competition if the plaintiff can show that he has, in fact, lost money or property as a result of the unfair competition. Since the plaintiff was unable to do so, the court ruled that this claim got tossed out too (though, if true, you do wonder if there might be a copyright issue -- which does not appear to have been raised here).

On the overall point of underpricing the market unfairly, the court points out how silly this is, noting that giving away free content in exchange for advertising is a business model that's been around for ages, and is hardly a form of unfair competition:
If Bright's business model sounds familiar it's because it's the business model typical of broadcast radio and television stations in the United States not to mention thousands of local newspapers and, more recently, tens of thousands of Internet websites including Youtube, CNN and Video.Yahoo.
The court also points out, in its opening, that business models change, and companies need to keep up -- and they shouldn't expect the law to keep their old business models in place:
In the 21st century, businesses of all kinds are having to adapt to a constantly changing commercial landscape. The business that the parties describe as the "adult entertainment" industry is no exception. Websites that originally made their money by offering such material on a subscription or pay-per-view basis are being replaced by "tube" websites which offer their content for free and make their money through advertising.
There's also an interesting discussion over whether or not RedTube qualifies for SLAPP protections, as the site's content must involve the "furtherance of their right of free speech on a public issue." The plaintiff said that his complaint had nothing to do with stopping speech, but from the "anti-competitive conduct." The court notes that even publishing videos of porn online is conduct in the furtherance of speech and, in fact, that there is a "substantial public interest in the kind of sexually explicit videos shown on tube-sites such as Redtube." That's one way to put it.

The final point that seemed worth discussing on this is just how silly some "anti-competitive" behavior laws and rulings can be. Part of the plaintiff's argument here was to bring up a bit of caselaw involving two competing San Fransisco tourist cruises, where one firm got in trouble for selling tickets below cost, even though the firm made it up elsewhere. The court rejects this, by claiming that the earlier ruling doesn't apply here because RedTube "does not sell two separate products." That seems silly to me, and if anything really just highlights the problem with the original court ruling about using the tickets as a loss leader. If you read the ruling this way, you get a nonsensical result: giving away the videos for free would be legal, but charging a penny for them could suddenly be seen as unfair competition, because now it would be "selling" two separate products. Bundling multiple products, such that some are given away free or cheaply in the interest of a larger business model should never be seen as anti-competitive on its own. While I agree with the outcome, it seemed like this was the most confused part of the court's ruling, in that it tapdanced around what was, basically, a really bad ruling. The real issue should be to get rid of any rule that says such kinds of bundles are against the law in the first place.


Reader Comments (rss)

(Flattened / Threaded)

  1.  
    identicon
    Anonymous Coward, Feb 2nd, 2011 @ 9:01am

    Redtube is a porn site that got huge by pirating the works from other sites, and then selling them to consumers for a much lower price. Many of the porn tube style sites run on the same premise. Apparently, heir model is similar to how youtube started, you know the material is in violation, but all you do is wait for dmca notices and remove the content for a few hours, renaming it and attributing it to another user, real or imagined.

     

    reply to this | link to this | view in thread ]

  2.  
    identicon
    Anonymous Coward, Feb 2nd, 2011 @ 9:04am

    Typo?

    "...downloaded the videos, and posted them on YouTube."

    Assuming you meant RedTube? Unless of course there's now a bunch of porn on YouTube I'm not aware of...

     

    reply to this | link to this | view in thread ]

  3.  
    identicon
    Greg G, Feb 2nd, 2011 @ 9:09am

    Pr0n!

    At least it appears the court got it right, which I find amazing.

    Now, everyone sing along!

    "I want my...

    I want my...

    I want my porn for free!"

     

    reply to this | link to this | view in thread ]

  4.  
    identicon
    bob, Feb 2nd, 2011 @ 9:26am

    Avenue Q

    The Internet is really really great

    For Porn


    Like Mike said, why no suit for infringement?

     

    reply to this | link to this | view in thread ]

  5.  
    icon
    Berenerd (profile), Feb 2nd, 2011 @ 10:01am

    The internet is for porn....

    EVERYBODY SING ALONG OK????

     

    reply to this | link to this | view in thread ]

  6.  
    icon
    reboog711 (profile), Feb 2nd, 2011 @ 10:16am

    Can we sue patent trolls for unfair competition?

    I wonder if unfair competition could be used against patent trolls? Or would they argue that they aren't competing as they have no product or service available in the marketplace?

     

    reply to this | link to this | view in thread ]

  7.  
    icon
    Tom Landry (profile), Feb 2nd, 2011 @ 10:47am

    Did this guy just step out of 1999? forget red-tube, there are countless other XXX sites that use the same business model as well. Seeing that very few shut down it seems that the business model they use is pretty profitable.

     

    reply to this | link to this | view in thread ]

  8.  
    icon
    Tom Landry (profile), Feb 2nd, 2011 @ 10:49am

    Re:

    From what I understand the larger sites like Redtube pay royalties for the bits they stream.

     

    reply to this | link to this | view in thread ]

  9.  
    identicon
    Anonymous Coward, Feb 2nd, 2011 @ 11:28am

    though, if true, you do wonder if there might be a copyright issue

    Does RedTube have the typical takedown request system? If not, they should. If they do, problem solved.


    In the 21st century, businesses of all kinds are having to adapt to a constantly changing commercial landscape. The business that the parties describe as the "adult entertainment" industry is no exception. Websites that originally made their money by offering such material on a subscription or pay-per-view basis are being replaced by "tube" websites which offer their content for free and make their money through advertising.

    If I could, I'd pin a medal on whoever wrote that paragraph. I bet the RIAA and MPAA weren't happy to hear it, though...

     

    reply to this | link to this | view in thread ]

  10.  
    icon
    lavi d (profile), Feb 2nd, 2011 @ 11:36am

    Prescience

    Websites that originally made their money by offering such material on a subscription or pay-per-view basis are being replaced by "tube" websites...

    There's Ted's "Tubes" again.

     

    reply to this | link to this | view in thread ]

  11.  
    identicon
    Olivia Angel, Feb 3rd, 2011 @ 2:19pm

    porn, like any content should be free

    it already is... its just a matter of time before the market settles and new business models drive out those that cant keep up

     

    reply to this | link to this | view in thread ]

  12.  
    identicon
    kazanbiev, Feb 4th, 2011 @ 7:05am

    kazanbiev@mail.ru

     

    reply to this | link to this | view in thread ]

  13.  
    identicon
    Adnan, Mar 18th, 2011 @ 6:41am

    Americans are as sholes

    F u cking americans.. u red neck as sholes.. we hate you..
    our country will make u burn...
    proud pakistani - Adnan
    adashkalfiz@yahoo.com

     

    reply to this | link to this | view in thread ]

  14.  
    identicon
    What's up, Mar 25th, 2011 @ 5:41pm

    Yes... Fuck nice!!

     

    reply to this | link to this | view in thread ]

  15.  
    identicon
    Edit forum frondy, Apr 18th, 2011 @ 10:20am

    Yes... Fuck nice!!

    Yes... Fuck very nice!!

     

    reply to this | link to this | view in thread ]

  16.  
    identicon
    이완유, Jan 29th, 2012 @ 1:49pm

    9899

    ㅜ뽄ㅇㅂㄷ혼

     

    reply to this | link to this | view in thread ]

  17.  
    identicon
    Choijinsu, Feb 28th, 2012 @ 1:25pm

    Re: Typo?

    Zz

     

    reply to this | link to this | view in thread ]

  18.  
    identicon
    sexboy, Jun 21st, 2012 @ 11:36pm

    sex boy

    mail me sex for startxtra12@gmail.com

     

    reply to this | link to this | view in thread ]

  19.  
    identicon
    james, Mar 27th, 2013 @ 5:53am

    Redtube rocks

    No matter what the case is, i really earn a big amount by sending traffic to redtube

     

    reply to this | link to this | view in thread ]

  20.  
    identicon
    oldfart2013, Apr 9th, 2013 @ 2:26pm

    I want porn so badly

    Sign me up please!!!

     

    reply to this | link to this | view in thread ]


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