Last year the studios filed a petition with the FCC to lift its current ban on SOC, but, so far at least, the FCC has not yet granted it. Ars points to a letter confirming that execs and lobbyists from Sony Pictures earlier this week met with Acting FCC Chairman Michael Copps and his staff "to talk up (PDF) 'the advantages of expanded consumer choices in the marketplace' which would supposedly come with a waiver on the agency's ban on" SOC.
Techdirt is outraged by this, particularly by the studios' argument that SOC will result in more consumer choice. Let's examine Techdirt's argument (while doing our best to ignore its liberal use of tendentious language ("break your DVR," "totally ridiculous," "jedi mind trick," "politicians are a bit slow," " The MPAA is simply trying to confuse politicians," "yammering on and on").
Techdirt implies that the studios claim they can't (i.e., are physically unable to) implement the new early home HD window without SOC, because there's something "stopping" them from doing so. But that's not what the studios actually said; if you read their petition in context, you will see that they simply said that they won't implement the new services unless they have SOC in place to allay their piracy and business concerns. So when Techdirt says, "There's absolutely nothing stopping the MPAA from offering this "consumer choice" right now," it's correct -- but the studios never claimed anything different. The studios' position in a nutshell is: Sure, as a purely technical matter, we could give everyone early-window HD VOD now. But we think that would be a bad business decision, because of our piracy and other copying concerns. But rather than paraphrasing, let's look at what the MPAA actually said in its petition:
Specifically, the Petitioners are interested in exploring opportunities to provide consumers with the ability to order recently released theatrical, high definition movies directly through their MVPD [multi-channel video programming distributors] (the "Services"). These new Services are exactly the type of ''new business models" that the Commission contemplated when it adopted the encoding rules. While each studio would have its own independent business model developed through private negotiations with existing and potentially new partners, the purpose of this Petition is to remove a general regulatory impediment that prevents implementation of content protection required in the specific case of the Services.When the petition uses language like "prevents" and "necessary," it is simply saying that, it the studios' judgment, their concerns about "unauthorized copying or redistribution" have led them to determine that they will not begin the new services without SOC -- not that anything actually physically prevents them from doing so. It's clear what the MPAA is saying: its members want to implement the new services, but, after evaluating the piracy and business issues involved, have decided that they aren't willing to do so unless they have SOC. No "jedi mind tricks" here.
In order to make this extremely high value content available for general in-home viewing at such an early release window, protections are necessary to ensure it is not exposed to unauthorized copying or redistribution. Enabling SOC in this instance will provide the Petitioners with vital protections by allowing their high value content to flow only over secure and protected digital outputs. Absent sufficient protections, the Petitioners' theatrical movies are simply too valuable in this early distribution window to expose them to uninhibited copying or redistribution. Expedited consideration of this waiver request is necessary in order for the Petitioners to move forward with their independent discussions with MVPDs regarding introduction ofthe Services.
Techdirt mocks the MPAA's argument that SOC would result in additional consumer choice. But the studios' argument is perfectly reasonable. As I previously explained:
Today the studios don't offer pre-DVD hi-def VOD. If SOC comes to be, they will, and consumers will have an additional choice in home-movie viewing. If the copyleft succeeds in continuing to block SOC, they won't. And how exactly are consumers better off when the government takes steps that result in the studios offering them fewer choices?Whether SOC opponents like it or not, the studios have made clear that they won't implement the new services without SOC. Thus the way to bring more choice to consumers is to allow the studios to use SOC, and experiment with the new early-window HD VOD service. Maybe SOC and the proposed services will be a complete flop. But we'll never know unless the FCC allows the SOC experiment, which the studios say will give them the confidence to proceed.
One more thing: Techdirt writes:
[SOC is] about giving the MPAA another way to block legitimate watchers from doing perfectly legal time shifting of the content on their TV.Techdirt cites no law for the proposition that it's "perfectly legal" to time-shift paid VOD content; that that's not surprising, for the simple reason that there are no cases so holding. The Supreme Court's Sony-Betamax decision is often mis-cited as an all-purpose free pass for time-shifting. But it isn't. In fact, the Court was explicit that it was not ruling on the ability to time-shift content that the user specifically pays for (which is what the VOD service at issue in the SOC proceedings would be):
This case involves only the home recording for home use of television programs broadcast free over the airwaves. No issue is raised concerning cable or pay television...The Sony-Betamax Court also was careful to define "time-shifting" quite narrowly:
the practice of recording a program to view it once at a later time, and thereafter erasing it.Thus the ability to record high-value paid content on a DVR, watch it multiple times, and retain it indefinitely, is well beyond the scope of existing law on time-shifting. I see no indications that courts today would expand Sony-Betamax to encompass such activities. And there is nothing wrong with copyright owners taking reasonable steps, such as pressing for permission to implement SOC, to inhibit unlicensed copying and further distribution of their most valuable products. Why should the FCC prevent them from even trying?
UPDATE: Paul Sweeting of Content Agenda has an interesting take on the issue, suggesting that falling DVD sales may prod the studios to put in place the early HD VOD service even without SOC:
Given than more than half of studios' profits from movies come from DVD, the rapid erosion of that revenue stream is potentially catastrophic. Disney and Fox-parent News Corp. this week each reported huge earnings hits in their filmed entertainment divisions due to plunging DVD sales. Time Warner saw an increase in film earnings but still experienced a decline in DVD revenue.
Would an early, premium priced, high-def VOD window get people watching movies at home again and replace some of those DVD losses? Hard to say. But it's also hard to point to any other existing or potential distribution channel where they're likely to replace those dollars in the near term.
The question for the studios is whether the need to create a new revenue stream will be keen enough to risk doing it without the protection of SOC.