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Betamax was a steppingstone
The mp3 generation may not remember it, but 20 years ago, Hollywood fell just one vote short of winning a ban on the VCR. This month marks the 20th anniversary of the Supreme Court's 5-4 decision in Universal City Studios v. Sony, the case where two movie studios asked the federal courts to impound all Betamax VCRs as tools of "piracy."
Thankfully, the Supreme Court spurned Hollywood's arguments, best summarized by Motion Picture Association of America chief Jack Valenti's famous quote: "I say to you that the VCR is to the American film producer and the American public as the Boston strangler is to the woman home alone." The court decided that American consumers were not violating copyright laws when they time-shifted television with their VCRs. It also declared that Sony was not violating copyright laws by selling VCRs, even though some people might use them to infringe copyrights. In other words, you don't go after the crow bar makers just because there are burglars out there.
In the 20 years since, we have learned two important lessons. First, new technologies and copyrights are complementary products in the long run. New technologies make copyrights more valuable because they unleash new markets and business models. That's been the rule, without exception, for a century. The VCR ended up making Hollywood rich, with sales of pre-recorded cassettes quickly eclipsing the receipts from box office ticket sales. There's no reason to think that the Internet won't create even more revenue-generating opportunities.
Second, if you want a vibrant technology sector, you let the innovators invent without forcing them to beg permission from media moguls first. Sony didn't ask permission to build the Betamax, and that's what made the VCR possible. In fact, the Supreme Court's rule set the stage for most of the amazing technologies we take for granted today. After all, would Hollywood have allowed the personal computer, if it had been asked? Would the recording industry have permitted hard drives? What about the book publishing industry and the scanner? And we know how these industries feel about the Internet. Fortunately, the rule in America is that innovators are beholden only to their customers and the marketplace, not to Disney or the Recording Industry Association of America.
Unfortunately, the entertainment industries are trying to get the courts and Congress to forget these lessons. In cases involving peer-to-peer file sharing software, their lawyers hope that amid all the shouting about "piracy" they can persuade judges to make future innovators answer to movie moguls instead of the American consumer. Meanwhile, in Washington, they urge legislators and bureaucrats to put innovators under the thumb of government regulation.
In 1984, the Supreme Court spared Hollywood from its own short-sighted desire to curtail innovation. The legacy of that decision has been technology that benefits us all. Let's hope that Congress and the courts have learned that lesson, even if the movie moguls haven't.