November 2005

Whose Copyright is it Anyway?

by on November 21, 2005

Well how about that! On Thursday I mocked James DeLong’s assertion that “the market” will give TiVo users the opportunity to transfer video content to the iPod. And now TiVo seems to have proved me wrong by announcing plans to sell a new software that will enable compatibility between its video recorder and the iPods. “The market,” it seems, has vindicated Mr. DeLong. DRM technology really does give consumers the content they want at a price they can afford!

Not so fast. The premise of DeLong’s argument was that DRM technologies allow copyright holders to earn more revenue for their products, thereby creating a greater incentive to creativity. But TiVo doesn’t own the copyrights to the TV shows and movies recorded with its devices. Indeed, TiVo implemented its DRM scheme over the vociferous objections of the content lobby last year. So where exactly does TiVo get off charging consumers for the privilege of watching other peoples’ content on their iPods?

The DMCA protects DRM systems, not copyright holders. And DRM systems often benefit their creators more than they benefit the owners of the copyrighted content the ostensibly protect. The TiVo DRM scheme benefits TiVo far more than it benefits Hollywood. Apple’s FairPlay scheme benefits Apple far more than it benefits artists or the recording industry.

TiVo achieves iPod compatibility by essentially abandoning DRM protections for TV shows transferred to the iPod. The videos have a “watermark” attached to them, but watermarks are easily removed and seem unlikely to have much deterrent effect. The bizarre upshot of the announcement is that TiVo thinks it may “circumvent” its own DRM scheme in order to transfer video to an iPod (and charge customers for the privilege, even though it’s not their content), but customers who “circumvent” the DRM scheme without TiVo’s help to achieve the same objective are guilty of violating copyright law.

If I were Hollywood, I think I’d be giving serious thought to a lawsuit against TiVo for attempting to profit from others’ copyrighted content. And if I were Mr. DeLong, I think I’d avoid using this announcement as a cast study on the virtues of DRM or the DMCA.

Seriously, is there a week that goes by these days that we don’t hear about another stunning innovation on the media front? In his recent essay on “Migrating Video Content,” Daniel English points out that “Media is shifting to a digital architecture where media is a continuous, ubiquitous experience and content is decoupled from any one particular distribution channel or device.” He goes on to cite numerous examples of this from just the past few weeks.

Continuing this theme, today’s big news was TiVo’s announcement that they plan to let users download onto an iPod ANY television show that they’ve recorded at home. What we have here is the marriage of two of the most disruptive media technologies the world has ever seen. What makes a “disruptive technology” truly disruptive, in my opinion, is the way it completely changes consumer expectations such that the old ways of doing business suddenly become increasingly difficult and then quickly impossible. That’s what TiVo and iPod are doing to the world of entertainment media delivery and use. The old mass media playbooks are being torn up and throw out the windows.

TiVo revolutionized the video experience by changing consumer expectations regarding when and how we viewed video programming. We no longer have to be sitting in front of the TV at a specific time just to catch a certain show we like; that show will now wait till we’re ready to watch it. Similarly, Apple’s iPod has revolutionized our listening experience by doing the same for audible media. We now expect our entire music collection (and all new music we buy) to be (a) digitized & intangible, (b) perfectly portable, and (c) playable on multiple devices. And iPod is in the video deliver business now too helping to change expectations in a similar way.

In sum: TiVo and iPod’s appearance on the scene have shattered the old “you’ll get it when we send it, however we want to send it to you” model and replaced it with an “anytime you want it, any way you want it” mentality. Media operators who buck this trend are probably doomed in the long run.

Oh, by the way, TiVo said today that they were going to offer all these new video space-shifting services for PlayStation Portables (PSPs) too. In my new book on the futility of trying to regulate content in a world of media abundance and convergence, I kick off the introduction to the book by asking the reader to imagine a future where every possible piece of content–videos, music, news, games, websites, photos, etc., etc.–is available for instantaneous use on their mobile media devices. And then I tell the reader to open up their eyes and take a look at what their kids at doing at this very moment. Chances are, they are already using their iPods and PSPs to do all that and more. The future is now, and I am enjoying the ride.

Last Friday, PFF hosted a forum on the Google Print battle featuring 4 excellent panelists. I’m not going to go into all the issues at stake in this debate, but I did find it interesting that the panel of legal experts speaking at the event spent so much time focusing on transaction costs, something we usually only hear about when the panel consists of a bunch of economists. Economists love to engage in debates over transaction costs issues because they often dominate many public policy disputes. But what role should transaction cost-based analysis play in the outcome of the Google dispute with publishers?

Quite a bit, if we are to believe copyright lawyer Jonathan Band. He repeatedly stressed how part of Google’s winning case can be built around the notion of transaction costs. (Jonathan has written a nice background paper on the issues involved in the Google controversy that you can find here).

Specifically, he argues that the transactions costs for Google would be exorbitant if the company would first have to find every copyright holder and receive their permission before copying a text for the GP program. Band elaborated on his point quite a bit, and also made mention of Jim DeLong’s recent congressional testimony
in which he employs a transaction cost-based framework in discussing various interpretations of fair use. Jim argues for “focusing on fair use as a transaction cost issue.”

Well, I completely agree with Jim and Jonathan that it would make a great deal of sense to the courts and copyright lawyers to focus on fair use as a transaction cost issue and even apply that logic in the case if Google Print. But while that logic provides a useful way to look at fair use law, and perhaps a seemingly powerful defense for Google in their case, I just don’t know if it really makes a damn bit of difference in a legal context.

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The Power of Framing

by on November 21, 2005

Alan Wexelblat has a good point. Policy debates–especially esoteric ones like the DRM controversy–depend crucially on the way they’re framed. For years, the copyright industry has sought to frame the debate as a debate between “property” and “piracy”–with them on the side of property rights. This was disingenuous, because most of their critics were in fact defenders of America’s copyright traditions. We were pro-copyright, we just didn’t like the aggressive expansion of copyright that has occurred over the last decade. But disingenuous or not, the framing was devastatingly effective, because it allowed them to stake out a “principled” position while forcing us to dwell on seemingly nitpicky details.

The recent Sony BMG controversy gives us the opportunity for a little payback: “DRM equals spyware.” Although not all DRM schemes are as horrible as Sony’s software, in a fundamental sense I think this characterization is entirely fair. DRM is all about seizing control of consumer’s computers to prevent them from doing things they have traditional been accustomed to doing, such as listening to their legally purchased music on the device of their choice. It has so far largely escaped consumer notice because the recording industry has been careful to keep its existence below the radar.

For many consumers, their first exposure to the concept of DRM will be through news reports on Sony’s spyware. I hope the label sticks, not just to Sony’s particular software, but to DRM schemes in general. It’s hard to imagine the recording industry winning a debate over whether it should have the power to put spyware on its customers’ computers.

New at Brainwash

by on November 21, 2005

In my latest column, I point out that the decision of Sony BMG and other music labels to antagonize their paying customers with ineffectual copy-protection tools is a bad business strategy.

This week, newspaper giant Knight Ridder announced that it was putting itself up for sale. In a sign of just how much the media universe has changed in just the past few years:

(1) the announcement received almost zero front-page attention in other papers; word of the sale was buried in the obscure back pages of most papers; and, more importantly,

(2) almost no one in the media business community expressed any interest in buying the giant paper chain.

Five years ago, such an announcement would have made front-page news and been greeted by a wave of offers from other media operators. Today, by contrast, the “ho hum” reaction is another indication that the Internet / media revolution is set to claim another old media victim.

For many years, newspaper industry analysts have predicted a contraction in this sector. As circulation continued it long, steady decline, and papers slowly began losing their lock on classified ads, market watchers have argued that consolidation would be the likely end result. If smaller papers were to be saved, bigger ones (owner by the biggest chains) would likely need to come to the rescue.

But it may be too late for that scenario now. In this weekend’s Wall Street Journal, venture capitalist John Ellis, who was also formerly a columnist at the Boston Globe, argues in an editorial entitled, “For Sale–Mostly Second-Rate Newspapers,” that “The consolidation everyone expects may in fact more closely resemble a break-up of the old order, and the selling-off of its assets, piece by piece.”

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Speaking of departures, today another departure from the telecommunications scene was finalized–that of AT&T. The final paperwork was concluded earlier today with the filing of a merger certificate with the New York state secretary of state.

Making things more than a little confusing, the name “AT&T” will not actually be retired–instead the SBC moniker will be leaving the stage. The merged company will take the historic AT&T name.

The most remarkable thing about this is the lack of attention it is getting. The old AT&T was once one of the most powerful companies in the world. And for the past 20 years, its battles (along with MCI and Sprint) with the Bells kept food on the table for hundreds of lobbyists and lawyers. Yet, its final passing–and that of the long-distance industry as a whole, has barely reached outside the business sections of newspapers. The fact is (as argued here earlier this year) the world has moved on. Real competition in the phone business is raging–with wireless firms, cable firms, and Internet providers all joining the fray. This leaves the old AT&T looking somewhat dated, like a rotary dial phone among Blackberries.

It bequeathes no monopoly its new owners–only an object lesson. The new AT&T (which will still be called SBC until Monday) cannot rely on size alone. It–like its competitors–must survive by providing what consumers what. That’s the way it should be.

Yesterday, Kathleen Abernathy– one of two current GOP members of the FCC–announced she would be leaving the Commission effective December 9. The announcement was no surprise–her term has already expired, and she had long made it clear that she would not seek re-appointment.

Still, she will be missed. Abernathy is one of a rare breed in Washington–a policymaker who never really sought the limelight, but consistently worked to do the right thing. Her style was in marked contrast to the flamboyant pyrotechnic style of others, such as former chair Michael Powell. Perhaps that was because of her long service as an FCC staffer, perhaps that is just her personality. But limelight or no, Abernathy’s opinions and votes always seemed well-reasoned, and grounded in common sense. And, while Powell and others got attention for being pro-market visionaries, Abernathy proved herself as the most consistent voice for markets at the Commission during her tenure.

As noted here previously, President Bush has yet to name her sucessor. Finding someone as good will be difficult. But he should try.

Here’s yet another example of how DRM is leading to pointless balkanization of the media marketplace:

Apple has been loath to license its FairPlay DRM, used to protect songs sold from the iTunes Music Store. That has been a sticking point for record companies, which yearn to provide iPod compatibility for their copy-protected discs. EMI–in the news earlier today for announcing Apple would be raising the price on some downloads–is now saying that it anticipates supporting the iPod with its DRMed discs.

“Apple is nearly finished with the technical work necessary to enable consumers to transfer music from content-protected discs to their iPods,” the label said in a statement detailing its copy-protection plans. “This is an important step for EMI and Apple, but even more so for music consumers who will soon be able to legitimately port music from protected discs they own to the iPod.”

It would be an important step, if it were about to happen. When asked about EMI’s statement however, Apple said in so many words that it wants to know what EMI is smoking and where it can get some, stating that there’s no agreement in place and none on the horizon.

Keep in mind that there’s absolutely no technical barrier to putting music from “unprotected” CDs (i.e. the CDs they’ve been selling for two decades) on an iPod. What Apple is refusing to do is to support EMI’s proprietary copy-protection format, or to allow EMI to use FairPlay, Apple’s proprietary copy-protection format. If that means consumers can’t play their legally purchased music on their iPod, that’s just too bad for them.

The worst thing about this particular pissing match is that it’s doing practically nothing to prevent piracy. After all, CD-based copy protection doesn’t make it impossible to upload songs to peer-to-peer networks, it just makes it irritating. As Ed Felten has reported, when consumers complained to Sony BMG that they couldn’t import their copy-protected CDs into iTunes, Sony actually told them how to use Windows Media Player to burn an unprotected audio CD. That audio CD can then be “ripped” into iTunes and transferred to an iPod. But of course, that audio CD can also be “ripped” to MP3 format and uploaded to KaZaa. So what was the point of having the copy-protection in the first place?

To put it bluntly, the labels are in denial. Their shiny new DRM schemes aren’t doing a thing to stop piracy, but the possibility that DRM can’t work is too horrifying to take seriously. So instead, they’re continuing to cripple their own products in the hope that somehow, inconveniencing their paying customers will teach the pirates a lesson. At some point, it will dawn on them that this brick wall isn’t going to fall down no matter how many times they bang their head against it.

Of course, if it weren’t for the DMCA, someone would write a utility to circumvent EMI’s copy-protection and convert the songs to an open format like MP3. But instead we have to wait for “the market” to sell us the right to put our legally purchased music on our iPods.

The UN’s World Summit on the Information Society ended today with the U.S.–or more precisely Internet users around the world–coming up winners. Efforts to impose international controls over Internet governance were firmly beaten back. Instead, the summit only called for creation of an advisory “International Internet Governance Forum,” with no binding authority. The new forum will meet next year in Greece.

Efforts to impose international control over the Internet, of course are unlikely to go away. UN Secretary-General Kofi Annan said as much earlier this week, stating that the Tunis agreement highlights the need for more international participation in discussion of Internet governance issues. The question is how to achieve this. Let those discussions continue.” For this reason, the new forum bears watching, lest it morph into an international regulatory body.

Still, its hard not to be pleased, and relieved, at this week’s outcome. The quote of the week goes to Commerce Department telecom chief Michael Gallagher, who said: “The Internet lives to innovate another day because of our combined efforts here.”

Kudos for the outcome are due to the Bush Administration for standing firm on this critical issue. Administration policymakers –including Gallagher and state department official David Gross–recognized early the dangers of globalizing Internet governance, and stood firm in their opposition.

Thanks also should go to the government of Tunisia, who hosted the conference. Its efforts to blot out unpleasant dissent during the conference–which included the blocking of websites from the country–did far more than any speech or policy paper to highlight the critical importance of protecting Internet freedom.

(For some interesting takes on the Tunis summit and its implications, check out the discussion held at The Heritage Foundation yesterday on the subject–featuring Sen. Norm Coleman, Rep. John Doolittle, fellow TLFer Adam Thierer and The Heritage Foundation’s John Tkacik.)