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Here we'll explore the nexus of legal rulings, Capitol Hill policy-making, technical standards development, and technological innovation that creates -- and will recreate -- the networked world as we know it. Among the topics we'll touch on: intellectual property conflicts, technical architecture and innovation, the evolution of copyright, private vs. public interests in Net policy-making, lobbying and the law, and more.

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In the Pipeline: Don't miss Derek Lowe's excellent commentary on drug discovery and the pharma industry in general at In the Pipeline

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June 17, 2004

Cory on DRM @ Microsoft

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Posted by Ernest Miller

Cory Doctorow has gone to Microsoft to bring the gospel of no-DRM, presenting a substantial, well-written speech (Why Microsoft should get out of DRM). Cory makes five points in his speech:

1. That DRM systems don't work
2. That DRM systems are bad for society
3. That DRM systems are bad for business
4. That DRM systems are bad for artists
5. That DRM is a bad business-move for MSFT

I, of course, agree with all of them except number 5. The problem is that because of Microsoft's monopoly position, creating DRM backed by law can actually be quite a good business move, particularly if you don't think you are in a position to continuously innovate or need some barriers to entry to slow your competitors while you copy their innovative ideas.

For example, AT&T very successfully blocked innovation for a time and thrived, relatively speaking. Once innovation was permitted, AT&T struggled and now it is little more than a famous trademark. And thriving, relatively speaking, is exactly what business leaders want. You never know if a new innovation will really grow the market for your company. It is sort of hard to prove and guarantee. But no one can fault you if you stay on top of a stagnant or slowly growing market. The profits lost due to stifled innovation aren't as obvious as the profits lost due to a business model shift.

via BoingBoing

Comments (13) + TrackBacks (0) | Category: Big Thoughts


COMMENTS

1. Brad Hutchings on June 18, 2004 2:58 AM writes...

A very seductive speech. An uderlying argumentive theme is what I'll call "technological induction". It says that in past instances, copyright holders have complained about a new technology and resisted it and it turned out to be a new market that was an economic boom for them. The most recent step in this progression is Betamax.

I may be wrong, but it seems to me that there are two intervening trends that make the current plethora of devices (DVD-R, file sharing, etc.) different in the sense that it makes DRM tenable (even without DMCA).

(1) In Betamax, Sony was up against the movie industry. Today, Sony is the movie industry. Similarly, Apple is the music industry. Real is the music and short movie indutstry. Microsoft wants to be the music and movie industry. There is corporate convergence between technology and content. The obvious concentration of control seems to be the software that bridges hardware technology and content.

(2) Since Betamax, we've also seen the beginnings, rise to prominence, and maturation of a software industry. Software has a very unique property in that it is the first thing that is both technology and content. As such, successful software business models have had to incorporate lessons from the previously separate sectors, and learn its own along the way.

Again, I may be entirely wrong with the facts or implications of this conjecture and welcome discussion. But the technological induction argument has seemed to me to have something wrong with it for a long time. Cory's essay and audience brought the thought together for me.

Permalink to Comment

2. Branko Collin on June 19, 2004 8:46 AM writes...

How valid is your example? Did AT&T wither because they lost their artificial monopoly, or because they did not adapt quick enough to the new circumstances?

IBM lost their monopoly on the PC. Comoditization of the PC hardware architecture meant that software became the valuable good. When IBM at first did not adapt, it withered. Later it adapted, started selling software and services itself, and now it's thriving again.

Permalink to Comment

3. Ernest Miller on June 19, 2004 9:39 AM writes...

I think AT&T would still be a big, huge company if:

1) The government hadn't broken them up.

2) The courts had supported AT&T claims that no one should be allowed to connect things to the telephone network but AT&T.

The fact that AT&T would still be a huge, dominant company doesn't mean that our economy would be better off for it. In fact, we would probably be quite far behind other industrialized nations.

Permalink to Comment

4. Branko Collin on June 19, 2004 11:35 AM writes...

Do you see the state as a non-variable in this? So far, abusing monopolies got clamped down on sooner or later. Surely, AT&T's management should have weighed this in with the other factors when deciding they would stick with milking the chicken with the golden eggs?

Only recently, should I accept Lessig's argument in Free Culture, has it been the case that the government stopped punishing the abuse of monopolies.

Permalink to Comment

5. Ernest Miller on June 19, 2004 11:42 AM writes...

No, of course the state plays a major role. For example, DRM would be a complete joke were it not for the DMCA. Everyone would have reversed engineered and be making iTunes compatible iPods today, for example. We would have DVD players that would let you make a backup.

Permalink to Comment

6. Brad Hutchings on June 20, 2004 6:06 AM writes...

Um, no Ernest. Without DMCA, nobody would have reverse engineered iTMS, because without DMCA, the iTMS would never have been launched.

If Lexmark is the poster child for what is bad about the DMCA, the iTMS is the poster child for what is good about it.

Permalink to Comment

7. Ernest Miller on June 20, 2004 9:03 AM writes...

Brad, please explain this to me. In a world without the DMCA there would be no legitimate music downloading service because:

1) Selling downloads is inevitably unprofitable without DRM. Music that is more convenient to use, easier to transfer, backup, etc., is simply not worth paying what you would pay for DRM'd music. People pay more for downloaded music when it is saddled with all sorts of limitations;

2) The record labels would absolutely refuse to license their music for download in the absence of the DMCA. As illicit filesharing grows in popularity, the record labels will not provide a legitimate alternative to counteract it, even though they realize lack of legitimate alternatives will only increase demand for illicit filesharing. The record companies will continue to hold out for unbreakable DRM that will keep their music from getting onto the illicit filesharing systems. Oh, wait, that doesn't exist. Thus, the record labels will never, ever license their music for download;

3) Only Apple and Steve Jobs could possibly develop a downloading service that is convenient and easy-to-use. No other company is creative and/or intelligent enough to design a decent music download service;

4) Open standards are bad for innovation and creativity. By making his internet standards non-proprietary, Tim Berners-Lee crippled the development of the internet. The web would be much more advanced if only the various proprietary networks had been allowed to duke it out without the free upstart. We shouldn't allow that sort of tragedy to happen to music; and/or,

5) The DMCA is beneficial, but only for some industries. This is because some industries benefit from lack of compatibility, like music, while others don't, like printers and printer cartridges. We need someone who has the knowledge to distinguish between those industries that benefit and those that don't and that person should be put in charge of our economy's centralized five-year planning bureau for the DMCA.

Permalink to Comment

8. Brad Hutchings on June 20, 2004 9:54 AM writes...

Was this a multiple choice test? The only correct statement there is (3), because Apple gets the systems approach to musiic downloads, but I don't see how that has anything to do with my assertion.

I just read Wendy's post above about DRM and monopolists, blah blah blah. The "it doesn't work" argument because "all DRM can be cracked" is bullshit. If you guys wanted to do some real research and gather numbers to demonstrate how well it does/doesn't work, you might try to quantify the effort needed to download a working copy from Kaazaa of songs that are uniquely available on a DRM-only CD, even that system that can be circumvented by shift-key. Track availability over 3 or 4 weeks. Corrolate with album sales. I can guaranfreakintee you that the record companies do such analyses on an ongoing basis. If DRM wasn't profitable, they would not waste their time.

Here's a story about how you don't have to be perfect to be effective... I visited my Mom's cousin in Alaska 12 years ago as a college graduation gift. The night we got there, it rained like hell. So hard that the entryway to their home sprung a roof leak and filled with a foot of water in the time we were eating dinner. So my cousin goes out there with a .357 and shoots 4 bullets into the floor. Problem solved until morning. DRM doesn't have to be perfect in keeping music off the darknets. It's just got to ease the flood and make it less available. I wonder how that subtle point could be lost on so many smart people here.

Permalink to Comment

9. Ernest Miller on June 20, 2004 10:08 AM writes...

Brad,

Why don't you go ahead and point us to the studies showing that DRM has inhibited the availability of music from CDs with DRM on the file sharing network as compared to music from CDs with no DRM.

If DRM actually worked, I guaranfreakintee you that the music industry would be shouting about the study from the rooftops. "See, see, we need to protect DRM with the DMCA because it actually does reduce piracy ... here are the figures to prove it."

Permalink to Comment

10. Brad Hutchings on June 20, 2004 10:36 AM writes...

What's the point in touting such data? The DMCA is the law of the land. Conceptually, this isn't much different than software sales, and anyone who's tried to sell software can tell you that protected software sells better. DMCA or nor DMCA. I've tried to break this down for you before 100 different ways, but you just don't seem to want to acknowledge that there might be a grain of truth in it.

Practically speaking... DRM is not about perfect security. The DMCA (applied as intended) is about keeping the imperfections from gaining too much traction. And I have to tell you... If you walked into the 24 Hour Fitness I frequent and struck up an anti-DRM conversation with anyone carrying an iPod, you'd get slapped. Not a week goes by that I don't end up talking with someone there about our iPods, what kind of music we like, whether we buy songs or albums from iTMS, etc. The system is that good. You might as well crusade against puppy dogs.

Permalink to Comment

11. Ernest Miller on June 20, 2004 11:27 AM writes...

Hmmm ... let me think ... could it be the Congressional hearings they had the other day with regard to a bill that would essentially gut the anti-circumvention provisions of the DMCA? Sure, the law isn't likely to pass this year, but why not simply head it off by the pass and give the facts and figures that would eliminate some of the arguments of the opposition to the DMCA?

Everytime there is a study that seems to indicate that sales have decreased due to filesharing, the recording industry has made everyone well aware of those studies. Why wouldn't they let everyone know of studies showing that DRM increases album sales?

Conceptually, I'm not sure what software sales you are talking about. In previous software examples you've used, you've discussed shareware. In such cases, people use before buying and pay only if they choose to later. In such cases, DRM does encourage people to pay for it afterward sampling.

However, that is not the model we are discussing with regard to music. You pay before downloading, not after. How DRM increases sales in such cases is beyond me.

Ahh ... the DMCA "applied as intended" ... and what would that be?

Well, I'm terribly sorry you go to a 24 Hour Fitness where violence is used to settle disagreements. Frankly, I'm surprised that people would slap me for saying things like "wouldn't it be great if you could buy MP3s with no restrictions instead of DRM'd files?"

Permalink to Comment

12. Derek Slater on June 20, 2004 7:28 PM writes...

Brad,
I hesitate to jump into this for numerous reasons. But I must point you to this paper, which Wendy and Cory and Ernest and I have all pointed you to and you have apparently not read:

http://crypto.stanford.edu/DRM2002/darknet5.doc

This paper is by Microsoft researchers who say that DRM has no impact on piracy. I repeat, this is by MICROSOFT researchers, not your typical copyfighters. Moreover, this is the position held by basically all computer scientists - the "computer scientists" who disagree are hocking DRM to the record companies.

If you would like to converse more about this, please send an email to me: slater AT fas.harvard.edu.

Permalink to Comment

13. Brad Hutchings on June 21, 2004 1:49 PM writes...

Derek,

I guess I missed that partcular paper being pointed to (for me), because I read this stuff voraciously.

A quick review for you... The paper ignores darknet contamination by "noise", more likely in a global darknet than a localized one to make content unfindable, I don't think that's what they meant by "SPAM", as the purposes outside darknets seem different to me. But it could be they just glossed over it.

To your contention about effectiveness, I quote from the article: On the other hand, if the darknet is made up of isolated small worlds, even BOBE-weak DRM systems are highly effective. That pretty much makes the point I have been making all along if you step back and realize that not everyone has or uses Kaazaa. FWIW, I do see DRM strength usually having rapid diminishing returns. The authors identify the meta-issue of DRM-crack techniques on the darknet. Yes, anything can be cracked, both theoretically and in practice. Once a crack is known or made, its spread is not affected by its difficulty. But if you put an 8 foot wall in front of your prospective, er, "borrower", they will often find it cheaper to just buy than to climb or walk clear around the wall. That's my point and I sticking to it.

Another theme of the paper from a graph-theoretic perspective is "connectedness". Think of as the theoretical ability for me to get some object from a friend of a friend of a friend. But practically, what matters most is "flow", not that I am connected, but that I can find and it can be transfered to me efficiently. The authors give mention to issues around this (bandwidth, storage, etc.) but don't see it as the central issue. I do, because if I want something, an existence proof does not cut it. Again, if it's less difficult to buy than to seek out a "free" copy, decent people will generally do the right thing and buy.

If I had one wish it's that the copyfighters would not blanket call DRM ineffective, because (a) it actually is and (b) a lot more context is needed to predict how effective it might be.

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