November 2005

Occasional TLF co-blogger Solveig Singleton has some very sensible comments about the pending lawsuits against Sony BMG. I largely agree with her that the actual damages of Sony’s actions are pretty small, and that these class action lawsuits are more likely to enrich lawyers than compensate consumers. I still think the lawsuits should go forward, however, especially given that Sony has yet to pull its other spyware, MediaMax, from the shelves, despite well-documented problems.

The part of her argument that I found most interesting was this paragraph:

It isn’t the technical characteristics of something alone that determine its legal treatment (whether or not we should think of it as an “attack”), it is partly the intent of the actors. Set aside the intent issue for a second and look at the tech. Is it really always clear what is a “pure” hacker tool and what is not? Isn’t it likely that in future programmers might well continue to experiment with “hacker tools” to see if they can use principles in those tools for a useful purpose? Isn’t the argument that there is such a thing as a purely useless and bad tech usually made by advocates of tech bans? Are we saying that all software always has to be easily removable and detectable? By everyone? What about security software or content filters used by parents or schools or employers? Suppose experts could find and remove it but not beginners? Suppose a DRM system was hard to find or hard to remove, but didn’t create a security vulnerability to outsiders? Or suppose it did, but was easy to find and remove? There are a million possible permutations of technology here–hard to imagine the legal system coming up with a top-down rule that makes sense for all of them, especially at this early stage of the game. Markets adapting after the fact are much more flexible.

I wholeheartedly agree. And I’m curious how Ms. Singleton would apply this reasoning to the DMCA. After all, the DMCA is a “tech ban” on a class of devices, namely “circumvention devices,” (which in practice means any devices that interoperate with DRM’ed devices without the permission of the DRM creator). It’s quite true that some “hacker tools” might be useful in software like parental controls. It’s equally true that some “circumvention tools” have legitimate uses as well. For example, as long as Hollywood refuses to create a DVD player for the Linux operating system, any software to play DVDs on Linux is by definition a “circumvention device.” Likewise, any utility to convert songs from the iTunes Music Store format directly to the Windows Media format (so they can be played on WM-based MP3 players from Dell, or Sony) is a “circumvention device.” I could give lots of other examples.

In short, the line between legitimate software and piracy tools isn’t clear-cut, and, to paraphrase Ms. Singleton, it’s hard to imagine Congress coming up with a top-down rule that makes sense for all of them. Which is why it was stupid for Congress to legislate such a rule in 1998. Markets adapting after the facts would, as she says, have been much more flexible.

So is there some distinction I’m missing? Or is Ms. Singleton a closet supporter of the DMCRA, which would repeal the “top down rule” Congress imposed on this market in 1998 and allow market actors to experiment with the potentially beneficial uses of circumvention technology?

WiFi with your Bourbon

by on November 29, 2005 · 2 comments

The city of New Orleans announced it will offer “free” WiFi over a network it deploys and owns. Everyone knows that “free” is not really free, making this one more disaster to add to the city’s woes. Using taxpayer dollars to subsidize porn surfing whilst people starve and go homeless is unconscionable. Hasn’t that city suffered enough?

Property is Property

by on November 29, 2005 · 10 comments

The bad news about Sony spyware keeps pouring in. We’ve already seen how the XCP software uses deceptive techniques to hide its presence from the user. Now we learn that Sony’s other DRM scheme, MediaMax installs itself on your system even if you click “decline” on the EULA that pops up on your screen.

This is trespass, plain and simple. No software should ever install itself on a user’s computer without some notification to the user and opportunity to decline. That’s doubly true for drivers, because if they have bugs, they can render your whole system unstable and even introduce security vulnerabilities.

I’ve been a little shocked to see pro-DRM libertarians shrug their shoulders at the recent revelations about Sony’s behavior. (and no, Sony hasn’t been “bending over backwards” to fix the problems) We libertarians believe that property rights are fundamental rights that everyone has a duty to respect. Even big corporations. We don’t think that trespass is OK as long as it doesn’t do too much damage.

NYU prof Siva Vaidhyanathan has been one of my favorite commentators on the Google Print debate because of his pragmatism. Today in the Chronicle of Higher Education he has his first non-blog analysis of the case.

His main concern is that Google has bet not just the company, but the whole internet on this case. If it loses, it could take Kelly v. Arriba Soft with it, and that would affect the very legality of search engines as well as all sorts of future innovation. But this is a fight we were going to have sooner or later, so why not now? After all, as he points out, this case is a clash between web norms (free copying with opt-out) and real world law (copying by permission only). It has to be settled eventually.

Continue reading →

Mayor Gavin Newsom has been pushing the idea of “free WiFi” in San Francisco, but it would be anything but free. The Mayor’s play to grant special status to only one WiFi provider in San Francisco would essentially create a government-controlled WiFi monopoly in SF. There are so many reasons to oppose a government-controlled Internet, that if I listed them all here, you’d be reading all day. To learn more, you can go to the Pacific Research Institute’s (PRI) fact page or you can see links to related data here.

PRI is calling on all San Franciscans to oppose government controlled WiFi. Please go to the PRI homepage and click on the “Fight Government-Controlled Internet in San Francisco” banner up top. This will send an e-mail to Mayor Gavin Newsom expressing your views.

If you join in–and if you pass the word on to your friends and family to join in–it will help to strengthen the voices of the free market and free speech.

Here is a open letter PRI wrote to the Mayor.

Shameless self-promotion

by on November 28, 2005 · 4 comments

Saturday’s Wall Street Journal has an excellent editorial by Jason Riley on the controversy over peer-to-peer file sharing (like everything at the Journal it’s behind a paywall):

The industry has every right to continue this behavior; downloading the new Harry Potter movie or Black Eyed Peas CD tracks without paying for them should satisfy any definition of intellectual-property theft. The more interesting question is whether litigation is the best long-term strategy for combating digital piracy.

He closes the piece with a couple of quotes by yours truly:

The lesson music and movie lobbyists take from their Grokster victory is to stay the course. But Tim Lee, a technology and intellectual-property expert at the Show Me Institute in St. Louis, says that suing tech companies and music fans ultimately is a fool’s errand. “I don’t think they [the entertainment industry executives] fully grasp the size of the challenge they face,” he says. “It will be an arms race. P2P networks will improve. The recording industry will find a new way to catch people, and P2P networks will find better ways to avoid getting caught.”

The fundamental problem, says Mr. Lee, is that the Internet itself is a peer-to-peer network. If two willing people want to exchange files, you’re never going to be able to limit their ability to do so in a nation of 290 million people. Besides, you wouldn’t have time to sue them all even if you could catch them.

The copyright laws we live by today were written to go after commercial piracy. They are based on the idea that you can use control of the ability to make copies as a basis on which to remunerate content providers. No one envisioned a time when we would all be in possession of computers that can make copies as freely and easily as we now can.

Moreover, the copyright system is based on moral precepts that most people today accept. But will future generations raised with P2P technologies see piracy differently? “If I were a recording industry executive,” says Mr. Lee, “I would be looking very hard at business models that embrace P2P technology, not looking to lawyers to thwart it.”

I should mention that I’m nowhere close to having a viable alternative business plan to offer. And in the short run, I think the lawsuits might actually be an effective tactic, as it probably does have some deterrent effect. But it’s not a good long-term strategy.

One place to start, though, would be to seriously re-think their approach to copy protection. I’ve argued before that DRM technologies hamstring their paying customers while doing little or nothing to deter piracy. That’s certainly won’t stop piracy in its tracks, but it’ll at least give legitimate customers one fewer excuse to become pirates. I pitched this idea to Mr. Riley in our interview but it seems he wasn’t sufficiently impressed to include it.

From the Onion.

FCC: All Programming To Be Broadcast In ADHDTV By 2007
November 23, 2005 | Issue 41•47

WASHINGTON, DC–The Federal Communications Commission voted 3-1 Monday to require electronics manufacturers to make all television sets ADHD-compatible within two years…FCC Chairman Kevin Martin characterized the move as “a natural, forward-thinking response to the changing needs of the average American viewer…”

…”In the media-saturated climate of the modern age, few have the time and energy to sit still for an entire episode of King Of Queens,” Martin said. “Although the FCC will leave it up to the television networks to make the necessary programming changes, we are recommending, in accordance with the ADHDTV standard, that all shows be no more than six minutes in length, and that they contain jarring and unpredictable camera cuts to shiny props and detailed background sets…”

…The ruling represents a growing shift toward ADHDTV, a television format designed to meet the needs of an increasingly inattentive and hyperactive audience. The tuner includes a built-in device that automatically changes channels after three minutes of uninterrupted single-station viewing, as well as a picture-in-picture-in-picture-in-picture option…”A majority of our shows are only watchable for a few minutes at a time anyway,” said Fox president Peter Liguori, whose recently unveiled fall 2007 TV schedule includes over 850 new series. ..

Well, it could be true. They’ve done stranger things.

Happy Thanksgiving…

Copyright Placebo

by on November 23, 2005 · 2 comments

One of the most bizarre things about the DMCA debate is the way its advocates hyperventilate about the horrors that would ensue if anyone were ever allowed to circumvent DRM technologies, while conveniently ignoring the fact that many existing DRM technologies are as airtight as Swiss cheese. Ed Felten has a partial list of the ways that Sony’s MediaMax DRM scheme (for those who haven’t been following this closely, Sony uses two different DRM scheme, and this is the less spyware-like one) can be circumvented. And not a single one of these methods require any sophisticated “hacker” techniques–they involve such devious techniques as holding down the shift key while inserting the CD.

DRM advocates might counter that DRM acts as “guard rails” to encourage lawful users to obey the law, rather than locking up content to make piracy impossible. But if that’s true, why bring the law into it in the first place? MediaMax would be every bit as effective if the DMCA were repealed: casual users would still be deterred, while determined pirates are barely slowed down by the MediaMax DRM scheme.

As I’ve said before, the labels are in denial. Software like MediaMax isn’t an anti-piracy tool, it’s a security blanket for music industry executives. It won’t actually prevent people from infringing their copyrights, but it allows the record companies to feel like they’re “doing something” about the avalanche that’s overwhelming their industry.

TiVo vs. Hollywood

by on November 23, 2005 · 2 comments

Well that was fast. As I predicted on Monday, the entertainment industry isn’t happy about TiVo’s iPod conversion service:

TiVo appears to be acting unilaterally, disregarding established rights of content owners to participate in decisions regarding the distribution and exploitation of their content,” an NBC Universal spokesman said. “This unilateral action creates the risk of legal conflict instead of contributing to the constructive exploitation of digital technology that can rapidly provide new and exciting experiences for the consumer.

One of the fascinating things about this quote is that it flies directly in the face of Supreme Court precedent. The Sony Betamax decision, probably the most famous decision in the history of high-tech IP law, was specifically about whether consumers had the right to “unilaterally” time-shift TV content. Hollywood argued they didn’t. Hollywood lost. Presumably, the legal analysis would be the same for the “space shifting” and “format shifting” at issue here.

However, I think TiVo would be on firmer legal ground if it offered the service for free. It’s easy to imagine the courts ruling that charging for the service makes the use commercial, and therefore more difficult to justify as a fair use. As I argued on Monday, what TiVo is profiting from isn’t so much a software service, as such, but an artificial monopoly on DRM circumvention created by the DMCA. That might affect the fair use analysis, because the decision hinged on the idea that a VCR was a “staple article of commerce.” The courts might conclude that software whose only purpose is to circumvent TiVo’s DRm scheme is not a staple article of commerce.

Ars Technica elaborates on the role of DRM technology in the dispute:

There another piece to this puzzle, too: the lack of universal DRM. The studios are unhappy because these files will not have any rights management attached to them. While TiVo is using unique watermarks that in theory would allow for them to identify the original source of content shared online, it doesn’t prevent people from making copies. TiVo’s native format used with other media players does have DRM, hence the lack of complaints. But with regards to Sony and Apple, TiVo can’t make them share their DRM technology, which means that TiVo has no way of offering protected content on the iPod or the PSP.

Apple has no reason to support other companies’ DRM, because they want to create as much incentive as possible for customers to buy video services from their own online store and play them on their iPods. As long as they are the market leader in both categories, the two product lines re-inforce each other.

I rather doubt that Congress intended to create platform monopolies for technology firms when it enacted the DMCA, but that’s precisely what the law is doing. As we’re seeing from TiVo’s dispute with Hollywood, TiVo’s DRM scheme doesn’t do much to benefit copyright holders. What it does is allow TiVo to control which devices are compatible with its own, and to charge consumers for the privilege of using their legally-recorded content as they see fit.

More Bad News for Old Media

by on November 22, 2005

The news just keeps getting worse for old media sectors and providers. Almost every Wall Street report or consultant survey that comes out these days predicts a dire situation for old media operators in coming years. New technologies, distribution outlets, the digitization of all information, complete media portability, and rapidly changing consumer expectations are combining to undermine the hegemony of the old media guard.

The latest report echoing this theme comes from a Kagan newsletter entitled, “Media Giants Cling To ‘Growth’ Label Even As Their Core Businesses Plateau.” This sobering report, which is based on a much longer study due out shortly, notes that the media industry’s “self proclaimed ‘growth stocks’ no longer show impressive growth.” “Over the past five years, [the share prices for] Disney, Comcast, News Corp., Time Warner, Viacom and other big names have underperformed the broad stock market, and their organic revenue gains are nothing special.

As a result, the Kagan report predicts anemic growth for old media operators in coming years. From 2005-2015, they project the following compound annual growth rates for various media outlets / services:

1% for daily newspapers;
2% for premium pay TV channels;
2.3% for TV stations;
2.3% for networks;
3.9% for movies;
4.4% for basic cable;

This echoes what Daniel English and I revealed in our recent analysis of the financial performance 5 leading media company stocks. In “Testing ‘Media Monopoly’ Claims: A Look at What Markets Say,” Daniel and I found evaluate the market performance of Time Warner, News Corp., Clear Channel, Comcast, and Viacom over the past five years and show that they have lost a whopping 52 percent of their market value (in terms of market capitalization). Moreover, we charted the performance of the entire Dow Jones U.S. Broadcasting & Entertainment Index and showed that it is down almost 45 percent below where it stood in 2000.

Meanwhile, Google’s over $400 a share and the Internet continues to steal away countless consumers of old media services. An yet, there are some people in this country who still lose sleep at night about the supposed big, bad “media monopolies” that supposedly rule the universe and control our thoughts! Give me a break.