Rose M. Welch was the first of a few of you to send in the news that librarians have realized that Netflix is a great way to expand the catalog of DVDs that can be loaned out, even though it violates Netflix's terms of service. Netflix seems a bit ambivalent about the whole thing, saying that they don't like it, and they would expect librarians would obey the terms of service (which this does not), but that they really don't want to sue libraries -- perhaps recognizing how awful that would look from a PR standpoint. While I applaud Netflix not going straight to the lawyers, is it really that big of a deal that libraries are using Netflix in this manner?

A few of you have sent in the fact that the Colbert Report recently did a fun segment about a guy arrested for selling polka DVDs:

The Colbert Report	Mon - Thurs 11:30pm / 10:30c
Nailed 'Em - Polka Piracy
www.colbertnation.com
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For all the talk we hear about how DVD counterfeiters are connected to "organized crime" and "terrorists," a lot of the times it's really situations like this one, involving a guy who did a public access TV show about polka. Someone called him to see if they could buy some DVDs of the show, so he made a few DVDs and sold them. But the whole thing was a setup, and the next morning he was arrested. The whole thing shows what a joke some of these claims really are.

Separately, I do find it amusing to see folks like Colbert mock the overreaction to things like copyright infringement -- considering that his employer, Viacom, is so aggressive on spreading the myth that DVD counterfeiting is really about supporting terrorism and organized crime.

Update: Good discussion in the comments about what the specific charges were in this case. Apparently, the guy used government equipment to make the recording and DVDs, so the local government felt it was theirs -- and they sold their own DVDs, which this guy's DVDs undercut. He was charged with using city property for "personal gain." Oddly, there's an "embezzlement" charge as a part of this... More details here.

While some of the Big 6 studios have been incredibly anti-Redbox, Viacom's Paramount has always been the most reasonable towards the DVD-rental kiosk provider. So it really comes as little surprise that Paramount has announced that, after testing delayed movie releases through Redbox it sees absolutely no reason to keep delaying such releases and instead will offer new release movies on Redbox at the same time the DVD goes on sale:

"There were two conclusions we came to," said Dennis Maguire, president of Paramount Home Entertainment. "There hasn't been a cannibalization of DVD sales from Redbox, and Redbox was allowing us to expand our business and ultimately make more money" than if the studio held back its DVDs to Redbox for a period of time.

Of course, this is exactly what many people said when studios like Warner Bros., Universal and Fox demanded the 28 day release, but it's nice to at least see Paramount actually looking at the data and realizing that Redbox isn't the evil destroyer of Hollywood that some of its competitors have made it out to be.

You may recall the legal fight over Kaleidescape. The company built a ridiculously expensive (tens of thousands of dollars) DVD jukebox that was clearly designed not for unauthorized file sharing, but for those with a huge disposable income to store their DVDs on the device so it was easier to watch or playback any DVD they owned (you couldn't transfer the movies off the device, so it was useless for further copying). Of course, as usually happens, Hollywood got upset, saying that this process of backing up your DVDs was illegal, using a twisted argument that the encryption on DVDs was broken by this system, and thus it's a violation of the DMCA. This is a massive problem with the DMCA's anti-circumvention clause, which says that even if the copy itself is legal, if it involves encryption, the process of making that (legal) copy, becomes illegal.

While Kaleidescape won in the lower court, the appeals court reversed, highlighting again how Hollywood (despite claims it would never use copyright law to block technology) uses the legal system to block technological innovation.

Kaleidescape has now come out with a new product that actually adds the ability to store Blu-ray discs as well -- which might be a surprise given last summer's ruling. However, in response to the ruling, Kaleidescape added one "feature" which it hopes will satisfy Hollywood lawyers: to play back a movie, you now have to put the original disc into the player. Yes, you read that right. This is a device designed to rip and store your DVDs -- and the only way you can play them back is to go ahead and put the actual DVD into the player to prove that you have it. In other words, it takes away the whole idea of the convenience behind the product.

And, guess what? Hollywood still isn't happy.

The AACS technology and licenses do not permit ripping of Blu-ray discs unless the copy has been authorized by the content owner, either by setting the Copy Control Information appropriately (and nearly all BD movies are set for “Copy Never”, just like DVDs), or by individual authorization through the Managed Copy process, which we anticipate rolling out at the end of this year or the beginning of 2011.

This is exactly what the law is not supposed to do. It's letting Hollywood set the terms of technological innovation, and blocking any concept of fair use or backup copies that are recognized as legal. It's giving Hollywood a veto on technology, and causing tech companies to jump through ridiculous hoops to disable obvious functionality, just because Hollywood doesn't like what it does.

For many years, we've pointed out the futility of the entertainment industry's constant focus on "shutting down" any source of unauthorized material. Every time they do so, the content sharing continues to grow -- it just moves further underground and makes it that much more difficult for the industry to actually use it to their own advantage. It appears this happens not just online, but offline as well. We've noted recently that China has been paying lip service to external pressures to "crack down" on infringement, often by using copyright and patent laws to go after foreign companies as well. But it appears to also be playing itself out in other ways.

The NY Times is covering how Chinese officials have been going around to DVD and CD shops that have lots of unauthorized bootlegs, and telling them that for the World Expo (which begins May 1), they need to stop selling that content so directly. It appears most of the shops all responded in nearly identical ways: cutting their stores in half by putting up a wall in the middle, then placing legitimate discs upfront, and putting all the bootlegs on the other side of the wall, with a "secret" doorway. The effort was so consistent that some accuse Chinese officials of suggesting this to store owners. Some stores readily admit that after the Expo ends, they'll tear down the wall and return to a single storefront.

Either way, it's quite similar to what we've seen online. You can "crackdown" all you want, and it never actually slows down the trade in unauthorized content. It just moves it further underground... or, perhaps, behind a (not so) secret wall.

You may recall that, at the end of March, Warner Bros. studios did a new deal with Blockbuster that seemed likely to confuse the hell out of consumers. That's because Warner Bros., in its backwards-looking wisdom, had already done deals with both Netflix and Redbox to not make new release movies available to rent until 28 days after their release. There is no good reason for this, other than it pisses off customers all around, and makes them less interested or inclined to bother watching Warner Bros. movies (hint to WB: you have competitors).

But the Blockbuster deal seemed confusing -- because most consumers wouldn't be following these silly deals and wouldn't understand why a movie had been "released" but wasn't available via their favorite rental service. Apparently, Blockbuster's answer to all this is to mock Netflix and Redbox for not carrying new releases. Seriously. Reader Daylyn sends in the following ad he recently saw that points out that Netflix and Redbox don't carry this movie: Apparently, this is all part of Blockbuster's new WB-partnered advertising campaign: "hey, the movie studios screwed over our competitors! rent from us!" Looking around, it appears a few others have noticed this campaign as well, which went into place quite quickly after the WB deal was announced.

If you only listened to the entertainment industry spokeslobbyists, you might think that Canada had no copyright/anti-counterfeiting laws at all. Europe is pushing for massive changes to Canadian copyright law via CETA, and the US entertainment industry insists that ACTA is needed to to drag Canada into the 21st century. Clearly, the laws must not exist. Except... Canada already does have copyright/counterfeiting laws in place, and they seem to work pretty well. Anshar points us to the news that existing laws were used to seize over a quarter of a million counterfeit DVDs. So, what, with CETA or ACTA it would have been half a million?

Robert Ring points us to the news that Hollywood studios are now threatening to stop selling DVDs in Spain, and are blaming "piracy." Specifically, Michael Lynton, of Sony Pictures, the guy who insists that nothing good has come from the internet, is claiming:

"Spain is on the brink of no longer being a viable home-entertainment market for us."

I'm really curious how Lynton keeps his job when his response to a market challenge is to leave the market entirely, shifting the unauthorized rate from whatever it is all the way up to 100% by choice. This is the same guy who claimed that the internet was killing the movie business, in the midst of a year with more movie releases than ever before and the largest box office take ever. He's also in charge of the company that wouldn't even support one of its own movies for the Oscars because it was afraid that the Oscar reviewer copies would end up online, even though the movie was already available for download.

This is a CEO who seems to want to blame everyone else for his own failures in giving people a reason to buy. He's blaming the internet when the real issue is his own inability to figure out how to provide scarce value that people want to pay for. I can't imagine how the board meetings go: "Hey, so how are you capitalizing on this massive increase in movie interest?" "Ah, well, we're dropping out of markets because the kids download." How do you manage to lead a company when your response to a boom in interest in your business is to take away one of the reasons to buy and then to blame the people who want your product? It's astounding.

It's tough to figure Warner Bros. out these days. It got both Netflix and Redbox to agree to delay renting new release movies for 28 days in an effort to get more people to purchase DVDs. For this, it got hit with a class action lawsuit. But now comes the news that it's signed a new deal with the financially troubled Blockbuster that has no such restriction. This has lots of people scratching their heads. The obvious answer is that Blockbuster is promising Warner a lot more money...

But there's a bigger issue here, which goes beyond just commentators scratching their heads: this is going to confuse a lot of customers at a time when that's the last thing Warner Bros. should be doing. Your average movie renter isn't paying attention to the silly games that Warner execs are playing, and all they want to know is how come they can't rent the latest release. If Warner somehow convinced all players not to rent until a certain date, then that would effectively have just shifted the release date further back (a dumb move in an age when windows are shrinking... but that's Hollywood for you). However, by having the movie available for rental in some places, but not others, it's now setting itself up for mass customer confusion, where people will hear that a movie is available, but then get pissed off that it's not available in their preferred rental system.

It's as if the folks in Hollywood haven't been paying attention to what happens to companies that aren't providing what their customers want.

Last week we wrote about how prosecutors in Indiana were threatening to file criminal charges against Redbox execs unless the company agreed to remove R-rated movies from its kiosks. The whole thing was instigated by brick-and-mortar video stores who didn't like competing with Redbox's $1 video rentals. However, as news spread about this threat, it seems that the residents of that county raised their voices and let the prosecutor know they wanted to keep their Redbox and its R-rated movies. The prosecutor noted that the standard for whether this was a problem was "community standards," and the community made it loud and clear to him that they wanted the Redbox kiosks to stay:

"It's not an exact barometer -- I didn't take a poll -- but it just seemed pretty clear to me that the community would not be behind the prosecution of this," Stan Levco said during Friday's news conference.

While it's good that he's backed down, I'm still not sure which is more troubling, that he initiated the threats at the behest of competitors, or that public outcry alone was enough to get him to back down.