Harry Potter Released Unprotected

"Warner Home Video has chosen not to copy-protect the home versions of its blockbuster movie Harry Potter and the Sorcerer's Stone in major markets, including the US and UK. This means people can go out and buy a DVD or VHS, connect the analogue output of their player to a recorder - either analogue or digital - and make free copies for friends.

Usually, hot new movies are protected by Macrovision, which tinkers with the analogue picture signal so that it can be viewed on a TV set but not copied.

The Harry Potter title was released worldwide in May. The chance discovery that it is unprotected was made by market analysts in the US, who interpreted it as loss of confidence in Macrovision. Tests run by New Scientist confirm that the UK release can also be copied.

Like all major movies, Harry Potter was widely pirated before its official release. Macrovisions-busters can also be bought, often disguised by names such as 'signal cleaners' to keep within the law. By not protecting Harry Potter, Time Warner has saved the five US cents or so per disc or tape that Macrovision charges. Analysts suspect that Warner left the release unprotected, to investigate whether this would have a significant impact on sales....

Industry eyes are all now on the next big video release, Lord of the Rings: The Fellowship of the Ring, which is due in August. If this is also unprotected, Hollywood may have decided that it is cheaper to let a few people copy than spend money on protection." [New Scientist]

Just as with videos, as long as the price point is low enough (which for the Harry Potter DVD it is), then this won't be a problem. Just like it wasn't a problem ten years ago. This is a good strategy, one the record industry needs to adopt. There won't be any problems with the LOTR DVD, and it will probably become the fastest selling DVD ever (at least until Spider-Man is released). There will be some piracy, but there won't be any problems.

Maybe some industry execs are waking up to the fact that you just can't plug the analog hole after all.

File Sharing: Innocent Until Proven Guilty

"Now [Stan] Liebowitz has turned his attention to another hot-button issue where law and economics intersect: file sharing. It's a logical step for the professor. He's been following copyright law and its effects since the 1970s, when audiotapes were being denounced by the recording industry as tools for theft. On May 15, the Cato Institute published a new paper by Liebowitz, "Policing Pirates in the Networked Age," that takes a comprehensive look at the history of the recording industry's battle with piracy.

In the paper, Liebowitz argues persuasively that record industry experts failed to prove their assertion that Napster was gutting industry revenues. But he also argues that eventually, digital downloading will be a serious threat to those revenues. Both topics will be part of his upcoming book, "Rethinking the Networked Economy," due to be published in August. But the specifics of those arguments may be somewhat altered from their form in the Cato paper, because when Salon caught up with Liebowitz, he was reexamining his data and wondering, Why isn't the record industry hurting more, already?...

Liebowitz: 'But again, you have to remember that what seems to take a long time while it's happening, in a historical context can occur very quickly. Videotapes when they first came out were totally mispriced. They used to sell them for about $100 because the idea was, no one really wants to have a library of videotapes. Why would you watch a movie more than once? The video rental places were going to be the ones to buy the videotapes, and since they were going to rent it over and over again, a very high price should be charged. It was only by accident that the movie industry discovered that gee, it's a much more elastic demand than we had thought....

Looking back, it appears that it happened quite quickly. But at the time, there were a couple years where videotape people were mispricing videotapes. So it wouldn't be surprising if we had mispricing here as well. They're learning what to do....

And to be honest, it looks like [file sharing] should really cause problems. I honestly believed it too. If you look at the logic of it, then you say this one is real, this one should really do damage. And I'm not willing to say that it's not going to. But I'm just saying it's beginning to look like a lie....

They should have tried to negotiate with Napster to try to change the rules a bit. Number 1, they could have kept a bit of control over what was happening. They could have done a few things, like saying in order to download something you have to upload something. That would more likely make people want to buy originals. It's a more controllable form than the pure peer-to-peer without the central server.' "  [Salon.com]

This interesting interview with Professor Liebowitz covers a lot of ground while trying to stay in the middle. I included the last bit above describing how expensive videos used to be because the industry misread potential demand. I've been meaning to make this point myself because I was flipping through TV channels recently, when I came across the movie Libeled Lady. I love classic movies, and this is an oldie but goodie. It's one of those 1930s screwball comedies and it stars Spencer Tracy, Jean Harlow, William Powell, and Myrna Loy (in an aside to their Thin Man days).

I first saw it in the 1980s on American Movie Classics, and I'd always wanted to see it again but it was rarely shown and I could never seem to catch it the few times it was on. I tried to buy it at the local video store, but they had never heard of it. When they looked it up in the catalog, it retailed for $99.98. This was for a little-known movie made in 1936! Even if I'd had $100 to spend on it, the price was ridiculous. Now you can get it for $19.99 at Amazon, though I haven't bought it because I'm waiting for the DVD, which will probably retail for $14.99 when they get around to releasing it.

I've always remembered this incident and it always boggled my mind that the studio didn't understand that my friends and I would want to own videos. And there was no way to prove to them that we were a viable market. I even called the folks that published the video store's catalog, and they re-iterated it would cost me $100 PLUS SHIPPING to own my own copy.

So the difference now is that there is a way for the market to make its voice heard. It's been a pretty loud wake-up call, too, and this time the industry has taken notice. Unfortunately, they're as clueless as they were 20 years ago. They refuse to learn from their past mistakes. One more excerpt from the Salon article, emphasis is mine:

Liebowitz: 'The idea [of digital rights management] has caused a fair amount of hysteria in the academic community, because they think fair use is going to disappear. I think that's totally not true. Fair use is still there. DRM can't keep you from reading the material, as long as you pay the price. Some say, Well, how can you take a paragraph and copy it anymore? That's what we normally consider to be fair use. But the fact is, you can still do that. You might not be able to cut and paste but as long as you can read it, you can type it....

You might have to pay something. But you can always go to someone that has a legitimate version, or to a library or something like that. So I don't think it's really changing fair use. It's what fair use was before the copier. We certainly had fair use then, so this doesn't kill fair use. It's just not as easy as it could be but it's not any harder than it was 30 years ago....

Academics have gotten a bit spoiled. These days they can copy things easily for free. If they had to pay some small amount, which is really all we're talking about, they get upset. I don't see the costs as a major problem.' "

I can't believe that Liebowitz doesn't understand the ramifications of DRM embedded in every digital file and every device capable of playing those files. There's no loophole for libraries to circulate material, which is a pretty big dent in fair use. So how do you read the material if you can't afford the price and the library doesn't have a legitimate copy because there's no exemption for them to circulate digital files? And if you can't access any current material, that's not just "harder than it was 30 years ago," it's impossible.

Obviously Liebowitz has let his job influence his world view. While it's true that academics are the ones most likely to be able to afford DRM payments, they account for a relatively small percentage of folks that would use digital files. His view that academics already post material for free anyway and that costs are not a problem are soundly refuted by the problems academic libraries face with spiralling prices of serials. It's not just a problem, it's a crisis of epidemic proportions. Just ask any academic librarian.

So just keep Liebowitz's bias in mind as you read this interview, because he's in a unique position that the rest of us are not in, and he can't see past his own blinders.