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Andersen: Retailers Must Wade Online To Avoid Music Industry's Pitfalls

5 May, 2003 By: Holly J. Wagner

Entertainment retailers must wade into providing movies online or risk the same kind of losses that have beset the music industry, Video Software Dealers Association president Bo Andersen said.

“We need more retail involvement and competition in online delivery of movies and less Groksters and Kazaas,” he said. “Echo [the retail consortium that music retailers formed to deliver music downloads] on the music side is an entry by retail that suggests one business model which could be multiplied many times and [create] slightly different business models.”Best Buy, Hastings Entertainment, Tower Records and Video, Trans World Entertainment, Virgin Entertainment Group and Wherehouse Music have collaborated on Echo, a retailer-driven digital music consortium, to recapture some of the revenue they said they are losing to legal and unauthorized music downloads.

Recent court decisions regarding file-sharing technology prompted Andersen's comments on an avenue to fend off the same fate for the video industry.

Late last month, U.S. District Court Judge John D. Bates' ordered Internet service provider (ISP) Verizon to give the Recording Industry Association of America (RIAA) the name of a Verizon Internet subscriber suspected of trading in pirated music. Days later, the trade group sent out 200,000 instant messages to users of Grokster and KaZaA, two of the file-trading software providers, and promised to send 1 million more. The messages warned that providing copyrighted product online is a crime.

In a separate decision, District Court Judge Stephen Wilson ruled companies, such as Morpheus and Grokster, that provide peer-to-peer software cannot be held liable for the way their products are used. That means even though their software is often used to trade music and movie files, they can't be forced to pay damages to copyright owners simply because they created file-sharing software and made it available. The logic is the same that was applied to protect VCRs in the Betamax case in the 1980s.

Both decisions push digital copyright enforcement down to the consumer level. Because the software providers can't be held liable for the material users trade, music companies and studios must pursue those who make unauthorized copies of their products available and those who download them.

Attorney Andrew Bridges, who prevailed in the Betamax case, sees the new cases as a music and movie trade group play to gut fair use rights. “There's no doubt that the motion picture industry wants to read Betamax as narrowly as possible and, given the chance, wants to overturn Betamax,” Bridges said. “The media industries have consistently phrased the advent of digital technology as posing new threats and new challenges that would impair their position compared to the analog world. That's not what's really been going on. They have been using the transition to digital to stake out greater rights than they had in the analog world. The Digital Millennium Copyright Act is the greatest example of that.”

But Andersen disagreed.

“The teachings in the Betamax case are part of the analogy here. Judge Wilson referred to them. But I don't think that's the plaintiffs' [trade groups'] intention,” he said. “They had a direct problem to address. These direct infringements are going on, and they were assisted by the technology that the defendants were promoting and supplying. [This was about] how much did they contribute and how much control could they have in responding to what was manifestly to everyone the theft of movies and music.”

Andersen conceded that some legal issues may remain for Congress to resolve.

“The court's opinion invited Congress to step in and craft a legislative remedy,” he said. “It is important for all segments of the industry to be involved in crafting effective legislation. We stand ready to work with the copyright community in this

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