CELEBRATING THE BETAMAX VCR CASE

Thirty years ago this week, the Supreme Court decided in the Betamax case (464 U.S. 417), that consumers could lawfully record television programs using newfangled video tape recorders. In that case, the Supremes said that the fact that consumers could use the new Betamax VCR for copyright infringement was not controlling because consumers could also use the device for significant non-infringing uses. The Court talked about using the tape recording for “private, noncommercial time-shifting in the home”.

Half of all households had a video-recorder within two years of that case. My generation has watched the rise and fall of the rental industry with Blockbuster (opened first in Dallas in 1985, last store closed in January 2014), which was replaced by Netflix and Redbox. We’ve also seen additional technologies arrive that make copyright infringement even easier, e.g., this Internet thing. Evolving commercial developments have essentially required aspiring artists to give their music away until it is commercially appreciated, e.g., Justin Bieber.

What is more and more obvious is that performing artists must actually perform in order to make money, because fans can download the mere music and performance from a number of sources (and not just Youtube). U2 gave away an entire album – the uproar was not about whether it was a good idea, but the fact that it was “forced” on everyone with an iTunes account. I’m a big fan of Les Miserables, and can watch the 2.5 hour Tenth Anniversary performance any time without paying a dime. The world of entertainment has changed and continues to change in the direction of less expensive entertainment.

Accordingly, bands suddenly have to tour to make money again…just like they did throughout all of human history until Mr. Edison’s inventions in the early 1900s. The era of paying significant money for mere recordings of performances is nearly over, irrespective of who wishes that development not to be so.

In this case, we can see that, had the Supreme Court gone the wrong way, movie studios would not have had the huge influx of additional revenue created by the rental industry. There were proprietary approaches that were discussed, but it would have been nothing close to what actually happened. Some observers have stated that the rental development was the salvation of the movie studios, rather than their doom.

The lesson to this story is that legislatures and courts often have the opportunity to quash technology developments, and we will never know the damage that they do, or the price that society pays when they get it wrong. These things matter.

THE RISE OF UBER AND LYFT

Today we can see a similar fight with the arrival of Uber and Lyft, which should be viewed as decentralized and personalized mass transit. These new technologies and services are illegal in most cities, because city councils pass laws that protect taxi services that prohibit the kind of arrangement that Uber and Lyft makes possible.

Taxi service is the only industry that I know that is controlled at this level by city councils. A new taxi service has to come to public hearings and beg a city council to allow it to operate. During these hearings, existing taxi services which have been approved have the opportunity to show the council that they could use more business and the council should not damage them by allowing the competition. It’s absurd, but the norm. Individuals wishing to enter the market and serve those who need a rise have to comply with a complex world of regulationdesigned to protect current providers and excuse a bigger bureaucratic empire, under the guise of protecting consumers.

Status quo supporters excuse this process with the assertion that they are protecting those who would be damaged by allowing just anyone to advertise as a taxi service, and cities have the obligation to protect tourists who might be cheated. Except that cities don’t really protect tourists from anything else (when was the last time you paid the room rate that is printed on the back of the hotel door?), and they don’t ensure that rental cars are too expensive. And of course, city councils don’t really do anything to ensure that taxis are actually available in the city. The fact is that city councils don’t really do anything with these laws except keep out competition and protect their bureaucratic empire.

This world is now threatened by the development of the decentralized and unregulated Uber and Lyft, two new services that connect people with empty cars and a bit of time with people who need to get somewhere.

What would happen if these services were adopted for everyday use in mass? Suddenly, people who don’t know each other, but through Uber, learn that others with their exact work schedules live close by, and work a block away from each other, and begin to carpool. Suddenly, a decentralized mass transit system arrives, where neither city council members, nor bureaucrats, nor unionized bus drivers have any power. A system where people learn not to fear someone who is a mere stranger (because both driver and passenger can look up the reputation of the other before making a deal), and the real number of cars on the road diminishes substantially.

Widespread adoption of decentralized ridesharing would be a great development for our society – but it’s illegal right now. The closest that we get in Arlington is our jitney law, added in 1998*, which while better than most cities, still requires a $500k insurance liability policy and has other requirements that kill off any real use of the law.

Does Uber need a subsidy or special law? No…all it needs is for city councils to get out of the way and let its residents reap the rewards of new technology. History suggests that they won’t, but city council elections are never more than a year away. Ask your council candidates where they stand on this – do they stand with the over-regulated past where it takes an hour to get a taxi, or with the vibrant future where their neighbors get them where they are going with a faster response and lower cost?

– Warren Norred (who enjoys the promise of technological revolt against regulation but worries we’ll all be singing Empty Chairs at Empty Tables when it doesn’t go right)

*Disclaimer – I was a resident member of an city council transportation subcommittee that wrote an early version of what became the 1998 law. The Council “fixed” what we had suggested, adding requirements that were fatal to any widespread adoption.