TiVo vs. Hollywood

Well that was fast. As I predicted on Monday, the entertainment industry isn’t happy about TiVo’s iPod conversion service:

TiVo appears to be acting unilaterally, disregarding established rights of content owners to participate in decisions regarding the distribution and exploitation of their content,” an NBC Universal spokesman said. “This unilateral action creates the risk of legal conflict instead of contributing to the constructive exploitation of digital technology that can rapidly provide new and exciting experiences for the consumer.

One of the fascinating things about this quote is that it flies directly in the face of Supreme Court precedent. The Sony Betamax decision, probably the most famous decision in the history of high-tech IP law, was specifically about whether consumers had the right to “unilaterally” time-shift TV content. Hollywood argued they didn’t. Hollywood lost. Presumably, the legal analysis would be the same for the “space shifting” and “format shifting” at issue here.

However, I think TiVo would be on firmer legal ground if it offered the service for free. It’s easy to imagine the courts ruling that charging for the service makes the use commercial, and therefore more difficult to justify as a fair use. As I argued on Monday, what TiVo is profiting from isn’t so much a software service, as such, but an artificial monopoly on DRM circumvention created by the DMCA. That might affect the fair use analysis, because the decision hinged on the idea that a VCR was a “staple article of commerce.” The courts might conclude that software whose only purpose is to circumvent TiVo’s DRm scheme is not a staple article of commerce.

Ars Technica elaborates on the role of DRM technology in the dispute:

There another piece to this puzzle, too: the lack of universal DRM. The studios are unhappy because these files will not have any rights management attached to them. While TiVo is using unique watermarks that in theory would allow for them to identify the original source of content shared online, it doesn’t prevent people from making copies. TiVo’s native format used with other media players does have DRM, hence the lack of complaints. But with regards to Sony and Apple, TiVo can’t make them share their DRM technology, which means that TiVo has no way of offering protected content on the iPod or the PSP.

Apple has no reason to support other companies’ DRM, because they want to create as much incentive as possible for customers to buy video services from their own online store and play them on their iPods. As long as they are the market leader in both categories, the two product lines re-inforce each other.

I rather doubt that Congress intended to create platform monopolies for technology firms when it enacted the DMCA, but that’s precisely what the law is doing. As we’re seeing from TiVo’s dispute with Hollywood, TiVo’s DRM scheme doesn’t do much to benefit copyright holders. What it does is allow TiVo to control which devices are compatible with its own, and to charge consumers for the privilege of using their legally-recorded content as they see fit.

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