Why Do They Poke Me in the Eye?

This is one of a series of posts; the last post was here.

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The new tools of creation and distribution make this the best time ever for those willing to give away their content. But professional content creators have never faced a greater challenge. Part of this is greater competition from the newly empowered amateurs, the new content professionals of the Internet era. Competition is healthy, and especially so given the poor track records of the gatekeepers in choosing content. The “failure” rate on professionally chosen music is extraordinarily high. But I suspect that most of the professionals believe, rightly or wrongly I do not know, that their content will win in the marketplace against the amateurs.

Instead, the greater challenge to professionals is the collapse of the copy and the ability of content users to unbundle content and ads. If content creators cannot control copies or cannot ensure that ads remain attached to content, how will content creators get paid? Content producers have looked to technology to bolster the copy as copy and to limit whether users can unbundle ads and content. It is important to see the systematic challenge posed.

You pop a DVD in and sit back to enjoy the movie. The first thing you see is the copyright warning and that is followed by a preview. None of this is what you wanted to see, so you hit the fast-forward button, but nothing happens. Instead, you see a red circle with a slash through it and your TV screen reads: “Operation not currently supported.” What is going on? Fast-forwarding has been turned off. A DVD player that complies with the specifications established by the DVD Copy Control Association is built to respect a setting on the DVD itself which temporarily turns off fast forwarding.

So you can’t fast forward because of the dictates of some shadow conspiracy that has the power to reach into your home and control the very stuff displayed on your television? Of course, most consumers hate it when they have to watch the previews (I hit the next scene button, which usually works). And no one is surprised by that, not DVDCCA, not the director of the movie, and not the company building the DVD player. Why on earth do these companies want to make the consumer mad? It as if they built a DVD player that occasionally reached out with a stick and poked you in the eye. We don’t think that there would be much of a market for the Sony DVD iPoker (“Now with Sharper Sticks!”), and yet every DVD player comes with the ability to disable fast-forwarding. Why?

Certainly the consumer electronics industry does not want to build devices that limit what consumers can do with content. The CE industry wants to build innovative devices that give consumers what they want. Consumers don’t want the limits and would choose devices without them. If the CE industry was free to build DVD players that didn’t obey DVDs that disable fast-forwarding, it would do so. Consumers would flock to these superior devices, as no individual consumer wants to have to watch the previews. Competition in the industry would quickly result in all DVD players with always-enabled fast-forward and a better world.

No, actually not, or at least maybe not. Consumers as a group may benefit from restrictions, even if each consumer would prefer to be free of them. This is TV advertising all over again: we need advertising to sustain free TV, but we want the other guy to watch the commercials. If no one watched commercials, all TV would need to be pay TV. A device that restricts fast-forwarding over commercials may be one way that we can sustain free TV and consumers as a group might be better off. Previews on DVDs are just another form of advertising, and again consumers might be better off—lower prices for DVDs—in a world in which fast-forwarding is limited.

But now we see why law will be called on in these situations. The device limits may make sense, but no individual consumer wants to be subject to them and each manufacturer would prefer to build devices without the limits. Getting one manufacturer to agree to the limits doesn’t accomplish anything, as consumers can just switch to the other manufacturers. Getting all of the manufacturers to agree will be complicated and is likely to make the antitrust enforcers take notice. After all, all of the manufacturers would be agreeing to not compete in fast-forwarding technology. And even if we surmounted all of that, a new producer could pop up, probably overseas, who wouldn’t be subject to the agreement.

Comments

[Kevin]

The consumer might be better off; they might not be.

Why should paternalistic industries be the ones to decide what the consumer wants?

Many, many consumers want the "pay TV" which you lament. It exists without advertising in the form of HBO.

Many, many consumers could very well want to pay a dollar extra per DVD to not have to watch the advertising there. Why not let them choose?

[Bruce Boyden]

Kevin, why should paternalistic grocery stores be the ones to decide what fruits the consumer wants? Perhaps you're a big fan of kumquats. Perhaps dozens of people in your neighborhood silently stew at the absence of kumquats. What gives the grocery store the right to stifle you and your compatriots' kumquat consumption by refusing to offer kumquats?

[Behavioral Dork]

Professor Picker, you write: "But now we see why law will be called on in these situations."

But should it be? I can understand if there is some kind of violated contractual obligation (but I think most EULAs are of dubious validity, a topic for another day), but why and when exactly should law be called on to protect an existing business model when it is threatened by technology?

[Doug Lay]

>> Previews on DVDs are just another form of advertising, and again consumers might be better off—lower prices for DVDs—in a world in which fast-forwarding is limited.

This proposition seems an almost comical logical stretch to me. Can you point out any research that indicates (a) whether restrictions on device functionality in the DVD market or similar markets lead to lower prices; or (b) whether consumers have clearly indicated a preference for low pricing over increased device functionality?

>> But now we see why law will be called on in these situations.

Interesting that you drop to a very passive voice here, not even stating WHO will be calling on the law. I presume you're talking about the content industries, perhaps in collaboration with a group of co-operative device manufacturers who wish to enter into legally blessed cartel-like arrangements. Am I misreading you?

[Randy Picker]

This is a pretty basic collective action problem (a group prisoner's dilemma if you will). The dominant strategy is to not watch ads. One of the standard justifications for why laws can be in everyone's interest is that the law solves a collective action problem. If you are interested in the theory behind that, consult Baird, Gertner & Picker, Game Theory and the Law (available at Amazon).

[Doug Lay]

Framing the issue as a group prisoner's dilemma abstracts away too many important questions, I think. Are consumers the only ones whose interests should be considered? What about device makers, who in this day and age could be anyone with a modicum of technical savvy? How much do consumers value not watching ads vs lower prices on DVDs? How do you measure this? Is there even a correlation between lower prices for content and legal restrictions on device functionality? Do we just take the word of the would-be cartel members that such a correlation exists?