Could Redbox Crowdsource Its Way Around Movie Studio Blockades?

from the connecting-with-fans dept

Last week, we wrote about the legal battle Redbox is facing with some of the movie studios. Redbox, of course, rents DVDs at a $1/rental from vending machines that it places all over the place. Some of the studios are upset that (a) they don't get a cut of each rental and (b) that Redbox also sells those DVDs. So they've been trying to force Redbox to sign agreements that would give them a royalty cut and which would put limitations on Redbox -- such as not renting out videos until well after the DVDs are released and also having the company destroy, rather than sell DVDs when they were done renting them. Of course, the labels don't have much of a legal claim here. Redbox has every right to buy DVDs and to then rent them (right of first sale and all that). But, what at least some of the studios have done is to demand that DVD wholesalers not sell to Redbox, which certainly seems like a typical restraint of trade situation. In at least one case, a studio has also told downstream retailers, like Walmart and Best Buy not to sell to Redbox either.

Now, you might think that Redbox could just send employees into those stores without saying where they're from, but those stores probably don't carry enough stock for Redbox to buy enough DVDs efficiently. But what if they did something different? In the comments to that post last week, our rather insightful community started suggesting ways that Redbox could get around the sales blocks from studios by crowdsourcing the acquisition of movies.

There were a few different suggestions on how this could work, but the basic idea, presented by commenter "McBeese" laid out the basics:

• Consumers open online accounts with Redbox. The account contains a Paypal id for deposits.
• Redbox publishes how many copies of each DVD that they want.
• Joe Consumer buys the movie, watches it, and then logs in to the Redbox site and 'pledges' the DVD. Each pledge automatically reduces the amount of a particular DVD that redbox is seeking.
• Joe consumer mails in the DVD with an associated pledge number. When the DVD is received, the agreed amount is deposited into Joe Consumer's account.

A little slower than buying in bulk, but unstoppable.

I'd argue that rather than paying the user for it, Redbox could just credit their account for a certain number of free rentals. Then, not only does Redbox get these movies, but it builds up an even more loyal userbase... with really no significant way for the studios to block this out. There are some things that are tricky about this -- including verifying that the purchased DVDs are what they say they are, and coming up with a way to accurately handle the inventory management, but it is creative, and it shows that as much as the studios want to think they can control this market, there's always going to be some way around their restrictions.

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Dear Hollywood: Don't Be Idiots; Don't Delay Movie Rentals

from the seriously dept

Sometimes you just shake your head at ideas that come out of some executives that are just so incredibly dumb, it makes you wonder how anyone ever took them seriously. There have been some hints about this latest one, though. Just last week, in discussing the latest IP Colloquium podcast, we noted (with surprise) that Paramount's top lawyer thought the solution to business model problems in the entertainment industry was "more windows." Windows, of course, are the different time periods in which movies are released solely for different formats/media. So, it starts with the theater (the first window), followed by video, pay per view, cable and network TV -- each representing another window, and another chance to squeeze more money out of the same content.

Yet, with the industry facing some challenges, rather than actually looking at what users want, its top brains seem to think that the answer is more windows. It's hard to explain how incredibly short-sighted this is, because it's so monumentally backwards that it makes you wonder what they're thinking. At best, my guess is that the execs are extrapolating out in the simplest form that with the launch of each "window" they make more money, so the way to make even more money must be to offer more windows. Of course, this assumes two rather basic things that are totally wrong. One, is that these windows won't piss off users and two, that those users have no alternatives.

But, apparently not realizing that, these execs have hit upon a few different attempts to add more windows. First, they've been pushing for the permission to break your TV or DVR with selectable output control barring your ability to tape movies. This way, they can create a new "window" of movies on TV that you can't record, that they can offer before the movies even get out on video. Of course, this will (a) piss people off and (b) drive them to more piracy. Brilliant.

The other attempt, is to get video rental places to stop renting movies when the DVDs first come out. The LA Times had an entire article explaining this plan, whereby the studios would force all rental services, including Netflix and Blockbuster to not rent certain films -- but only offer them for sale. The idea (short-sighted as it is), is that this would somehow force people to buy more DVDs, which gives the studios a higher margin than rentals. We actually heard about this earlier this year with the contract terms that the studios tried to put on Redbox, but it's apparently trying to do the same with Netflix and Blockbuster as well.

This idea is so bad that even the LA Times, who tends to support its hometown industry more often than go against it, put out a separate opinion piece with the original article, calling this new idea "crazy" and "absurd."

In the meantime, what do customers actually want? Well, there's pretty good evidence they prefer choice not being limited by windows. They've been clamoring for so-called "day-and-date" release, whereby all these windows are compressed. If you don't want to see a movie in the theater, why not be able to get the DVD? It's as if the studios don't realize that part of what they're selling is the social experience of "going out" to the theater. Even better, if the DVD comes out at the same time as the theater version of the film, less marketing money needs to be spent to sell more DVDs, and you can do nice tie-ins, like having the ability to buy the DVD as you walk out of the theater. Giving people more value and more choice is what the market is asking for.

Instead, Hollywood execs are trying to take away choice and limit value. Incredible.

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Looking At The Redbox Antitrust Fight

from the is-it-an-antitrust-issue-or-not? dept

Law.com has a nice article detailing the legal issues involved in the battles between Redbox and the various movie studios. The main question is whether or not it's an antitrust violation on the part of the studios to block distributors, wholesalers and retailers from selling DVDs to Redbox. The studios want (a) a revenue share from Redbox (b) Redbox not to offer new release DVD movies for rental and (c) Redbox not to sell used DVDs. The reasons are pretty obvious: Redbox is a much more competitive offering. Since it's a lot less labor intensive, it's able to offer the DVDs for much less (both rental and sale), and the movie studios are freaking out, because in their minds, their old revenue streams should never be allowed to decrease.

The statements from the studios on the dispute is incredibly disingenuous:

"The real complaint is Fox won't sell DVDs to Redbox on the terms Redbox demands, and that is not in our view an antitrust violation," said Watson, an antitrust expert who has teamed with Yosef Riemer, a litigation partner in Kirkland & Ellis' New York office, in representing Fox, part of News Corp.'s Fox Filmed Entertainment. "There's nothing in the law, antitrust or otherwise, that says a seller must sell its product at the price that the buyer demands on the date the buyer demands and through the distribution channel that the buyer demands."

Indeed, Watson is correct that no seller needs to offer the product at the price the buyer demands, but that's not what's being disputed here at all. Clearly, prior to Fox and some of the other studios throwing their hissy fit, the distributors had no problem selling DVDs to Redbox at the prices Redbox thought were reasonable. The studios sold the movies to the distributors at the usual price, and the distributors sold them to Redbox at the usual price. Everyone should be happy.

But... what happened now is that these studios (Fox, Universal and Warner Bros.) told not just the distributors (Ingram and Video Product Distribution) but also retailers like Best Buy and Wal-Mart to not sell to Redbox. That's restraint of trade. The studios have every right not to sell videos to whomever they want -- but those distributors and retailers can then sell to whomever they want. The studios should have no say in the downstream sales of the videos once they've been sold to the distributor, wholesaler or retailer. That's where the antitrust issue is. The studios are successfully controlling downstream sales.

The studios are either being disingenuous or are just playing dumb when they claim that there's no antitrust violation because end users can still rent movies from Blockbuster or Netflix. But, that's defining the wrong "user" for the market in question. The market is in being able to buy from the distributor/wholesaler, and the "customer" is a retailer like Redbox. And these studios have stopped that customer from being able to make a perfectly legitimate purchase. That's the antitrust issue, and it's amazing that the studios think anyone will believe their false market definition or this bizarre claim that this about Redbox demanding some special price. It's not. Hopefully the judge recognizes that and doesn't fall for the studios simply making stuff up.

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Nicolas Sarkozy Caught Mass 'Pirating' DVDs; Time To Kick Him Off The Internet

from the see-ya-later-nicky dept

Why is it always the adamant defenders of silly policies like kicking people off the internet for copyright infringement who are later found to be mass infringers themselves? French President Nicolas Sarkozy, of course, was the first major politician to support the concept of kicking people off the internet for copyright infringement (more commonly called a "three strikes" rule). He took credit for coming up with the idea originally nearly two years ago, and pushed very hard for the law -- which eventually passed but was then tossed out as unconstitutional in France. Sarkozy still stood by it and helped bring back a revised version.

Of course, in the middle of all this, there was a bit of irony in that Sarkozy was caught using music without authorization in some online videos, for which he paid a €30,000 fine. Of course, it now appears that may have just been the tip of the iceberg. Boing Boing points us to the news that Sarkozy's administration has been caught mass "pirating" DVDs of a documentary about Sarkozy. The publisher of the documentary only made 50 copies. Sarkozy's "audiovisual services" group happened to make itself another 400 without permission -- even replacing the name of the original publisher on the cover.

Once again, this should be a "teachable moment," to point out to Sarkozy and other supporters of such plans to kick people off the internet that the issue isn't quite so simple after all. When you're on the other side, sometimes it seems perfectly natural to make a copy of something, without even realizing it's potentially infringing. Unfortunately, why do I get the feeling that Sarkozy won't change his stance one bit -- or even recognize the irony of the situation?

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Forget Piracy Or Boxee... Could Netflix Take Down Cable?

from the submarine-innovation dept

A bunch of folks have been sending in the recent Wired Magazine article talking about how Netflix's online streaming offering may be a disruptive innovation that takes down cable. The thinking is that, with Netflix service being built into lots of different settop devices, and the ability to watch various TV shows that are offered via DVD (and the Netflix streaming service, as well), why would people need cable any more? They can just wait until the "video" is out, and stream it via Netflix. The article may go a bit far in proclaiming Netflix as the winner of this battle right now, but it does suggest that (whether it's Netflix or some other provider) the model that cable television has relied on for so many years is certainly facing a pretty big disruption, one way or another.

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Once Again, Music Licensing Harms The DVD Release Of A Classic TV Show: The State Goes Generic

from the sad-days dept

Fans of The State have a cultish connection to the fantastic sketch comedy series that was on MTV in the 90s. Recently, DVDs of the show were released, and reader Milodon points out that like WKRP in Cincinnati, The Wonder Years and a variety of other classic TV shows, The State was unable to use the original music it had used when the shows aired:

Back in the free-wheeling 1990s, we had access to a huge library of popular songs to use as a soundtrack for the show. Today, licensing this music for the DVD would have cost us millions of dollars, and most of it was unavailable to us at any price. However, we have worked very closely with original series composer (and consummate rock star) Craig Wedren to carefully replace certain tracks, while maintaining the spirit of the original sketches as much as possible. The only moment in the whole series that we could not include on the DVD is a 15-second "link" where characters are singing a Pearl Jam song which we could not get the rights to.

Of course, we've seen how closely "the spirit" of the original music has been drained out of those other shows. Part of the reason these shows are such classics was their use of timely and evocative music. It still boggles my mind that it should even require any additional licensing. The music was licensed for the show. The DVDs are simply the same show. The music was already licensed. Why should it need another license? And, even if you grant the idea that it should get the license, why would anyone not let that happen? Having the music in these shows is never going to harm the market for that music or those musicians. It can only serve to draw more attention to that music, especially for people nostalgic for the time when the show aired.

Also, the page about the DVD notes one other bizarre change:

A few brand names and images had to be blurred or replaced for legal reasons.

I'm still trying to figure out what these "legal reasons" are. Last month we wrote about a lawyer whose job it is to make sure no brands appear unblurred in movies, but I'm struggling to understand the legal rationale behind this. It's not a trademark violation to use a brand in a movie or a TV show. There's not going to be any "confusion" from showing a brand or dilution of the brand because a long-off-the-air TV show isn't competing with those brands. This is yet another sign of the ridiculous levels to which intellectual property law has taken culture these days.

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Is There Any Innovation That Hollywood Won't Try To Kill?

from the can-you-say-moral-panic? dept

It's well known how the MPAA tried to kill of the VCR (well, Betamax, originally), with Jack Valenti declaring: "The VCR is to the American film producer and the American public as the Boston Strangler is to the woman alone." As William Patry's new book details, Valenti and the MPAA have been masters of creating moral panics -- bogus, hyped up threats to make legislative response seem not just palatable, but desired -- that do nothing more than try to protect an old, decaying business model from innovative competition. Given that history, it's worth pointing out that it appears to be happening again with Redbox, the DVD vending machine business, that's taken the video rental market by storm. We've covered this story since last fall, when NBC Universal tried to figure out a way to stop Redbox from renting its movies. It gave Redbox a long list of ridiculous ultimatums, and told distributors not to sell to Redbox. In return, Redbox sued Universal. Since then, 20th Century Fox and then Warner Bros. joined in. Sony and Paramount are the only studios enlightened enough to do deals with Redbox.

But, that hasn't prevented the moral panic lobbying/promotional campaign from gearing up -- though, at least some appear a bit skeptical about it. The NY Times has an article that goes through the details and notes that Hollywood lobbyists have been working over time to convince the press to complain that Redbox rents R-rated movies to children. And they're also trying out some ridiculous claim about how Redbox is going to put studio plumbers out of work. Seriously. But, just you wait and see. It won't be long until articles start appearing claiming that Redbox kiosks are a threat to our children, since they can rent R-rated movies (the fact that these same kids can access whatever websites they want in the privacy of their own homes, with content much more graphic than any R-rated movie probably won't be mentioned).

But, of course, that's purely a moral panic -- and one that Patry even predicted in his book. What Hollywood and its lawyers are really worried about is that they don't get the same monopoly rents on pricing of DVDs. Once Hollywood got over its totally bogus fear of the VCR, it eventually embraced the idea of "windows." It's basically an attempt to do what economists call differential pricing -- where different people pay different amounts for the same basic product (or perhaps in slightly different forms). Classic differential pricing is a good thing in economics, if done right, because you can actually better optimize the market -- selling expensive (high margin) goods to those who will buy them, but making additional money on lower priced/lower margin goods to those further downstream, thus (in theory) maximizing profit.

Hollywood's version is a bit mucked up, of course, because it often will seek to abuse its monopoly position to squeeze excess rents out of the market with the government helping it -- and thus it freaks out when any sort of innovation (the internet, rental kiosks) come along. The real fear is that by introducing $1 rentals as soon as the DVD is released, it will cut into DVD sales (why buy at all when it's so cheap to rent?) and rentals from places like Blockbuster, who have worked out revenue sharing deals with the studios. So, once again, rather than compete in the market, Hollywood's lawyers are trying to convince the press and politicians that Redbox DVDs are "a threat to your children." But this is the exact same sort of "folk devil" that Patry describes Hollywood trumping up with every kind of technological innovation. Hopefully, we're smart enough not to fall for it this time.

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Hollywood's War With Redbox Expanding To Netflix As Well?

from the shooting-the-foot dept

Hollywood really never learns, does it? Following 20th Century Fox's decision to try to stop Redbox from getting movies to rent via its kiosks (to which Redbox has responded by suing Fox), Warner Bros. has joined in as well, but isn't just trying to stop Redbox, but Netflix, too. It wants to force both companies not to rent DVDs until a month after the DVDs are actually released... unless the companies agree to share revenue from the rentals.

There's basically no legal basis for this move, which would only serve to piss off consumers (yet again). These companies are free to buy the DVDs and rent them out, but the studios want a cut of every rental. It's sort of like video game makes demanding a cut of every used game sale, or an artist demanding a cut every time a piece of his artwork is sold. It's entitlement society all over again. Nothing should happen without the original company getting paid. What they don't realize is how this limits them. Netflix and Redbox become less interested in promoting Warner Bros.' movies, because they're now a lot more expensive to those companies. Instead, Hollywood is handing incentives over to these companies to promote other films that don't demand their tithe.

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Fox The Latest Studio To Declare War On Redbox

from the not-a-good-idea dept

It was just a few days ago that Mark Cuban was singing the praises of Redbox as the perfect model for movie distribution, claiming that the movie studios loved it, because they pay the studios a minimum guarantee with no returns. Cuban claims that this is a no-risk deal for studios who get pure incremental revenue. That didn't read right to me, because it was just a few months ago that it seemed like Universal Studios was doing everything it possibly could to kill Redbox. And, now, Mark alerts us to the news that 20th Century Fox is also demanding wholesellers not sell to Redbox. In fact, the article notes that Redbox only has a deal with Sony. It purchases all the movies from other studios through wholesale middlemen -- which seems to contradict Cuban's claims. Either way, this is a story of the movie studios letting their own greed interfere with innovation. These movies are being legally purchased. It's difficult to see how the studios have any leg to stand on in preventing Redbox from using their movies in its service. Isn't there a First Sale right somewhere?

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Surprise, Surprise: Blu-Ray Still Not Catching On

from the late-to-the-party dept

Way back in 2005, as we sat through yet another ridiculous and self-defeating standards battle over the "next generation" standard for high definition DVDs, we pointed out that it was probably already too late, as the market was already beginning to recognize that disc-based storage made less and less sense. And yet, because the two sides fighting over the standard could only see monopolistic dollar signs from winning the "battle" they kept on fighting. Yet, with two competing standards, very few people wanted to bet on either one, knowing if they bet wrong, they were stuck with a useless box. And this went on for years. And years. And eventually Blu-ray won in early 2008, even though it was clearly already too late.

The latest numbers suggest, indeed, that despite Blu-ray "winning" the standards battle, it likely missed the big window for success, as many people just don't see the point in buying yet another new box and having to get movies all over again -- especially as online delivery is becoming more and more effective and efficient. I don't think Blu-ray will collapse completely, but it seems like the standards battle became a prisoner's dilemma of sorts -- with both sides ending up much worse off. If they had just agreed to a standard back in 2004/2005, when they had a chance, because online delivery options really weren't that good. Today, however, they're not just good enough for many people, they're getting better all the time.

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Blu-Ray To Allow Users To Make 'Copies' -- With Lots Of Strings Attached

from the asterisk dept

"Beginning next year, studios and other content holders will be required to give consumers the ability to make one copy of any Blu-ray Disc they buy," says the article (via Engadget). Sounds great -- movie studios and others finally realizing that people should be able to freely back up DVDs they legitimately purchase. The devil, of course, is in the details. While discs will have to support this "managed copy" feature, it will require new hardware, and there's no mandate that DVD player manufacturers include support for it at all. The copy, as you'd expect, is all DRM'ed up, and in order to make the copy, the Blu-ray player will have to connect to an "authorization server". This is the sort of model that's caused lots of problems in the past, when companies decide to pull the plug on the servers, rendering the feature useless. But the biggest potential problem with the feature is that movie studios and others will be free to charge whatever they wish for it. That means this really isn't a backup or a copy at all, it's simply the distribution means for the latest incarnation of the entertainment industry's favorite business model: getting people to pay for the same content over and over. That's why the studios want to block things like Real DVD -- not because they'll increase piracy, but because they cut off the only business model the studios can see for digital content.

Carlo Longino is an expert at the Insight Community. To get insight and analysis from Carlo Longino and other experts on challenges your company faces, click here.

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Nintendo Wii Doesn't Infringe On DVD Playing/Parental Control Patent

from the good-news dept

It's nice to see a patent lawsuit go in the right direction. A judge in LA has tossed out a patent infringement lawsuit against Nintendo concerning parental controls on DVD players. The only problem? The Wii doesn't play DVDs. Of course, Nintendo still faces a number of other patent infringement lawsuits, but at least this one was dealt with relatively quickly.

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Since When Is Driving With Infringing DVDs A Crime?

from the this-is-a-good-question dept

Last year, we pointed out that the RIAA was going around telling district attorneys and other law enforcement folks that they should start looking to see if they could use "piracy" charges as a front to get search warrants of suspected drug houses when there wasn't enough evidence to get a warrant having to do with drugs. It seems that some in law enforcement are following through on that. Michael Scott points us to a troubling lawsuit involving just such a situation. Apparently, narcotics officers were told to try to pull over a certain vehicle on any sort of traffic infraction, on the belief that there were drugs in the vehicle. While there was a tiny amount of marijuana, it wasn't enough to do anything. However... there was a big box of what turned out to be counterfeit DVDs. The guy was arrested and a warrant was issued to search his house -- and eventually he was charged with copyright infringement for the DVDs. The guy argued that the search of his car and house were a violation, but the link above includes an important point by Shourin Sen:

Mere possession of infringing DVDs isn't illegal. You can drive around with a truck full of them. You just can't reproduce or distribute ten or more infringing copies of a copyrighted work which have a total retail value of more than $2,500. If it wasn't the marijuana, what in fact was the Defendant arrested for? And was there probable cause to search the defendants house based only on the possession of material he was legally allowed to carry?

These are all good questions...

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Film Studios Can 'Cannibalize' Their DVD Sales, Or Lose Them Completely

from the time-warp dept

"Like music before it, and lately the book industry, major film studios are grappling with the transition from distribution of physical DVDs to electronic delivery. It is a change the studios need to make, to cut costs and curtail piracy." You'd be forgiven for thinking that line was from a story about the film business from several years ago, but it's from a piece over the weekend in the WSJ laying out that movie studios still haven't figured out this internet thing. Of course, with guys like Michael Lynton in charge, that doesn't seem too surprising. Anyway, the main point of the WSJ piece is that studios have been slow to move because they're afraid of killing off DVD sales, which still account for 43 percent of film revenues. Here's the rub, though: DVD sales are already slipping, and efforts to boost them by pushing new kinds of plastic discs on consumers aren't helping. The studios seem to believe that their content is valuable enough that they can dictate how people purchase and enjoy it, and that they'll keep on buying, regardless of how their preferences and desires change. This attitude has already shown up in the studios thinking of yanking their movies from Netflix and trying to hamper the Redbox rental service. Clearly, the idea that studios can protect DVD sales by hamstringing downloads and online services isn't working. Using the fear of cannibalizing DVD revenues with online services isn't particularly smart. Studios face the choice of perhaps cannibalizing their own sales, or losing the revenues to somebody else completely.

Carlo Longino is an expert at the Insight Community. To get insight and analysis from Carlo Longino and other experts on challenges your company faces, click here.

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MPAA Points Out That Real Once Argued Against Fair Use Exceptions To The DMCA

from the flip-flop dept

The MPAA's suit to block Real Networks' RealDVD software rolls on, with some twists and turns. The latest is that the MPAA says that about 10 years ago, Real made the same argument that the MPAA is making in this case, saying that there is no fair use exception to the DMCA. Real used the argument in a case against Streambox, which created software that let people record Real streams. It prevailed in the Streambox case, so the MPAA asked the judge for an estoppel ruling, which would preclude it from arguing for fair use in the current case, since the argument contradicts its earlier position. Closing arguments in the case have wrapped up, and there's no indication when the judge will issue a ruling -- nor whether Real's apparent change of heart on fair use and the DMCA will hamper its efforts.

Carlo Longino is an expert at the Insight Community. To get insight and analysis from Carlo Longino and other experts on challenges your company faces, click here.

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Fox Makes 24 DVDs Available As Soon As The Season Ends

from the about-time... dept

I have to admit that, for all the insistence from movie industry folks about the importance of "windows" between releases in different formats, it's never made any sense to me that movies aren't released in multiple formats at the same time. In fact, I still can't figure out why the movie studios don't have DVDs of the movie you just saw for sale as you walk out of the theater. Offer up the DVDs with a discount if you have a ticket from the showing, and if the movie was really good, the DVD has lots of extras, and the price is reasonable, plenty of people would buy it right up -- rather than needing to remember months later. So consider me surprised and impressed that Fox made sure that the DVD for the latest season of the show 24 was available the day after the season ended. It's not quite the same as having DVDs of movies available, but it's close. Of course, the studio also decided not to do much marketing for the DVD release, fearing that people wouldn't watch the finale if they knew they could buy it on DVD the next day. Of course, they could also just record it with their DVR, but who's counting?

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RealNetworks Ups The Ante; Wants To Add Antitrust Charges Against The MPAA

from the your-move dept

With the lawsuit between the movie studios and RealNetworks off to an inauspicious start, it looks like RealNetworks decided to pull out the nuclear option: it's trying to add anti-trust charges against the movie studios to the case. The company claims it's come across evidence that the studios colluded to boycott RealNetworks and its attempt to let people back up their legally obtained movies. It would be interesting to know the details behind the evidence, as it could make the case a lot more exciting pretty quickly.

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Real DVD Copying Case Gets Off To An Inauspicious Start

from the not-a-good-sign dept

The latest joke of a lawsuit from Hollywood, over Real Networks' RealDVD software, began today. The movie studios were actually able to get the judge to close the courtroom and kick out the press, despite not following the normal procedures to request such a move. If you haven't followed the case at all, basically Hollywood is suing RealNetworks for making software that allows you to back up your own DVDs, though it places significant limitations on them. What's really odd about this is that there are tons of free DVD rippers out there that put no restrictions whatsoever. In Real's case, it puts significant limitations on the backup copies -- and courts have shown in the past that making a backup of a digital good is accepted as fair use. Taking Real's product off the market makes almost no sense at all.

However, it seems like Hollywood's argument is based on the claim that Real somehow is using "hacker" technology in its product that violates the DMCA. It's not clear why using hacker technology should make the situation any different than having built your own. The MPAA is also claiming that there is no fair use defense to backing up a DVD, which is difficult to believe, given that fair use covers backups of music and software. What makes a movie so different? Well, the MPAA, of course, will claim (as it did in a previous case, against 321 Studios) that the encryption makes it illegal.

And that's where the problems come in. Thanks to the anti-circumvention clause of the DMCA, an action that is clearly fair use (backing up a movie) becomes illegal not because of the backup, but because of the circumvention of the DRM. That should go against all common sense: if the action itself is legal fair use, why should it matter how it's done (or who made the software)? Unfortunately, we don't often see common sense win out in these cases... and the early reports from the court room suggest that the judge is siding with the MPAA. Perhaps this isn't a surprise. Marilyn Hall Patel is the same judge who declared Napster illegal as well, despite a strong safe harbor defense. In this case, she told RealNetworks:

"They have the copyright. That's the issue here right? They have the copyright. They have the right to exclude."

That's actually a somewhat scary quote from the judge who should know better. Copyright does give them a right to exclude, but a limited right, which is supposed to be weighed against the rights of consumers, including their rights to fair use for things like (drum roll....) making a backup.

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Obama's Gift To British Prime Minister Rendered Useless By DRM

from the learning-process dept

A few years back, it emerged that US Senator Ted Stevens had been given an iPod by his daughter, and it had changed the way he saw the RIAA and the measures for which it lobbied. It's always seemed to me that once politicians -- at least those not beholden to the entertainment industry -- experienced the stupidity and frustration of the locks and controls that groups like the RIAA and MPAA put on content and want backed up by law, they'd realize they were little more than attempts to frustrate consumers and prop up outmoded business models. Maybe the UK is prepared for a similar political inflection point: its Prime Minister, Gordon Brown, was recently given a gift of 25 DVDs of classic American movies by US President Barack Obama. When Brown sat down to watch one of them, he found he couldn't -- because Obama had given him Region 1 DVDs, unplayable in Brown's Region 2 DVD player. The pointless DRM didn't stop any piracy, it prevented an absolutely reasonable use of legitimately purchased content. Maybe this experience will help the British government understand how many of the entertainment industry's efforts to strengthen intellectual property controls do little more than irritate legitimate consumers in the name of supporting failing business models.

Carlo Longino is an expert at the Insight Community. To get insight and analysis from Carlo Longino and other experts on challenges your company faces, click here.

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If Your Business Model Revolves Around Taking Some Feature Away From People, You're Doing It Wrong

from the add-value,-not-diminish-it... dept

I'm always amazed when companies think that they can take features away from users and then charge more for re-accessing those features. Taking features away from people to charge them for them almost never works. It just pisses off people who quickly go looking for alternatives. The latest company getting set to discover this for themselves appears to be 20th Century Fox studios, who wants to remove all the special features from rental DVDs in the hopes that people will buy those DVDs instead. Of course, what might happen is that fewer people rent their movies and fewer people buy the movies. I'm a fan of various DVD extras -- and it's part of the reason why I rent movies. If a DVD doesn't have them, I'm a lot less likely to rent the film -- and I'm unlikely to buy a DVD if I haven't first seen it as a rental. So, for me, Fox's strategy will certainly backfire, and I'd imagine the same is true for many others as well.

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