Earlier this week, RealNetworks settled its litigation with the movie industry over its RealDVD software, which allowed users to make copies of DVD video content onto PCs. The copies were encrypted with RealNetworks’ DRM, which limited playback to five PCs. Under the settlement, Real agreed to keep the product off the market, thereby making permanent the injunction that Distict Judge Marilyn Hall Patel issued in October 2008. Real also agreed to pay the MPAA and the DVD Copy Control Association their litigation costs of US $4.5 Million.
This case had echoes of a previous DVD CCA case against Kaleidescape, a Silicon Valley company that made a hardware device that ingested video from DVDs and stored it on hard disks. That case turned on the terms of the DVD Copy Control Association’s licensing agreement, and in 2007, Kaleidescape prevailed. (RealNetworks had a similar hardware device in the works as well.)
This time the movie studios sued on the basis of the Digital Millennium Copyright Act as well as on DVD CCA licensing grounds. They claimed that Real broke the law by circumventing the CSS encryption used on DVDs. Real argued that users should have the right to keep backup copies and that its DRM was at least as protective of the content as CSS and therefore should not be considered to be circumventing it.
The case settled, so the judge wasn’t able to decide whether to rely on a strict interpretation of the anticircumvention law or to focus on RealDVD users’ rights under copyright law. Judge Patel’s only meaningful output was her statement that RealDVD was “likely” to be found to violate the DMCA and the DVD CCA license, which she made to justify her preliminary injunction. Thus this case offers little further clarification of users’ rights to make backups of their legally obtained video content.
DVD players do decrypt the content, under license from the DVD CCA, but that same license restricts what they can do with the content once it’s in the clear. Real claimed that it observed the DVD CCA license terms — just as Kaleidescape did in the earlier case.
It’s possible that Real might have prevailed if it had kept fighting the case beyond the three years it has gone so far. The decision to settle most likely reflects the strategy of Real’s new management, now that Rob Glaser — who decided to provoke the MPAA in the first place by introducing the RealDVD product — was forced out of the CEO’s job by Real’s board.
Glaser’s real loss as RealNetworks’ CEO was the battle of video formats, which the company lost to Microsoft and Apple years ago. He learned subsequently that it’s very difficult to make money with a digital media platform if you don’t control the format, and owning the DRM is a great way of controlling a media format.
Having lost this battle, Glaser decided to fight to salvage his media platform by creating products that taunted the established order. Back in 2004, Real released Harmony, a service that sold music in Microsoft’s and Apple’s DRM formats as well as its own — in other words, encrypted music that could play on iPods. Apple couldn’t find a reason to sue, but it took steps to restrict playback of those files on iPods. Few consumers cared, and Real discontinued the service. eMusic, and then Amazon, emerged as the alternatives to iTunes for iPod-playable music… in DRM-less MP3 format.
RealDVD was a bolder gamble, and Real thought it could rely on the Kaleidescape decision to back it up. But now apparently Real’s new management wants to jettison Glaser’s “rebel outsider” stance toward the media industry and focus on its remaining grab-bag of content services and infrastructure, such as the mobile music service provider WiderThan and the digital gaming service TryMedia, plus content sites like film.com and RollingStone.com.
The historically important RealAudio and RealVideo formats have been reduced to marginalia, and Real is spinning off the Rhapsody subscription music service that it co-owns with Viacom’s MTV networks. It will be interesting to see how — or if — RealNetworks can recapture the public’s attention again.