From: Subject: Business 2.0 Print: Mr. Gadget Takes on Hollywood Date: Fri, 28 Jul 2000 11:21:57 -0700 MIME-Version: 1.0 Content-Type: multipart/related; boundary="----=_NextPart_000_0000_01BFF886.0A78AC90"; type="text/html" X-MimeOLE: Produced By Microsoft MimeOLE V5.00.3018.1300 This is a multi-part message in MIME format. ------=_NextPart_000_0000_01BFF886.0A78AC90 Content-Type: text/html; charset="Windows-1252" Content-Transfer-Encoding: quoted-printable Content-Location: http://www.business2.com/content/magazine/ebusiness/2000/07/25/15094?template=article_pf.wm Business 2.0 Print: Mr. Gadget Takes on = Hollywood

Find this article at: http://www.business2.com/content/magazine/ebusiness/2000/07/25/15094=

Mr. Gadget Takes on Hollywood

Recording TV shows to sell on the Web seemed like a cool idea. = The=20 MPAA was not amused.

25,=20 2000

Rachel=20 Lehmann-Haupt

Earlier this = year,=20 college students addicted to Napster rattled the music industry. = Now it=92s=20 Hollywood=92s turn. In March, a 40-year-old suburban dad recorded=20 Pok=E9mon off the Web for his daughters, drawing flocks = of=20 neighborhood kids=96and a $10 million copyright infringement = lawsuit filed=20 by the Motion = Picture=20 Association of America (MPAA), Disney, Fox, MGM, and = Paramount, among=20 others.

David Simon, who makes his living writing = high-speed=20 printing software, fitted his daughter=92s PC with a TV tuner = board and=20 wrote a few lines of code, programming the computer to record = television=20 shows and replay them on a RealNetworks media player. =

Pretty=20 soon, his daughters, Phoebe, 9, and Carly, 5, were the envy of the = neighborhood, and children started gathering at the house to watch = the=20 programs running on Simon=92s "virtual VCR." Three months later, = however,=20 Simon=92s neighborhood hit became the target of a high-profile = Hollywood=20 lawsuit. The case, currently in litigation, will decide whether = Simon is=20 merely a suburban pirate or an agent of change who stumbled across = a=20 technology that could force lawmakers to reinterpret the = boundaries of=20 copyright law.

"Copyright law alone can no longer = control=20 behavior," says Mark Fischer, a new-media lawyer with Palmer and = Dodge in=20 Boston. "There is no question that copyright content owners are = going to=20 have to change their business models."

The accidental celebrity

In early March, news of this cool new toy began to spread = around Agoura=20 Hills, a quiet middle-class suburb in West San Fernando Valley, = Calif.,=20 where Simon lives with his wife and daughters. Simon added a few = more TV=20 tuners to a few more PCs and put up a makeshift Website so all the = kids=20 could play. He even gave everyone a password.

The = site=20 allows users to scan a database of TV shows and choose which shows = they=20 want to record. Users can then play back the recorded shows on = RealVideo.=20

By chance, a little-known Webzine called Web = Surfers=20 Digest happened upon Simon=92s Website, which he had dubbed = RecordTV.com, = and wrote a=20 story about it. Pretty soon he was on CNET=92s "PM Drive" radio = show and the=20 site was drawing close to a million hits per day. "If the service turns out to be legal, there = is a=20 possible business model that could be constructed around licensing = the=20 technology to portals and becoming a kind of private-label TiVo [a = site=20 that allows users to record TV shows]," says Ravin Agrawal, a = partner with=20 EastWest Venture Group in Los Angeles. "But that hinges on whether = the=20 technology is proprietary, and I=92m not sure there is a lot of = magic=20 there." Others think the business is laughable. "If you record = movies on=20 your VCR for personal use and then try to sell the copies, it=92s = not a=20 business model, it=92s piracy. That=92s what David Simon is doing = with his=20 =91virtual VCR,=92" says Gerry Kaufhold, a principal analyst with = market=20 research firm Cahners In-Stat Group.

The MPAA = thought so,=20 too. It claimed, in the words of Jack Valenti, MPAA=92s president, = that=20 Simon had "willingly and knowingly built a business based on = offering its=20 customers access to valuable stolen property."

Simon = was=20 stunned. "I didn=92t even receive a cease-and-desist letter," he = says. He=20 had been running a disclaimer on the site, stating that it was to = be used=20 as a home VCR is used.

The MPAA likens the case to = the=20 recent lawsuit filed by the National Association of Broadcasters = against a=20 Canadian company, iCraveTV.com, which was shut down earlier this = year.=20 That site allowed people to view 17 television stations via the = Web. Simon=20 rejects the comparison because his site doesn=92t steal signals, = as iCraveTV=20 was alleged to have done, nor rebroadcast the shows live. His site = also=20 differs from music-download site Napster, he says, because users = cannot=20 share shows with one another.

History lessons

Simon has decided to go eyeball-to-eyeball with MPAA. His = lawyer, Ira=20 Rothken, is looking to the 1984 case of Sony v. Universal = Studios=20 . In 1976, Universal sued Sony for infringement of copyright for a = little-known technology called Betamax. The case took years to = decide and=20 eventually landed in the Supreme Court. In the end, Sony won. The = court=20 decided that no copyright was violated because of so-called "time=20 shifting," meaning that the VCR recorded programs that a viewer = couldn=92t=20 watch when the show was airing. According to Rothken, "the = question is=20 whether the technology is located in someone=92s house or on a = server=20 thousands of miles away. In this case, we are dealing with time = shifting=20 and geography shifting."

But the MPAA worries that = because=20 television distributors sell their shows market by market, the = Internet=20 and programs such as Simon=92s might allow viewers to watch shows = from other=20 cities. "If David Simon wants to create his own programming, = that=92s fine,"=20 says Rich Taylor, a spokesperson for the MPAA. "But until he owns = a=20 license to retransmit our shows, it=92s not fine." =

Fischer=20 says the first threshold will be to figure out the boundaries of = the=20 technology.

However the case is decided, it = highlights once=20 again the power of new technology to force quick changes in law = and=20 business. And whatever the outcome, David Simon is no longer a = small-time=20 technologist tinkering in obscurity.

Rachel Lehmann-Haupt (rachel@business2.com) = is a staff writer for Business = 2.0.

Content copyright =A9 2000 Imagine Media = Inc.

Find this article at: http://www.business2.com/content/magazine/ebusiness/2000/07/25/15094=

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