For months now, the major studios have been waging all-out war against technology companies that are developing devices that offer consumers the ability to watch their DVDs on their own computers and televisions under circumstances that give them maximum flexibility.  Heaven only knows how much the studios have paid in fees in order to have their legal surrogates wage a war of words and briefs against relatively small companies like RealNetworks and Kaleidescape that are trying to fill this market niche.  RealNetworks has been hit particularly hard by the aggressive court action lodged against it by the studios. 

Why is Hollywood beating up so badly on RealNetworks?  What sin did this company commit that has caused such legal violence to be visited on it?  Was it pirating Hollywood movies?  Was it committing a fraud on consumers by advertising something it did not deliver?  Was it perhaps handmaiden to a Bernie Madoff Ponzi scheme?  To the Hollywood studios, it was something much scarier – allowing consumers to exercise their “Fair Use” rights.  

What RealNetworks did that landed it on Hollywood’s Black List, was to have the audacity to listen to the market and give consumers something they wanted at a time when Hollywood was not growing to meet the needs of these same consumers. RealNetworks had figured out that consumers wanted the capability to store their own DVDs on their own laptops and home computers, so they could then watch them at their leisure and without having to load each one into the computer every time they wanted to play it.  Based on its market research, RealNetworks then developed a product that would do just what the consumer desired, while also protecting the studios’ rights – the RealDVD system.  Unlike the ubiquitous assortment of illegal DVD rippers than can be located with a simple Google search on the Internet, RealDVD is the only product that allows consumers to save copies of their own, legally-purchased DVDs to their computers while also preventing people from burning copies.  While this would seem to be the likely start of a beautiful friendship between RealNetworks and the movie moguls, it unfortunately was just the beginning of Real’s troubles with the Hollywood studios.  

For more than a year now, RealNetworks has been fighting an expensive and difficult defensive action in federal court in San Francisco, as the major studios seek to permanently stop it from marketing its RealDVD product.  In fact, last August, the judge presiding over the case temporarily enjoined the company from selling its product. 

Rather than licking its wounds and moving to other products, RealNetworks is determined to fight this assault on competition and free enterprise.  Just this week, for example, it formally appealed the August 11, 2009 order issued against it by U.S. District Court Judge Marilyn Patel.  Ayn Rand would be pleased with RealNetworks’ attitude. 

What neither Ayn Rand nor any free market advocate would understand, is the manner in which the studios are proceeding against RealNetworks.  It makes no sense from a business standpoint, and if anything shows that the movie industry is destined to make many of the same mistakes that the music industry made.  Consider that DVD sales are down significantly in the current slow economic climate.  Would it not make sense for Hollywood studios to take steps to encourage consumers to buy DVDS?  And, insofar as offering a product that makes it easier for consumers to record, store and view their DVDs would cause them to purchase more DVDs, why would the studios fight tooth-and-nail against a company whose goals are essentially the same as Hollywood’s? 

Perhaps because at least one of those major studios – Disney – is developing its own technology to make it easier for consumers to digitally store and view movies?  In a recent interview, for example, Disney chief exec Bob Iger indicated his company would shortly begin marketing its “Keychest” system that would do just those things. 

Even the DVD rental industry, which is fighting its own battles with the Hollywood studios, understands that DVD sales generate significantly more income for the studios than do rentals. Yet those very same studios that are taking steps to increase sales of their movies and limit rentals, are tone deaf to the work of companies like RealNetworks, whose product also would encourage sales of these silver discs.  

Hollywood, which continues to toy with the idea of bringing Ayn Rand’s free market opus, Atlas Shrugged, to the silver screen, would be well-served to actually read and digest the novel’s admonition to use if not embrace the forces of the market place, rather than oppose the very forces that could help it.  Such a tactic would be in the industry’s “enlightened self interest,” and it would benefit all concerned.  Unfortunately, the moguls who head the studios apparently don’t have time for such lessons

That it felt it necessary to do so was in reaction to its declining share of the entertainment market against the little box, television, where you could see things for free and in the comfort of one’s own home. 

Hollywood assumed an adversarial stance against television right from the beginning, doing everything from encouraging stars under its control to stay off TV to changing the aspect ratio of movies so that they no longer matched the dimensions of the television screens.  Yet think of how different things might have been, for television and for the Hollywood studio system, had the moguls of the 1950s decided that television represented not a threat, but a new outlet, a new source of profits in which everyone would have a chance to wet their beaks. 

But they didn’t.  They put more value on the short-term loss than on the potential for long term gain – and an already teetering studio system crumbled.  And, after the ground finally stopped shaking and thanks to folks like MCA’s Lew Wasserman - the studios found themselves in the television business anyway.  But they had to learn the lesson the hard way. 

So you might think the next time the opportunity arose to tap into an emerging market that had the potential for big revenues, the studios would be the first ones in line.  Guess again.  As we all know from the famous “Betamax” case, the folks who produced movies and television entertainment were so concerned about the potential for abuse that they tried, essentially, to put a stop to home video recorders while overlooking the enormous profits to be made in movie rentals. 

Fool me once, shame on you.  Fool me twice, shame on me.  But fool me a third time?  The studios still seem to think that new technology, rather than being a source for additional profits, remains the enemy.  Case in point: RealDVD, a product from Real Networks, the same folks who gave us Real Player and other interesting media applications for our computers. 

As the company puts it, RealDVD is “a cool new product that lets you save your DVDs to your PC or laptop,” a way to get additional value from the DVDs you have already purchased.  RealDVD is, in essence, a convenience in much the same way cassette tapes (remember them?) were a way to listen to the music contained on the LPs (remember them?) you had purchased while driving in your car. 

RealDVD is not, at least according to RealNetworks, a tool for pirating media.  The company says it has stringent protections embedded in its software to prevent piracy and illegal copying.  And, truth be told, anyone interested in breaking through the piracy protections encoded into today’s DVDs so they can rip free bootlegs has more than enough shareware to choose from already that they don’t need a program developed by a for-profit company to make things easier for consumers. 

But, just like they did with television and with home video recorder, the big studios have reacted with horror to the idea that something that might make it easier for consumer to get more life out of products, in this case DVDs, which consumer have already purchased, that they brought suit against RealNetworks to shut things down. 

There are certainly real issues involved here.  The protection of intellectual property is a very real concern, for producers and consumers alike.  As is the matter of the assignment of rights for duplication, the definitions of personal use and the distribution of revenues that might be generated from what one can assume would be the increased sale of DVDs. 

But the fact remains that the technology companies, RealNetworks among them, are looking to the future while the studios remain grounded in the present or, even worse, the past.  DVDs will eventually go the way of the LP, becoming an anachronistic storage device of interest only to serious collectors.  The Internet, and downloads, is where the future lies.  Programs like RealDVD are part of the transition and it makes little sense to trying and keep it shut down.  The smart move, from a business perspective as well as a technological one, is to follow where it leads.