Abstract
The primary purpose of this note is to provide a solution for the current region based restrictions on media such as films, video games, and software. The previous system was based around physical media. Since the future is switching to intangible online-based media, this system must be reevaluated. A system that provides worldwide access to media would create a profitable relationship to both consumers and copyright holders. Society would benefit because copyright holders would be encouraged to produce more works for a wider audience across the world.
Introduction
This note will first evaluate the current state of Digital Rights Management. It will then examine copyright holders justifications for the current system. Finally, it will introduce a new system, show how this system would be beneficial to both consumer and copyright holders, and show why current justifications for region based restrictions are no longer appropriate given the changing market.
I. The Current State of Digital Rights Management and Region Based Restrictions
Digital Rights Management (DRM) is used to control access to a digital copyrighted work.[1] Through a variety of methods, DRM technologies provide copyright holders with greater rights than those traditionally afforded by copyright law.[2] However, copyright law critics show that the rights of those who use the copyrighted work are greatly decreased.[3] Today, DRM is found on all sorts of products including movies, video games, computer software, cell phones, printer cartridges, and even websites such as YouTube. Many companies have adopted such technological protective measures and the implications have been felt globally. This section will briefly explain the policies behind copyright protection. It will then explore different laws adopted globally which validate DRM. Next, both how and what types of works are controlled will be evaluated. Finally. it will show how the current state of viewing copyrighted works is evolving.
Policy
There are two policy concerns for providing copyright protection. These concerns are based on utilitarian and natural law functions.[4] From the utilitarian perspective, society will receive more new creations since authors will be encouraged to continue to create by having their works protected.[5] Microsoft program manager, Michael Burke, argued that “without digital locking restrictions, content makers would have little incentive to make or let people play music, movies or other materials on their computers.”[6] The natural law, or Locke view centers around rewarding the author with copyright protection for the fruits of his labor.[7] DRM is a way that copyright holders may provide additional protections to their works.
The Rise of Global DRM Protection
Copyright holders in the modern world often try to reach beyond the rights granted to them by traditional copyright law. Shrink wrap license and click-through agreement have become staples of the modern world. Many copyright holders opt to be protected by the full force of copyright and contract law. Works not protected by copyright, may be bolstered with contract law.[8] ProCD v. Zeidenberg shows assent and consideration in a contract is qualitatively different from copyright infringement. Parties can freely enter into license agreements that enforce stricter requirements than copyright, without the risk that such agreements will be preempted by copyright law.[9] The days where a consumer purchases a product and is free to do as he wishes with it, appear to be passing. Instead, many people are entering licensing agreements to use software, music, movies, and even video games. As Bowers v. Baystate illustrates, fair use does not preempt freedom to contract.[10]
Such an expanded power over software and media is now receiving protection as paracopyright law.[11] There once existed a clever work around to licensing agreements under fair use. To illustrate this, imagine a savvy businessman who legally purchased a copy of the latest accounting software for his corporation. The software is encrypted so as to prevent anyone from using the software without agreeing to licensing provisions which limit its use to one computer. If this businessman had the technological know-how, under fair use he could circumvent the encryption and licensing agreements, and do as he wished with the software including installing it on multiple computers against the software company’s wishes. Without the force of laws supporting it, DRM is a smoke shield, everything can be circumvented. Companies may dictate through licensing agreements and technological protective measures how they want consumers to use their products, but lawful purchasers do not have to subscribe to such uses if there is no applicable law governing. However, much to the disappointment of the consumers, laws have arisen to prevent such situations and expand the power of those who own such works. Anticircumvention laws prohibit the circumvention of a digital good’s technological protective measures, such as DRM, to use a digital product in ways copyright holders do not wish to allow.[12]
Peter Yu, the Director of the Intellectual Property Law Center at Drake University Law School, states that “intellectual property rights are territorial by nature.”[13] Globally there is variance in many aspects of law, which leads to copyright holders adding additional protections such as DRM. However, “Since the nineteenth century sovereign governments have worked with each other to address cross-border challenges by establishing international intellectual property agreements.”[14] Today, most infringement stems from internet usage.[15] However, this is still capable of falling under global laws because, “information does not flow in a vacuum, but in political space that is already occupied.”[16] Therefore the following treaties and laws are applicable when applied to both offline and online infringement.
The basis for many countries anti-circumvention provisions is Article 11 of the World Intellectual Property Organization Copyright Treaty (WIPO). Article 11 requires ratifying nations to “provide adequate legal protection and effective legal remedies against the circumvention of effective technological measures that are used by authors in connection with the exercise of their rights under this Treaty or the Berne Convention and that restrict acts, in respect of their works, which are not authorized by the authors concerned or permitted by law.”[17] The European Union has implemented anticircumvention provisions in compliance with this treaty.[18] The United States became a ratifying nation through the Digital Millennium Copyright Act (DMCA), where it codified provisions of Article 11 of WIPO.[19]
Response to the DMCA shows how anticircumvention laws have expanded in the past decade. Copyright holders may add DRM and other technological protective measures to a work, and the DMCA provides causes of action against circumvention of these access and copying safeguards.[20] There are limited exemptions to the DMCA for libraries, law enforcement, reverse engineering, and encryption research.[21] Although the DMCA states that DRM does not affect fair use, this statement is somewhat illusory, since only a very limited number of consumers would have the knowledge and wherewithal to circumvent.[22] Universal City Studios, Inc. v. Corley, suggests that the DMCA is not too great of a burden on fair use.[23] Case law shows that for the DMCA to be applicable, circumvention must be closely linked to a copyright violation.[24] However, the circumvention of digital media is likely to be closely linked to a copyright violation in many cases so copyright holders will fight adamantly against all circumvention.
How DRM is Used through Region Based Restrictions
There are numerous forms of DRM, but this note will focus on how access to works is protected based on location of the user. The two methods of controlling access based on location involve region codes and geofiltering.
Region codes are used primarily to protect tangible media that consumers may purchase locally. By using the content scrambling system (CSS) data is encrypted and authenticated to prevent unauthorized viewing and copying of video files directly from the disc.[25] Distributors will encode the media to specific regions of the world. Because of the encryption, only devices with the corresponding region, which are only purchasable in that region of the world, are able to access the copyrighted work. For example, a region three DVD purchased in Taiwan could not be brought back to Canada and played on a region one DVD player. The Canadian movie aficionado would have to also purchase a Taiwanese DVD player or buy the movie in his own region. “[R]egion codes have been widely used to protect not only movies and television shows, but also music, software, video games, and, the most surprising of all, printer tone cartridges.”[26]
Film distributors have divided the world into region codes. The world is divided into the following regions for the distribution of DVDs and Blu-rays:
DVD Region Codes
| Region code | Country/Area |
| 0 | Informal term meaning “playable in all regions”. Region 0 discs will play on any DVD player. |
| 1 | Bermuda, Canada, United States and U.S. territories |
| 2 | The Middle East, Western Europe, Central Europe, Egypt, French overseas territories, Greenland, Japan, Lesotho, South Africa and Swaziland |
| 3 | Southeast Asia, Hong Kong, Macau, South Korea and Taiwan |
| 4 | Australasia, Central America, the Caribbean, Mexico, Oceania, South America |
| 5 | The rest of Africa, Former Soviet Union, the Indian subcontinent, Mongolia, North Korea |
| 6 | Mainland China |
| 7 | Reserved for Future Use |
| 8 | International venues such as aircraft, cruise ships, etc. |
Blu-ray Region Codes
| Region A | East Asia (except Mainland China and Mongolia), Southeast Asia, North America, South America and their dependencies. |
| Region B | Africa, Southwest Asia, Europe (except Russia and Kazakhstan), Oceania (including Australia and New Zealand) and their dependencies. |
| Region C | Central Asia, East Asia (Mainland China and Mongolia only), South Asia, central Eurasia and their dependencies. |
[27] A movie (either DVD or Blu-ray) sold in one region is designed to be played in a device coded for that region.
Geofiltering is best described as the region code of the internet. Jillian York writes, “just as DVD region codes limit viewing to a geographic area, the geofiltering of web-based videos and other sites limits viewers from outside of a particular region from accessing them.”[28] The process involves a server side DRM calculation which looks at a number of factors to grant or deny access to an individual based upon geographic location.[29]
Some factors which may be considered include a computer’s MAC address or a user’s credit card information, but the most common method is through internet protocol (IP) addresses.[30] An IP address is a unique numerical identifier assigned by an internet service provider.[31] An IP address can be seen by a company when an individual attempts to access its web content. By identifying the IP address, a company can map the general location where the address originates from and grant or deny access to localized (region-locked) content accordingly.[32] Geofiltering is a powerful tool that permits “sports leagues and movie studios to offer content they would otherwise keep offline because of territorial licensing restrictions.”[33]
It is likely that in the future region codes, which are tied to a tangible medium, will give way to geofiltering. It has been noted that there has been a “shift in the distribution of Internet traffic . . . the majority of Internet traffic by volume is a result of streaming media websites (e.g., YouTube) and hosting services.”[34] Accessing entertainment on the Internet does not require one to be tech savvy.[35] Hosting services are often used to provide easy dissemination of works of authorship.[36]
Growing Internet usage, along with increased connection speeds and bandwidth, makes geofiltering the DRM path of the future. While governments may employ geofiltering, often it is a tool used by corporations.[37] Businesses often apply this technique “to the websites of television stations such as CBS, HULU, and Netflix in the United States.”[38] In some cases these businesses argue it is legally necessary for copyright reasons, such as “Netflix videos [being] unwatchable outside of the United States [because] their licenses do not allow it.”[39] Differing local quirks will almost always be a reason provided for limiting access by geofiltering. “The laws for copyright and licensing and the business rules are different in every country, so it’s important the content providers be given a facilitating technology.”[40] Geofiltering provides what many distributors believe is necessary in order to comply with the laws in place. Additionally, along with geofiltering protection, the DMCA gives copyright owners the power to have infringing websites taken down, thus providing distributors the ability to retain their exclusive right to publish.[41]
II. Current Justifications for DRM
Television executives, film producers, software distributers, and game developers have pointed to many justifications for their uses of DRM. The biggest threat to these producers of multimedia lays in the digital nature of the products they deliver. Analog media was plagued with the deficiency that it naturally loses quality with each copy generation, and in some cases during normal use.[42] However, digital media files may be duplicated an unlimited number of times with no degradation in the quality of subsequent copies.[43] Because of this risk, protective measures such as region coding and encryption became necessary tools before copyright holders would risk digital distribution.[44] This section will first cover the problems copyright holders face with digital media, and then it will proceed to cover the benefits of copyright holders providing region locking as a method of DRM.
The Threats of Digital Media
Not only does digitalization create the threat of perfect copies, but modern methods of communication provide a risk of widespread use against the copyright holder’s will. Leaffer has written that, “[i]f digitalization allows us to store and manipulate data in ways never thought of, it has radically changed the way we transmit data.”[45] Reproduction and distribution rights were once intruded upon by face-to-face dealings with bootleggers in places like a Fresno Swap Meet or at a Chinese Night Market.[46] However, such meetings are becoming increasingly less efficient because “the networking of communications facilities allows the transmission of data from everyone to anywhere. Physical limits do not restrict the number of copies of a work that can be transmitted by electronic means. Similarly, no ceiling exists as to the number of recipients than can receive the work or where they may receive it.”[47] The Internet has opened an easy distribution channel. The limitlessness of peer-to-peer networks and streaming websites has created a greater potential harm than one person selling knocked off tapes could previously manage.
Digital media is more sought after by consumers than analog media, yet there exists a “time lag between technological and legal change. Technological change always seems to outstrip the law’s ability for adaptation.”[48] Copyright holders are eager to adapt to consumer preferences, however, the risk of losing control of their copyright has led them to adopting DRM and other technological protective measures. Proponents for such measures argue that “digital locks are necessary to prevent intellectual property from being stolen just as physical locks are needed to prevent personal property from being stolen.”[49] Encryption and region coding have been methods used in the past to lock products, but the Internet seems to have exacerbated copyright holders’ worries.
In [the copyright holders’] view, the network environment is a place of both great opportunity and tremendous risk. On the one hand they have identified the Internet as a potential future source of vast profits; a distribution medium with the potential of delivering contents of all kinds, on demand, to consumers without the high overhead associated with conventional distribution systems. On the other hand, they perceive the Internet as a present danger to their valuable intangible assets. Their aim, then, is to make the network environment “safe” for digital commerce in information and entertainment products.[50]
The Benefits of Access Based Restrictions
Copyright holders receive multiple benefits through their institution of region codes or geofiltering. Through such practices copyright holders have (1) controlled sequential releases, (2) discriminated on prices, (3) controlled distribution and licensing agreements, and (4) had a stricter hand in censorship. The primary purpose of these benefits returns to the natural law theory of rewarding the holder of a copyright with revenue.
Controlling the sequential release worldwide is the first justification for imposing region locks on a copyrighted work. In fact, segmenting the global market is the most widely cited justification for region codes, and this practice enables companies to release copyrighted works in different places at different times.[51]
The film industry has long stood by the practice of sequential releases. The DVD Copy Control Association has provided the following example for why films are released at different times in different regions of the world.
[A] film that opens in December in the U.S. might not premier in Tokyo until several months later. By the time that Tokyo premier occurs, the film may be ready for DVD distribution in the U.S. Regional DVD coding allows viewers to enjoy films on DVD at home shortly after their region’s theatrical run is complete by enabling regions to operate on their own schedules. A film can be released on DVD in one region even though it is still being played in theaters in another region because regional coding ensures it will not interfere with the theatrical run in another region. Without regional coding, all home viewers would have to wait until a film completes its entire global theatrical run before a DVD could be released anywhere. [52]
The current system allows film makers to maximize their profits, both at the box office, and through the sales of digital copies.
Studios have significant control over theatrical releases but weaker control over the circulation of films through DVDs, Blu-rays, and streaming websites.[53] “Most Hollywood movies premiere in the United States before they are shown abroad.”[54] With the exception of direct to video releases, most films receive a theatrical release, followed by a lag time after which they are released on digital media.[55] Through this system film producers are able to capitalize on their regional audience in the theatre and through third party distributors where the consumer purchases his film formats. This is an important protection, because if consumers could watch the latest film in the privacy of their own home, it is likely that many would opt out of going to the theatre all together. Studios however expect to make money both on the theatrical release, and physical media sales.
Film studios claim this delay occurs, because it is often infeasible for simultaneous global theatrical releases. If all localization problems such as subtitling and dubbing, promoting the film, and dealing with censors were covered there would be a significant delay in releasing the film anywhere.[56] J.D. Lasica states that it is not uncommon “for movies to be released with different languages and occasionally different edits to suit local sensibilities.”[57] Rostam J. Neuwirth states studios may prefer to stagger release dates “to test the potential appeal of the movie before it’s marketed on a wider or even global scale.”[58] Screens are scarce compared to consumers who own a television and media player.[59] If region coding was not implemented, a studio would have to wait until a film completes its entire global theatrical run before it released the film on a home format.[60] Smaller films which don’t have the same appeal in other countries as big summer blockbusters would face a very delayed release as the demand for their theatrical showing would not be as great.
A second justification that deals with profit maximization is price discrimination. Michael J. Meurer describes price discrimination as “a profit maximizing mechanism studios use to charge a high price to high valuation users and a low price to low valuation users.”[61] This translates into media such as the Blu-ray box set of Star Wars having different prices depending upon the region.[62] Studios realize that consumers in other countries may not be willing or even capable of paying the same price as consumers in other regions.[63] Copyright holders may not be inflexible with prices or else they face alienating consumers who will go without, or seek the media through other means. By taking advantage of economies of scale and making products available worldwide copyright holders may be able to generate more profits.[64] DVDs, Blu-rays, and streaming technologies make it very easy to reproduce films at relatively little cost compared to the filming of the movie itself. By adjusting prices to meet what consumers will pay for the film in any given region, studios maximize profit.[65]
The copyright holders’ third justification for region locking involves the necessary adjustments to a product’s distribution in various regions. The most obvious of these changes involves translating the copyrighted work into the language of the local market, through processes such as dubbing and subtitling.[66] Additionally, distribution may require special packaging and advertising to appeal to the region’s market.[67] Nintendo, a video game company’, president Satoru Iwata states that each region has their own cultural acceptance.[68] In evaluating whether to bring a new game to a country the company asks “how much of a localization effort is it . . . we are aware that there [is an interest for our games], but we must ensure it is a strong financial proposition.”[69] As much as consumers wish products would be available for them, companies will only do so if they believe they will make a profit.
One additional way copyright holders may profit is by offering licenses and distribution agreements to third parties. Third party distributors may have better knowledge of what types of movies appeal to the region. By offering licenses to third party distributors copyright holders do not put much of their capital at risk. In some cases, such distribution agreements may be necessary to finance ventures. Barfield writes,
“Newer and smaller motion picture companies . . . may need to raise capital for production . . . by selling or licensing rights to particular territories and media or both before a picture is produced . . . Thus, by conferring exclusive control over a region, studios provide local distributors or licensees with the much needed incentive to invest in regional distribution and marketing efforts.[70]
By providing region locks, companies are free to capitalize on opportunities by striking up different agreements with distributors in other regions.
A final justification for copyright holders’ region locking is the necessity of dealing with individual countries censorship. In Germany, the Bundesprüfstelle für Jugendgefährdende Medien, is authorized and protects minors in Germany from media content, such as violence, which the organization deems harmful.[71] Copyright holders must comply with different legal restrictions across the world.[72] Copyright holders will always be quick to point out that what is legal in one country is not necessarily legal in another, and therefore localization efforts must be made to appropriately censor products. In reality it a foreign movie studio would only desire to appeal to Chinese censors not for what the censors believe, but so that they may profit off of a Chinese audience.
By instituting region locks copyright holders attempt to maximize their revenue worldwide. The four justifications provided above are tools towards greater profits. However, as discussed in sections III and IV, such justifications are not as beneficial as they once were.
III. Proposing a New System and Increasing Consumer and Corporate Benefits
The current system of region locking is not the best available system. This section consists of two parts. First, it will introduce a new system of distribution that is free from location based restrictions, and provide justifications for that system. Second, it will show why the justifications for such a system trump the prior justifications copyright holders used for introducing location based DRM onto digital products. It is important to note that this paper is not arguing that all DRM is unnecessary. The digital nature of films, games, and software means that some forms of DRM are necessary to prevent indefinite reproduction at the copyholders’ expense.[73] Rather this paper, argues a different system could be more beneficial to consumers and copyright holders.
A New System and Its Attendant Benefits
Great powers of prediction are not required to perceive the future of media. The days of physical media such as DVDs and Blu-rays are numbered. There will be a shift to predominantly intangible media. All entertainment will soon be downloaded or streamed from the Internet. The Internet provides users with instant access to information. Such access is commonly relied on, and global access has improved drastically.[74] The media market is beginning to profit from this access.[75] To better accommodate shifting consumer and distributor minds region based restrictions should be lifted.[76] Film, video game, and software copyright holders should adopt a new system of distribution not based on region codes or geofiltering.
I propose that the most profitable situation for distributors in the future would be to do away with both region restrictions and physical media entirely. Internet access is continuing to increase, and high speed access is becoming more readily available throughout the world.[77] Copyright holders have the opportunity to make products available online to be streamed or downloaded. By creating an online storefront, copyright holders could cut out distribution costs such as the production costs of creating physical media like DVDs and Blu-rays (along with the accompanying packaging) and retail costs of dealing with third party distributors. By making products available worldwide, these distributors will provide access to a larger market which could net more profits than past location based restrictions. Perhaps studios could even setup a centralized distribution center by working together as they did in establishing the content scrambling system of encryption.[78] Additionally, products distributed online would still be fully encrypted, and circumventing such encryption would be punishable under anticircumvention laws.[79] The following subsections will discuss the benefits to consumer and copyright holders of such a system.
Consumer Benefits
Quite possibly the biggest factor in determining whether a distribution system will be viable is consumer expectations. Since there still exists a tie to physical media (DVDs still line store shelves), consumers expect to face region restrictions.[80] However, when all media becomes intangible, consumers will likely question what difference it makes if they access the digital product they legally purchased in Boston or in Beirut. While there is some tradeoff, consumers predominantly expect to be able to use new technologies to their advantages.
Placing purchased products such as movies in online cloud-based storage has several distinct advantages to consumers. Because there is no tangible product, the consumer’s loss of the right to transfer should be supplemented by impeccable service including constant access, lowers prices, and increased cultural options.
The Internet has created an expectation that digital files can be accessed from anywhere in the world. With this expectation in mind, consumers will expect the same thing from their media. If this expectation is not met and companies choose to limit users through geofiltering, companies will likely be the ones who feel the pain. Yu notes that, “the inconvenience DVD region codes generate may force viewers to turn to websites that distribute content without the content providers’ authorization.”[81] Such was the case, when Nintendo refused to bring a popular video game, Xenoblade, to the United States despite glowing international reviews and hundreds of thousands of eager purchasers.[82] The same will likely be true involving intangible media, and in fact it is hard to be sympathetic to companies who refuse to make their copyright works available despite extreme demand from willing customers.[83] Users ultimately want access to products.[84] When CD Projekt, developer of the Witcher video game series, announced that their latest iteration, the Witcher 3, would be free of all DRM, consumers responded with glowing praise.[85] Access to purchase and play media from anywhere in the world is a benefit that must not be overlooked. Film aficionados would be overjoyed to have access to a wider selection of movies to purchase at any one time. The net effect for the industry would be a wider audience and consumers could purchase what best suits their tastes.
A second benefit to consumers would be lower prices in media. Sebastian Anthony writes that he pirates video games and movies because he believes they are currently too expensive.[86] Consumers would not have to resort to such tactics if products were readily available to them for a fair price, and region-free digital distribution may help drive prices down. Copyright holders may pass on some of the savings they receive by not having to produce a physical product. Additionally, if consumers are offered with a wide range of content, prices may be lowered when companies try to keep their media competitive.[87] Current online services, though region locked, such as Steam and Amazon frequently feature discounts for digitally distributed products.[88]
Finally, consumers would be able to practice greater cultural rights over what they legally view if online distribution was worldwide. Cultural rights are very important to consumers and, “by restricting access . . . DVD region codes . . . threaten to intrude on the viewer’s enjoyment and exercise of his or her cultural rights.”[89] Despite region restrictions, a person may often move out of his home country. It would be unusual that a Japanese mother living in Germany may wish to access Japanese movies portraying Japanese life. She could want to do this for a variety of reasons, such as developing her child’s language skills or simply to view familiar material. The Committee on Economic, Social and Cultural Rights (CESCR) claims that such
access covers in particular the right of everyone . . . to know and understand his or her own culture and that of others through education and information, and to receive quality education and training with due regard for cultural identity . . . effective and concrete opportunities for individuals and communities to enjoy culture fully, within physical and financial reach for all in both urban and rural areas, without discrimination.[90]
Systems that provide worldwide access would be especially helpful in developing children.[91]
Additionally, cultural rights are not restricted to those originating from the country of a copyrighted work. Localization efforts may be a bit overblown by copyright holders today, because some users want to see the original version.[92] In such cases distributors could appeal to these users simply by adding subtitles. Such a system would ensure a director’s original vision is accurately portrayed. Additionally, by allowing media to flow unaltered readily around the world it discourages censorship.[93] The United States has a long standing interest in promoting free speech, free press, and other civil liberties abroad and incorporating such a system globally would help promote such goals.[94]
Copyright Holder Benefits
For copyright holders, a worldwide distribution system would be beneficial in numerous ways. Such a system would carry two attendant benefits. By providing digital media worldwide copyright holders would both combat the threat of piracy and increase their revenue.
There is a risk of piracy if copyright holders do not adapt to changing communication platforms and the expectations that are present with the turf.[95] Peter Jenner, Pink Floyd’s former manager has said, “the flagrant spread of Internet piracy in developed countries is a reflection of the failure of the industry as a whole to develop an appropriate copyright response to the distribution and remuneration options made possible by new technologies.”[96] Valve co-founder and CEO Gabe Newell believes piracy is a “service problem and not a pricing problem.”[97] Newell illuminates further:
if a pirate offers a product anywhere in the world, 24X7, purchasable from the convenience of your personal computer, and the legal provider says the product is region-locked, will come to your country 3 months after the US release, and can only be purchased at a brick and mortar store, then the pirate’s service is more valuable. Most DRM solutions diminish the value of the product by either directly restricting a customers use or by creating uncertainty.[98]
William Patry agrees that, “the best way to prevent the sale of unauthorized goods is to flood the market with authorized goods.”[99] Piracy is the result of copyright owners being unable to adapt to a changing market.[100] There exist solutions outside of laws and restrictions which are beneficial to copyright holders. Newell made available Steam, his video game distribution system, to Russia with much criticism. He stated, “Prior to entering the Russian market, we were told that Russia was a waste of time because everyone would pirate our products.”[101] However by providing access, Newell was capable of avoiding piracy issues and instead Russia became his company’s largest market in Europe.[102]
Providing global access to media will not only decrease piracy, but also increase revenues. A business model that provides more choices and more customer satisfaction will ultimately lead to greater revenue.[103] If copyright holders were to remove region based restrictions on the products they offered digitally they would likely gain more willing purchasers.[104] It would be a poor business practice to ignore consumers who are willing to purchase media. Those companies which do provide for these customers will likely be rewarded.[105]
Producers will save on distribution costs since providing services digitally is cheaper than working through brick and mortar stores. This shift to intangible media also will give companies a chance to gain new perspective purchasers. For example, Syd Field states that the first ten pages of a screenplay are vital for hooking the reader.[106] Movie studios could make available for download the first ten minutes of a movie, such a tactic might hook a customer into the purchase for the completed film.
Finally, by shifting to this global friendly system, companies will be able better appeal to specific audiences, thus ensuring more revenue. Companies may use geolocation to determine what consumers are purchasing their products. If a film studio notices a large number of Chinese viewers streaming their material, they may wish to research and further reach out to this market in future films.
A new model would be beneficial to both consumers and distributors. Increased access to media, lower prices, and more cultural options would draw in consumers. Meanwhile, reduced piracy and increased revenue will entice distributors. All this model will take is copyright holders to step away from the justifications seen in Section II, and approach this greatly expanded, easier to reach market with open arms.
Copyright Holders Prior Justifications Lack Substantial Support
The justifications listed above in Section II, are not as strong as they once were. The shifting needs of the market have undercut such justifications.
Widespread pirating of films through the internet draws into question the reliability of film studios sequential releases of their products throughout the world. Brian Hu notes that film studios are “reducing geographic windows primarily to diminish the appeal of piracy.”[107] Films are now receiving worldwide releases so providing region lock out methods does not make sense.[108]
The other three justifications are equally as weak. Regions are too poorly defined to provide efficient price discrimination.[109] There are often wide variances in economies and the target audience in one country may not be able to afford to pay for a copy of the latest movie. However, if a region free strategy was adopted, the company that finds a global price that most of the world would willingly pay would be rewarded with increased revenue. Although distribution and licensing agreements sometimes provide funds, there is nothing stopping copyright holders from contracting with others for the distribution of their film.[110] Finally, meeting censorship ratings in some countries is important. But censorship takes away the original vision of the product and such modification may not be what is in the interest of consumers attempting to purchase such products.
Since the demands of the market are shifting the past justifications for imposing region based restrictions are no longer adequate. Copyright holders must adjust due to the shift away from tangible media to the future intangible offerings of the Internet.
Conclusion
The current system of region based restrictions is functional, but consumers and producers would benefit more from an alternative system. Global copyright laws provide the incentive of protection for producers to provide access to films, video games, and software. Through this protection, individuals cannot circumvent region based restrictions and other DRM to access copyrighted work without facing legal issues.
While copyright holders are entitled to a reasonable fee for their work, region based restrictions which determine who is entitled to pay that fee seems increasingly faulty in the face of globalization. The once used justifications are losing ground as the market demands and expectations have shifted. This further shift away from tangible media distribution will make region based restrictions noticeable by consumers as a significant deprivation of rights. If copyright holders do not adapt by removing region based restrictions, consumers will likely abandon the market, or seek other means such as piracy to obtain entertainment. But, by removing region based restrictions and releasing media worldwide, copyright holders would be able to benefit from global anticircumvention copyright laws that restrict piracy, and from increased revenue through a larger audience. Additionally, this system will instill greater benefits to consumers through increased access, lower prices, and greater cultural options. The global market will soon be ready to accept such a system along with the attendant benefits.
[1] Cengage Learning, Computer Forensics: Investigating Network Intrusions and Cybercrime 9-26 (2010).
[2] See Ross Anderson, Security Engineering 719 (2nd ed. 2008) (showing that the legal bounds of copyright are supplemented by access controls, implemented by hardware manufacturers, publishers, and copyright holders. The legal privilege given by laws such as the Digital Millenium Copyright Act, creates a new bundle of de-facto rights, criticized by many legal scholars as paracopyright.)
[3] Id.
[4] Craig Joyce et al.,Copyright Law 1-30 (9th ed. 2013).
[5] Id.
[6] The Pros, Cons, and Future of DRM, CBC News (Aug. 7, 2009), http://www.cbc.ca/news/technology/the-pros-cons-and-future-of-drm-1.785237.
[7] See Joyce, supra note 4.
[8] See ProCD v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996) (determining that material that could not be protected by copyright could be protected by a shrink wrap license, so long as the actions restricted by the license were not “equivalent to any of the exclusive rights within the general scope of copyright.”).
[9] See Bowers v. Baystate Technologies, Inc., 320 F.3d 1317 (1st Cir. 2001) (establishing that license agreements can preempt fair use rights as well as expand the rights of copyright holders beyond those codified in federal law.).
[10] Id.
[11] See Anderson, supra note 2.
[12] See Marshall A. Leaffer, Understanding Copyright Law 526 (pointing out an important element that anticircumvention prohibition and penalties “are independent of copyright law: consumers could be liable even if their circumvention was down in aid of the exercise of the fair use privilege or another exemption.”).
[13] Peter Yu, Region Codes and the Territorial Mess, 30 Cardozon Arts & Ent. L.J. 187, 188 (2012).
[14] Id. at 188-91 (stating international agreements such as the Anti-Counterfeiting Trade Agreement, and Trans Pacific Partnership Agreement have IP provisions pertaining to cross-border enforcement.)
[15] Citation (shouldn’t be too difficult)
[16] Robert O Keohane & Joseph S. Nye, Power and Interdependence 217 (3d ed. 2001).
[17] World Intellectual Property Organization Copyright Treaty, art. 11, Dec. 20, 1996, 65 FR 64556-01.
[18] See European Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonization of certain aspects of copyright and related rights in the information society.
[19] See 17 USC § 1201.
[20] The three new causes of action specifically are a prohibition on the circumvention of technological measures which control access to a copyrighted work.17 USC § 1201(a)(1). Prohibition on trafficking in technology that helps circumvent such access control measures. 17 USC § 1201(a)(2) . And a prohibition on trafficking technology that helps circumvent copy-protection measures. 17 USC § 1201(b).
[21] 17 USC § 1201 (d)-(h)
[22] 17 USC § 1201(c); see also Leaffer, supra note 12, at 526 (“Unless consumers are able to avoid technological protection measures to gain to safeguarded content, where appropriate, they will be deprived of exercising their various copyright-based use privileges”).
[23] See Universal City Studios, Inc. v. Corley, 273 F.3d 429 (2nd Cir. 2001).
[24] See Chamberlain Group, Inc. v. Skylink Technologies, Inc., 381 F.3d 1178 (Fed. Cir. 2004) (holding that distribution of a circumvention device (in that case a garage door opener) did not violate the anticircumvention provisions because its use did not lead to any copyright violations); Storage Tech. Corp. v. Custom Hardware Eng’g & Consulting, Inc, 421 F.3d 1307, 1318-19 (Fed. Cir. 2005) (holding that a copyright holder must show a connection to a copyright infringement in order to succeed in a claim under the DMCA).
[25] See Jim Taylor, DVD Demystified 5-4 (2d ed. 2011) (Discussing how encoding is used by copyright holders).
[26] See Yu, supra note 13, at 257.
[27] DVD and Blu-Ray Region Code Maps, World-Import.com http://www.world-import.com/world_region_code_map.htm (last visited Dec. 30, 2013).
[28] Jillian C. York, Geofiltering: How to Alienate Business Customers Without Really Trying, OpenNet Initiative (Mar. 3, 2009), https://opennet.net/blog/2009/03/geofiltering-how-alienate-business-customers-without-really-trying.
[29] Karl Schaffarczyk, Explainer: What is Geoblocking, The Conversation (Apr. 17, 2013)
http://theconversation.com/explainer-what-is-geoblocking-13057.
[30] Id. (And in some cases a user may select his geological location and be locked to it as is the case with many modern gaming consoles).
[31] Id.
[32] Id.
[33] Associated Press, Geolocation: Don’t Fence the Web In, Wired.com (Jul. 12, 2004) http://www.wired.com/techbiz/it/news/2004/07/64178?currentPage=all.
[34] Gregor Maier, Anja Feldmann, Vern Paxson, and Mark Allman, 2009. On dominant characteristics of residential broadband internet traffic. In Proceeding of the 9th ACM SIGCOMM Conference on Internet Measurement, ACM, 90-102.
[35] See generally Anders Drachen, Kevin Bauer, and Robert W.D. Veitch, Distribution of Digital Games via BitTorrent (2011) (showing the rise of use in file-hosting services where Internet users can access the information with a couple of clicks).
[36] Id. at 2 (“The use of one-click hosting services can be appealing to people wishing to distribute copied content because they require only very limited technical knowledge to access it”).
[37] See Geolocation, supra note 33 (A French court considered geolocation when it directed Yahoo in 2000 to prevent French Internet users from seeing Nazi paraphernalia on its auction pages. America Online sees geolocation as one way to comply with the French Nazi ban as well as a Pennsylvania child porn law”). http://www.wired.com/techbiz/it/news/2004/07/64178?currentPage=all; But see York, supra note 28 (“In contrast to government-mandated filtering, geofiltering is typically applied for business reasons: typically as a defense strategy against spam or harassment”).
[38] York, supra note 28.
[39] Id.
[40] See Geolocation, supra note 33.
[41] See Anderson, supra note 2, at 718 (Although there is also a provision for the subscriber to file a counter notice and have his content put back within 14 days unless the copyright owner files suit, but many ISPs will just terminate a customer’s service rather than get involved in litigation).
[42] DVDCCA Frequently Asked Questions http://www.dvdcca.org/faq.aspx#qa03 (last visited Dec. 30, 2013).
[43] Id.
[44] See Taylor, supra note 25, at 5-1 (Discussing how encoding is used by copyright holders. “Before Hollywood would embrace DVD, it had to be assured that DVD would not put Hollywood’s bread and butter out on the open market for anyone to make perfect digital copies”); DVDCCA Frequently Asked Questions, supra note 42. (supporting Taylor’s argument); see also Yu, supra note 13, at 196 (“Because they are ‘digital,’ DVDs can be used as a perfect master for an infinite number of exact copies if the master is not protected by a system like CSS”).
[45] Leaffer, supra note 12, at 26.
[46] See Eric Jou, How Tourists are Encouraging Chinese Knock-Offs, Kotaku (Apr. 23, 2012), http://kotaku.com/5904238/how-tourists-are-encouraging-chinese-knock+offs/; Fonoviso, Inc. v. Cherry Auction, Inc., 76 F.3d 259 (9th Cir. 1996).
[47] Leaffer, supra note 12, at 27.
[48] Id. at 25.
[49] The Pros, Cons, and Future of DRM, supra note 6.
[50] Leaffer, supra note 12, at 28. (showing the mixed response to the growth in internet usage of copyright holders such as those in the motion picture, sound recording, book publishing, and software distribution industries).
[51] See Yu, supra note 13, at 200 (talking about movie studios segmenting the global market).
[52] DVDCCA Frequently Asked Questions, supra note 42.
[53] See Yu, supra note 13, at 202 (discussing the ways studios can control theatrical releases through their control of film prints, contracts, and intellectual property laws. However, it is difficult to control what a consumer will do with his legally purchased copy of a movie).
[54] Id.
[55] Id. (“Before [a] movie can be released as a DVD (or in other home use formats), the product has to go through this time-tested distribution cycle . . . the later the movie is shown in local cinemas, the more time the studio will need before it can release the DVD in the same region”).
[56] Id. at 200-01.
[57] J.D. Lasica, Darknet: Hollywood’s War Against the Digital Generation 115 (2005); see also the recent release of Iron Man 3 in China. James Daniel, IronMan 3 Execs ‘Changed Film For Chinese Audience’ by Adding Four Minutes to the Film with Chinese Actors, Mail Online (May 13, 2013), http://www.dailymail.co.uk/news/article-2324077/Iron-Man-3-execs-changed-film-Chinese-audience-adding-4-minutes-Chinese-actors.html (Modifications include four extra minutes of footage designed to appeal to Chinese sensibilities by adding Chinese actors and modifying of the main villain’s birth place. “As the Chinese market grows, studios are likely to adapt their films towards China’s wishes. It will affect what the audience sees not just in China but around the world too with more stories set in the country and more Chinese or Chinese/American-looking actors taking on lead roles”).
[58] Rostam J. Neuwirth, The Fragementation of the Global Market: The Case of Digital Versatile Discs (DVDs), 27 Cardozo Arts & Ent. L.J. 409, at 421 (2009).
[59] Id.
[60] DVDCCA Frequently Asked Questions, supra note 42 (Explaining that otherwise a studio in this positiong would be jeopardizing its own revenue).
[61] Michael J. Meurer, Price Discrimination, Personal Use and Piracy: Copyright Protection of Digital Works, 45 Buffalo L. Rev. 845, 850 (1997).
[62] Compare Amazon (USA), http://www.amazon.com/s/ref=nb_sb_noss_1?url=search-alias%3Daps&field-keywords=star+wars+box+set&rh=i%3Aaps%2Ck%3Astar+wars+box+set (Region A (USA) priced at 89.96 on Jan. 5, 2014), with Amazon (UK) http://www.amazon.co.uk/Star-Wars-Complete-Saga-Blu-ray/dp/B005HNV2OS/ref=sr_1_1?ie=UTF8&qid=1389580744&sr=8-1&keywords=star+wars+box+set (priced at 48 pounds, the equivalent of 79.12 on Jan. 5, 2014).
[63] See Yu, supra note 13, at 206 (“Allows studios to price the product according to the cost of living in foreign countries. For example, many Mexican consumers are reluctant to buy DVDs of Hollywood movies at U.S. retail prices. Region codes allow U.S. studios to sell products in Mexico at a much lower price. After all, the Region 4 DVDs purchased in Mexico are unviewable on region 1 player in the United States”).
[64] Id. at 207.
[65] See Ryan L. Vinelli, Note, Bringing Down the Walls: How Technology is Being Used to Thwart Parallel Importers Amid the International Confusion Concerning Exhaustion of Rights, 17 Cardozo J. Int’l & Comp. L. 135, 143 (2009) (Stating “price discrimination is particularly important for manufacturing products that have large development costs and relatively small production costs, since companies can produce cheaply and profit more with larger distribution and increased consumption. Thus, by reducing costs to groups and being able to recuperate large development costs, price discrimination can improve welfare and expand consumption”).
[66] See Claude E. Barfield & Mark A Groombridge, The Economic Case for Copyright Owner Control over Parallel Imports, 1 J. World Intell. Prop. 903, 930 (1978).
[67] Id.
[68]Luke Plunkett, Nintendo’s Region-Locking Excuses Are Pretty Weak, Kotaku.com (Jul. 4, 2013), http://kotaku.com/nintendos-region-locking-excuses-are-pretty-weak-664179343.
[69] Robert, Ward, Nintendo’s Reggie Talks Wii U, Western Development and Operation Rainfall, Siliconera.com (discussing despite over 100,000 gamers petitioning for the game Xenoblade’s release in the United States, the company still questioning whether to bring the game to consumers.)
[70] Barfield, supra note 66.
[71] See Bundesprüfstelle für Jugendgefährdende, http://www.bundespruefstelle.de/bpjm/information-in-english.html (The task is authorized by the Protection of Minors Act. For a more detailed description of how works are indexed and reviewed by the board visit the above website).
[72] See Plunkett, supra note 68 (Nintendo describes its troubles with censors stating, “There are many different region around the world, and each region has its own . . . legal restrictions, as well as different age ratings. There are always things that we’re required to do in each different region, which may go counter to the idea that players around the world want the freedom to play whatever they want”).
[73] See The Pros, and Cons, and Future of DRM, supra note 6.
[74] See Akamai, The State of the Internet 2nd Quarter, 2013 Report, 6 Akami 2(David Belson 2013).
[75]See Press Release, Apple, iTunes Store Sets New Record with 25 Billion Songs Sold (Feb. 6, 2013) (on file with the author). http://www.apple.com/pr/library/2013/02/06iTunes-Store-Sets-New-Record-with-25-Billion-Songs-Sold.html Billion Songs Sold); Erin Kasenchak, Director, Investor Relations with Netflix, Addressing Netflix’s Third-Quarter 2013 Financial Results (Oct. 21, 2013) https://www.youtube.com/watch?v=5EfTgvKqtOY
(Netflix now exceeds the number of HBO subscribers with 31.1 million subscribers. The company has revenue of $1.11 billion and earnings per share of $0.52).
[76] See Yu, supra note 13, at 263 (“Region codes were developed in the mid 1990s, a bygone era where goods were distributed primarily in physical form. As consumers become more interested in borderless enjoyment of media content and as movie studios rethink their distribution strategies, it is important that we step back to reconsider the needs for region-based restrictions and their attendant benefits”).
[77] See Akami, supra note 74.
[78] See A Digital Agenda for Europe, at 7, COM (2010) 245 final/2 (Aug. 26, 2010) (the European Union making steps towards such systems in a Digital Agenda for Europe, stating “Consumers expect, rightly, that they can access content online at least as effectively as in the offline world. Europe lacks a unified market in the content sector. For Instance, to set-up a pan-European service an online music store would have to negotiate with numerous rights management societies based in 27 countries. Consumers can buy CDs in every shop but are often unable to buy music from online platforms across the EU because rights are licensed on a national basis. This contrasts with the relatively simple business environment and distribution channels in other regions, notably the United States, and reflects other fragmented markets such as those in Asia”).
[79] See Anticircumvention footnotes, supra notes 17-19.
[80] Leaffer, supra note 12, at 29-30 (The trend is that readers, listeners, and viewers of copyrighted works are having less and less unencumbered lawful personal use of books films, or music in a technological and legal environment in which those uses are easier to trace, and charge for).
[81] Yu, supra note 13, at 219.
[82] Audrey Plaza, Xenoblade Pirates Don’t Be Stupid, IGN.com (Jan 3, 2012), http://www.ign.com/articles/2012/01/03/xenoblade-pirates-dont-be-stupid.
[83] Id.
[84] Tom Phillips, Nintendo Blames Region-Locking on Local Cultural Differences And Legal Restrictions, Eurogamer.net (July 4, 2013) www.eurogamer.net.articles/2013-07-04-nintendo-explains-its-decisions0to-region-lock-games (Providing the example of long wait times for video games to reach countries. “Fire Emblem: Awakening was available in Japan twelve months before Europe. Animal Crossing: New Leaf took seven months to land on UK shores. Why penalize those who want to buy a Japanese versions”).
[85] See Marcin Iwinski, No DRM in the Witcher 3: Wild Hunt – An Open Letter to the Community, CD Projekt (Oct 30, 2013) http://cdpred.com/no-drm-in-the-witcher-3-wild-hunt-an-open-letter-to-the-community.
[86] Sebastian Anthony, Why I Pirate, Extremetech.com (Jan. 18, 2012) http://www.extremetech.com/computing/114493-why-i-pirate (Useful in understanding the thoughts of pirates).
[87] Barfield, supra note 66, at 927 (discussing how competitors today often collude to fix prices, but how permitting parallel imports could help discipline them and lower prices).
[88] Robert Purchese, Valve: Piracy a “Non-Issue” for Steam, Eurogamer.net (Nov. 28, 2011) http://www.eurogamer.net/articles/2011-11-28-valve-piracy-a-non-issue-for-steam (Steam’s digital distribution platform requires you to download and log into a Steam application each time you wish to play a game. This simple check performs a service many DRM services are criticized for. Steam also ensures games are up to date, as well as offers multiplayer matchmaking facilities, friend lists, achievements and various other platform-based community features. The service is renowned for its weekly sales, as well as their massive discounts during their Summer and Winter Sales).
[89] Yu, supra note 13, at 226.
[90] Committee on Economic, Social and Cultural Rights, General Comment No. 21: Right of Everyone to Take Part in Cultural Life (Art. 15, Para. 1(a), of the International Covenant on Economic, Social and Cultural Rights) (hereinafter CESCR General Comment No. 21], P 1, U.N. Doc. E/C.12/GC/21 (Dec. 21, 2009).
[91] See CESCR General Comment No. 21, P 26, U.N. Doc. E/C.12/GC/21 (Dec. 21, 2009) (“Children play a fundamental role as the bearers and transmitters of cultural values from generation to generation. The fundamental aim of education developments is the transmission and enrichment of common cultural and moral value in which the individual and society find their identity and worth”).
[92] See Phillips,supra note 84 (“Regardless, those who go to the trouble of importing the game from another region will likely be aware that they will be getting a non-local version”).
[93] See Brian Hu, Closed Borders and Open Secrets: Regional Lockout, the Film Industry, and Code-Free DVD Players, Mediascape, Spring 2006, at 4, available at http://www.tft.ucla.edu/mediascape/Spring06_ClosedBordersAndOpenSecrets.pdf.
[94] See Yu, supra note 13, at 231 (describing how region restrictions have undermined these interests).
[95] Id. at 216 (discussing how DVD region codes could eventually backfire on content providers by reducing consumption).
[96] Greg Kot, Ripped: How the Wired Generation Revolutionized Music 2 (2009).
[97] Purchese, supra note 88.
[98] Id.
[99] William F. Patry, How to Fix Copyright 256 (2011).
[100] Id.
[101] Purchese, supra note 88.
[102] Id.
[103] William Patry, Moral Panics and the Copyright Wars 11 (2009).
[104] Patry, supra note 99, at 183 (“the largest problems facing authors today are not unauthorized uses but the obstacles put in the way of buyers willing to pay for access to or copies of the work. These obstacles have caused a huge loss of income for composers, performers, and photographers”).
[105] See generally Chris Anderson, Free: The Future of a Radical Price (2009) (Many consumers would pay a small subscription fee to have reliable delivery of entertainment they enjoy).
[106] Syd Field, The Foundations of Screenwriting (2005).
[107] Hu, supra note 93.
[108] See Taylor, supra note 25, at 12-2 (“In the past decade, some blockbuster movies have been simultaneously released worldwide [or with a significantly reduced lag time], partly in response to widespread illegal downloading”).
[109] Yu, supra note 13, at 208-209 (discussing price disparities throughout Latin America).
[110] Id. at 213.