Copyright Industrial Policy

by on June 30, 2008 · 16 comments

My final contribution to the June edition of Cato Unbound is up. I criticize Doug Lichtman call for “more complicated [copyright policy] interventions that, by design, influence the development of technology tools and services”:

Back in the late 1990s, companies started to develop MP3 players that are essentially miniature musical jukeboxes. The recording industry sued to block their sale, but was unsuccessful. The result was a surge of innovation, culminating in the iTunes/iPod ecosystem that now dominates the digital music marketplace. It’s tough to say what would have happened if the recording industry had won that lawsuit, but I think it’s safe to say that it would have taken longer for portable music players to emerge on the scene, and that the digital music ecosystem would be less advanced today.

Fast forward a few years, and we can see that hard drives are now large enough that one could easily build a set-top box that does for your DVD collection what the first iPod does for your CDs. Insert each DVD you own once, and the box copies it to your hard drive. From then on, you can watch any DVD you own with the touch of a button. And of course, you’d likely be able to do much more than that: stream movies wirelessly to different TVs around your house, stream them to yourself while you’re on the road, transfer them to an iPod or other mobile device to watch on the road, and so forth. Even more important, the existence of a competitive DVD jukebox market would likely produce spin-off innovations, just as the MP3 player did, with people developing devices, software, and accessories that interoperate with the DVD jukeboxes.

Unfortunately, Hollywood sued the first DVD jukebox out of existence. And this time, thanks to the DMCA, they’ve won. CDs have no copy protection, so under copyright law anyone is free to make a device to play or manipulate music on CDs. But DVDs do have copy protection, so in effect no one may innovate in the DVD marketplace without Hollywood’s blessing.

Libertarians are rightly uneasy with government “industrial policy,” efforts to reshape the marketplace by legislative or administrative fiat. In a sense, I think the theory Lichtman articulates suffers from much the same defect. Policy makers will never know if the extra creative works supposedly stimulated by the DMCA are worth more than the foregone innovations. We should therefore be suspicious of proposals to encourage the development of one part of the market at the expense of another. Such efforts rarely turn out as well as policymakers hope.

  • http://www.codemonkeyramblings.com MikeT

    Indeed. I’ll do you one better than the jukebox. I can convert a DVD into a MPEG4 video of identical quality easily using Handbrake. The new file will take up about 2.25GB of hard drive space, and have no discernible loss in quality from the original data. Without the DMCA, Apple could have easily built features into iTunes to allow me transfer any movie I want from my DVD shelf to my Apple TV for convenience.

  • http://linuxworld.com/community/ Don Marti

    Without the DMCA, you could openly sell a mod chip for PlayStation and XBox consoles “to run Linux” that would also allow the consoles to run infringing copies of Grand Theft Auto IV.

    Easy access to mod chips would mean that game companies would be less likely to invest in story and detail that makes a game valuable in single-player mode, and just concentrate on MMORGs where they can make money from subscriptions.

  • http://www.codemonkeyramblings.com MikeT

    Indeed. I’ll do you one better than the jukebox. I can convert a DVD into a MPEG4 video of identical quality easily using Handbrake. The new file will take up about 2.25GB of hard drive space, and have no discernible loss in quality from the original data. Without the DMCA, Apple could have easily built features into iTunes to allow me transfer any movie I want from my DVD shelf to my Apple TV for convenience.

  • dmarti

    Without the DMCA, you could openly sell a mod chip for PlayStation and XBox consoles “to run Linux” that would also allow the consoles to run infringing copies of Grand Theft Auto IV.

    Easy access to mod chips would mean that game companies would be less likely to invest in story and detail that makes a game valuable in single-player mode, and just concentrate on MMORGs where they can make money from subscriptions.

  • Lewis Baumstark

    Don: those same companies produce top-quality games for PCs, which are quite capable of running infringing copies straight out of the box. Clearly the illegality of mod chips has little to do with innovation in the video game market.

  • Lewis Baumstark

    Don: those same companies produce top-quality games for PCs, which are quite capable of running infringing copies straight out of the box. Clearly the illegality of mod chips has little to do with innovation in the video game market.

  • http://linuxworld.com/community/ Don Marti

    GTA IV is only out for PlayStation 3 and Xbox 360.

    It’s not necessarily the technical quality of the game that the DMCA encourages, but all the offline-usable art and story detail.

    Naturally the DMCA discourages many other investments, and many of those might have been more valuable or useful to more people. It’s interesting and rare to see a content creation investment that the DMCA promotes.

  • http://linuxworld.com/community/ Don Marti

    GTA IV is only out for PlayStation 3 and Xbox 360.

    It’s not necessarily the technical quality of the game that the DMCA encourages, but all the offline-usable art and story detail.

    Naturally the DMCA discourages many other investments, and many of those might have been more valuable or useful to more people. It’s interesting and rare to see a content creation investment that the DMCA promotes.

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