Last week, I listened to a speech at Georgia Tech in Atlanta, presented by Yaron Brook, President and Executive Director of the Ayn Rand Institute. I was enthralled by Brook’s eloquent and forceful defense of the free market. In this time of rampant government meddling in the economy, it was refreshing to be reminded of how the free market rewards those who work with its forces rather than against them. If only the Hollywood studios had been in that audience and heard the message.
For months now, the major studios have been waging all-out war against technology companies that are developing devices that offer consumers the ability to watch their DVDs on their own computers and televisions under circumstances that give them maximum flexibility. Heaven only knows how much the studios have paid in fees in order to have their legal surrogates wage a war of words and briefs against relatively small companies like RealNetworks and Kaleidescape that are trying to fill this market niche. RealNetworks has been hit particularly hard by the aggressive court action lodged against it by the studios.
Why is Hollywood beating up so badly on RealNetworks? What sin did this company commit that has caused such legal violence to be visited on it? Was it pirating Hollywood movies? Was it committing a fraud on consumers by advertising something it did not deliver? Was it perhaps handmaiden to a Bernie Madoff Ponzi scheme? To the Hollywood studios, it was something much scarier – allowing consumers to exercise their “Fair Use” rights.
What RealNetworks did that landed it on Hollywood’s Black List, was to have the audacity to listen to the market and give consumers something they wanted at a time when Hollywood was not growing to meet the needs of these same consumers. RealNetworks had figured out that consumers wanted the capability to store their own DVDs on their own laptops and home computers, so they could then watch them at their leisure and without having to load each one into the computer every time they wanted to play it. Based on its market research, RealNetworks then developed a product that would do just what the consumer desired, while also protecting the studios’ rights – the RealDVD system. Unlike the ubiquitous assortment of illegal DVD rippers than can be located with a simple Google search on the Internet, RealDVD is the only product that allows consumers to save copies of their own, legally-purchased DVDs to their computers while also preventing people from burning copies. While this would seem to be the likely start of a beautiful friendship between RealNetworks and the movie moguls, it unfortunately was just the beginning of Real’s troubles with the Hollywood studios.
For more than a year now, RealNetworks has been fighting an expensive and difficult defensive action in federal court in San Francisco, as the major studios seek to permanently stop it from marketing its RealDVD product. In fact, last August, the judge presiding over the case temporarily enjoined the company from selling its product.
Rather than licking its wounds and moving to other products, RealNetworks is determined to fight this assault on competition and free enterprise. Just this week, for example, it formally appealed the August 11, 2009 order issued against it by U.S. District Court Judge Marilyn Patel. Ayn Rand would be pleased with RealNetworks’ attitude.
What neither Ayn Rand nor any free market advocate would understand, is the manner in which the studios are proceeding against RealNetworks. It makes no sense from a business standpoint, and if anything shows that the movie industry is destined to make many of the same mistakes that the music industry made. Consider that DVD sales are down significantly in the current slow economic climate. Would it not make sense for Hollywood studios to take steps to encourage consumers to buy DVDS? And, insofar as offering a product that makes it easier for consumers to record, store and view their DVDs would cause them to purchase more DVDs, why would the studios fight tooth-and-nail against a company whose goals are essentially the same as Hollywood’s?
Perhaps because at least one of those major studios – Disney – is developing its own technology to make it easier for consumers to digitally store and view movies? In a recent interview, for example, Disney chief exec Bob Iger indicated his company would shortly begin marketing its “Keychest” system that would do just those things.
Even the DVD rental industry, which is fighting its own battles with the Hollywood studios, understands that DVD sales generate significantly more income for the studios than do rentals. Yet those very same studios that are taking steps to increase sales of their movies and limit rentals, are tone deaf to the work of companies like RealNetworks, whose product also would encourage sales of these silver discs.
Hollywood, which continues to toy with the idea of bringing Ayn Rand’s free market opus, Atlas Shrugged, to the silver screen, would be well-served to actually read and digest the novel’s admonition to use if not embrace the forces of the market place, rather than oppose the very forces that could help it. Such a tactic would be in the industry’s “enlightened self interest,” and it would benefit all concerned. Unfortunately, the moguls who head the studios apparently don’t have time for such lessons
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