Wal-Mart's not-so-super downloads
For a snapshot of where the major entertainment companies would like to take consumers, check out the new movie downloading service from Wal-Mart. The king of discount retailers is offering the DVD version of "Superman Returns" with three optional add-ons: a downloadable copy of the movie formatted for Microsoft-compatible portable players (about $2), a higher-quality download for a computer ($3) or both ($4).
Think about this for a minute. If you buy a CD, you can (and frequently do) make copies of the songs to store on portable devices and computers. You assume that when you buy an album, you've bought the right to put the music on every device you own. For most people, DVDs represent the other extreme. Restricted by electronic locks, these discs can't be ripped with iTunes or copied with the burning software that ships with a Dell, an HP or a Mac. (Yes, I know, you can find plenty of tools online to do both of these things, but most people don't.) The studios and their allies have been quick to sue companies that try to unlock DVDs even for what seem like legitimate purposes -- e.g., Kaleidescape and Load 'N Go. And the U.S. Copyright Office has refused to permit people to circumvent such electronic locks for personal use, such as making back-up DVDs or loading movies onto portable players.
So from the perspective of the studios and federal officials, consumers have to pay for the privilege of doing the sorts of things with DVDs that they're accustomed to doing with CDs (and LPs and cassettes). That's where Wal-Mart's offer comes in. Unlike download stores such as Movielink, Wal-Mart isn't positioning downloads as a substitute for DVDs, at least not yet. That's a realistic stance, given that downloadable movies don't yet match the picture quality or even the limited flexibility of packaged discs. Instead, Wal-Mart is treating downloads as a complement to the disc -- the copy you would have made for your PC or portable, had you been allowed to. And it's pricing them accordingly.
The savvy folks at TechDirt seem to like this approach, which is similar to what Larry Kenswil of Universal Music Group's eLabs has been advocating for years. I'm intrigued by the idea of letting people pay for just the rights they want, rather than charging everyone for the whole bundle. Yet this makes sense to me only if we trust copyright holders not to use technology to eliminate some of what Gary Shapiro of the Consumer Electronics Assn. likes to call consumers' "reasonable and customary practices and expectations." Unfortunately, that's what they've done again and again -- witness the DVDs with promotional material that can't be skipped, or the "copy-managed" CDs whose songs can't be transferred to an iPod. And while market forces can certainly tame the worst behavior, the monopoly nature of copyrights means that consumers who don't like the way Company X protects a particular title, they have only two alternatives: buying a different title with fewer restrictions, if such a thing exists, or not buying anything.
The entertainment industry can blame some of the problems on immature technologies that weren't sophisticated enough to allow legitimate uses but not illegitimate ones. That's a tough distinction to make, and the next generation of DVDs -- HD DVDs and Blu-ray discs -- are a step forward in that regard. For starters, they can enable consumers to make a limited number of copies for home video jukeboxes and portable players. The question is whether the studios will enable those features, and if so, what they might charge for them. Will they expect a premium for high-def pictures, then another premium for the personal copies? Should they?
Addendum on 11/30 -- For the perspective of someone who really understands copyright law, instead of just pretending to, see this post by Fred von Lohmann of the EFF.
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There is a popular misconception that anything you can legally do with music on your CDs, you are also entitled to do with movies on your DVDs. The argument is that if ripping songs to your portable player is fair use, then ripping movies is fair use as well. I've never been convinced.
First, the legitimacy of most copying of CD music to portable players has nothing to do with fair use. The non-commercial ripping of CDs to portable players enjoys specific protection under Section 1008 of the Copyright Act (which provides that copyright owners cannot sue for certain “non-commercial” infringement of the reproduction right in sound recordings). This legal structure compensates copyright owners (even if imperfectly) for the resulting proliferation of uncompensated copies by charging the manufacturers of blank media and recording devices a royalty, which is then passed on to copyright owners. No such protection from prosecution or system of compensation exists for books, movies, video games or anything else, other than music.
Second, the fair use analysis applied to ripping CDs does not square with economics of ripping DVDs. One who purchases a CD typically wants to listen to it more than once, and wants to listen to it in multiple locations. The practice of ripping began when people wanted to listen to their vinyl LP on their cassette player in the car. Copying to the playback medium in the car was the only practical solution, but the owner of the LP typically kept it for playback on the turntable at home. I have a number of CDs that I regularly listen to at home or in the car equipped with a CD player, but I also rip them to my laptop to listen to in my office, and to my portable player to listen to while working out or in my car that has no CD player. Though I make copies to expand my freedom to listen to music wherever I like, I place no additional copies into commercial circulation.
The typical movie, in contrast, is watched once. If I buy a DVD, I may sell it, lend it or give it away after watching it unless I want to keep it in my library to enjoy a few months or years down the road. DVD rental is an option not available for CDs, and the over $6 billion per year consumers spend renting movies suggests that they are happy to obtain possession of the DVD just long enough to watch it, and then return it to the owner so someone else can rent it. If I rent a DVD for a day and make a copy to keep forever before returning it, I am interfering with the economics of gaining temporary possession of, but not owning, a single DVD. A video retailer may rent me a DVD for $3 or sell it to me for $18. As a consumer, I have a choice: I can own it for $18 (and then keep it, sell, it, rent it, lend it or give it away), or for only $3 I can possess it for a short period of time, treat it as I would property that does not belong to me, and then return it to its owner within the agreed time. Ripping the DVD before passing it on is more likely to impact sales and rentals.
Third, this is not so-called “space-shifting”. The original space-shifting bill introduced by Congressman Rick Boucher several years ago would have authorized the simultaneous deletion of the first copy once the work was transferred to another medium. Copyright case law in the United State and Canada has long recognized that taking the copyrighted work off of one medium and placing it on another does not infringe the reproduction right of the author because, at the end of the process, no additional copies exist. That is true “shifting” of the work from one space to another. But indiscriminate ripping shifts nothing. Instead, a second copy is made on a new medium, leaving the original copy intact.
While there may well be situations in which copying a DVD might constitute fair use, routine ripping just to own more copies in more formats does not. There is no legal mechanism to protect me from infringement lawsuits, there is no compensation system for the copyright owner’s loss of control over such copying, and I can’t argue with a straight face that I just want to be able to watch my DVD of An Inconvenient Truth over and over, from my portable player while jogging, in my car while driving, from my computer while working, and then flip on my DVD player to watch it again while I’m cooking dinner. Pretty much the only reason I would have for ripping a DVD would be to avoid late fees on a rental of a movie I have not yet watched, or to gain the benefits of selling or giving away my DVD while not paying the “cost” of giving up my copy.
This brings us to the Warner/Wal-Mart deal. In proper perspective, it is terrific. Like buying one pizza at regular price and getting a second one at half price, you can eat the second pizza right away, place it in your freezer, or invite someone else to have the second one if all you personally needed was one pizza. No one has a “fair use” right to buy or rent a DVD and rip a copy to keep forever while returning the original DVD to the video store, giving it away or selling it on eBay. Sure, you can legally give away or sell a used DVD, but the copy you kept is the infringing one.
I once asked Tower Records why, back when consumers were ripping CDs to cassettes for their cars, they didn’t think to offer a CD/cassette bundle at a fraction of the cost of buying them separately. “We wanted to,” I was told, “but the labels would not give us the price break we needed. They were afraid people would buy the package and give one to a friend instead of keeping them both.” Warner is to be applauded for its courage to offer such a price break that allows retailers – hopefully any retailer who wants to – to pass such an offer on to consumers, thereby expanding the number of value propositions through which to choose non-infringing copies. Sure, there may be consumers out there who will watch the download and sell the DVD on eBay or give it to a friend, but when my pizza parlor offers the second pie at one half off, it is also persuading me to order pizza instead of Chinese food. It is adding value to the purchase of the first pizza. The Warner/Wal-Mart offer allows you to get two perfectly legal copies for less than the price of buying the two separately and, as a result, you may just walk out of the store with a movie instead of the unbroken $20 bill with which you walked in.
Posted by: John T. Mitchell | November 30, 2006 at 06:49 PM
I like your analysis for the most part, but totally disagree with this statement: Pretty much the only reason I would have for ripping a DVD would be to avoid late fees on a rental of a movie I have not yet watched, or to gain the benefits of selling or giving away my DVD while not paying the “cost” of giving up my copy.
I can think of several reasons to rip a DVD, but the main one would be to have all my videos in a digital video jukebox that I can connect to from any room or from my laptop when I'm on the road. A secondary one would be to make it easier to convert the video format into something that would work with a video iPod or other portable.
You're right, though, that it's hard to allow those behaviors, which I think are fair uses (although IANAL), without also allowing people to rip all the DVDs they rent from Netflix.
Posted by: Jon Healey | November 30, 2006 at 07:32 PM
Jon: Fabulous piece, as always. I'm fascinated by Walmart's pricing. It strikes me as essentially a convenience fee; "We know you're perfectly capable of ripping this yourself, but that takes time and we know how busy you are so for two bucks you can just grab a copy." Makes an enormous amount of sense to me,
Posted by: Dave | December 06, 2006 at 04:35 AM