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.
Disclaimer: the opinions expressed in this weblog are those of the authors and not of their respective institutions.
...except when the Cartel does it. No, really. As this year's Sundance movie festival winds to a close, the MPAA is shamefacedly admitting it pirated a film. Well, sort of. They don't all seem to be speaking from the same script.
The bootlegging apparently took place late last November, when the film This Film Is Not Yet Rated was itself submitted for an MPAA rating. The documentary attempts to uncover the secretive MPAA ratings process, the people who do the rating, and apparently takes a fairly critical look at this process and American culture.
The MPAA is still denying charges... err, well, sort of. Some of the MPAA's officers and lawyers appear to be admitting that they did pirate the movie, but for what they claim are good reasons. Clearly the filmmaker's investigation into the MPAA's movie-rating process and its prejudices hasn't sat well with the MPAA. And, as the LA Times story points out, the MPAA appears to be operating under a double standard - telling the public that "ALL forms of piracy are illegal" but trying to justify its own piracy. Of course, if the MPAA is forced to admit that there are good reasons for making personal copies... well, camel, nose, tent.
The NYT reports that Headline publishers (an outfit nearly impossible to Google) will be re-issuing Jane Austen classics as "Classic Romances."
Don't look for her anytime soon on Oprah, but Jane Austen, dead since 1817, is about to get a jolt of 21st-century image-making. When it is finished, Austen, the clergyman's daughter whose novels include "Sense and Sensibility," "Pride and Prejudice" and "Emma," will reemerge among the royalty of romance. In May, Headline publishers will issue her six novels as "Classic Romances," with glossy pastel covers depicting dashing dandies and bonneted Regency beauties, Reuters reported yesterday from London.
Yup, even though Austen's books are all in the public domain, so Headline gets no copyright exclusivity in their publication, the publisher still thinks it can make them profitable with clever packaging and marketing. That's probably right. Just as filmmakers could attract audiences to the remakes of Pride and Prejudice or the update to Emma in Clueless, so book publishers can find new audiences who wouldn't want to (or think to) retrieve the dry ascii from Project Gutenberg.
As Headline's search page describes:
All six of Jane Austen's novels are being packaged so they appeal to the fiction-buying public, rather than as either dusty academic texts or film tie-ins. A HUGE untapped market \n
More power to them. It is a truth universally acknowledged, that a publisher in possession of a good audience, must be in want of a text. (with apologies to Jane Austen)
A reader pointed me to a Businessweek Online piece on Sony's spyware fiasco. This brief piece contains one new tidbit, but it's crucial. According to Lorraine Woellert's story the artists themselves are finally starting to get up in arms. About bleeping time.
In my more fanboy moments, I hang out with writers (books) and artists (sculptors, photographers, musicians). For the most part they've bought into the Cartel's propaganda. They're worried about "piracy" and someone "stealing" their work. I don't have many big-name creative friends, so most of the folk I talk to are sensitive to even a small loss of income when they make very little to start with. They tend to believe that DRM is a good thing and that it'll somehow help them get paid more or better.
What we now see is that the exact opposite is true. Musicians and their managers, according to Wollert, are starting to realize that DRM is preventing sales. Bad publicity is the kiss of death and it's really unclear whether any Sony artists are going to escape at least some level of contamination. That translates to lost sales, often dramatically lost (50% drop in one week - ugh).
If the creative corp finally get it through their heads that the Cartel's DRM strategies are only there to fatten executive wallets then we might actually see a kind of revolution from within. As Wendy noted a couple weeks back, the frog may well jump out of the pot.
I also have to hope that The Association of American Publishers will catch on to this. Although the current fiasco is over music disks, there's a very direct and very short line between the meme "don't use DRM to screw up fans' experience of artists' music" and the meme "don't use mistaken interpretations of copyright law to stifle readers' desire to find books."
(well, I couldn't say they were pushed to the rim, could I?)
RIM is fast running out of maneuver room. A federal judge has ruled that the company's preliminary settlement with NTP isn't enforceable, rejected a request to wait for final word from the USPTO and is moving to reinstate an injunction against BlackBerry service in the United States. My guess is that all of these actions could be appealed but it seems likely that RIM would rather settle than fight, even though the settlement costs could be quite high.
On the surface, what's at stake here is the future of the BitTorrent search engine, which was previewed back in May of this year. The agreement by BitTorrent (the company) is to obey the existing law (DMCA) with regard to takedown notices for content deemed illegal that shows up on their search engine. For the most part, this is a no-op. The company more or less had to do this to stay a legal enterprise, and is putting a good face on the inevitable. Presumably, few people trading, say, first-run movies are going to be stupid enough to put their torrent sites into the index of the search engine anyway. So in the end, unless Hollywood somehow figures out a way to put the protocol genie back into the bottle this is going to have just about zero impact on the trading of content via BitTorrent (the protocol).
Looking a layer deeper, this story is about whether or not the Cartel will allow companies that kowtow sufficiently to go legit, especially after showing they can smash Grokster (the company - no effect on music trading of course). As with any protocol, BitTorrent software can be used for any number of purposes. If the Cartel ever want to have a distribution protocol and network for their content they'll have to buy or build something. if BitTorrent (the company) wants to be part of that buy/build answer - and I bet it does - then this kind of agreement is absolutely necessary table stakes.
An anonymous copyfighter pointed me to this story on the BBC detailing the Sony debacle. The story by Canadian law professor Michael Geist paints a picture of a bad situation spiraling totally out of control. I particularly like the unnamed Cartel exec doing his best Michael Brown "how wrong can you get in one sentence or less" impression. Trust me, bozo, consumers may not be able to describe what a 'rootkit' is, but they've heard the word enough to know it's Something Bad and when your product gets linked to public scare words like 'rootkit' and 'spyware' you are in a heap of trouble.
Plus, do you really want to be the one getting called out on the carpet by the US Department of Homeland Security's assistant secretary of policy? His words ought to be tattooed inside the eyelids of every Cartel exec: "it's very important to remember that it's your intellectual property - it's not your computer." Amen.
Geist points out that other publicity debacles (e.g. the poisoned Tylenol scare) led to long-term changes in marketing and business models by the affacted industries and calls on the music industry to take this to heart.
Michael Geist points to a new decision from Canada's Supreme Court ruling that Lego couldn't use a claimed trademark on the interlocking shape of its blocks to insulate them from competition after its patent expired. The ruling echoes a recent U.S. Supreme Court decision, TrafFix Devices Inc. v. Marketing Displays Inc. (2001), that an expired patent couldn't be extended by a claim that the design had acquired trade dress distinctiveness.
Lego (Kirkbi) had patented the Lego system of interlocking blocks and now claimed that even after the patent expired, the "distinctive orthogonal pattern of raised studs distributed on the top of each toy-building brick" had become "LEGO indicia" due protection as an unregistered trademark. Without this protection, Kirkbi protested, Mega Blok would be able to free-ride on the popularity established by Lego's hard work and reputation for quality.
One must start from the problem the appellant faced when its patents expired. ...[T]he very cleverness and flexibility of LEGO technology, of the combination of studs on top of the brick and tubes under it, had almost turned "LEGO" into a household word. Source and product became identified. LEGO bricks, for many, came to designate these small colourful building blocks, with their clever locking system. But when the patents expired, the LEGO technology fell into the public domain. The LEGO name, whether on the product, on its packaging or in its advertising, remained protected, but the monopoly on the wares themselves was over. The monopoly had been the key to the building up and preservation of LEGO’s market share, and so Kirkbi employed a number of different means to protect it, one of which was the assertion of a trade-mark.
The court properly recognized that the patent confers a limited monopoly. In Canada, as in the United States, patent protection is temporary: "Patent protection rests on a concept of a bargain between the inventor and the public. In return for disclosure of the invention to the public, the inventor acquires for a limited time the exclusive right to exploit it." Entry into the public domain after the patent's expiration is a core part of the public-private bargain -- a bargain that can't be abrogated by trademark claims.
True, Kirkbi had built a Lego empire, but as an empire founded on the functional properties of Lego's interlocking bricks, its moats came with an expiration date. "Free riding" after that date benefits society by giving more companies the chance to build interlocking bricks, giving more kids (and non-kids) access to reasonably priced building kits.
The fact is, though, that the monopoly on the bricks is over, and MEGA BLOKS and LEGO bricks may be interchangeable in the bins of the playrooms of the nation – dragons, castles and knights may be designed with them, without any distinction. The marketing operations of Ritvik are legitimate and may not be challenged under s. 7(b) [of the Trade-marks Act].
This reasoning, like the similar U.S. TrafFix decision, reflects a general feature of Anglo-American intellectual property law: Intellectual creations generate value that is shared between the creator and the public. We do not say, "if value then right to exclude," but rather that creators accept the bargain of limited-scope rights when they create.
Let us not forget these principles in the copyfight. Though the term of copyright may never expire in our lifetimes, its scope is cabined by fair use, first sale, and limits on the activities copyright reaches. The copyright bargain authors accept when they write and publish does not include the right to charge for every search index or to break your computer in the name of "securing" music.
For years, the entertainment industry's DRM strategy has seemed to follow the old story about how to boil a frog: Start it going in a pan of cold water and gradually turn up the heat.
So it is with digital rights management: Start consumers off with restrictions only the techiest edge-cases among them will notice, then quietly increase control. Apple's iTunes, for example, has downgraded the behavior of already-purchased music files. One day you could burn a playlist 10 times, the next day only seven.
Once you've accepted that "your" music comes with only a set of pre-defined uses -- and not any personal use you can invent -- you might not notice as you lose the ability to do your own format-shifting. Just as fans once re-purchased music as it moved from 45 to LP to CD, perhaps they could be conditioned not to complain if they were made to re-license when they replaced computers and stereo components. Instead of selling CDs, then, marketers will then be able to slice up the "music experience" and license pieces back to the fans whose rights they've taken, ideally for more than the one-time profit on a CD.
Given that Sony has taken to installing spyware to protect their music, you may be wondering why this episode in the DRM struggle has been good for the consumer. Simple: consumer awareness. For the past several years, much has been made of viruses and spyware and their adverse effects on our computers. The industry designed to stop these threats brings in tens of millions of dollars every year to stop these vicious pieces of software. The average consumer understands what a virus or spyware is. However, stop most consumers and ask them to explain DRM and you'll probably get a blank stare. Up until now, the consumer has been uneducated on what DRM is and how it will affect their daily lives. The major music and movie studios have been fine with this; and now that awareness is changing.
The average fan, who may never have been blocked from playing music from the (new) Napster music store on an iPod; who may never have tried to create her own version of the Daily Show from a TiVo-to-Go'd evening news program but been stymied by copy controls; suddenly has a vivid example of how DRM takes your music -- and your computer -- away from you. CERT, the US Computer Emergency Response Team, is advising
users, "Do not install software from sources that you do not expect to contain software, such as an audio CD."
As Jefferson Graham's story makes clear, consumers aren't happy. Artists aren't happy. Electronics companies aren't happy. But don't expect the Cartel to back down. They'll just batten down the hatches, stonewall, and wait for this to blow over. They're holding on to the fantasy that DRM will save their sinking business models and along the way they'll twist the courts, Congress, and device manufacturers to their wills. The rest of us should, presumably, shut up and suffer in silence.
Update: a friend pointed me to Mark Russinovich's continued flensing of First 4 Internet, the ultimate authors of the DRM package that Sony used. (The content of the page is short; extensive commentary below the posting makes it appear long.)
Ina Fried has a story on news.com about the just-published Apple patent application. The idea seems to be that code would be limited to specific hardware and in theory could get around various simulators and virtualization technologies. I find this hard to believe, but perhaps that's why it's "resistant" rather than "proof." According to Fried's story, the OS itself would be obfuscated in such a way as to make it difficult to detect what MAC or ROM code was being read to validate the hardware platform. I haven't looked at the patent application yet, so I've no idea what prior art is cited. My guess is that there's a ton and the patent has little or none of it. Geeks who attack this technology as breakable (which it most certainly will be) are missing the point. This is further evidence that whatever Jobs says in public, Apple is kissing ass hard with the Cartel. Apple want to convince the Cartel that digital content will be locked up tight, using a combination of Intel's hardware and Apple's OS use of it.
Tim Lee, who scolded Patrick Ross for equating DRM with a contract, now concedes that while DRM is not a contract, it's contract-like in ways that can be beneficial to consumers (say, by enabling a limited-time online rental of a movie). But he goes on to argue that the DMCA is not necessary to yield these benefits -- and further, that allowing the proliferation of circumvention tools may be necessary to stop DRM schemes from harming consumers:
In practice, most consumers don’t want to engage in piracy. To the extent that DRM schemes prevent piracy at all, they do so by putting up “speed bumps” to discourage generally law-abiding folks from casual sharing of copyrighted material. But those “speed bumps” would be just as effective in a world where circumvention is legal. Downloading cracking tools will always be a somewhat seedy and inconvenient process, and so most law-abiding consumers won’t do it even if it’s legal. On the other hand, in cases where the DRM scheme becomes a major impediment to a lawful activity (say someone decides to switch from an iPod to a Dell MP3 player) the availability of “circumvention tools” (such as, say, a Dell-provided software tool that converts iTunes songs to a format suitable for use on Dell’s MP3 player) provides an important safety valve to prevent the DRM scheme from placing unreasonable restrictions on consumers.
Tim Lee offers counterintuitive advice for the record labels when they re-up their licensing agreements with Apple for iTunes: they should demand that Apple strip the DRM from the tunes.
How come? Because DRM isn't helping the labels sell music. It's helping a company (Apple) become the music industry's single gateway to the people who want to pay for music online.
Thanks to DRM, a song downloaded at the iTunes Music Store will only play on iTunes or an iPod. That means that if a customer wants to start using different jukebox software or another MP3 player, he'll need to rebuild his music collection from scratch.
As Apple's share of the overall music market grows, it will be more and more difficult for you to walk away from the table during contract negotiations. Jobs will hold all the cards, because his customers--who form an ever-growing share of the music market--will be locked into his products. Like Bill Gates in the PC world, Steve Jobs will become the gatekeeper to tens of millions of music fans, and you will have to pay his price for admission.
How does ditching DRM help? If Apple's songs were distributed without copy protection, your customers would be able to switch to another program at any time. You could threaten to cut a deal with any of the other companies now clamoring for your business--Real, Napster, Sony, Microsoft, etc--and Jobs would know that his customers had the option of leaving his platform.
I know what you're thinking: what about piracy? The reality is that DRM does next to nothing to reduce piracy. Virtually every song ever recorded is already available on peer-to-peer networks. It's easy to "rip" a song from a CD (which has no protection at all), and Apple's DRM scheme has been repeatedly cracked. So people who don't respect the law aren't going to buy songs from the iTunes Music Store in the first place. DRM won't do a thing to stop them!
On the other hand, DRM systems treat your most honest customers like criminals. People who purchase music from the iTunes Music Store know perfectly well that they could get the same song for free via a peer-to-peer network. They choose to purchase from iTunes for one of two reasons: they value convenience or they respect the law. Either way, you don't need DRM to keep them honest. If they were inclined to engage in piracy, they wouldn't have bought the song in the first place.
Via Edward Felten's Dashblog, Tim Lee's post debunking PFF VP Patrick Ross's "incredibly confused" defense of the DMCA:
The folks at PFF desperately want to portray the DMCA as a “free market” approach to copyright problems. But the shoe just doesn’t fit. TPM systems are not contracts, and circumventing them, as such, is not theft.
On that note, a pair of quotes to ponder:
Mr. Ross, in the article referenced above: "No sane business operator enters a contract in which one party has the right to disregard its terms at will, but that's what HR-1201 permits."
Cory Doctorow @ BoingBoing: "DRM ass-kissers talk a lot about how DRM is a 'contract' -- someone offers you content in exchange for you waiving your rights to record, or time-shift, or format shift, or archive, or use on your Mac, or whatever.
But it's a funny kind of contract that is renegotiated at the whim of one side, who can unilaterally change the deal whenever he feels like it, and which you can't get out of if you decide that the new deal isn't one that you like."
A story in the Reg shows just how muddled up the thinking is around downloaded music and pricing.
Apparently, the standard (ie iTunes) price for a single in the UK is 79p. Out of this, performers get 4.5p. Now the Music Managers Forum, a trade body of artists' representatives, are upset. Why are they upset? Let's see.
This rate is half what artists were getting from CD singles (physical). Has anyone informed these people that the Cartel has been working to kill off the CD single since... oh, 1997 or so? I wouldn't be the first to suggest that the death of this format was a major spur to the upswing in music trading that happened around that time. So if you're making less money now than on a dead format that is iTunes' problem precisely how?
Also, "an artist needs to sell in excess of 1.5m units before they can show a profit." Well, let's see. Who was it put the artists into this forced indentiture where they have to pay up front for production time, tour costs, etc? That would once again be the Cartel. Last time I looked, iTunes wasn't dictating the terms of artists' contracts.
Jazz Summers, MMF chairman further complains that recording companies had been "caught with their pants down" by the legal download services. Hello? What universe do you live in? Caught with their pants down, five years after Napster blew their business model to smithereens? Three years after miserable failures on the part of various Cartel-sponsored and -approved download services? If anyone was caught with his pants down in that situation he's incompetent and should join Michael Brown on the unemployment line for clueless gits.
If you haven't been following the discussion over @ The Patry Copyright Blog about authors and publishers complaining about Amazon.com selling used books alongside new ones, you're missing out. Here, William Patry argues that Amazon is rescuing the market for "non-Blockbuster" authors and publishers, and that suggesting that used-book sales rob from full-price sales is as foolish as arguing that every pirated copy equals a lost full-price sale:
Literary authors haven't pointed to any evidence that there has been any diminishment in sales of the brand new books due to amazon.com's program, and it seems logically impossible since every resale is off of the sale of that brand new book. Indeed, amazon.com provides the most amazing publicity imaginable for literary authors: the ability to find and buy their books. I work in New York City which used to have great bookstroes. Now they are all Barnes & Noble and those stores are fast approaching blockbuster Video quality. (This isn't true for Barnes and Noble online, and its same day delivery service in Manhattan is awesome). It is, I submit, only online shoppoing that saves the rest of us and non-blockbuster type authors. But it is just like copyright owners to bit the hand that feeds them, and that is what led to my posting: frustration from someone who is an ideal customer.
While the used book issue is of much greater scope because of the lack of any geographic limitation, literary authors seem peeved about the sale of "new" books at less than list price. On that point too bad.
The overall economic thrust of Rob's comments remind me a bit of copyright owner's claims that every pirated copy overseas represents a lost sale: baloney; many represent copies that would never have been sales becasue the price is way too high. So too to some extent with new books: if the book is priced reasonably, more people might buy it; if it isn't any used copies are available then I will either not buy or buy a used copy.
Meanwhile, over on the Pho and A2K lists, Gordon Mohr points to a "more economically literate discussion of the interaction between the used and new book markets" than the WSJ piece to which Professor Patry refers -- economics professor Hal Varian's NYT piece that's long been making the rounds in IP blog discussions, Reading Between the Lines of Used Book Sales. Summarizes Mohr:
Specifically [the article argues]:
- the existence of a strong used book market also
makes people more willing to buy new books, at full
price, because of confidence in their resale value
- offering affordable used books can attract more
customers to a bookseller, and result in more
books, new and old, being purchased overall
- a recent academic study suggests used book sales
only slightly substitute for new book sales
- the same study calculates the net social impact
of used book sales as strongly positive, after
weighing the benefits to consumers and sellers
like Amazon against the potential losses to
publishers and authors
William Patry, commenting on the news that some authors and book publishers are unhappy about sites like Amazon.com offering books for sale at different prices -- i.e., list price, sale price, used book price:
It is really no fun to write about copyright owners acting like Luddite pigs, and being in private practice it has a definite commercial downside; I would much rather praise Caesar. But, things are as they are, and I have always opted for honesty over craven brown-nosing and over self-imposed censorship. I hope my twins forgive me. ...
I buy the vast majority of my books through amazon.com and pay alot of attention to the choices they offer for the book I am interested in. Choice is bad, apparently. I should have to pay list price and I shouldn't be able to resell it (at least through amazon.com) without amazon.com sending a check to the publisher, who will of course pass 100% through to the author, at least that is what a literary agent is quoted in the article as advocating.
Sad, is the only polite word I can think of for authors and publishers' utter failure to embrace an extremely beneficial system. The first sale doctrine was judicially created by the Supreme Court pre-1909 Copyright Act in order to prevent publishers from misusing copyright to maintain list price. Some things truly never change.
PVRblog found a service that sounds like something out of a law school copyright exam: Rent My DVR.
Never miss your Favorite TV Show again!
Now you don't have to remember to program your DVR or VHS to record you favorite TV show. With the Rent My DVR site you can simple hire someone that will do the recording for you.
Simply file a request on our site to have someone record for you and as soon as a new episode of your favorite show has been broadcasted, it is downloaded automatically to your computer and you can watch it whenever you want.
The site appears to be a "matchmaker," facilitating digital transfer of shows from someone who has recorded them to another who wants to watch it. (It also says it's based in Sweden, but since I know U.S. copyright law better, I'll stick to that.)
The site analogizes its users' activity to the time-honored practice of giving or lending a videotape to a friend -- without the videotape. So would judges extend fair use protection to this transposition of an offline use, or would they trip over the fact that multiple "copies" are being made? If there's infringement, is RentMyDVR a contributor, vicarious assister, inducer?
From the "who are you calling a thief?" files, Fred von Lohmann has the story behind the story of the record labels' push for variable (read, "increased") pricing for songs sold through Apple's iTunes:
Edgar Bronfman Jr., the CEO of Warner Music Group, recently took a moment to attack Apple's Steve Jobs for the 99-cent pricing of music downloads in the iTunes Music Store. According to Bronfman, "Not all songs are created equal -- not all time periods are created equal. We want, and will insist upon having, variable pricing."
What? Bronfman singing the praises of "variable pricing"?! Lest anyone forget, he was at the helm of Universal Music Group back when it (along with all the other major labels) was engaged in a scheme of price fixing aimed at keeping CD prices high.
Back in the good old days (about 5 years ago), the "Big Five" could force music stores to adopt "minimum advertised pricing" (MAP), meaning that no matter how rotten (sorry, "unequal") a CD, retailers had to advertise it at a pre-established minimum, else the labels withdraw millions of promotional dollars. The Federal Trade Commission no likey. It determined that MAP was a form of price-fixing and that music fans may have overspent by as much as $480 million while it was in force.
Unrepentant, a few of the labels issued statements stubbornly defending the practice -- e.g., "While we continue to believe that MAP was a legitimate and appropriate practice, BMG looks forward to moving ahead and continuing to do what we do best: deliver great music to the consumer," and "We believe MAP serves a valid business purpose for our customers and the consumer and is an appropriate and lawful practice."
So in calling for variable pricing, it would appear that these self-proclaimed experts in delivering great music have changed their tune. Or not. As Fred points out, this push seems to be about ignoring market forces, not embracing them:
[Bronfman] apparently doesn't think that "variable pricing" might include lowering the price of some tracks below 99 cents. Said Bronfman, "Some songs should be $0.99 and some songs should be more." So what he meant to say is "we should be raising our wholesale prices and preventing people from discounting."
P2Pnet has a nice story about the "We're not gonna take it anymore" club of parents fed up with being targeted because of Cartel greed. Candy Chan, James and Angela Nelson and John Harless have joined acclaimed mom Patricia Santangelo in standing up to the jihad against customers. All three are making the case that they are being wrongfully targeted and are resisting Cartel threats to sue their children if they don't pay up.
Cory picked up on PVRblog's coverage of what was eventually determined to be a bug: Users found their TiVos unexpectedly expiring recorded shows.
It might well have been a bug in this instance, but bugs like that don't just come from nowhere, with fully formed error messages alerting viewers that "Due to policy set by the copyright holder, 'Keep until I delete' is not permitted." Maybe it wasn't meant to show up here and now, on broadcast TV, but someplace in TiVo's corporate innards, someone decided that unrequested expiration was a feature.
Nothing in copyright law mandates this "feature." To the contrary, once you have a lawful copy of a copyrighted work, the first sale doctrine says you have the choice whether to save, lend, or discard it, while Betamax says timeshifting creates a lawful copy. If not copyright law, then copyright-holder muscle probably sits behind TiVo's design. Copyright holders work with Macrovision to implement extra-copyright controls, then jointly lean on TiVo to respond to them. Together, they restrict user rights beyond copyright.
The bug also illustrates the fallibility of proprietary technologies (particularly those with automatic update). "Update" doesn't always mean "improve" -- an update can take away functions you've come to enjoy, just because someone else objects. This misfeature of any DRM that implements "revocability" gives "planned obsolescence" a whole new meaning.
Like Cory, I've gone the MythTV route instead. With hundreds of people hacking on its open-source code, MythTV updates really are improvements. Its features are truly features, like commercial skip, time-stretch, transcoding and transfer to other media, plus an open-format music server on the side, giving full access to all the rights copyright reserves to the public. Sorry TiVo, you've been out-evolved.
That's the question David Pogue asks in today's NYT column, because what you can do doesn't include many of the things a customer would most want. Add Apple/Cingular/Motorola's new Rokr to the list of technologies Derek recently reviewed in the new guide, The Customer Is Always Wrong -- deliberately crippled to protect outdated business plans.
...Will the phone have a hard drive that can hold thousands of songs? Will you be able to download songs straight from the Internet? Will it have a FireWire or U.S.B. 2.0 connector for superfast music transfer? Will you be able to use your songs as ring tones, so that the phone bursts out in "You Make Me Feel Like a Natural Woman" when your husband calls? ...the answer to all of [those questions] is no.
No, the phone doesn't contain a hard drive. It comes with a tiny, 512-megabyte TransFlash memory card. Incredibly, though, you can only store 100 songs on the phone, tops, no matter how much room is left on the card.
...
No, you can't use songs as ring tones, at least not the songs you've bought from Apple's music store. (You can use ordinary MP3 files as ring tones, but loading them onto the phone isn't trivial.) This, too, is almost certainly a limitation driven by corporate interests. Cellphone carriers charge $1.50 to $3 apiece for ring tones; Cingular certainly wouldn't want to hand that lucrative business over to Apple's music store.
If you'd rather listen to music on your phone than grouse about these engineered limitations, there's always the open-source TCPMP for Treo or WinCE, which not only plays MP3 and OGG files, but videos too.
The core disagreement is that labels feel that flat rate pricing doesn't capture enough margin for those hot tracks where users would pay more. Numerous studies will be trotted out, showing that consumers will pay up to $2-3 for hot singles, so the labels are giving up substantial margin by wholesaling all tracks at $.70-75...I have no doubt that if you picked one hot track, and polled users in isolation to ask them if they would pay more than $.99 for that track, many would tell you yes. But the studies show that when you measure behavior across a longer period of time, everyone is better off with lower prices for music downloads, with $.50 being actually the magic number, especially for a business which has NO hard cost of goods outside of artist royalties, which are almost never on a fixed basis so they will decrease with the price.
Back in June, NPD Group raised some eyebrows (including in this blog) with a claim that iTunes was the second-most popular music download site, surpassing many free P2P sites. Derek Slater commented that the NPD study was "worthless."
Well, NPD are back again, and their latest message is resonating with the RIAA. According to an AP story (here on SiliconValley.com) NPD are claiming that burned CDs accounted for a larger percentage of music obtained by fans than downloads did. The RIAA are, of course, pointing to this as a justification for more copy-prevention.
A very telling quote appears at the end of the AP story, where Virgin Entertainment Group International's CEO Simon Wright is quoted as saying:
If, particularly, the technology allows two-to-three burns, that's well within acceptable limits and I don't think why consumers should have any complaints.
And that, boys and girls, is the nub of the problem. The Cartel believes it should be able to extend its control past the sale of the product, past what the law might say, and into your and my houses and cars. Let's take a real-world example: my neighbors have two adult children that live with them. So that's four cars, and at least three CD systems in one household. How many copies of a given CD purchase should that family be allowed to make? None? One? Seven? And why does Wright think that my neighbors shouldn't complain if he makes it impossible for them all to enjoy their purchases?
By coincidence over on Reuters (story copy here on silicon.com) we read that "Legal music downloads [are being] held back by DRM." The gist of the story is that incompatible DRM systems (fingers pointing primarily at Apple and Microsoft) are somehow preventing consumers from downloading more music.
My first response is that this is a crock. I don't think DRM issues enter into anyone's minds when going to download music. ITunes is enjoying phenomenal success (what business wouldn't mind doubling its size year over year?) and Napster et al are sour-grapesing because their systems (which use the MSFT-promoted DRM systems) are lagging. Blaming it on the DRM is a smokescreen for having to admit "My customer experience sucks, the subscription model isn't working, and Apple are kicking my ass."
...even if their record company tells them not to.
Downloadable music wasn't much in Japan, until about a week ago. Then iTunes hit the Japanese market and four days later a million new downloads had been racked up. The company's local catalog boasts about a million song titles from fifteen of Japan's record labels.
However, some of those left out want in, even if their nominal record label (*coughSonycough*) would rather they sat home. According to an AP wire story (here on SiliconValley.com) at least one individual artist and a major management agency are seeking to do deals directly with Apple.
The snark factor here is incredibly high. Not only does music want to be free, so do musicians. That's "free" as in "free to pursue new and potentially profitable ways to connect to fans." Once again the Cartel puts control over all else - Sony wants to control the download of music from production through distribution, through the service you use and all the way to the devices you're allowed to use to listen to it. This control serves only the corporate interests, despite their attempts to dress it up as being in the artists' interests. Given even the slightest crack of light the artists will promptly bolt for the door.
I've been trying to avoid writing about the ongoging feud in next-generation DVD technology, mostly because I consider it stupid. The competition serves no one, and most certainly is a detriment to consumers, who would be best served by a broad market of compatible devices all working to a unified public, open standard.
In this case, the flap is over the fact that Blu-Ray have added DRM features that both mirror and extend the controls that competitor HD-DVD wants to offer. Both systems use the Advanced Access Content System (ACCS), but Blu-ray want to add something to ACCS that they're calling BD+. Tom's Hardware guide has a detailed explanation of what appear to be Blue-ray's plans: throw the kitchen sink in, too. According to that story, the set of DRM features include "phone home" capabilities, self-destruct, and additional ecryption.
So dumb idea the first - have two competing standards - is compounded by dumb idea the second - believing that technical superiority will determine which standard ultimately succeeds. History shows that either marketing+content will beat superior technology (VHS over Betamax) or rapid industry change will bypass the competing standards altogether (as DVD bypassed numerous competing laser disk formats).
Edward Jay Epstein has a nice piece on Slate (audio broadcast on NPR) explaining some of where Hollywood makes its money. Turns out most of it comes from what Epstein calls the "El Dorado" that is television licensing. Ninety percent of the licensing revenue from TV is profit, versus about 2/3 of revenue as profit from DVD sales. Actual theatrical showings are money losers, as even the vastly increased ticket prices and ads stuffed before showings don't cover the studios' publicity and marketing budgets for major films. It costs studios about USD 1.4 for each $1 in ticket revenue generated.
The article also includes other financial tidbits, such as the assertion that the wholesale price of a DVD is around $5, meaning that retail mark-up is 100-400%. Finally, Epstein delves into the way that this revenue arrangement has led television to drive the studios and how that hurts independent movie producers, who don't have the huge television revenue stream on which to rely.
The study, by Anindya Ghose of NYU and Michael D. Smith & Rahul Telang of CMU, looks at the impact of the used-book market on the new-book market, particularly online. This subject has been of concern to organizations such as the Authors Guild and the Association of American Publishers, which sent a letter to Amazon a couple years back bemoaning its promotion of used options along with new sales.
In their study (online text available from ssrn.com), Ghose et al conclude that the secondary market actually drives new sales, in part because it helps buyers be more confident they can dispose of unwanted books they bought new. This supports a study by Judith Chevalier of Yale School of Management and Austan Goolsbee of the Chicago Business School. These two looked at college textbooks (which are quite expensive to purchase new, compared to mass-market hardcovers) and found that students were, in effect, paying a price to "rent" a textbook for a semester. Paying full cover price for new was deemed more acceptable on the understanding that a percentage of that price could be gotten back by selling the book back at reduced price to the bookstore or to another person.
The bottom line is that consumers and their behaviors are complex and need to be studied wholistically. Just as a used-book sale doesn't one-for-one take away a new-book sale, we should understand that the availability of free downloadable digital media doesn't take away one-for-one from new purchases (whether it's CD sales, movie ticket, DVD sales, whatever). By coming to a better understanding of consumers' motivations and assumptions we can design business models that are more likely to succeed.
These, of course, are the same avid fans that the Cartel are suing as fast as they can. Never one to miss a business opportunity they didn't think up themselves, the RIAA and cohorts such as the BPI have no intention of calling off their jihad.
The BBC reports that Abbott has signed a deal with the Brazilian government for its anti-AIDS drug Kalestra. The deal involves gradual price reductions over six years and access to Kalestra's successor. Brazil projects savings of USD 250 million over that time period and anticipates continuing to offer free anti-retroviral drugs to all needy patients in the country.
As I noted back in June, drug patents push uncomfortably into areas where IP rights may come into conflict with governmental initiatives and even fundamental human rights. Anti-HIV campaigners had argued that Brazil's situation qualified under WTO rules for patent suspension. For now that will remain an academic debate; however, Brazil is far from the only country with a growing AIDS epidemic and other similar situations are likely to arise in the near future.
In the wake of Grokster, NPR's Morning Edition carried a good piece this AM on the ongoing slump in box office sales. Titled "Movie Industry Refocuses Amid Box-Office Slump" the piece examined the current decline in US box office ticket sales.
The current movie year is not being good to Hollywood. Last week was the 18th straight week in which year-over-year ticket sales were down (that is, comparing 2005 to 2004). Since spring and summar are traditional big movie-going times for Americans this is somewhat surprising. What's also surprising was that Kim Masters' story didn't just point the finger at P2P and shout "piracy."
Indeed, there are two fairly direct explanations for the decline in revenue, which amounts to about USD300 million. One is that there are fewer movies coming out. Six fewer than last year. On average, a big Hollywood movie will make $50 million in ticket sales. The math adds up. Two is that last year at this time a big box-office seller was Mel Gibson's The Passion of the Christ. I've seen ticket figures for this movie ranging from $330 million to $390 million. In addition, this movie appealed to an audience that doesn't traditionally go to Hollywood movies. Losing that revenue this year also explains the change.
So, what to do about it? Masters reports on a number of experiments in altering traditional distribution methods, including shorter times to release DVDs (where movies make most of their money), simultaneous release, or even releasing big budget films direct to DVD.
All of these are responding to the changing demographics and finances of the box office business. In particular, a large segment of the audience just don't go out to movies as much because they're older, have kids, and have a harder time getting out. Couple this with the change in financing, where DVD prices are going down (now often below $20 even for first releases) and ticket prices are going up. Two tickets alone are $20; add in costs for babysitting, parking, and snacks and you've created an equation that doesn't favor the box office.
Of course, all of these changes and proposals are causing heartburn for theater owners, who see Hollywood as using the piracy claim as a smokescreen for shifting money away from the box office. The owners want to see more movies, better movies, and better promotion.
Michael Schreiber, head tech over at the United Way of America, has published a scathing editorial about the nasty impact that business method patents could have on the future of non-profit/community service organizations:
Consider what the future looks like for nonprofits operating in a landscape where activities as important and efficient as online fundraising are patented by one company or even a few companies. Nonprofits face a few scenarios, and none of them are good:
Divert a greater percentage of every dollar raised to cover license fees just to operate — money that previously was earmarked for and still needs to go to programs and services making a positive difference in the lives of constituents.
Settle for other, less effective and efficient technology solutions to avoid the higher cost of patented solutions as well as the threat of being sued.
This certainly is not how donors envision their contributions being used. Donors do care how their money is leveraged to achieve sustainable societal change.
Nonprofit organizations exist to address complex social, environmental, and educational challenges. The last thing we need is another structural impediment like business method patents that could seriously distract us from the creation of tangible and sustainable change in our communities.
The story by Jon Healey and Charles Duhigg has a smarmy condescending tone but covers the essentials. Notably, this tactic is aimed at the casual copier (read: customer), not the really serious pirates. Note that it's still incompatible with iTunes.
Most importantly, note that if fans sit by silently, the Cartel will take that as an OK to proceed. I suggest you do not sit silently. Make yourself heard by taking your dollars elsewhere, by writing to the companies, by creating public ruckus. Blog this, pass it on. Urge the companies to focus on large profiteering bootleggers and call off their war on their customers. Not that I actually expect anything to change, but as the bumper sticker says: "You have the right NOT to remain silent."
(*) use bugmenot if the registration page annoys you.
FWIW: the NPD report is basically worthless. The report ignored BitTorrent and eDonkey, the most popular P2P services. The report also treated all users equally; doesn't matter if you've downloaded one song on iTunes and one thousand on Limewire, you're regarded as a single user for each. Saying that iTunes is as popular as Limewire on that basis seems just a bit foolish.
The report is nothing more than pre-Grokster decision ramp up.
Copyright Prof William Patry addresses derivative works today on The Patry Copyright Blog. He gets to the thorny intersection of the Section 115 compulsory license and newer multimedia discs, such as Super Audio and DualDisc, that contain multiple versions of the same recording.
Issues for compulsory licensing are presented because there is more than one layer on a single Super Audio disc. Two principal questions are: (1) whether some of these layers are merely "transfers" that do not represent new authorship, or, whether some, such as remixes for 5.1 channel surround sound, are derivative works for which a separate compulsory license fee is required unless (2) even though there are as many as three layers on a given disc (all perhaps with different derivative versions), the disc is considered to be one "phonorecord" within the meaning of Section 115, and thus one payment only is required notwithstanding that if the layers were separately released they would require three payments.
These aren't just law exam hypotheticals. About the only thing I've heard make record execs steam nearly as much as "peer-to-peer" is the music publishers' claim that they're entitled to double royalties for "copy protected but computer playable" CDs. The music publishers argue that they're entitled to royalties for each copy of the tracks on disc: one set of CD-audio tracks, often poorly hidden from the computer, and one set of WMA or other DRM'd files "meant" for computer playback. It's arguable that end-users have the music publishers, as well as incompatibility problems, to thank for the market failure of copy-protected CDs.
An unbylined story on CNET points to a study by NPD Group indicating that iTunes is now the second-most popular music download site. Most of the popular sites, including #1, remain free P2P sites. But Napster and RealPlayer store also made it onto the list, indicating a growing parity of interest. I'm glad to see this, and sad that it didn't happen five years ago.
Update: The story has hit a bunch of major media outlets that give fuller coverage. For example, Mtv.com gives the list and some background. The award for "Biggest BS with a straight face" has to go to RIAA CEO Mitch Bainwol who is quoted as applauding "A vibrant, competitive marketplace for digital music is a good thing for both fans and investment in new art."
This from an organization that has made its mark stifling digital music marketplaces (see my comment below), engaging in price fixing, and suing fans as fast as possible.
This time it's atoms, not bits, but it's the same story. Reuters reports that Sony is trying to stop distribution in the UK of its PSP (PlayStation Portable). Sony chose to omit European consumers in first shipments due to supply shortages. However, retailers (both online and offline) have responded to consumer demand and established so-called "parallel import sales."
Sony is attempting to use trademark infringement claims to halt the practice. Frankly, it's a crock. This is the same crock as region-encoded DVDs; it's the same crock as nation-limited online archives. The message is "we want to control you." Intellectual property law is just a tool used to exercise that control. I think this is one reason that the fight between the Cartel and its opponents is so nasty. Although it's cloaked by both sides in rhetoric about artistic compensation and business models, it's really a fight about control, and even people who don't openly acknowledge that sense it and get edgy.
A couple of brief pieces (here on geek.com and here on webpronews.com) reporting on Sony's BMG unit continuing to push more widespread use of DRM. After testing in the UK, Sony is now rolling out in the US a technology called XCP2 that is supposed to stop people making further copies of copied disks. The system is designed so that a personal backup copy can be made but the DRM transfers with the copy and blocks further copying. So you can have one copy in your car, but if you own two cars you're SoL?
XCP2 is just one of the copy-control technologies that Sony BMG have deployed and once again the customer is in the dark since the company doesn't label disks it has doctored, nor inform you in advance of purchase. This is what caused me to drop my BMG membership - I want to know. I disagree with PCPro, who call this an "informal deal" with the customer. I didn't have any part of this deal, nor do I have any negotiating power in the exchange, except to pick up my dollars and walk away. I'd hardly call that a "deal."
Of course I'm a completely biased reader, so there's not much point in my commenting on this. In my eyes, Burger does a good job of laying out the realities of why the flag is an absurd overreach of control. Glickman falls back on hyperbole and fear, telling us that without the flag we'll lose broadcast television. Someone send him a link to Pesce's piece, please? Glickman's not as much fun to bash as Valenti - at least not until he reaches equal levels of rhetorical excess - but he doesn't seem capable of conceiving of even the slightest evolution in business models.
IT SOUNDS too bad to be true; but, then, it might not be true. Up to 35% of all PC software installed in 2004 was pirated, resulting in a staggering $33 billion loss to the industry, according to an annual study released this week by the Business Software Alliance (BSA), a trade association and lobby group.
Such jaw-dropping figures are regularly cited in government documents and used to justify new laws and tough penalties for pirates-this month in Britain, for example, two people convicted of piracy got lengthy prison sentences, even though they had not sought to earn money. The BSA provided its data. The judge chose to describe the effects of piracy as nothing less than "catastrophic".
But while the losses due to software copyright violations are large and serious, the crime is certainly not as costly as the BSA portrays. The association's figures rely on sample data that may not be representative, assumptions about the average amount of software on PCs and, for some countries, guesses rather than hard data. Moreover, the figures are presented in an exaggerated way by the BSA and International Data Corporation (IDC), a research firm that conducts the study. They dubiously presume that each piece of software pirated equals a direct loss of revenue to software firms.
To derive its piracy rate, IDC estimates the average amount of software that is installed on a PC per country, using data from surveys, interviews and other studies. That figure is then reduced by the known quantity of software sold per country-a calculation in which IDC specialises. The result: a (supposed) amount of piracy per country. Multiplying that figure by the revenue from legitimate sales thus yields the retail value of the unpaid-for software. This, IDC and BSA claim, equals the amount of lost revenue.
Cringely's column looks at inflection points, including Microsoft's new game box (which is, predictably, a home digital media center), the Google Accelerator (which is going to push all sorts of buttons around fair use and restricting access - I may try to do a Big Think about that later), and finally he gets back to what he thinks Apple's plans are.
Along the way he lays out his view of the strategy for Yahoo's Music Service, pointing out that their USD7 pricepoint is probably the zero-margin point. This means that the subscription services that are charging more are probably pocketing that extra $7-8/month as profit. Not bad on a per-customer basis; too bad there are so few customers.
Cringely notes that this a Yahoo! trying to displace the per-song pricing model that has made Apple dominant. However, Cringely seems to agree with me that the major market (for both music and movies) is and will remain in the download-and-play arena, not streaming.
When iTunes first debuted I pointed out that Apple missed an opportunity to undercut other services on price. In a way they did offer a cheaper alternative by dropping mandatory subscription fees, but Apple's motto has always been "We'll make it good; someone else will make it cheap." This was true for the Mac, for digital music players, and for online music services.
Dowloading is also possible, for an additional $.79 per song. The downloads are touted as "burnable" but the site is extremely cagey about formats. My guess is that what they're selling are Windows audio formats because their link for players you can use goes to Windows' "Plays For Sure" page. The iPod question is also a bit confusingly answered. It appears that what they're doing will work with a Windows-linked iPod even though that's not on their list.
The DRM is even more confusing for end users, as you can read the following two sentences only a couple paragraphs apart: Send a song to other subscribers easily
and Yahoo! Music does not permit copying or transferring music files to other users.
Presumably "sending" is different from "copying" or "transferring" but the page doesn't even come close to explaining how. Nor why I should care.
I confess I don't see anything here that I'm willing to try to plow through, even for the admittedly throwaway price of $5/month. I can get free streams now from aggregators like Shoutcast or specialty services like Digitally Imported. And if I'm saving 20 cents per download I'd need to make 25 downloads/month just to break even with iTunes' prices.
I'm not sure I would call this "podcasting" since it will include only broadcast and streaming - no downloading. However, it does have some interesting features, not least of which is Infinity's announced intention to use its deep pockets (it is a subsidiary of Viacom) to cover major-label music-licensing fees. This definitely falls into the "could be really good or could really suck a lot" category.
(Speaking of "suck" could someone please convince these guys that black-text-on-a-mostly-black-and-gray-background is not cool? It's stupid and unreadable.)
A long paper from Professor Ronald J Mann of UT Austin Law School attempts to analyze "the role that patents play in the software industry itself" rather than analyzing software patents per se.
Mann's main claim seems to be that patents are actually beneficial to small companies competing against larger firms. He specifically excludes "prerevenue startups" - that is, anyone too poor to afford costly patent lawyers. He also excludes most free & open software organizations and (by implication) many standards bodies, as he is concerned only with entities that attempt to make money from software development and innovation.
Mann also writes against the notion of a "patent thicket" that would intuitively act to slow innovation and constrain development by firms not themselves holding large patent portfolios. Mann argues that the industry's continued high R&D spending is evidence against such a thicket. Although this is a good point (why spend so much if you're afraid you'll get snagged by patents) it has the underlying problem of equating corporate R&D spending with software innovation. Speaking personally as someone who's been inside the software industry for a long time I can assure you there's no correlation whatsoever.
Mann has a lot more to say about IP and the software industry, including up-front attacks on the weakness of copyright (e.g. GPL) in protecting software. The article is dense and worth reading even if you disagree with some of the author's premises. In particular, it is important to consider his conclusions that patents do not have an overall large impact on the industry and that - to the extent that they do have an effect - any effect is a net benefit to small (properly defined) firms, not large.
Edward Jay Epstein on Slate takes us along on a money-chasing ride that shows how creative rights and money mingle in modern Hollywood. The story focuses on the particularly arcane case of Michael Moore's Farenheit 911, which netted Mr. Moore a tidy sum. People I've spoken with elsewhere in the movie biz tell equally bizarre and arcane tales of how films get made, funded, and owned. An interesting insight into some of the Cartel's inner workings.
Linspire CEO/perrenial troublemaker Michael Robertson takes a turn banging the DRM slowly* -- that is, explaining why people should reject products hobbled by Digital Restrictions Management. Robertson's description of Microsoft's attempt to sell DRM to consumers is darkly amusing; while Seth Schoen compares your computer to a car and argues for "owner override," Microsoft evidently describes itself as the "black box flight recorder" on your airplane. Uhm, yeah. It's a black box, all right.
It's the ultimate marketing challenge to explain to the world that turning over more control to Microsoft is an improvement that computer users should desire and pay money for. Microsoft has floated a series of hyper-technical sounding initiatives like Palladium and Next-Generation Secure Computing Base (NGSCB), each time explaining why it's a good thing for Microsoft to decide what software users should use. Earlier this week, Bill Gates talked about how it was like a "black box flight recorder," a not-so-subtle reference to 9/11 designed to tug on emotions. I leave it to others to comment on whether Microsoft has the security track record to decide what software is secure enough for me to be running. I'm more interested in the liberty and cost issues.
Update: Related reading via Furdlog via CoCo blog -- an SSRN paper on the implications of DRM for privacy and free expression: "Focusing on two central features of digital rights management - their surveillance function and their ability to unbundle copyrights into discrete and custom-made products - the authors conclude that a promulgation of the current use of digital rights management has the potential to seriously undermine our fundamental public commitments to personal privacy and freedom of expression."
Last year I blogged somewhat on the topic of modern-day radio payola and how it is distorting the listening landscape. In my fantasies a crusading AG exposes the industry's corruption and cleans things up. Now it appears that the code of silence around this practice may break, as two "independent music promoters" have filed suit against Universal Music Group alleging that the latter forced them to submit false invoices.
So the problem, guys, is not that you were part of the payola racket, but that you got fired and blacklisted for refusing to pad your payola records? Excuse me while I cry a crocodile tear river here. The whole system is rotten to the core. Promoters don't promote. Artists get ripped off. Producers get bullied. And the Cartel hollers "piracy" when you and I share songs? What a hypocritical bunch of hooey. How about we put the entire bunch of 'em out to pasture and actually let artists promote and sell their music to consumers without this blood-sucking mass of sanctimonious double-dealing?
Robert X's latest column shows he's been hitting off the same crack pipe as Vint Cerf. He looks ahead a few years and sees the big winner in the rollout of WiMax being BitTorrent because, properly used, it would vastly reduce the studios' costs for supplying downloadable movies.
This is technically true but totally fails to take into account a host of business realities or "facts on the ground" as the military terms them. These include: the Cartel's overt hostility to new technologies, the stagnation and entrenchment of business models, the fear of uncontrolled distribution, etc. The Amazon download-promos site I blogged earlier could easily have been put up by the Cartel five years ago, but they didn't. And they won't. It's anathema to their nature.
About the only way I could see this happening is if the Cartel succeeds in 0wnz0ring BitTorrent in the way they now 0wnz Napster. Maybe an emasculated BitTorrent could be deployed in the service of providing overpriced download rentals. But I doubt it.
Couple of stories on CNET today purporting to tell us what the Cartel thinks. The first, a brief bit by Renai LeMay makes Vint Cerf sound like he's smoking crack. "Hollywood interested in BitTorrent," says the headline. Ah, yeah, that'd be like "Piranhas interested in meat in water," right?
No, actually, Cerf appears to have spoken to "at least two interested movie producers." This is immediately recognizable as a reporter blowing it out of proportion, since no two producers speak for any studio, let alone Hollywood. Studio execs aren't producers; studio execs are hard-nosed accounting types with little or no interest in the creative aspects making movies except insofar as that improves their bottom lines. And their response to new technologies is, as we've seen, to open a can of legal whup-ass rather than sit down and rationally discuss options. So if Cerf is indeed chatting up a few producers, more power to him. But that's got zero to do with what that arm of the Cartel is interested in.
John Borland turns in a longer and more thoughtful piece on Steve Jobs vs. the music moguls. Borland indicates that the music arm of the Cartel are frustrated by Jobs' intransigence on price and are trying to wrest back control over what they see as "their" industry from this upstart geek. This fits known patterns of behavior both for the Cartel and for Jobs (shades of Disney v. Pixar - another seemingly sweet deal that left Jobs' team in control and the other side scrambling for new avenues after being essentially shut out). So if the players stay true to form Borland is likely right.
Borland paints a picture of Jobs' intransigence on issues such as formats, DRM, and variations in price to fit the Cartel's model of what's hot. The fact that iTunes continues to dominate (70% market share according to Borland) just might be a clue that he's onto something.
The supposed savior for the music business is mobile, where people are apparently willing to pay $2.50 for a poor quality snippet of a song they can get in whole for $.99 elsewhere. That does seem like stupid behavior on the face of it, but if it's what people will pay then you can bet the Cartel will go after it. The Cartel are better aligned with the mobile networks, which are designed to move content and promote airtime minutes, while Apple continues to remain pretty squarely in the hardware sales business.
One possible monkey wrench in the works would be if Apple moved more strongly in the direction of streaming to iPods. Podcasting is one obvious example of streams, but there's no inherent reason why content now streaming over the Web couldn't also be streamed to iPods. In fact, my favorite Web streaming site (di.fm) already offers "DI for MP3 Players." It would be a simple move for Apple to sign up DI, or work through a few redistributors like Shoutcast to give iPod users access to a huge variety of streams. One can easily imagine such a move giving Cary Sherman more headaches.
Of course, the best place to get this material isn't in the big box retailers or even local music stores. It's online. Everything from Indian DJs uploading hourlong mixes of their latest club spins to officious institutions like the Smithsonian, which is now offering smithsonianglobalsound.org, a slick and professional presentation including annotations and royalties flowing to musicians around the world.
Pareles does a nice job of turning a paragraph or two on many of the major non-US influences in this area. So if you want to know about Brazilian pop or Congolese soukous you can read a bit. I just wish he had put in a few more URLs. The links are tantalizing but mostly slanted towards commercial services like emusic.
Tony Smith reports for The Reg that the labels have dumped their shares in MusicNet. It was bought by Baker Capital, a New York-based private equity firm (or VC as we tend to label them in the US). The details of the deal are private, but one item caught my eye:
The takeover will give [MusicNet] the funding it needs to expand, to license more content and take that content to more big-name retail partners, [MusicNet's PR release] said.
Which, if you read it the way I do, is an oblique way of admitting that the labels were starving the enterprise for cash. Gee, shall we sit back and speculate on why they wouldn't invest in their own downloadable music service? Could it be they didn't want it to succeed because, you know, that might legitimize this whole download business model? Maybe. Or it may be, as Smith notes, that the labels don't want to be in the digital distribution game, preferring to license content to third-party distribution channels such as AOL.
I'm traveling this week back and forth to Portland. In the airports are a series of shops advertising "$20/2." Reading the fine print shows that you can buy two DVDs or CDs for USD 20. This is, in my mind, a sign of the impending death of the CD.
Look at the difference: with the CD you get some music tracks, maybe some liner notes if you're lucky, and... um, well, that's about it.
Or, for the same $10 you can get a couple hours of video, plus commentary, alternate tracks, possibly multiple languages, maybe a behind-the-scenes or other feature. If you're really jonesing for music you can buy concert DVDs of the same pop stars (these shops have tiny inventory - it's all hit-oriented material). The concerts cover the new songs, and you get to watch your idol perform them (or lip-synch) and get a backstage view or maybe a bonus track with an interview or tourbus footage.
According to this refreshingly forthright Seattle Times article, it's because Microsoft knows that the FCC is going to start regulating everything its mission touches, so it had better start playing nice:
Fights over copyrights provide an interesting example of Microsoft's current DC presence and how it switches priorities and sides. ...Only a few years ago, Microsoft opposed the flag, because such an approach attempts to tell software designers what to include and sets limits on the Internet.
But now, Microsoft cannot afford to tick off its fledgling friends from Hollywood, the movie moguls it will need to provide content as it ventures into new video technology.
And of course there are similar reasons why it's Mark Cuban and not Bill Gates who can "afford" to fight for innovation in Grokster -- despite the fact that not so long ago, Gates was the young entrepreneur on the outside looking in.
One of the things the Cartel has most successfully done in this war is control the language, reporting, and thought around P2P music sharing.
One side effect of this is that there has been an almost complete shut-out of mainstream reporting on real research in the area. Why? I believe it's because every study that has been done since Napster has shown that music sharing has no negative effects on music sales (CD or downloaded). In fact, some show a positive effect. If that message got into the public consciousness the Cartel would be much worse off. Therefore, they've done all they can to frame the debate in terms of their scares, not science. So we have the scene - surely worthy of Beckett - in which a certified class of 27,000 songwriters and music publishers will argue against Grokster, as Tony Mauro put it on law.com "casting it as a life-or-death struggle over theft of their means of livelihood."
There's just one eensy weensy problem here - NOBODY's livelihood is being stolen. It's just not happening. There were no WMD in Iraq, there was no cocaine on that boat (*), and music sharing does not cost artists money.
How do we know this? Well, we do studies. Like, for example, the just-published Japanese study by Keio Universtity Economics professor Tatsuo Tanaka, who looked at the P2P application "Winny" and its effect on Japanese music consumers. Prof. Tanaka's original study is reported on here (Japanese HTML), but fortunately for people like me there's an English translation (17 page PDF).
In addition to a lack of negative effects, the study argues, there is evidence for a positive correlation between sharing music and purchasing more new music. Not terribly surprising, if you've been paying attention over the last half dozen years and not been deafened by the drums of the other side. Sadly, just about nobody has been paying attention. We've been soundly defeated in the propaganda war. Here's hoping Tuesday goes better.
(*) The Usual Suspects reference, in case you were wondering
First, a judgement has come down in favor of Immersion and against Sony. In effect, the issue is around whether Immersion's patent on console controls that vibrate in synch with game actions was infringed by Sony's immensely popular PlayStation. The judgement was entered for about USD 90 million (including interest) and a formal injunction against selling the Playstation was suspended pending appeal. Reporting online has been extremely sparse and detail-free. My guess is that the gaming press will buzz about this for some time, but in the end it's going to be another NPT/RIM situation. Sony will pay up - the question is when and how much, and what will be left of Immersion after being ground down by Sony's battery of lawyers.
Two, Randy Picker sent me a pointer to another of his forthcoming papers (PDF). This one is nominally on Grokster as well, focused on the Betamax doctrine. Anyone remember who made Betamax originally? Picker argues that the Betamax doctrine should not cover all products equally - that the ability of some products to (in his phrase) "phone home" after release for update and continued control by the maker means that more responsibility should be shifted from the user to the manufacturer. Shades of Apple vs PyMusique!
that it can be used for political speech (and porn!) ,
and the reason we're in the current mess is the Cartel's extensive anticompetitive behavior in the last decade.
Well, yes. I'd say "we told you so" but that would be both redundant and probably ignored, as the esteemed Mark Cooper, research director for the Consumer Federation of America, apparently feels that there's something wrong with us "geeks" debating this. Excuuuuuse me!
At heart I'm glad the consumer groups have finally decided to get into the Copyright wars. I doubt this will have any massive impact, though.
File this under "don't you people ever learn ANYTHING?" How many people are driven to download because they don't want to pay $18 for a CD that has one or two tracks they want. Raise the price enough and legitimate services will start to look less appealing compared with free. Remember, kids, downloading itself isn't illegal, it's the sharing that people get busted for. I can download to my heart's content without violating a single law or risking becoming part of the Cartel's jihad. But it's a pain. A hassle. Spending a buck is easier most of the time. Make it a few bucks and maybe I'll reconsider.
The new Treo arrived, and apart from some SIM and Cingular issues, seems to work well. It seems that software patents have stopped it from being even better, though.
The Treo keyboard is very good, for something with chiclet keys, but there are times when Graffiti, Palm's early written-character-entry system, is easier. The Treo 650 doesn't provide out-of-the box access to Graffiti, but it turns out the device still has the character recognition buried inside. Installing the free Graffiti Anywhere enables you to invoke that capability by writing anywhere on the screen.
Great! but here's where patents get in the way. When I first learned Graffiti on the "Palm Pilot" (a name killed off by trademark demands), it used a set of single-stroke characters, with the exception of the standard "X". A pain to learn, perhaps, but quick to enter ever after. I start up Graffiti Anywhere, start writing this is a test, and wind up with 'hls. Hmm.
Then I remember Xerox's patent infringement suit against 3Com. Xerox claimed ownership of a system for recognizing "unistrokes" -- characters written in a single stroke -- and sued. 3Com defended by arguing, among other things, that Graffiti did not infringe because the "X" took two strokes. A bit of Googling and Westlawing turns up a 1997 complaint against U.S. Robotics, a trip to the Federal Circuit, and finally, a 2004 judgment from the Western District of New York finding the patent invalid.
Good news, but (there's always a but), in the meantime, 3Com Palm (now split from 3Com) decided to dot its I's and cross its T's (literally) to hedge its bets against potential damages or injunction: In 2003 it licensed from Jot the more cumbersome two-stroke Graffiti 2.
Or, as PalmOne explained in its 2004 Form 10K
We cannot assure that palmOne will be successful in the litigation. If we are not successful, we may be required to pay Xerox significant damages or license fees and pay
significant amounts with respect to Palm OS licensees for their losses. It may also result in other indirect costs and expenses, such as significant diversion of management
resources, loss of reputation and goodwill, damage to our customer relationships and declines in our stock price. In addition, Xerox unsuccessfully sought and might again
seek an injunction preventing us or Palm OS licensees from offering products with Palm OS with Graffiti handwriting recognition software, even though we have largely
transitioned our products to a handwriting recognition software that does not use Graffiti as well as to physical keyboards. Accordingly, if Xerox is successful, our results
of operations and financial condition could be significantly harmed and we may be rendered insolvent.
Even now that the Xerox patent has been ruled invalid, no one seems to be rushing the original Graffiti back into production. Once again, end-users lose out. A seven-year patent fight leaves even big companies exhausted. So that's why I can't write an undotted "i" on the shiny new Treo. Yet another reason to be glad not everyone's rushing into the software patent game.
Reuters piece (here on CNET) indicating that the UK is the biggest market for TV downloads. Oops, did I say 'market?' Silly me, that would imply someone was trying to meet consumer demand. No, this is not a market, friends. This is a "wave of illicit activity," or somesuch balderdash.
My guess is that we'll see the usual pattern of meretricious Cartel behavior. First, they'll deny it's a problem. Then they'll scream it's a huge problem and demand immediate legislation. At the same time they'll sue their customers, all the while clinging to outdated business models that are based on the absurd notion that the flow of electrons on a wire will obligingly stop at a national border. This will be followed by a wave of public FUD, the suing of several innovative small companies into oblivion or lapdog-like obeisance (vis iMesh).
About ten years later they'll finally launch something that might approximate what BitTorrent was doing two years ago, at sky-high prices. The failure of this commercial petit mal will be named as evidence that there never really was much of a market anyway. That is, unless Apple beats them to the punch.
Derek Slater: "[The paper's arguments] highlight an important aspect of the current debate surrounding Grokster: what does it mean to support 'market forces' or the 'free market'? The paper's conclusion is that market forces will resolve copyright holders' concerns and the government should stay out. Yet, many would say that the DMCA and extended secondary liability are unfortunate interventions in the market."
Ed Felten: "How can we tell whether the record industry is responding competitively to DRM? An interesting natural experiment is about to start. MP3Tunes, a new startup headed by serial entrepreneur Michael Robertson, is launching a new music service that sells songs in MP3 format. Will the major record companies license their catalogs for sale on MP3Tunes? In a competitive market, they would license to MP3Tunes."
Update (12:55 p.m.): Prof. Felten's follow up: "It makes sense to rely on market competition to blunt the potential downside of DRM. That strategy will only work if we adopt pro-competition policies, or at least reverse the anti-competition aspects of our current policy. Talking about competition is good; but having competition is much better."
As reported by Gizmodo, PalmOne has added $100 to the price of its unlocked Treo 650 GSM only a few days after releasing the product. Most likely, it did so under pressure from the cell phone carriers. I was lucky (or obsessive) enough to get my order in at the original price, but I'm less certain now that I'll want the device when it arrives.
I was willing to pay a premium over the Cingular-locked-subsidized version, because I'm tired of the petty tyranny of cell-phone providers who want to control what users can do with devices they've bought. After dealing with the TMobile-constrained Sidekick, I wanted a device that was open and customizable. Once I've paid for the service, I should be able to choose what data to send and receive, and how to use it.
What PalmOne doesn't seem to understand is that its customers are buying a platform, not just a phone. Those who buy the $400-600 Treo instead of a $100 phone (free with cell servitude) buy it for the rich set of applications available -- many of them developed by other users.
I don't develop for the PalmOS and probably never will, but I benefit from the "virtual network" around an open platform because I can add any of its array of third-party applications. Since every application written makes the platform (marginally) more functional, every developer who joins the network adds potential value. That value redounds to Palm -- without any extra work on Palm's part -- because customers still need Palm hardware to take advantage of this "network."
Raising the price of the full-functioned unlocked Treo turns away those user-developers. By making it more expensive for users to develop for the platform, Palm makes the device less attractive even to the non-developers. By alienating the "alpha-geeks," in Tim O'Reilly's term, Palm has hurt many more than the few hundred people who might have bought the unlocked Treo. It hurts every user of the platform, and its own bottom line. I hope I haven't just bought a $600 paperweight.
Terrence Maxwell has a new article in First Monday (Is Copyright Necessary?) attempting to model the effects of different copyright policies historically and into the future (e.g. authors wanting high-protection copyright vs. the public wanting low-protection copyright). His models are fairly abstract and complex (see image below), but his results are interesting:
As indicated in the table, the desired policies of authors, publishers and public domain advocates produce very different outcomes in a 100–year simulation, some of which run counter to the protagonists’ stated goals. For instance, while the authors’ position led to the largest number of authors, it also generated the lowest sales figures, and the fewest number of volumes published. This indicates that the demand for new volumes from authors was the lowest among the three options, and points to a greater level of competition among authors seeking publication. Similarly, while the reader position generated the highest level of sales, the greatest number of different volumes, and the lowest cost for books, it also severely constrained the number of authors. This means that while a greater number of volumes would be available, diversity in authorship would be curtailed. This, in turn, would tend to diminish the likelihood of variety in information products.
Fellow Copyfight author Wendy Seltzer has a new Legal Tags post responding to the news that TiVo and ReplayTV have agreed to hobble their products with digital rights management (DRM). Therein, she compares and contrasts the story the entertainment industry tells about DRM with what history teaches:
The story, as these entertainment producers tell it, is that without DRM, no recording at all would be permitted of pay-per-view. Or, if they couldn't control the tech to stop consumer recording, they wouldn't even broadcast some content in the first place...In that case, individuals are left with the choice between DRM-encumbered content and none at all.
[...]
Would mass entertainment cease to be if mass producers couldn't restrict the choices of their audiences? No, no more than musical composition stopped when courts ruled that the piano roll wasn't an infringing reproduction or sound recording stopped when audio artists had no public performance right. Scrappy upstart technology companies disrupted the business of producing music, but when producers couldn't control the technologies of distribution, they changed their business models instead.
So far, it looks like the entertainment industry is succeeding in doing everything but change business models. Indeed, it's working to persuade lawmakers to change the law to protect old business models, while supporting attacks on doctrine shown to enable new ones. Meanwhile, we -- the lowly customers without which the industry wouldn't exist -- get to "enjoy" less and less functionality for more and more money.
So what do we do about this? There's been plenty of discussion about, though little movement toward, building a "GeekPAC." But Wendy reminds us that there's a simpler, more direct route to influencing the industry: refusing to purchase DRM-hobbled products:
Too much of the public is willing to sell out the benefits of competition and creative destruction for the shorter-term promise of entertainment content. If we could instead commit ourselves to rejecting DRM, we'd force the entertainment industries to a test of whether they'd really shut down rather than offering open content, and we'd leave room for innovation in the creation and delivery of mass entertainment content.
To that end, Wendy is leading a project at EFF that could serve as a shopper's guide of sorts for innovative -- and because of that, endangered -- technologies; we plan to unveil it in November, just in time for the Thanksgiving/Christmas shopping season. Stay tuned.
As we reported last week, Microsoft's new music download store, MSN Music, advised its frustrated iPod-toting customers to simply burn their purchases to CD, then rip them to an open format like MP3. That way, they could play their MSN Music downloads on their iPod (or any other device) without having to worry about the incompatibilities created by Microsoft's platform-specific DRM restrictions.
Of course, that was too good to last. According to Salon, senior Microsoft honchos decided to have that bit of tech support advice pulled off the website.
I don't know whether Microsoft did it under pressure from the record labels, or whether out of a desire to maximize platform lock-in, but I do know it wasn't to benefit Microsoft's customers, the people actually expected to be paying for the MSN Music downloads. Chalk this up as another anti-competitive, anti-consumer use of DRM.
Later: Derek Slater: "MS changed the language, noted by Fred, that advocated burning DRM-locked songs onto CD and then re-ripping into another, possibly unencrypted format. It now reads simply:
'Unfortunately Apple refuses to support the popular Windows Media format on the iPod, choosing to only support their own proprietary DRM format. If you are an iPod owner and are unhappy about this, please send feedback to Apple and ask them to change their policy and interoperate with other music services. There are more than 70 portable audio devices that support MSN Music today, and we hope that someday Apple decides to join with the industry and support consumer choice.'
70 devices: wow! I mean, Microsoft has picked them all out for me ahead of time, probably put a little red bow on them, too. What would I need interoperability and independent consumer choice for when Microsoft can shepherd me to approved devices?"
WritesFred von Lohmann @ Deep Links: "Tech support for Microsoft's new MSN Music service is responding to the incompatibility between its downloads and the iPod by advising its customers to burn the downloads to CD, then rip the CD to a compatible format...Now that's what I call freedom of music choice, in contrast to Real Network's misleading campaign of the same name."
Even as the FCC and consumer electronic companies try desperately to push Americans toward HDTV, one Washington Post reviewer joins the crowd throwing up hands at the complexity of it all. Parts don't interoperate well, even once you've upgraded for high-res, and worst of all, that's on purpose:
[T]he link from cable box to D-VHS remains troublesome -- by design. Thanks to an industry agreement, a high-def program can be copied from Comcast box to D-VHS only once. If you stop halfway and try again from the start, a "copy flag" prevents it.
In other words, consumer electronics manufacturers have so far capitulated to the demands of greedy copyright owners that they've built extra failure modes into their devices. It's not enough that the picture might pixellate due to weak signal or bad connections, the industry must punish its best customers (those who have just spent thousands on HD-capable equipment) by breaking perfectly reasonable personal use patterns. Of course, if you're sick of being treated like a thief, you might try an open-source MythTV-based HD-PVR.
John Borland @ CNET: 'Plays for Sure' Means Microsoft's Inside: "Microsoft is planning a new branding campaign similar to 'Intel Inside' for its Windows Media audio and video technology, hoping to highlight the near-ubiquity of its multimedia technology, sources familiar with the plans say."
Derek Slater: With DRM and the DMCA, Nothing Plays for Sure: "With DRMed digital media, backed by the DMCA, nothing plays for sure. Please, somebody start THAT campaign, rather than playing these silly games. Your digital media is forever tethered to the DRM owners and relevant copyright holders. Your digital media plays the way they say it can be played, that's for sure. But you will never truly be able to use your digital media however you want on whatever device you want - we will never see true interoperability."
If Real actually cared about "Freedom of Music Choice," it would be telling its customers to burn the downloaded music they purchase to CD, then rip to any DRM-free format they like (including MP3, WAV, or AAC, all of which play just fine on the iPod). That's a much better option than being dragged into a feud between Apple and Real.
Meanwhile, Real's record for promoting the "healthy, open competition" made possible by reverse engineering for interoperability is less than inspiring. Consider, for example:
In the RealNetworks v. Streambox case, Real was among the first litigants to invoke the DMCA to squash a competitor trying to interoperate with Real's proprietary streaming software.
Real's own end-user licenses expressly forbid reverse engineering, even where that activity would be lawful as a fair use.
Real has been conspicuously silent when it comes to legislative reforms, like H.R. 107, that have been introduced to reform the DMCA to permit legitimate reverse engineering.
Tim Wu has yet another excellent post over at the Lessig Blog, this time on the "Loser's Paradox" -- e.g., the affinity the U.S. government has for ailing business sectors.
"[T]here's not much a conceptual difference between something like the Induce Act on the one hand, and the farm subsidies for corn on the other," writes Wu. "Each case features an industry that desparately wants to slow the arrival of more competitive rivals. And each are in truth, slowly dying industries whose ongoing decay poisons our economy."
NYT: "RealNetworks plans to announce on Tuesday that it is putting its digital music offerings on sale at half price as part of an aggressive strategy to force its way onto Apple Computer's popular iPod digital music player.
[...]
Mr. Glaser acknowledged the company would not benefit directly from selling music at a loss, but he said that he believed that it would help force Apple to change its policy about licensing the iPod to play music from competitors."
Later: Engadget: "Hoping to get a little people power on their side in their battle to try and get Apple to open up the iPod to downloads from their online music stores, RealNetworks launched a 'Hey Apple, Don't Break My iPod' online petition which quickly turned against them and filled up with such witty anti-Real chestnuts as, 'REAL CRAP. rob you are a loser!' and 'If you guys dare to touch my iPod!! Oh Boy…! Im so going to rip out your....' They ended up removing the link from their site and put up another one which only lists people's names and nothing else."
Later #2:Fred von Lohmann: "In the latest development in the ongoing spat between
RealNetworks and Apple over the iPod, RealNetworks has launched its 'Freedom of Music Choice' campaign. 'Consumers are getting a raw deal with the status quo in digital music, which limits healthy, open competition that drives down prices and encourages innovation,' trumpets the campaign website.
Lovely sentiment. We couldn't agree more. But it's not as if Real is doing anything to change that status quo. After all, Real keeps its customers in DRM shackles that look pretty similar to Apple's FairPlay. In fact, Real's beef with Apple is really about keeping those shackles on its customers when the move songs to the iPod."
It's always interesting when guests blogsit for Larry, and Rep. Rick Boucher is no exception. Check out the lively discussion of compulsory license schemes in the comments over on Lessig Blog.
Cory Doctorow, on Siva Vaidhyanathan's new article on using technological "tethers" to force customers into using your products, your whole line of products, and nothing but your products: "It's easy to understand why hardware companies love tethering -- it's a license to screw their locked-in customers out of titanic sums of money -- but that's exactly why smart customers need to reject tethered products."
Dan Gillmor, on his decision to stop purchasing iTunes: "Threats to use copyright law against Real are exactly what you'd expect, unfortunately. Apple wants control over online music, and this is just part of the game.
What we customers want is cross-platform compatibility: standards. What the companies want is lock-in. They may win, but they're only locking me out -- because I won't play by those rules. Which means I've bought my last iTunes Music Store song until Apple starts paying more attention to what its customers want."
The Register runs an interesting meditation on Apple's DRM strategy (DRM begins to work its magic). The article basically accuses Apple of playing the ol' "format upgrade - buy everything over again" game:
"Wouldn't it be great if you could take a dozen of your favorite songs with you," [on your cell phone] Jobs told the crowd.
Wouldn't it, just? For millions of users however this is already a reality. Much like a burglar giving the burgled householder first opportunity to buy their own stuff back, Apple is promising a right we already enjoy as a bonus. An innovation, even...."If people accept [DRM], the logic for the music industry is to apply the wonders of the Internet to the old vinyl-tape-CD upgrade gag, and to start selling different versions of playback rights (want a shedload of one-time play music for tonight's party? we can do that for you)," wrote John Lettice.
Having set the bar so low at 128kbps encoding - and the price at 99 cents per song, so high - one of the premiums that the music industry will now be able to offer is 'fair use'. In order to get the public to accept this proposition they must first forget that they ever had the right to make a copy of music they'd bought. And that's the true significance of today's announcement.
Actually, I don't really agree with all of the Register's analysis, but it is something to consider.
The New York Times reports that the the 9/11 Report has been "a royalty-free windfall" for publisher Norton.
"The 9/11 Commission Report," the final report of the National Commission on Terrorist Attacks Upon the United States, has remained at the top of the best-seller lists at online bookstores since its release last Thursday.
The report is topping the Amazon charts despite being uncopyrightable and freelyavailableon the web. It's one of the of the few types of works left -- works of government authorship -- that enters the modern public domain.
According to the typical copyright story playing in Washington, this publication and its profits for the publisher shouldn't have happened. What would be the incentive to publish a book that anyone else could freely read and even republish? Yet it seems that some people still want to read on bound paper, and a publisher can still make money by being first to market at a reasonable price. Of course the newsworthiness of the event and subject had plenty to do with this story, but it helps show, as do and
Lawrence Lessig's experience with it, that total control isn't the only workable business model for publishers.
Free from patent impediments at last, the GD graphics library once again supports GIF images. I doubt that Unisys's LZW patents promoted innovation -- unless you count innovation in competing graphics formats such as PNG to work around the patent.
Rick Klau expresses the frustration that more and more of us will feel as the content industry begins to leverage the power it won through the broadcast flag mandate: "I understand NFL's concern about its product. But guess what? I pay them for their product. And I pay DirecTV. And TiVo. At what point have I paid enough people for the privilege of watching right to watch it when I want it?"
Good question. The broadcast flag allows copyright holders to take away your legitimate, personal uses, and they are perfectly capable of using that power to sell these uses back to you. The flag doesn't care about "first sale," "fair use," or any of that other stuff that copyright law traditionally allows. It listens to the signal embedded in a broadcast, not a judge. So you may *never* pay copyright holders enough to get reasonable, legal uses of digitally recorded programs. After all, it's not in their interest to stop you from paying -- again...and again...and again.
Look who's auctioning: My eyes popped this morning when I saw that eBay has announced that for 180 days it will allow sellers to offer digital downloads, through a new subcategory of its music section. This is one of these ideas that, once you hear it, you wonder why it wasn't done a long time ago. You can find nearly everything else on eBay, so why not? Seems that eBay has only considered digital music verboten for fear of being stuck in the middle of an infringement suit (like that recently filed by Tiffany's). The plan now is that sellers have to warrant that they own the copyright to the recordings being offered. This is in marked contrast to the policy with respect to cds, which are clearly covered by the first sale doctrine. I wonder if this is enough. My suspicion (though I have had many,many great experiences with eBay) is that some sellers will glibly drop in the required language without much concern about whether or not they own copyright. If that happens, I'd expect eBay to pull the plug faster than you can say "Buy it now."
Whether you like Microsoft or not, you've got to recognize that they haven't gotten to be the richest company in the world through stupidity. DRM is long-term stupid. It's technology designed to make technological products less useful ("Where do you want to frustrate your customers from doing today?"), and it doesn't work as long as there's one determined attacker in the audience.
The DRM moment has been left behind by science. Publishers were looking for pay-per-use and perfect price discrimination; DRM promised it to them. But DRM was backed by bad science. As long as we live in a world where we can still talk to our friends and still tinker with our tools, DRM is doomed to failure. And when it fails at its primary purpose, it succeeds only at driving potential customers to other sources.
In the short term, DRM may help facilitate lock-in to a particular manufacturer's products. Once you buy a few Microsoft media player tracks, it's easier to keep buying Microsoft. But as the format gets less useful, and the media player's requirements become more restrictive, OGG looks more attractive. Sure, it'll take some effort to get your existing tracks back (you might have to convert, re-purchase, or most likely, find clear versions on the Darket), but once you see the gains in flexibility, you're unlikely to look back. Customers jump ship from DRM, with best customers first over the edge. If Microsoft as technology company doesn't see that, it's just ceding its leadership to someone who does.
Or at least, that's what it's trying to do. But there's a not-so-minor complication: TiVo for radio hasn't even been born yet.
This is, of course, just how the RIAA wants it: If you kill or hobble a new technology at/before birth, it can't grow up to threaten the status quo. And the music industry should have veto power over any technology that stands in the way of the past.
Fred von Lohmann has a new piece on this over @ Deep Links, pointing to the EFF/Brennan Center comments (PDF) asking the FCC to deny the music industry its latest request for a tech mandate.
"The RIAA seems to have missed the fact that recording from the radio is perfectly and clearly legal," writes Fred. "Europeans already have car stereos that can time-shift digital radio. We can already record streaming webcasts and analog FM broadcasts. So why is it, exactly, that we should somehow end up with less capable devices for digital radio?"
We put a huge amount of resources into punishing and excluding free riders in many parts of society. But is it because they are actually problem, or is it because they piss us off so bad?
...
My local CSA's trade box was just another good idea: at the pickup site there is a cardboard box you can drop things you don't want (and would most likely waste) and pick out other people's goodies that they didn't want. It had to be a net positive. Then they decided to make it fair and try to exclude the free riders. There's a sign on the box now that says you can only take something out if you put something in. You know, to keep something in the trade box, i guess.
When you think about it, the problem becomes apparent. If you want everything you got that week you either have to exclude yourself from the tradebox, giving up something that possibly no one else want, or give up something which it may turn out no one wanted, and you would have happily eaten. Most painfully, if no one defects from the system, it guarantees that at least one item will go to waste every week. So the tradebox was a great way to reduce waste, until they decided to kick out the free riders, and it became the vector for waste. But at least it's "fair" now.
Food that rots in the box is the co-op's deadweight loss. At some point, guarding the commons to exclude free riders saps more value than it protects. What's more, today's free rider might be tomorrow's donor or innovator, though those who bridle at "free riders" might be more comfortable with "beneficiaries of consumer surplus." In their determination to stop copyright free riders, copyright holders are causing great social harm.
These problems aren't new to copyright. They just show up here more often because technology has driven the marginal cost of the next copy of a copyrighted work near zero, and peer-to-peer lets independent re-distributors shoulder those costs that remain. As a matter of hard costs, the free rider costs the copyright holder and publisher nothing. So long as we can get over the startup hump -- giving creators enough incentive to get the first copy of a work produced -- we should be able to give everybody access to it.
Copyright has long recognized this paradox. The Consitutional compromise is to give authors exclusive rights for limited times. But today, of course, the times have gotten longer (CTEA), the costs of exclusion (DRM or the PIRATE Act) have risen, and fewer and fewer members of the public get to benefit from the consumer surplus of a smoothly functioning market.
We may not have all the answers to a perfectly functioning copyright commons yet, but it can't be to assume, as the MPAA's copyright "education" does, that "If you haven't paid for it, you've stolen it."
Only a broken system leaves orphan films to rot because the only ones willing to restore them don't hold (and can't find holders of) the necessary bundle of rights.
The main spin of the study appears to be that, for those consumers who buy CDs, 3 out of 4 dentists... no wait, make that 1 out of 20 purchasers also pay to download music. In other words, if you buy music in stores, you may buy music online. (duh?)
More noteworthy, I think, is another set of results buried at the bottom of the press release:
According to NPD there were other notable differences in CD purchase behavior, depending on how consumers used specific online music services. CD buyers who also used an online music subscription service, such as Rhapsody, in the past twelve months purchased an average of 11 CDs last year; those who had paid for a music download from legal download site, like iTunes, purchased 10 CDs; those who used a P2P file-sharing site purchased eight CDs; and those who did not download or stream music from the Web bought six CDs.
If one assumes an average CD price of $12, then the average P2P user in their survey is paying the RIAA labels $96 per year for music they already can get for free. Who says you can't compete?
Ed Felten has posted his attempt at synthesizing the supposedly contradictory studies on how file-sharing affects CD sales:
The Grand Unified Theory explains the study results by breaking down the users of filesharing into two subpopulations, which I will call Free-riders and Samplers.
Free-riders are generally young. They have few if any moral qualms about filesharing, and they tend to assume that others feel the same way. They use filesharing to accumulate libraries of music, as an alternative to buying CDs.
Samplers are generally older and more risk-averse. They are highly engaged with cultural products of all sorts. They are morally conflicted about filesharing, and use it mostly to download songs that either aren't for sale, or that they don't value enough to pay for. They buy music that they really like, and filesharing causes them to find more music they like, so it tends to increase their CD purchases.
Increasingly, cable companies are getting into the business of Personal Video Recorders (PVR), integrating them into the cable set-top box. While in many ways convenient for the consumer (one less electronic component, potentially less expensive, never have to worry about recording the right channel), a worrisome potential for control over the viewing experience remains. If the cable company gives you the PVR, they will likely retain the ability to modify how you are permitted to use it. EE Times reports on one possible example of this with regard to integrated DVD recorders (Set-top boxes may put a lid on rewritable DVDs):
The current scheme under discussion is preventing disks made on a set-top burner from being played on any other system by linking the content to the serial number of the set-top using triple DES encryption.
essentially you’d be able to create an archive, but when your cable box dies on you or you move and switch to a different cable or satellite provider, your entire collection would be useless to you.
John Schwartz at the NYTimes has an interesting article this morning on the recent UNC/Harvard Study claiming P2P has almost null effect on CD sales. In particular, I thought the critique of the RIAA's "illegal activities" survey method was particularly good:
The industry has reacted with the kind of flustered consternation that the White House might display if Richard A. Clarke showed up at a Rose Garden tea party. Last week, the Recording Industry Association of America sent out three versions of a six-page response to the study.
The problem with the industry view, Professors Oberholzer-Gee and Strumpf say, is that it is not supported by solid evidence. Previous studies have failed because they tend to depend on surveys, and the authors contend that surveys of illegal activity are not trustworthy. "Those who agree to have their Internet behavior discussed or monitored are unlikely to be representative of all Internet users," the authors wrote.
...
"The single-bullet theory employed by the R.I.A.A. has always been considered by anyone with even a modicum of economic knowledge to be pretty ambitious as spin," said Joe Fleischer, the head of sales and marketing for BigChampagne, a company that tracks music downloads and is used by some record companies to measure the popularity of songs for marketing purposes.
Also check out Ed Felten's write up on the article here.
This certainly looks real, and even if it isn't, the growing inexpense of storage means that it will be true eventually, probably sooner rather than later. I could say all sorts of things about what this means for the market and communications, but this is Copyfight, so let's talk about IP.
The Merc has a great article on how the RIAA bashes P2P out of one side of their mouth while secretly using data from the networks to boost sales of their CDs. Check out this tasty bit:
Record-label executives discreetly use Garland's research firm, BigChampagne, and other services to track which songs are traded online and help pick which new singles to release. They increasingly use such file-sharing data to persuade radio stations and MTV to give new songs a spin or boost airplay for those that are popular with downloaders.
Some labels even monitor what people do with their music after they download it to better structure deals with licensed downloading services. The ultimate goal is what it always has been in the record business: Sell more music.
``I know of a case where an artist had obviously gone with the wrong single, and everyone loved this other song they had on their record,'' said Guy Oseary, Madonna's business partner and head of her label, Maverick Records. ``In the world of what we do, it's always good to have real information from real fans.''
Maverick used BigChampagne's 100-city breakdown of popularly downloaded songs to persuade radio stations to start playing a new band, Story of the Year, during prime daytime listening hours instead of at night.
The online data revealed that despite Story of the Year's lunar rotation, its single ``Until the Day I Die'' ranked among the top 20 most popular downloads, alongside tracks from Blink-182, Audioslave and Hoobastank that received significantly more airplay. And when the band performed in a city, ``we didn't necessarily see the phones blowing up at radio, but we saw download requests for the song skyrocket as they went through,'' said Jeremy Welt, Maverick's head of new media.
Armed with this data, Maverick fought for more airtime at radio, which translated into more CD sales. Story of the Year's album, ``Page Avenue,'' just went gold, selling more than half a million copies....
Folks keep asking why more artists aren't breaking into the mainstream through P2P. I think this may provide some answers -- they are; the record labels are just taking all the credit.
[ed-Sorry for the lack of links/source. This was sent via email. I think it's from Variety.]
Update:here is the link to the Variety story, although a subscription is required to see the whole thing.
By MEREDITH AMDUR
Is Hollywood to blame for the music industry's woes?
According to market research group NPD, it's not just illegal downloads of electronic MP3 files that are eating into traditional music sales but the ever-increasing popularity of DVD movies.
In a survey of consumers who admitted to spending less money on CDs in the last year, some 21% blamed an increased spending on DVDs for their reduced appetite for CDs. Only 15% of respondents blamed their DVD habit in the same survey a year and a half earlier. NPD noted that the increase was the largest single jump in its survey. At the same time, the number of consumers who cited downloading as their excuse for lower CD spending fell from 30% in 2002 to only 21% this month.
NPD, which just finished up a study into understanding why people are buying less music, said the chief reasons remain the high price of CDs (48% cited) and the general quality of content available recently (42%).
One household entertainment budget
While music and movies are vastly different pastimes, NPD analyst Russ Crupnick argues that the decline in CD sales is increasingly attributable to the rapid rise in DVD sales. (Similarly, many publishers believe the lure of inexpensive DVDs, available in big chains like Borders, has eaten into book sales.) Researchers note that purchases and rentals of movies and music, along with videogames, typically come out of the same household budget for entertainment, so an increase in one can have a direct impact on the other.
"As DVD prices fall, especially for catalog titles, the price-to-value proposition only gets higher," noted Crupnick.
NPD reported that the average full length CD sold for a still-hefty $13.47 in the fourth quarter of last year. This price represents a fairly modest 2% reduction from the same period in 2002 and 4% down from 2001. Many DVD movies can be purchased for $15 or less.
An interesting new study from Harvard and UNC economists finds that file-sharing may not, after all, significantly affect CD sales:
A longstanding economic question is the appropriate level of protection for intellectual property. The Internet has drastically lowered the cost of copying information goods and provides a natural crucible to assess the implications of reduced protection. We consider the specific case of file sharing and its effect on the legal sales of music. A dataset containing 0.01% of the world's downloads is matched to U.S. sales data for a large number of albums. To establish causality, downloads are instrumented using technical features related to file sharing, such as network congestion or song length, as well as international school holidays. Downloads have an effect on sales which is statistically indistinguishable from zero, despite rather precise estimates. Moreover, these estimates are of moderate economic significance and are inconsistent with claims that file sharing is the primary reason for the recent decline in music sales.
Good news, but (there's always a but), in the meantime, 
As reported by 
