Why can’t movie-streaming sites deliver the selection of movies that customers obviously want? This was the question posed by a recent New York Times column, comparing undersupplied services like Netflix with unauthorized platforms like Popcorn Time. The answer, the Times explains, is windowing—the industry practice of selling exclusivity periods to certain markets and platforms, with the result of staggered launches.
But the Times fails to ask a more fundamental question: why do streaming sites have to listen to Hollywood’s windowing demands in the first place? After all, while it’s clear why the studios like windowing—they can sell the same rights over and over once the promised exclusivity periods expire—it doesn’t seem like a very good deal for users. Those users get access to a smaller selection, higher prices, and fewer choices between platforms and services. It should be astonishing that a company that once had to maintain and transport a staggering inventory of fragile plastic discs is able to offer less when its marginal cost dropped to near zero.
The problem is that, unlike earlier movie-rental options, streaming rights fall fundamentally within a permission culture….
Netflix is a great illustration of what’s gone wrong here. It’s gone from having a nearly unrivaled catalog of films available to rent to being the butt of Onion jokes. What happened: It shifted from a system where nobody had a veto power over its operations, to one where it had to get permission and make deals with Hollywood. Sometimes it’s difficult to find the concrete costs of living in a permission culture, but the decline of Netflix’s selection is an important cautionary tale.
It’s especially clear when you look at how Netflix upended the movie rental market in the first place. In one way, it suffered from a major competitive disadvantage: competitors like Blockbuster had locations near people’s houses. As long as those stores had the movie you wanted, you could be watching within hours—not days—of deciding on a title.
But Netflix was able to experiment with different price points and subscription models and, crucially, it could try those without first convincing any incumbents. Both Blockbuster and Netflix’s DVD-by-mail service relied on the first sale doctrine, meaning they can buy physical copies of movies, and then resell or rent at any price they like. No royalties, no licenses, no contracts—with physical media, once a rental company has bought the copy, the copyright holder is basically out of the picture.
You can see how this is great for users. Companies can experiment to find the things that people like best, and have the power to make decisions based on their users’ needs and wants. Movie studios still got paid—these rental companies were buying lots and lots of copies, after all—but couldn’t exert control over the rental businesses, which could then compete on their merits.
Rightsholders hate not having this control. So the first sale doctrine gets attacked over and over. From Nintendo’s suing Blockbuster in the 80s to Universal’s “revenue sharing agreement” with Redbox, and through to more recent cases like Kirtsaeng v. Wiley in the Supreme Court, rightsholders have tried to restrict the first sale doctrine in physical media. And when it comes to digital media, consumers have even more of an uphill battle.
When the ranking member of the House Subcommittee on intellectual property is calling the principle of “you bought it, you own it” an extreme view, there’s something seriously wrong here. Furthermore, the Netflix example shows that the problem isn’t confined to the books, movies, records, and games that we own; it limits the kinds of services that can ever be created.
With a commercial product like Netflix, we can feel those costs today. But more troubling are the costs we will feel tomorrow, in a decade or a century from now, if we make a transition to digital media without keeping the first sale doctrine intact. Copyright has already cost us crucial elements of our cinematic and literary history. Those costs will compound if librarians, archivists, and enthusiasts aren’t allowed to care for their own copies.
As Matt Schruers over at the DisCo Project notes, studio practices have ensured that no option so far can be convenient, comprehensive, and lawful. Netflix Instant is a great service for what it is able to offer, but in a permission culture it is broken from the start.
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