How did the cycle end? Can we bring it back? To understand the answers to these questions, we need to consider how the cycle worked — back when it was still working.
How Things Used to Work
In 1950, a television salesman named Robert Tarlton put together a consortium of TV merchants in the town of Lansford, Pennsylvania to erect an antenna tall enough to pull down signals from Philadelphia, about 90 miles to the southeast. The antenna connected to a web of cables that the consortium strung up and down the streets of Lansford, bringing big-city TV to their customers — and making TV ownership for Lansfordites far more attractive. Though hobbyists had been jury-rigging their own "community antenna television" networks since 1948, no one had ever tried to go into business with such an operation. The first commercial cable TV company was born.
The rise of cable over the following years kicked off decades of political controversy over whether the cable operators should be allowed to stay in business, seeing as they were retransmitting broadcast signals without payment or permission and collecting money for the service. Broadcasters took a dim view of people using their signals without permission, which is a little rich, given that the broadcasting industry itself owed its existence to the ability to play sound recordings over the air without permission or payment.
The FCC brokered a series of compromises in the years that followed, coming up with complex rules governing which signals a cable operator could retransmit, which ones they must retransmit, and how much all this would cost. The end result was a second way to get TV, one that made peace with—and grew alongside—broadcasters, eventually coming to dominate how we get cable TV in our homes.
By 1976, cable and broadcasters joined forces to fight a new technology: home video recorders, starting with Sony's Betamax recorders. In the eyes of the cable operators, broadcasters, and movie studios, these were as illegitimate as the playing of records over the air had been, or as retransmitting those broadcasts over cable had been. Lawsuits over the VCR continued for the next eight years. In 1984, the Supreme Court finally weighed in, legalizing the VCR, and finding that new technologies were not illegal under copyright law if they were "capable of substantial noninfringing uses."
It's hard to imagine how controversial the VCR was in its day. MPAA president Jack Valenti made history by attending a congressional hearing where he thundered ,"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."
Despite that unequivocal condemnation, home recording is so normal today that your cable operator likely offers to bundle a digital recorder with your subscription. Just as the record companies made peace with broadcasters, and broadcasters made peace with cable, cable has made its peace with home recording.
It's easy to imagine that this is the general cycle of technology: a new technology comes along and rudely shoulders its way into the marketplace, pouring the old wine of the old guard into its shiny new bottles. The old guard insist that these brash newcomers are mere criminals, and demand justice.
The public flocks to the new technology, and, before you know it, the old guard and the newcomers are toasting one another at banquets and getting ready to sue the next vulgarian who has the temerity to enter their market and pour their old wine into even newer bottles.
That's how it used to work, but the cycle has been interrupted.
The Cycle is Broken
In 1998, Congress passed the Digital Millennium Copyright Act, whose Section 1201 bans bypassing a "technical measure" that “controls access” to copyrighted works. The statute does not make an exemption for people who need to bypass a copyright lock to do something legal, so traditional acts of "adversarial interoperability" (making a new thing that plugs into an old thing without asking for permission) can be headed off before they even get started. Once a company adds a digital lock to its products, it can scare away other companies that want to give it the broadcasters vs records/cable vs broadcasters/VCRs vs cable treatment. These challengers will have to overcome their fear that "trafficking” in a “circumvention device" could trigger DMCA 1201's civil damages or even criminal penalties—$500,000 and 5 years in prison...for a first offense.
When companies like Sony made the first analog TV recorders, they focused on what their customer wanted, not what the winners of last year's technological battle thought was proper. That's how we got VCRs that could record off the air or cable (so you could record any show, even major Hollywood movies getting their first broadcast airing) and that allowed recordings made on one VCR to be played on another recorder (so you could bring that movie over to a friend's house to watch with a bowl of popcorn).
Today's digital video products are different. Cable TV, satellite TV, DVDs/HD DVDs/Blu-Ray, and streaming services all use digital locks that scramble their videos. This allows them to threaten any would-be adversarial interoperators with legal reprisals under DMCA 1201, should they have the temerity to make a user-focused recorder for their products. That stifles a lot of common-sense ideas: for example, a recorder that works on all the programs your cable delivers (even pay-per-views and blockbusters); a recorder that lets you store the Christmas videos that Netflix and Amazon Prime take out of rotation at Christmastime so that you have to pay an upcharge to watch them when they're most relevant; or a recorder that lets you record a video and take it over to a friend's house or transfer it to an archival drive so you can be sure you can watch it ten years (or even ten minutes from now.
Since the first record players, every generation of entertainment technology has been overtaken by a new generation—a generation that allowed new artists to find new audiences, a new generation that overturned the biases and preconceptions of the executives that controlled the industry and allowed for new modes of expression and new ideas.
Today, as markets concentrate—cable, telecoms, movie studios, and tech platforms—the competition is shifting from the short-lived drive to produce the best TV possible to a long-term strategy of figuring out how to use a few successful shows to sell bundles of mediocre ones.
In a world where the cycle that led to the rise of cable and streaming was still in effect, you could record your favorite shows before they were locked behind a rival's paywalls. You could search all the streaming services' catalogs from a single interface and figure out how to make your dollar go farther by automatically assembling a mix of one-off payments and subscriptions. You could stream the videos your home devices received to your phone while you were on the road...and more.
And just as last year's pirates — the broadcasters, the cable operators, the VCR makers — became this year's admirals, the companies that got their start by making new services that centered your satisfaction instead of the goodwill of the entrenched industries would someday grow to be tomorrow's Goliaths, facing a new army of Davids.
Fatalistic explanations for the unchecked rise of today's monopolized markets—things like network effects and first-mover advantage—are not the whole story. They are not unstoppable forces of nature. The cycle of concentration and renewal in media-tech shows us that, whatever role the forces of first-mover advantage and network effects are playing in market concentration, they are abetted by some badly written and oft-abused legal rules.
DMCA 1201 let companies declare certain kinds of competition illegal: adversarial interoperability, one of the most historically tried-and-true methods for challenging dominant companies, can be made into a crime simply by designing products so that connecting to them requires you to bypass a copyright lock. Since DMCA 1201 bans this "circumvention," it also bans any competition that requires circumvention.
That's why we're challenging DMCA 1201 in court: we don't think that companies should be able to make up their own laws, because inevitably, these turn into "Felony Contempt of Business Model."
DMCA 1201 is just one of the laws and policies that have created the thicket that would-be adversarial interoperators run up against when they seek to upend the established hierarchy: software patents, overreaching license agreements, and theories of tortious interference with contractual relations are all so broadly worded and interpreted that they can be used to intimidate would-be competitors no matter how exciting their products are and no matter how big the market for them would be.