Book Review: “Reclaiming Fair Use” by Patricia Aufderheide and Peter Jaszi

Earlier this summer, I made the winning video for Public Knowledge’s video contest to create a response to YouTube’s “Copyright School” video, which made only a token mention of the crucial exception in copyright law for “fair use” and portrayed fair use as being too complicated for ordinary YouTube users to understand. Public Knowledge challenged the online video community to create a video presenting a more balanced view of fair use, and my video, “Fair Use School: The Rest of the Copyright Story,” ended up winning that contest and even received a bit of news coverage, such as in this TechDirt article.

Soon after my video was announced the winner of Public Knowledge’s contest, I was contacted by Patricia Aufderheide of American University, who is also the director of the Center for Social Media. She graciously offered to send me a copy of the new book she recently coauthored with Peter Jaszi, called Reclaiming Fair Use. I have spent the last few days reading the book while on vacation in Washington state and British Columbia (my family thinks I’m crazy for reading about copyright law on vacation), and enjoyed it immensely.

Overall, I found this book to be an excellent resource on the current state of fair use law in the U.S., complete with succinct analysis of changing judicial views becoming friendlier to fair use, and valuable strategic insights for those involved in the copyright reform movement. The basic thesis of Reclaiming Fair Use is that, far from being a dead letter or uselessly vague concept, fair use today is alive and well; and the more people insist on exercising their rights under fair use, the better they can shape the practices which will ultimately come to define fair use for their communities.

The book starts out with a brief recapitulation of the many flaws of our current copyright system, which should be familiar to most people concerned with this subject. Copyright today lasts longer than ever, is broader than ever, and actually licensing copyrighted content for new uses is more difficult than ever. This has resulted in a significant chilling effect on the creation of new cultural works, as ignorance about fair use rights and fear of copyright lawsuits have kept many from creating as freely as they might otherwise have done.

The authors then give a detailed history of the fair use doctrine, from its origin in the 1800s, through its codification in 1976, up through the present day. Even though fair use went through a brief period of decline in which it was marginalized by a law-and-economics approach to considering whether a new use competed with the market for the original, judges have more recently recognized “transformativeness” as the key element of fair use analysis. If copyrighted content is put to a new use that adds new meaning, message, or purpose rather than merely superseding the original, courts today are much more likely to find fair use, even if the new use could conceivably compete with some market for licensing the original material.

While I found the history of the fair use doctrine and current judicial interpretation enlightening (I did not previously know that courts now consider transformativeness to be more important than economic impact), the part of the book I found most fascinating was its insights on the strategy of the broader copyright reform movement. The authors argue that copyright reform advocates were far too quick to concede that fair use is too vague and nebulous a concept to be of any real use to those wishing to put copyrighted content to new and transformative uses. Instead, scholars like Lawrence Lessig and others began advocating either for radical changes to the copyright system that are unlikely to ever happen, or for alternatives to traditional copyright such as Creative Commons.

Aufderheide and Jaszi argue that it was a mistake to concede so much ground to content owners, such that many copyright reformers had effectively given up on fair use. As Peter Jenkins once wrote in response to the quick dismissal of fair use by copyright reform advocates, “with friends like these, who needs enemies?” Rather than giving up on fair use and allowing it to atrophy, we should rather be aggressive in asserting our rights to make fair use of copyrighted content.

Fair use was deliberately designed to be a flexible concept, very much tied to contemporary practice and community norms. Aufderheide and Jaszi argue that it is up to fair users themselves—not their lawyers or their gatekeepers—to define for themselves what fair use means for their community. One of the best ways to do this is by developing “codes of best practices,” which set forth standards for what is believed and accepted to be fair use by a given community, be they documentary filmmakers or media studies teachers. The authors then go on to cite a number of encouraging examples of how these codes of best practices have helped empower several creative communities to throw off the shackles of unnecessary licensing and fear of copyright lawsuits and begin making fair use of copyrighted content in ways they previously considered impossible.

Personally, I found the authors’ insights into the strategy of the copyright reform very enlightening, and was encouraged by the work they have been doing promoting codes of best practices in fair use. I too have previously noted how easily many copyright reformists have given up on fair use as having any practical value. One of the most important things I learned through competing in policy debate in high school and college was the concept of “ground” in a debate, where the side that most aggressively seizes ground in the early stages of a debate and successfully holds onto it usually wins.

When viewed in this way, it was indeed a grave tactical error for the copyright reform community to concede fair use early on, as it has only made it much more difficult for us to retake that ground and begin restoring utility to the fair use doctrine. I was glad to read of the many successes the Center for Social Media has had promoting its codes of best practices in several key creative communities. I wholeheartedly agree with the authors that the best way to fight against overly restrictive copyright laws is by boldly asserting our rights under fair use whenever possible.

One thing I disagree with the book on, however, is that I don’t think codes of best practices will always necessarily be the best way to do this. While codes of best practices may work great in professional communities such as documentary filmmakers and media teachers, they are much less useful in creative communities that do not have any well-defined structure or representative organizations. This is particularly true in the amateur online video community. While I admire the Center for Social Media’s effort to create a Code of Best Practices for Fair Use in Online Video, I don’t see how it could ever reach enough people to have a meaningful impact. I run a website called fairusetube.org, in which I provide tutorials on fair use and guides for dealing with copyright issues on YouTube. I get messages from YouTube users facing copyright takedowns several times a week, and do my best to help them by giving general pointers about fair use and the YouTube copyright dispute process (without crossing the line into giving legal advice of course).

From my experience, most YouTube users know virtually nothing about fair use, and even when informed about their right to dispute copyright claims against their videos, they are too terrified of drawing the ire of copyright owners to risk filing a DMCA counter-notice. Add to this the fact that YouTube’s dual systems of copyright enforcement (both the automated Content ID system and the DMCA takedown process) are hopelessly confusing and leaves gaps in which videos can be blocked with truly no recourse, and copyright continues to be a huge obstacle to online video creators, regardless of the existence of a code of best practices (which most online video creators do not even know exists). Ultimately, as I argued in my forthcoming student note (to be published in the fall 2011 Regent Law Review), I think it will take clear legislative protections for noncommercial, transformative works and real penalties for abuse of the DMCA to solve this problem.

And while this criticism goes beyond the book itself, I also don’t think the Center for Social Media’s code goes far enough to cover the majority of what online video creators actually do. It strongly implies that any use of a complete piece of music in a video cannot be transformative, and therefore is unlikely to be fair use. Coming from my perspective as a vidder who has made several highly popular anime music videos, I would disagree with this. Even though my vids use complete copyrighted songs, I (like other AMV creators) deliberately craft my videos so that the music and video are inseparable parts of a new work of art, where both mutually reflect upon the other and add new meaning and message that would not be present with either the music or the video alone. If this isn’t transformative, I don’t know what is. The fact that these songs would be impossible for amateur creators to license any other way should only add to the case for fair use in these situations. Personally, I would love to see a more expansive code of best practices for online video that recognizes things like vidding—even where complete songs are involved—as fair use.

These minor criticisms aside, I found this book a highly informative and insightful read on the current state of fair use law, with lots of valuable suggestions on how to reclaim and expand fair use rights in the face of long and strong copyright restrictions. It is a must-read for anyone interested in issues of copyright reform, and I hope it will lead to more and more people standing up and exercising their rights under fair use as one concrete step we can all take to fight against overly burdensome copyright laws.

 

 

Copyright and Fair Use in Virtual Worlds

I’ve been meaning to write on this subject ever since I began playing Second Life a few months ago and started exploring the many unique environments it has to offer. For those not familiar with it, Second Life allows users to create vast virtual environments and to buy and sell virtual goods with an in-game currency that is exchangeable with real currency. Second Life itself is extremely interesting from a copyright perspective, since its entire virtual economy is based on copyright. Since the in-game economy is based on buying and selling virtual goods, the value of these goods relies on artificial scarcity produced by copy protections ultimately backed by copyright. It is another aspect of copyright in Second Life that I am interested in right now, however–namely the copyright implications raised by the nature of many of the virtual environments themselves.

I have previously written on one important type of fan-made “remixing” of popular intellectual properties in the form of anime music videos and similar fanvids. I argue that these types of fan-made media provide far more benefit to the original copyright holders than harm, and that these types of uses should be considered “fair use” under U.S. copyright law. In virtual worlds like Second Life however, there is an even more elaborate and sophisticated type of fan-made media that is even more threatened by excessive copyright enforcement–virtual environments based on copyrighted books, TV shows, and films.

As I’ve explored Second Life I’ve noticed that some of the most popular “sims” (simulations: user-created virtual environments) are sci-fi and fantasy role play sims–many of which are based on popular movies and television shows. I have discovered probably a dozen highly detailed sims based on Star Trek, Star Wars, Battlestar Galactica, Firefly, and Stargate, as well as several based on the Myst videogame franchise. Many of these contain highly detailed re-creations of exterior and interior environments from their respective franchises, and allow your avatar to dress as characters from the series, purchase objects and weapons based on those in the series, and even fly fully operational replicas of various types of spaceships. Allow me to illustrate with a few pictures:

On the bridge of the USS Voyager in a Star Trek themed sim.

Stargate Command, from Stargate SG-1.

The Gateroom of the Ancient starship Destiny from Stargate Universe

The Battlestar Phoenix - an imitation of a battlestar warship from Battlestar Galactica.

CIC (command center) of the Battlestar Phoenix, from Battlestar Galactica

Boarding a "Viper" starfighter in another Galactica themed sim.

The city of Coruscant from Star Wars

Exploring Tatooine from Star Wars

The city of D'ni from the Myst Uru videogame.

As you can see, all of these sims are highly detailed, realistic recreations of environments from several highly popular intellectual properties–meticulously modeled down to the tiniest detail by fans who will often spend months creating these sims. And I am willing to bet most sim owners do not go through the trouble of attempting to license their sims, if that would even be possible considering how inaccessible the licensing departments at most major media companies are to ordinary individuals. This makes all of these sims potentially copyright infringing, and leaves them all merely one DMCA notice away from being taken down. This is indeed a serious risk, as those who create these seems must invest a considerable amount of time and money into creating and maintaining them. Running a full-size sim in Second Life can cost around $400 a month, which is paid either out-of-pocket by the sim owner or through donations and virtual sales paid for by members of various role-playing groups. The creators of sims like those above based on popular IPs thus run the risk not only of a lawsuit for copyright infringement, but significant financial loss as well if the sim is taken down–a risk that is not present for fanvids uploaded to YouTube. And it is a significant risk, since I found at least one instance where a Dune themed role-play sim was forced to sanitize their sim of all Dune related material after a copyright claim by the movie studio which owned the rights to the Dune series. Fortunately for them they were able to remove the aspects of the sim explicitly related to the Dune series and turn it into just a generic sci-fi desert planet sim, but for some of the sims shown above that would not be an option, since the entire sim is related to their parent sci-fi series.

Under current copyright law, it is highly questionable whether these sims would be considered fair use by a court if an infringement suit based on them ever came to trial. For a use of copyrighted material to constitute fair use, it must satisfy the four-part test of (1) the purpose and character of the work, (2) the nature of the copied work, (3) amount and substantiality, and (4) effect on the original work’s value. The first and fourth are the most important, which is why I will concentrate on them.

Under the first prong, since these sims do not directly copy anything from their source, they would fall under the derivative works right, and much of the fair use analysis would depend on whether they are “transformative” or merely “derivative.” In most cases sci-fi themed sims try to duplicate original environments from movies or TV shows as faithfully as possible, though they may change minor details or fill in parts that were not shown in the original show. It seems to me that these sims would thus be more of a simple adaptation of the original than a true transformation, since they are merely taking copyrighted scenes and adapting them to 3D virtual environments. It is a process quite similar to when movie studios license movies to videogame companies to adapt into video games.

Another important part of the first prong is whether the use is commercial or noncommercial, with noncommercial use more likely to be fair use. Most sims barely bring in enough income from donations to pay for the sim, and many sims help offset the cost by selling virtual goods which are themselves modeled after things in the series. It is possible to buy a wide variety of outfits (i.e. a Starfleet uniform), spaceships (i.e. a Puddle Jumper from Stargate, a Viper starfighter from Galactica, or the Millennium Falcon from Star Wars), and weapons (i.e. lightsabers from Star Wars), which are either fully operational in the game environment or serve as decoration. While sci-fi themed sims are probably still not making a profit (or at least not a large one), this does add a commercial aspect to them that makes it difficult to characterize them as strictly non-commercial. On the whole then, these sims probably do not satisfy the first prong of the test.

The second and third prongs are likewise questionable. The nature of the copied work is literary/artistic, which generally weighs against fair use. Under amount and substantiality, while these sims don’t by any means incorporate all or even most of the original work, they do often simulate the most important locations in their parent series, and could thus be said to take the “heart” of the copyrighted work. Finally the fourth prong is also fairly weak, as adapting movies and TV shows to video games is an established market which a well-made Second Life sim could be said to compete with, though it is doubtful this could be empirically proven. This would however make these sims likely to fail the fourth prong as well, disqualifying them from claiming a fair use defense.

Under current copyright law, therefore, it appears that these types of Second Life sims based on recreating environments from copyrighted films and TV shows are likely infringing. The question is, should they be? I believe the answer to that is no. While these types of sims may be derivative and even have limited commercial aspects, and may at least in theory compete with other video games based on these franchises, in reality any negative effect they could have on other markets would likely be negligible at best. Even the best made Second Life sims are still amateur and rather clunky in comparison to professionally made video games. Even if made by an experienced sim developer, the Second Life platform simply doesn’t allow for the same degree of functionality and realism that a professionally produced video game has, and consumers would be highly unlikely to forgo buying an officially sanctioned video game in favor of Second Life role-play environments. For example, would a Star Wars fan prefer the Star Wars themed environments in Second Life over the latest Knights of the Old Republic game? Not likely. The two are entirely different and the Second Life environments would be highly unlikely to decrease the market for the other. And even though there is an established market for licensing IPs for adaptation into video games, it’s not like the people who make Second Life sims could afford to pay the studios’ exorbitant licensing fees anyway, eliminating any possibility that they could be a revenue source for the studios.

More importantly, fans creating their own virtual worlds based on their favorite films and TV shows represents a type of cultural innovation that should be promoted rather suppressed by overly restrictive copyright laws. Lawrence Lessig loves to talk about a quote from John Phillip Suzza, who feared that the invention of the phonograph would stop young people from joining together to sing the songs of the day and would turn them into merely passive consumers of media. And that is precisely what happened with 20th century media technologies, which created separate and distinct classes of cultural creators and cultural consumers. Modern computer technologies have reversed this trend and allow “consumers” to now directly interact with the stories and songs that form our culture–in this case by actually “creating” the very worlds in which those stories take place–albeit virtually.

Ever since books and movies have existed, they have formed the backbone of our culture as common cultural reference points which we can all share and relate to. Moreover, they have always been a starting point for our imaginations, which allow us in a sense to participate in these stories ourselves. How many Star Wars fans have not indulged in daydreaming about what it would be like to live in the Star Wars galaxy, or perhaps imagined themselves as part of that great saga? Now with virtual world technologies like Second Life, individuals have the ability to play out such fantasies in a far more concrete manner, actually walking the streets of Courscant or flying on the Millennium Falcon in the guise of their Second Life avatar. It is a natural evolution of the universal desire to interact with and build upon our culture.

It was precisely this type of cultural enrichment that copyright law was designed to promote rather than hinder. It does so primarily by providing financial incentive for authors and artists to create, but we must not lose track of the fact that its ultimate goal is cultural enrichment. Copyright was never meant to give certain big companies a monopoly over culture, and in cases where fans’ follow on creativity builds on major cultural icons like Star Wars and Star Trek without substantially harming the ability of the original creators to profit from their work, it should be encouraged rather than suppressed. Not every use of copyrighted material that can be licensed should be subject to license, as in some cases it may end up decreasing cultural enrichment rather than increasing it. Such is the case here, for if copyright laws were to be rigidly applied to prevent Second Life users from building environments based on these cultural icons, a great deal of incredible creativity would be lost. This matter will only grow more important as virtual worlds continue to mature (perhaps someday even to the level of the fully immersive virtual reality portrayed in the TV show Caprica), and I can only hope that courts and legislatures begin to see the importance of protecting such follow-on creativity before copyright law is allowed to stifle this world of possibilities they represent.

It is high time we expanded our concept of “fair use” to include these types of fan-made creations, for until we do, the law will continue to cast a pall of uncertainty on all such endeavors, producing a chilling effect that can only discourage a great deal of otherwise culturally beneficial creativity.

Are Anime Music Videos Fair Use?

Anyone who knows me probably knows I like studying issues related to copyright law–a fascination driven by the fact that as a child of the Net Generation, I have grown up immersed in what Lawrence Lessig calls the “read-write” culture fostered by digital technology, where virtually any action I take online raises potential copyright implications.

Nowhere is this true than the hobby I have had since high school of creating “anime music videos” or AMVs (music videos setting footage from anime shows and video games to popular songs) and posting them on websites such as YouTube and animemusicvideos.org. And it’s not just me; there are tens of thousands of these videos posted online and they have taken on a life of their own as an art form in their own right, with a whole subculture of AMV editors with contests, awards, and websites dedicated to them.

Yet despite their popularity, I am astonished at the lack of articles analyzing where these videos stand in relation to copyright law. Most articles I have been able to find on the subject simply assume they are copyright infringement, in which case American copyright laws have essentially rendered this entire art form presumptively illegal. However, I am not convinced of this, and I think a solid case could be made that AMVs fall firmly under the doctrine of “fair use” in US copyright law. After my own experiences with copyright run-ins related to my AMVs (and subsequent victories), I thought I’d post a brief analysis of why I think there’s a good case to be made for AMVs as fair use.

As audio/visual works, there are two separate components of AMVs that raise potential copyright concerns and must be analyzed separately to determine if they constitute fair use–namely the video and audio tracks.

Video Track

AMVs typically take ripped footage from anime movies, TV shows, and video games and re-edit them using brief clips no more than a couple seconds in length each set to music, telling a new story by juxtaposing video clips with the beat and lyrics of the song that emphasize different aspects of the original plot. Because this heavy re-editing is so obviously transformative, there is a very strong case to be made that the video portion of AMVs constitutes fair use. Running down the four criteria for fair use in US copyright law, we get the following:

1. The Purpose and Character of the Use

a. Non-commercial — Non-commercial works are much more likely to be fair use than commercial works for profit. Anime music videos are purely non-commercial works created for fun and entertainment and not personal or financial gain.

b. Transformative — The more a work changes and adds to the original rather than merely copying it verbatim, the more likely the use is fair. The standard for determining whether something is “transformative” rather than merely “derivative” is whether it “merely supersedes the objects of the original creation or whether and to what extent it is ‘transformative,’ altering the original with new expression, meaning, or message.” (Campbell v. Acuff-Rose Music). At least in regards to the video track, AMVs so heavily modify the original source footage by clipping, reordering, and overlaying special effects as to make it an entirely new creation. While the use is certainly “derivative,” re-editing plus the new meaning imparted by the particular scenes selected and the music makes AMVs highly transformative, weighing significantly in favor of them being fair use.

2. Nature of the Copyrighted Work

Under copyright law, published materials are more likely to allow fair use than non-published works, and factual works are more likely than artistic works. In this case, the original copyrighted material (anime footage) is published (counting in favor of fair use) artistic work (counting against fair use). However, this factor is the least significant of the four, and can be outweighed by the other three.

3. The amount and substantiality of the portion used in relation to the copyrighted work as a whole

Generally, the less of a copyrighted work that is used in relation to the whole the more likely it is to be fair use. In the case of AMVs, only 3-5 minutes of footage are typically used, consisting of 1 or 2 second clips, often out of hours of available source footage. While these clips may often contain the “heart” of the original work (the most significant scenes of the original anime), the minuscule amount of footage used combined with the brief duration of clips weigh significantly in favor of fair use.

4. The effect of the use upon the potential market for or value of the copyrighted work

This is often the most important prong of the fair use test, and together with the first prong is the one most strongly in favor of AMVs as fair use. In the case of non-commercial works, the burden of proof is on the copyright owner to prove harm to the market or value of the work (Sony Corp. v. Universal City Studios). In the case of AMVs, the small amount of footage used, the reordering of brief clips, and the absence of the original audio track makes it almost impossible for an AMV to be a substitute for the original work (i.e. nobody would watch the AMV instead of the original work). There is also no market for licensing anime clips for use in amateur music videos. Thus AMVs would be highly unlikely to have a negative impact on the market for the original work. In fact, they are more likely to have a positive impact on sales of the original, as they would increase interest in the original work and drive increased sales, effectively acting as a free promotion for the source anime. This factor also weighs heavily in favor of fair use.

Conclusion:

Because the video track of AMVs is non-commercial, highly transformative, uses only a small portion of the original, and has no negative impact on the market for the original, there is a very strong case that the video portion of AMVs constitutes fair use.

Two notes, however. First, in cases where an AMV creator  had to break the copy protection on a DVD to obtain the source footage, that would be illegal as they violated the anti-circumvention provision of the DMCA, which prohibits any circumvention of copy protection regardless of whether or not the use is fair. Second, because AMV creators are usually their most avid fans and they wish to avoid upsetting them, anime creators are highly unlikely to ever mount legal challenges against AMVs. Thus the video portion of an AMV will likely never be the subject of copyright action. The most likely threat comes from the owners of the copyright for the audio track, to which I now turn.

Audio Track

Since AMVs typically use popular songs by high profile artists signed under major record labels (an overall much more litigation-happy bunch than anime creators), it is because of the audio track that AMV creators are most likely to experience copyright problems. Wind-up Records (the label for Evanesence, Seether, and Creed) has already issued take down notices barring AMVs using their songs from animemusicvideos.org, and as I mentioned in my last post, I myself have run up against Warner Music’s YouTube embargo with my own AMVs. Unfortunately, the audio portion of AMVs also has the weakest case for fair use, though I believe a good case can still be made that they are indeed fair use.

1. The Purpose and Character of the Use

a. Non-commercial — Once again, AMVs are completely non-commercial works which makes them much more likely to be fair use. While they are often posted on commercial sites such as YouTube, that has no bearing on whether AMVS themselves are fair use or not. Because of this I find it highly ironic that YouTube has attempted to work out licensing agreements with music labels to allow users to use their music in user-generated videos. Under the DMCA safe harbor provision, the responsibility to ensure content is non-infringing is entirely that of the user that uploaded the videos, not YouTube. Thus whether or not sites like YouTube have a licensing agreement with labels such as Warner has no bearing on whether the videos are infringing or not.

b. Transformative — It is much less clear that AMVs are transformative in relation to the music source than the video source. Since they usually use a whole song without editing or altering it, they clearly don’t transform the song in the sense that they make it into something different as with the video track. However, I think there is still a case to be made that AMVs are transformative in relation to the song used in “altering the original with new expression, meaning, or message.” Overlaying the song with poignant video images which are often used to translate the lyrics literally on screen or otherwise highlight certain things about the song clearly adds a new layer of meaning and expression to the song. The video and music are combined to create an entirely new message which is much greater than the sum of its parts. The music reflects on the video and the video reflects on the music, imparting new significance to both. It is thus a qualitative transformation rather than a quantitative one. The viewing experience of watching an AMV is qualitatively different than either watching the anime by itself or listening to the song by itself, and thus AMVs could still be considered transformative and likely fair use.

2. Nature of the Copyrighted Work

As with the video, the source songs in AMVs are published artistic works. The fact that they’re published (assuming you don’t use a pre-release leak or something) is slightly in favor of fair use, while the fact that they’re artistic rather than factual works is slightly against fair use. Overall, this prong isn’t very significant either way.

3. The amount and substantiality of the portion used in relation to the copyrighted work as a whole

This prong is slightly problematic, since an entire copyrighted song is used. This would tend to weigh against fair use. However, some cases where an entire work was copied have nevertheless been held to be fair use, “if the secondary user only copies as much as is necessary for his or her intended use.” In this case it could be argued that the entire song is needed, since the whole point of an AMV is for the song to shape the video and for the video to illustrate the song. Using any less than the entire song would make for an incomplete video and would reduce the power of the video. If the audio in the video is encoded at a significantly lower quality than CD quality audio, you could also argue this point qualitatively, since the song in the video is too low quality to substitute for the original. Nevertheless, this argument is still fairly weak and it would be a better strategy to argue this prong is outweighed by the other prongs.

4. The effect of the use upon the potential market for or value of the copyrighted work

This is where the strongest case for usage of the song being fair use can be made. Once again, in non-commercial cases, the burden of proof is on the copyright holder to demonstrate a negative effect on the market for the original work. There are two possible ways they could show this—the effect on sales of the original song and the impact on a possible market for licensing the song for audiovisual synchronization:

a. Effect on the market for the original song: Copyright holders could argue that AMVs could serve as a substitute for buying the original song if people merely listen to the song on YouTube or rip the audio track from the video and save it to their computer instead of buying the song. While both of these things are certainly possible, it would be difficult for the copyright holder to prove an actual negative impact on sales. Those who are content to merely listen to the song on YouTube would not have been likely to buy the song anyway, while relatively few people possess the technical knowledge to rip the audio from a video and use that in place of buying the song. Those that do would most likely consider the audio rip of inferior quality to purchasing the song (or merely illegally downloading it a different way), and would thus not likely consider it worth the trouble. Both of these factors also most likely would be outweighed by the positive effect the video would have on the market for the original song by giving the artist additional exposure and free promotion, motivating people who otherwise might not have heard the song to buy the artist’s work.

b. Effect on a possible licensing market: In large-scale commercial scenarios, there is an established market for audio visual synchronization rights, where musical artists sell the rights to filmmakers to “synchronize” their music with video footage such as in films or television commercials. However, there is at present no market for licensing tracks to individual hobbyists wanting to create amateur non-commercial music videos for fun. Indeed, if such an individual tried to license a song for an AMV, they would most likely find themselves lost in a maze of legal red tape or simply ignored by music labels who wouldn’t take their request seriously. Even if they did, the labels would most likely insist on charging commercial-scale license fees on the level of several thousand dollars per use—an overwhelmingly cost prohibitive sum for amateur non-commercial use. Because a legitimate market for licensing songs for uses such as AMVs does not currently exist, there is therefore no potential for this use to have a negative effect on such a market. You cannot negatively impact that which does not exist.

Conclusion:

While the case for the use of copyrighted music in the audio track of an AMV is not as clearly fair use as the use of anime footage in the video track, I think a strong case for fair use can be made here as well. The best strategy in this area would be to emphasize the non-commercial transformative nature of the use and the absence of any negative impact on the market for the original song. Indeed, AMVs often have a positive effect on song sales, since many people discover bands through watching AMVs they would not otherwise have heard of and in turn go and buy their music. Music videos can serve as valuable promotion for musical artists—something artists themselves recognize when they create their own music videos to promote their music. The transformative nature of AMVs plus their non-commercial character and absence of harm are thus strong indicators that they constitute fair use.

More resources about anime music videos and fair use:

• Wikipedia article on fair use
• Copyright and Culture: Anime Music Videos
• Lawrence Lessig, “Creatives face a closed Net”
• Code of Best Practices in Fair Use for Online Video
• Stanford Center for Internet and Society: Fair Use Project
• ChillingEffects.org