UNITED STATES OF AMERICA

FEDERAL TRADE COMMISSION
WASHINGTON, D.C. 20580

mer Protection
Division of Advertising Practices

October 9, 2008
Randal M. Shaheen, Esq.
Arnold & Porter LLP
555 Twelfth Street, N.W.
Washington, D.C. 20004-1206

Re: | MLB Advanced Media, L.P., FTC File No. 082-3043
Dear Mr. Shaheen:

As you know, the staff of the Federal Trade Commission has conducted an investigation
into whether MLB Advanced Media, L.P. (‘MLBAMY”) violated Section 5 of the Federal Trade
Commission Act, 15 U.S.C. § 45, in connection its advertising and sale of videos consumers
purchased and downloaded via the MLB.com web site.

From approximately Autumn 2003 through Summer 2008, MLBAM sold to consumers
downloadable digital copies of Major League Baseball game telecasts and other baseball content
via its MLB.com web site (“Downloads”). Consumers who used MLBAM’s MLB.com Digital
Download service could purchase Downloads for viewing on their PCs and compatible mobile
devices. MLBAM restricted the Downloads with a digital rights management (“DRM”) system
that makes it necessary for a consumer’s media player application to download a DRM license
the first time a consumer plays a Download on a particular computer. Once a DRM license is
issued for that computer, a Download can be played an unlimited number of times on that
computer (assuming no significant system changes are made). MLBAM will issue a maximum
of three DRM licenses per Download, thereby limiting to three the total number of computers
consumers can ever use to watch a Download. Thus, over time, as Download customers replace
their computers and then attempt to watch Downloads in their video collections, they would
encounter the three-computer DRM limit and be unable to view the content that they lawfully
purchased.

Through at least the end of 2006, MLBAM’s advertisements on its MLB.com web site
represented that consumers would “own” the Downloads. For example, one banner ad read:

Don’t just watch the game OWN IT! Get complete game broadcasts as
downloadable files you can OWN. Only $3.95 each! Own the moment.
MLB.com Digital Download Service


Randal M. Shaheen, Esq.
October 9, 2008
Page 2

Similar claims that consumers would “own” the Downloads and could use them in a manner
comparable to their use of other copies of entertainment content that they own included:

OWN THE MOMENT. Key highlights from last night’s game you can OWN.
OWN complete game downloads from this year or yesteryear.

[Y]Jou can watch [‘Minivision clips’ highlight videos] where you want, when you
want, on your PC at home or work, or on a Windows Mobile'TM-based Portable
Media Center to view them on the go. You can even burn them onto a CD to start
your own baseball library.

Store them on your PC or portable media device, or burn them to a CD to build your own
baseball library.

A [Boston Red Sox] Championship 86 Years in the Making; re-live the glory!; Own a
piece of history . . . get them all now to have the complete collection.

Own the History. Downloadable files of baseball’s classic matchups, available as full-
game replays you can own ~ yours for only $3.95! Start your own collection of baseball’s
best games from this season or from seasons past. Burn them to a CD or enjoy on your
laptop or portable media device, only from MLB.com.

From late 2007 through Summer 2008, MLBAM advertised Downloads with the language:
“Own today’s games and yesterday’s classics” at the top of its main Downloads page on the
MLB.com web site. MLBAM has at all relevant times disclosed the three-computer DRM limit
only in an “FAQ” page accessible via an inconspicuous link on the MLB.com Downloads pages.

The Commission has the challenge of ensuring, in the context of sales of digital products,
“that consumers are provided sufficient information prior to purchase so that they understand any
inherent limitations on the use of the products they buy.” Protecting Consumers in the Next
Tech-ade: A Report by the Staff of the Federal Trade Commission, at 16 (Spring 2008).
Increasingly, companies are selling entertainment content to consumers as downloadable, digital
copies. When consumers purchase content in this form, they may not expect certain ownership
and usage rights to be restricted by the seller via DRM systems.' Boilerplate disclosures in

‘See Sony BMG Music Entertainment, Inc., FTC Docket No. C-4195 (June 28, 2007
consent order) (Commission alleged record label deceived consumers by failing to adequately
disclose that some of the CDs it sold contained DRM restrictions that limited the portable
devices to which music files could be transferred from a computer and limited consumers to
making three copies of the music files directly from the CDs).


Randal M. Shaheen, Esq.
October 9, 2008
Page 3

lengthy “Terms & Conditions” or “End User License Agreements” may be insufficient to apprise
consumers of important limitations on their purchases, particularly if the limitations may lead to
an inability to view or listen to content in the future.’ In addition, MLBAM’s representations that
consumers would own the Downloads could, in the context of MLBAM’s advertising, cause
reasonable consumers to believe that they had the ability to play the content on a potentially
unlimited number of compatible devices, or could otherwise use and dispose of the copy
consistent with how consumers can use and dispose of other copies of copyrighted works that
they own.

Upon careful review of the matter, including non-public information submitted to the
staff, we have determined not to recommend enforcement action at this time. Among the factors
we considered in making this decision are MLBAM’s discontinuation of advertising claiming
that consumers will own their copies of any downloadable baseball content they purchase, and
the accommodations that MLBAM is making to its customers who purchased Downloads
directly from the MLB.com web site and encounter the three-computer DRM limit. MLBAM
will advise those Download customers, in messages generated on-screen when they
unsuccessfully attempt to view Downloads on new computers, that all non-functioning
Downloads previously purchased directly from it will be made available at no additional charge
to those customers, without regard to the number of computers to which the Downloads have
been transferred. If MLBAM is unable to provide those Download customers with replacement
videos, it will offer them a refund. Moreover, it is advising those Download customers of this
policy via its web site. Thus, it appears that no further action is warranted at this time and the
investigation is closed.

This action is not to be construed as a determination that a violation may have occurred,
just as the pendency of an investigation should not be construed as a determination that a
violation has occurred. The Commission reserves the right to take such further action as the
public interest may require.

Very truly yours,

y wt
rer tearo ven

pera irector

Consumers’ right and ability to access and play DRM-protected digital content is
constrained, as a legal and practical matter, by the Digital Millennium Copyright Act. See 17
U.S.C. § 1201(a)(1)(A) (prohibits circumvention of “technological measure[s] that effectively
control[] access” to a copyrighted work); and 17 U.S.C. § 1201(a)(2) and (b)(1) (prohibits
offering to public or “traffic[ing] in” tools or software that could circumvent technological
measures that control access to copyrighted works or that protect copyright owners’ rights).