In this session, we're going to talk about the risks and challenges associated with protecting entertainment and why this is complicated and relies heavily upon consumer goodwill and how that may be a limitation. Now keep in mind, limitations - first sale doctrine matters, performance rights matter, expired copyright matter; but it also matters that you have protect consumer goodwill and there are few other areas. We're going to focus now on consumer goodwill and what that means in the context of protecting entertainment, an important area of copyright. Now in terms of entertainment, there's a challenge here because if you get the balance wrong and you're too soft on protecting your copyright, your artists don't make money. Too many people copy, the artists don't make any money, there's no incentives, you don't make any money as a corporation and you can't even afford to promote your music or your movies. And that's bad. But if you're too tough, consumers don't like you. And they may resent you to the point of boycotting or avoiding your software or your music or your media, your movies - and say I don't like this. This is not fun. I don't want to use this. I don't want to buy this. And so you don't want to lose consumer loyalty or goodwill because consumers are kind of fickle. And so you have to balance being too soft versus too tough. Now what's the alternative? Well, one way that you can limit people's ability to do things is to do it in software. Digital rights management system enable you to do things like say well, you can download this music on iTunes and you can make five copies; or you can watch this Blu-ray disc on this media and this media with up to four devices, but not in this other way - you can't just make copies anywhere you want, we're limiting what you can do. This can stop you from being able to make copies and it's kind of, in some cases, very customer-specific or company-specific software, where you say we're going to stop you from playing this video in this region or in some other way stop you from doing something. Sometimes it's an industry standard, sometimes it's a company-specific software to stop you from doing certain things. Like Apple, as an example, has company-specific software that limits you to certain rights for what you bought digitally. Now in the case of Sony, they decided to develop some company-specific software that gave them some rights to stop you from doing certain things. So they used what's called a rootkit to protect their music CDs. Now what's a rootkit? A rootkit is something that installs something on the root of your computer or the lowest level of your hard drive. And what happens is you put this CD into your computer. And it automatically installs some software on your computer; installs it for you - it doesn't ask, just does it. That software, that disk gets sold to consumers. They put it in their CD and it automatically installs the software. What does that software do? Well, it prevents you from ripping the CD. Once that software is on, you can't rip that CD. It also limits your ability to copy MP3 files; so any MP3 files already in your machine may be unable to be copied or moved to other drives or other computers. And it, if you remove it, it disables your hardware - turns off your CD. So you can't remove it, you can't copy, you can't rip - and even worse, it spies on you. It will send messages back over the internet to tell Sony oh, look what we found. Look at all the music on this machine. Look at all the things you could sue this user for. Isn't it wonderful that we have installed this software for you on this user's computer without their knowledge. Because how the heck did Sony get away with that? Well - Sony said well, you bought the CD, didn't you? Yeah. And in the CD it says somewhere in the packaging and the fine print - somewhere on there - that it has specialized software that will install a digital rights management system on your computer that prevents you from breaking copyright law. And you said okay, okay - whatever. You say well, I never read it. Of course you never read it, you never read these things. But you did agree to it because you bought it and you opened the plastic wrap and you agree to lots of things when you open software or open CDs. And so customers are angry. They say well, I didn't sign up for this. And they're mad. They say I want my money back. I also want my computer back, but at least I want my money back. And they said this shouldn't even be legal. So a lawsuit was filed by a group that represented users on behalf of all the users who were going to file. And Sony agreed okay, we'll reach a - we'll release a patch that will enable you to disable the software so you can take it off. It won't harm your hardware, but you still can't copy our music. Users said it's not enough. I don't want just this patch. I don't want you to fix that. I want my rights back. I want to be able to make copies. They actually don't have these rights, but they argued this. They pushed for it. The court said well, the rootkit is kind of a harsh thing to use. It's usually used by virus makers. It's usually used to hack into systems. It is not a great thing for Sony to be using, but this application is actually legal because Sony is using the rootkit to protect their legal rights. They have the right to stop you from making copies of their music. The only thing it stops you from doing is making copies of music by Sony or others. And they've allowed a patch that enables you to copy other people's MP3 files, so it only protect Sony's rights and that's legal. The court said Sony wins, users lose. Too bad. Sony's application is legal. Even with the court win, Sony lost. Why did they lose? They won in court, but they lost in the court of customer opinion. Six months after their albums were sold, sales were good. Their artists were popular. Their music was selling. And then news was reported on TV stations, cable shows, talk radio, newspapers, magazines about this Sony virus and hack and what it was doing. People didn't know. They knew there was a problem, they didn't know why. This news gets out and within 24 hours, there's a massive drop in sales. People start boycotting Sony's albums. After three days, retail stores returned 4.7 million discs. That's a lot of money. That's millions of dollars that Sony lost because they won in court, but they lost sales. The artists were furious. Even worse than the return of the CDs is the artists said we're not going to record with studio Sony anymore. We view this as a breach of contract for our agreement, we view this as a horrible thing and we will never sign another agreement with Sony. Sony says oh, okay, okay. I'm sorry. You can't lose your suppliers. So Sony said okay, okay. We will recall the disks. And they issued an apology. They've re-released 52 albums without any digital rights management or rootkit - completely unprotected, normal CDs - you can copy anything, rip anything, do anything you want. We're sorry. So they apologized, they re-released - after they had won. They won and they still apologized. They still re-released because they lost sales, they lost support, they lost goodwill. And they promised never to do this again. I will never do what I'm legally entitled to do because you will hate me if I do it. This is a limitation on copyright. You can't do something which people hate. You win in court, you lose goodwill - you lose. So to summarize, you can't be too soft or artists don't make money. You can't be too tough or consumers don't like you. You've got to be in the middle. You've got to balance yin and yang. These two opposing forces make it complicated to protect entertainment. Thank you.
