Download ruling a blow to vid biz

Office sees no reason for Capital Hill to amend laws

WASHINGTON — A crucial U.S. Copyright Office report has just made it easier for studios to sell movie downloads directly to consumers without having to worry about a virtual Blockbuster setting up shop and dipping into the competition.

In long-awaited correspondence to Congress made public Wednesday evening, the copyright office said it sees no reason for Capitol Hill to amend copyright laws to allow vidtailers or other parties to sell or rent copies of downloaded movies without additional permission.

Disappointed vidtailers lobbied hard for the Copyright Office to support the notion of extending the so-called “first-sale doctrine” to cover retransmission of copyrighted works.

In the analog world, the first-sale doctrine allows vidtailers to rent physical cassettes and DVDs without the authorization of the copyright owner. But according to the Copyright Office, online vidtailers should not be allowed to rent or resell digital downloads obtained from the studios without permission.

Studio control

The rule, in effect, would force anyone hoping to offer downloaded movies to first obtain a license from the studios.

“We are still looking at the report, but from what we’ve reviewed so far, we feel the Copyright Office has come to a proper conclusion,” Motion Picture Assn. of America spokesman Richard Taylor said.

Taylor said the consumer is the ultimate beneficiary since studios will feel much more comfortable about putting movies online without fear of rampant piracy.

In recent weeks, five studios –MGM, Paramount, Sony, Universal and Warner Bros. — announced plans to begin offering movie downloads directly to consumers. Disney and Fox are widely expected to announce their video-on-demand plan soon.

Vidtailers also want a piece of the download action, and argued to the Copyright Office that forcing retailers to obtain licenses would allow the studios to squash competition online and ultimately force consumers to pay higher prices for downloads.

While the report sympathized with the vid biz, it concluded the threat of piracy from unlicensed retransmission “outweighs the pro-competitive gains that might be realized” by permitting them. Copies in the digital age are just too perfect and too easily swapped.

“We’re pleased that the Copyright Office recognized that some licensing restrictions could go too far, but we disagree that it’s premature for Congress to worry about it,” Video Software Dealers Assn. prexy Bo Andersen said.

“It’s clear that the office did no independent inquiry into what’s really going on in the market, because those kind of restrictions are part of the business models that are already being rolled out.”

Studios have argued that such issues should be resolved by the marketplace through individual licensing deals, not government intervention.

Backing up

The Copyright Office did suggest consumers be allowed to make backup copies of digital works, giving films and music the same protection covering computer software.

Weighing in at nearly 1,000 pages (including exhibits), the report had industry lobbyists still struggling Thursday to come to grips with its findings.

The status report was ordered by Congress when it passed the Digital Millennium Copyright Act of 1998. Report, charged with assessing how well the DMCA is working, originally was skedded to be delivered in October 2000, but the sheer complexity of the issues added nearly a year to its delivery time.

In addition to the movie download question, the report touches on music streaming, computer software and a host of other issues.

Report is meant to guide Congress in making any adjustments to the DMCA in light of ongoing developments in digital technology. The House Judiciary Committee is tentatively slated to hold hearings on the issue this fall.

Generally speaking, the Copyright Office concluded that Congress doesn’t need to go back and amend the DMCA — at least for now. That was good news not only for the movie biz, but also for the recording industry.

Royalty pains

One group that did take a hit was music publishers and songwriters, who were pushing for an additional reproduction royalty for copies made in the course of Webcasting songs.

The Copyright Office recommended that Congress pass legislation specifically exempting such copies from any further royalties.

“The office’s conclusion regarding temporary buffer copies as applied to sound recordings is not material to the recording industry today, because we have never asserted a claim based on the making of temporary copies,” Recording Industry Assn. of America senior veep and general counsel Cary Sherman said.

Sherman noted that the music biz is grateful to the Copyright Office for determining that the original DCMA is doing the job it set out to do.

Digital Media Assn. exec director Jonathan Potter also claimed victory, saying the Copyright Office took a “sound and reasoned stance that balances the interests of consumers and artists with those of content owners.”

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