RealNetworks: Make $$$ Now, Worry About the Law Later
Tuesday, September 30th, 2008 by Patrick RossAbout two years ago I was on a panel where a speaker said he had just come back from Silicon Valley, and every investor he met said they wanted to get in with any start-up that had a way to get creative works to people more easily, the law be dammed. Asked why they weren’t afraid of breaking the law, the investors said they planned to make as much money as they could during the legal process, get a large user base, and then hopefully sell to a big-pocket company, the way YouTube did with Google.
I thought of that when I first heard RealNetworks, a company struggling to stay relevant as a distributor in the digital age, was going to market a service that essentially allowed multiple duplications of a DVD. DVDs come with protection known as the Content Scramble System, and CSS is licensed out to anyone in the DVD space willing to respect it. At its core, CSS prevents unauthorized reproduction of the DVDs. RealNetworks, a CSS licensee, has decided to market a service called RealDVD that copies DVDs to multiple devices, charging an additional license fee for each device. Hardly what is expected of a CSS licensee.
It’s okay if you’re confused by this business model. Duplication is one of the rights reserved to copyright owners. Licensing for copying to multiple devices is a business model used by many copyright owners in the creative industries. But note, in these cases the duplication and licensing authority came from the copyright owners. Exactly where does RealNetworks get the notion that they have a right to charge consumers to perform activities with DVDs not authorized by the copyright owners?
They call it fair use, but this is a business model, not fair use. It’s a business model based on making money quick and getting consumers accustomed to a service quick before the legal system can play itself out.
And yes, the legal system is at work here. Presumably anticipating an imminent suit, RealNetworks filed a preemptive suit this morning asserting they are in the clear, despite overwhelming arguments against them and not even mentioning their service to copyright owners until mere hours after first announcing it. Hours later MPAA filed their own suit. MPAA argues that RealNetworks violated the Digital Millennium Copyright Act by bypassing DVD copy protection. This seems obvious on its face; even if CSS remains on the copied copy, the CSS on the original copy was intended to prevent any new copies. Thus, the very act of making a copy requires bypassing CSS.
My goodness, this issue has been going on a long time. A company called 321Studios a few years ago sought an exemption under the DMCA from the U.S. Copyright Office for a service that created “back-up” copies for DVDs. The Copyright Office rightly rejected that petition.
Why the obsession with backing up DVDs? There are so many ways to obtain movies now, from pay-per-view and video-on-demand to mobile download to PSP to legal broadband, and yes, you can still rent DVDs from Blockbuster or Netflix. (Which raises another point, there is nothing stopping someone from taking a Netflix DVD, making a copy to keep, and sending the Netflix disc back. This same issue existed with 321Studios.)
RealNetworks doesn’t produce creative works. It has tried to make a living off of distributing others’ creative works. This is not a disreputable enterprise by any means, but it can be difficult in the digital age because ad revenues are not comparable and subscription models are not as popular online. (Compare, for example, the number of people who subscribe to RealNetworks’ music subscription service to the number of people who subscribe to, say, cable television.)
But even if you’re struggling with legal ways to distribute the creative works of someone else, that hardly justifies infringing on the rights of that creator.
The courts will have to settle this, and it will take some time. But common sense suggests that RealNetworks is grasping at straws in thinking it can charge people to practice what it calls “fair use” but what is in fact the domain of the copyright owner through licensing. Unfortunately, this illegal DVD-copying door has now been opened just a bit further, making it that much more difficult for copyright owners to find a place for legitimate business models to flourish. Consumers lose with that result.
October 1st, 2008 at 5:45 pm
Patrick, where is it written that a business model can’t be based on fair use? Building VCRs and DVRs is a lucrative, legal business model based almost entirely on fair use.
October 2nd, 2008 at 8:54 am
I am seaching for some idea to write in my blog… somehow come to your blog. best of luck. Pak Tam
October 2nd, 2008 at 8:58 am
Fair point, John. But there is a US Supreme Court decision that says a VCR is fair use. RealDVD is not a VCR. The only decision I know of regarding making a copy of a CSS-protected DVD was from the US Copyright Office, and it refused to grant an exception from the DMCA for the purpose of back-up copies, which is an even narrower use than the platform transfer performed by RealDVD. Don’t forget, there is a new consortium of creative works producers looking for a way to move media across platforms, we don’t want to discourage that effort.
If we want studios and broadcasters to continue to offer alternative methods of viewing works, from streaming services like Hulu to download services like Unbox or Xbox360, we need to respect the restrictions placed on various media by the copyright owners. If we thwart an owner’s license model and do what we will with the creative work with the help of a third-party vendor, we’re looking at creators being forced to produce a one-price-fits-all model that benefits no one.
October 2nd, 2008 at 8:59 am
Pak Tam,
Best of luck, glad you found us. Stop back anytime.
Patrick
October 3rd, 2008 at 7:15 pm
[...] prompted by news of the RealDVD service by RealPlayer that offers to do that or by the news that litigation is now occurring between RealPlayer and MPAA over that service, but given that the issue has been on my mind I was [...]
October 16th, 2008 at 4:28 pm
[...] the debate surrounding RealNetworks’ RealDVD copying service. I’ve written on how the service does not in fact promote fair use and how in fact if the service were allowed to go forward consumers would be harmed, but it’s [...]
November 7th, 2008 at 1:23 pm
I don’t dispute that the copyright holder has rights, but what about the poor consumer confronted by new methods of content distribution. E.g. he/she has diligently purchased DVD’s for numerous years and now would like to stream that content to his/her television by a media server, such as Apple TV. Without making a copy of the DVD this is currently impossible to do. Are you suggesting that the studio’s should get a second crack at the same consumer, asking him/her to purchase a digital (DRM’d) version downloaded from whatever service, in order to avail themselves of the flexibiltiy of watching a film, previously purchased and owned on a DVD on their Apple TV? What exactly is being protected here, the studio’s right to squeeze the consumer for more money for the same content?