For an informed view on connected entertainment in the UK & Ireland, visit Cue Entertainment
The
“first sale” doctrine in the United States allows anyone who buys a DVD to
re-sell it but now studios worry that it applies to the codes that unlock the
UV digital locker.
Digital
delivery allows consumers to download or stream entertainment content to almost
any device from smartphone to connected TV when and where they want it. Today,
the right to download a digital copy of a current feature film with unlimited
access to three simultaneous streams is on open sale in the US for as little as
$1.50 (£0.95) with few restrictions and no expiry date.
Although
the studios are unhappy with the situation, it arises from the doctrine of
“first sale” that is enshrined in US copyright law. Once sold to the first
customer, the rights owner has no further claim on ownership of the physical
media, which the buyer can retain, sell or give away without limitation. In a
triple-play pack, for example, the consumer has the right to give away the
digital copy, sell the DVD on eBay and retain the Blu-ray for home enjoyment.
The
situation is not as clear with the UV redemption code, which comes on a printed
card within the Blu-ray case. This group of numbers and letters is a key for
one-time use, which unlocks access to one digital download file and unlimited
streaming to registered devices. Once entered online, the code has no further
value. If the user doesn’t want digital delivery, however, the card with the UV
key could become a tangible asset and subject to the “first sale” doctrine. As
such, US owners would have the right to sell it for whatever they can get.
There is
no requirement for the buyer to prove ownership of the physical product; all
that is needed is a valid access code. As first registrant, buyers have access
to all the benefits of UV including streaming rights for up to six friends and
family members and an HD digital download. For the equivalent of 95 pence, it
is a bargain!
UV codes
are available widely to unlock access to films such as WHE’s “Final Destination
5” ($1.50), “Happy Feet Two” ($3), Paramount’s “Adventures of Tintin” ($3) and
New Line’s “Horrible Bosses” ($2).
On
Apr.18, the Consumerist website run by Consumer Reports – the US equivalent of
the UK’s Which magazine – told of a man named Stephen who bought Paramount’s
“Mission: Impossible – Ghost Protocol” on Blu-ray and received with it a UV
redemption code. As he had no use for the UV code – he was probably an iTunes
user – he listed it on eBay. Within an hour or so, the online auction firm shut
down his listing, on the grounds of copyright infringement.
Law firm
Dow Lohnes Senior Advisor Jim Burger, an authority on intellectual property and
former Apple Computer Senior Director, says that eBay was being “super
cautious” in delisting Stephen’s offer. He tells Cue Entertainment that
although the UltraViolet management is aware of the situation, there is no
official view on whether or not “first sale” applies in this case: “Once you
have registered, you certainly can’t resell parts of the service under the
terms of the licence, but if the original buyer has not used the redemption
code it might be difficult to prove copyright infringement.”
To go
after an individual who offers an unwanted code on eBay is counterproductive,
Burger says, although the firm has the right to remove any item that it
suspects might infringe copyright. At the time of writing, bids on “Harry
Potter and the Deathly Hallows Part 2” UV code had closed at $2 – a bargain for
someone so long as the code genuinely was unused. The cost of Universal’s
“Contraband” on the other hand, rose steadily through 13 bids to conclude at
$12.99.
It is
not, however, just teenagers who seek to make a few dollars by auctioning
unused codes on eBay. Other players have entered the market. Based near
Chicago, Family Video is the largest privately owned movie and videogame
rentailer in the US –with more than 770 stores in 19 states – and Canada. The
proliferation of double- and triple-play releases means the company may split
the pack and sell the Blu-ray, rent the DVD and offer UV redemption codes
online. Currently, 22 UV titles are listed on the Family Video website although
not all are available immediately. For $13 (£8.02) the firm will email you the
codes for seven UV titles. To receive the cards as proof of purchase, there is
a shipping charge of $1.99 (£1.23).
According
to the Family Video website there is a limit of three UltraViolet codes per
customer per movie. Shipping fees will be charged automatically but will be
refunded if an order contains only UltraViolet redemption codes. At three codes
per movie, that means 18 friends and family plus three digital downloads and
yet it still costs less than a single purchase of physical media.
The law
in Europe and Australia is different, and Burger points out: “If the studios
chose to take action to stop the sale of codes in the US, it would be necessary
to enforce copyright on a state-by-state basis. It might be easier to enforce
the terms of the licence outside the US, particularly in a country such as
France with its ‘three strikes’ Hadopi legislation.”
This has
not stopped the creation of a website, UltraVioletCodes.com, registered at the
start of the year with a Dallas, Texas internet service provider. Despite its
apparent US origin, the owner of the domain is in the Czech Republic and it
appears that it will target the European market for UV codes.
The
potential for consumer confusion and disenchantment is considerable since,
unlike BD and DVD regions, UV codes are usually country-specific. Unlike the
single market in the US, British citizens with homes in France and Spain have
already found that they cannot access UV content overseas. It is far from
certain that UV codes from central Europe will be valid in the UK and Ireland
when the site is active.
The
issue of UV codes brings into focus the sensible approach taken by Tesco and
Blinkbox. Rather than ask consumers to register purchases online, with all the
associated problems, they provide registration automatically at point of sale.
The acquisition of both physical and digital copies is associated immediately
with the purchaser’s Tesco Clubcard, and the formalities are in place usually
by the time the customer returns home with the shopping. The access code and
the Blu-ray title are bound together, which eliminates the possibility of
unbundling and avoids the creation of a secondary market in digital files.
In the
US, Walmart has taken the concept a step further. Customers may now go any of
more than 3,500 Walmart stores and use their existing BD and DVD discs as a
token of ownership in order to purchase digital streaming rights. DVDs qualify
for standard definition (SD) video while Blu-ray discs gain access to high
definition (HD) quality. Both are priced at $2 (£1.25). In a smart move,
Walmart also will upgrade SD DVDs to the HD version for $5 (£3.10), which
should encourage owners to convert more of their library.
Cloud
video provider VUDU provides the technology for the Walmart venture, which is a
partnership with SPHE, Paramount, Fox, Universal and Warner. To avoid the
possibility that a single disc will make several trips to the store, each one
is stamped with an invisible (and presumably un-erasable) code. There is no
lengthy upload – the title references the master file held by VUDU, and
customers retrieve their discs immediately after they are stamped. As with the
Tesco/Blinkbox partnership, Walmart customers will have instant access to their
content in the cloud when they return home.
In its
April 16 announcement the company hedges its bets: “Walmart Entertainment
supports UltraViolet, the movie industry’s initiative currently in its beta
phase that allows consumers to put their purchased movies into a cloud-based
digital library and keep track of them safely and securely. Walmart is able to
offer customers the ability to watch and purchase UltraViolet-enabled titles
directly from VUDU.”
It’s no
surprise that both Tesco and Walmart have grasped one of the most basic tenets
of retail: make it simple for customers to understand and do most of the work
for them. For all its technical sophistication, UV continues to stumble from
hurdle to hurdle, without clear direction at the top or public recognition at
the base. To chase after individuals who try to sell unwanted redemption codes
on eBay is not the way to win the PR battle.
To the
surprise of many observers, it is the supermarkets and not the studios that are
making the running in this particular race.
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