A normal consumer-level DVD or video (or CD) is licensed to its purchaser only for 'home' use; you can't rent it out for profit, you can't show it to large crowds of people you don't know. Movie theaters get the exclusive rights to crowds (which they pay for when licensing movies for themselves) and rental places get exclusive rights to making money off the same media over and over again (which they also pay for.) You wouldn't want to piss them off by making them pay for something everyone already has. So everyone gets a different license. Fair enough, I suppose. Let's keep playing by the rules.
What you are allowed to do, however, does include lending (without profit) your CD's or DVD's to friends, neighbors, and half-assed acquaintances. If someone comes knocking on your door, asking if he can borrow a copy of, say, X-Men2, you might want to find out where he lives so you can recover it -- but your license doesn't forbid you from handing the DVD to him. Libraries operate on this principle: they have limited copies of copyrighted materials, which a single set of people will have exclusive control over for limited periods of time, with identifiability being key to making sure the common property is returned for re-use. Public libraries are the most common -- if you can't make a profit off of letting people borrow the books, someone else is going to have to pay for the building, the workers, and the books (or movies, or music, or whatever), which is where the government comes in. Taxes are so fun, don't you think?
But what if we were to build a distributed library, with no permanent hours, no employees, and no financial transactions? What if we took the technology we already have, allowing fast downloads of files across networks, and combined that with the rules of commercial copyright licenses? You can let your neighbor borrow a movie for the night -- why not let some guy in Zimbabwe borrow it for the night sometimes too?
All we really have to do is set up a system that allows people to prove they made a good-faith effort to play by the rules in terms of exclusive use of copyrighted materials at any given time. When someone's borrowing your DVD's, you don't get to watch them. When someone's borrowing digital copies of those same DVD's, we play by the same rules. The physical token indicating that you own the license remains at your house -- but the concept of 'use' gets to move around.
So let's imagine a system in which participants are free to upload digital certificates indicating that they swear they own a legal copy of various movies. Then let's assume that a reliable system tracks requests for media, hands tokens to the appropriate people, tracks how long the media are to be borrowed for, how long they're available for borrowing, etc. (Let's say you put your copy of X-Men2 up for viewing for the next three months; during that time, you swear that you own a copy, and that you will not watch it without re-acquiring the permission to do so from the network.) At this point, file-sharing isn't an issue -- you could always share files, it was watching them that caused issue. Why not allow people to queue downloads on the assumption that the'll eventually get permission to watch what they've downloaded (they're in the queue to get permission, but don't have it yet) ... they can have a copy ready to watch as soon as they gain exclusive control over it. Of course, the system would track hundreds of certificates for every uniquely-identifiable media -- and you might want to avoid having slightly-differing copies of the files around, as that's just pointless. The point is that, at any given point in time, only one person has permission from the owner of a license to be using that license. The owner may take back that permission, but only if they've re-acquired the exclusive control of the media. (Automatically taking permission away from borrowers seems like a good idea -- why have issues with people forgetting to bring back the movies?)
Let's talk money: this system wouldn't eliminate the need to purchase licenses. Yes, their cost might go up, but then again, people don't currently rely entirely on movie rental places for their viewing desires. They'll buy their own copy to make damned sure they can watch the movie when they want to. And even if a lot of people decided that such a network-based system were good enough for their needs, there would be an equivalent to 'rush hour traffic' -- hundreds of people at once wanting to acquire temporary licenses to view recent movies. Someone's going to have to provide those licenses, and we're still assuming that this means someone has to go out and buy a copy legally, certify that they've done so (or provide proof in a way that isn't currently available) and put it up for borrowing. The market would demand that copies still be bought in bulk, assuming the movies (or music) are popular enough. So that's not any different.
All we're doing is:
a) using our right to borrow movies, music, etc. from complete strangers
b) using the concept of 'license' to mean that you don't need physical control of the original media to have logical control over watching/listening to its content. (Should you have to buy a new copy of a movie if the DVD gets scratched? Is the DVD the license? I think not.)
The easiest thing for a group like the MPAA or the RIAA to do at this point would be to constantly queue up (under fake accounts) licenses to as many copies as possible, driving down supply substantially. A 'ratio' system (as is already used among less-than-legal traders) would work for this. Or at least, like the local library, only let people check out 3 things at a time, and require everyone to be identified as a legal person (avoid fake accounts.) How do we verify that they're legal people? That's a question I haven't figured out yet.
If you borrow a movie from a friend, and are later caught with it and told it's an illegal copy, you can point to the friend and say you honestly didn't know. It would be the responsibility of the person putting up a copy for viewing to vouch for the validity of their license. It would also be up to that person to vouch for their own honesty. If you let a friend borrow your movies and he makes copies of those movies himself, then returns the DVD -- did you have any hand in it? Is it your fault someone else made copies they shouldn't have? Of course not! Likewise, if you watch the movie you've let someone else borrow, breaking the voluntary rules of the system, it's your own fault. So things are, I think, rather clear in that respect. It's not the system's fault if you're dishonest. (Never blame the tool. The gun didn't make you shoot.)
If we let people only borrow, say, as many items as they have up for borrowing, I can see copyright owners flooding the system with 'crap' -- legal licenses to view things nobody cares about. How many copies of 'Gone with the wind' would such a system need, on average? (Yes, I despise that movie.) For them, it's free -- it's a lot like printing cash (or rather, the way people imagine printing cash must be.) For some reason, this is reminding me of bank loans -- you have to have money before you can borrow it. I'm sure creative minds can see solutions to this form of 'attack'.
The next move though would be for new movies to all be released with new licenses forbidding the above practice. Even if it's entirely legal, and even if it doesn't seriously impact the money-making potential of movie studios (it's just an improved, private-sector library system) ... the licenses on commercial copies of movies could be altered to make it illegal (in the sense of being against the license, which is a form of contract.) This wouldn't affect older movies (and music, books, paintings, etc.) but it would be a rather brutal blow.
Okay, so I'm probably off my rocker. Trying to find a legal way for people to swap movies and get more bang for their buck? I must be! (And I was in California this weekend -- that'll mess you up.) But at least consider the idea -- no central library (in a physical sense), hundreds of copies of the latest movies and music up for grabs (you might have to wait sometimes, and not everything is listed -- you might still have to purchase an original copy yourself and contribute it to the library)...
Eventually, we could merge it with a marketplace system. You've already got registered users certifying ownership of licenses. You can resell a DVD, right? You can, therefore, transfer this license to someone else. You could transfer ownership to a buyer, even while the item is up for borrowing -- when it comes up for renewal, the buyer could take it out of the system at his leisure, and regain permanent control over his purchased item (license.) Fair enough, yes?
So, we'd track:
a) unique 'pieces' of copyrighted material
b) licenses up for borrowing (owner, start and end dates)
c) queues of people wanting to borrow a particular item (borrower, request date, maybe a preferred date or range of dates for borrowing the item -- special events?)
d) licenses being borrowed (license, borrower, start and end dates of validity, etc.)
e) transfers of ownership, eventually
See? All fun and games. And we don't actually have to change a thing about current file-sharing networks -- this is just a legal framework on top of them. You could grab a file any way you can figure to, and then just watch it only when you have permission to do so from someone who can let you borrow it! Weee! [Okay, I'm putting myself to bed. You needn't worry any more.]