Several installments of my “media deconsolidation” series have dealt with problems at AOL-Time Warner (see parts 8, 12 and 14). That’s because when this marriage was struck back in 2000, media critics where in full-blown Chicken Little mode over the deal. Critics claimed the AOL-Time Warner deal represented “Big Brother,” “the end of the independent press,” and a harbinger of a “new totalitarianism.”
What a joke. It’s just another sign how irrational people get about media ownership issues. Reality is rarely so exciting. In fact, as the latest news on the AOL-Time Warner front proves, reality bites for many traditional media operators. Like so many other companies who are struggling to adjust to our modern world of media abundance, user-generated content and digital everything, AOL-Time Warner is struggling to make “synergy” work.
Unfortunately, synergy isn’t working out so well for them. The company had lost a staggering $99 billion in market cap by January of 2003 and shortly thereafter Time Warner decided to dump AOL from their corporate name altogether. This summer, Time Warner President Jeff Bewkes went so far as to declare the death of synergy, famously calling it “bullshit.” And this week Jonathan Miller, chief executive of AOL, admitted to the U.K.’s Sunday Telegraph that the Time Warner board is indeed mulling over a break-up of the company. When asked by the Telegraph about the possibility of an AOL-Time Warner divorce, Miller said that “It’s possible, going forward. It’s not a discussion that Time Warner has a problem with understanding or engaging in. Until we were on this present course, it wasn’t even the right discussion. Now it becomes more interesting.”
It’s only a matter of time before it’s finalized. I wonder what all those media kooks will say then. I’m sure that they’ll find something to complain about.
Fortune has a fascinating article about “DVD Jon” Johansen’s latest project, a company that licensing technology to make third-party devices work with Apple’s FairPlay DRM. His software will allow third-party music stores to transfer their music to the iPod, and it will allow third-party device makers to play iTunes songs. Fortune asks the obvious question:
There’s an obvious question: Isn’t opening the iTunes system illegal? There is no obvious answer. FairPlay is not patented, most likely because the encryption algorithms it uses are in the public domain. (Apple would not comment for this story.) And Johansen says he is abiding by the letter of the law – if not, perhaps, its spirit.
To let other sites sell music that plays on the iPod, his program will “wrap” songs with code that functions much like FairPlay. “So we’ll actually add copy protection,” he says, whereas the DMCA prohibits removing it. Helping other devices play iTunes songs could be harder to justify legally, but he cites the DMCA clause that permits users, in some circumstances, to reverse-engineer programs to ensure “interoperability.”
It seems to me that this is backwards. Johansen’s actions clearly are within the spirit of the law. There’s a reverse-engineerig clause in there for a reason. It’s extremely unlikely that creating platform monopolies was what Congress had in mind when it passed the DMCA.
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Today marks the 5-year anniversary of the iPod. Matt Yglesias has some spot-on comments about the DMCA’s role in Apple’s success.
In particular, if you went out and bought an iPod, and then you wanted to legally acquire some music for it, the only place you could turn was the iTunes Music Store. And, once you’d built up a library of songs purchased through the iTunes Music Store, the only place you can play the songs is . . . on an iPod. So if when your iPod’s battery dies, you think to yourself “fuck this, I’m going to buy a different company’s player,” well, doing that will require you to re-buy all your music. So you buy another iPod, and you buy more music and you’re further and further locked-in. Even better, the Digital Millennium Copyright Act makes it illegal for a rival firm to construct a player capable of playing legally owned iTunes Music Store files. This is a great deal for Apple who, in virtue of being first, gets to entrench its advantage deeper-and-deeper but it’s not very smart legislation.
Obviously, I agree with his sentiment concerning lock-in effects. However, I think it’s important to keep in mind that there’s little evidence that the iTunes Store drove the iPod’s success, rather than the other way around. The iPod was unveiled in October 2001, while the iTunes Store didn’t launch until April 2003. Clearly, the hundreds of thousands of people who bought the first two generations of iPods weren’t doing so in order to play music purchased on the iTunes store.
And to this day, most of the music on peoples’ iPods is not from the iTunes store. Some of it is pirated, of course, but a lot of it (including almost all of mine) comes from peoples’ existing music collections on CDs.
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Courtesy of reader Steve R, the Washington Post has a pretty good write-up of the mess that DRM is making of the digital music market:
Ah, progress. It used to be that you just went out and bought a compact disc and you didn’t have to worry about whether it would work on your player.
These days, in the age of digital distribution, we don’t need to buy CDs anymore. What we have, instead, are a bunch of online music services, offering songs for sale or rent via quick download to a bunch of digital music players that might or might not actually play them.
Take music fan Chauncey Canfield: He has a whopping 180-gigabyte music collection, an iPod and a smartphone he can fill with songs from his subscription Yahoo Music account. But he can’t put Yahoo Music songs on his iPod, and he can’t put songs purchased from the iTunes Music Store on his phone.
Canfield knows that iTunes is the most popular online music store, but he avoids it because of the playback restrictions. Instead, he prefers to shop at eMusic, which sells its tracks in the MP3 format, an open technology that works on every music player on the market. Even the iPod.
“The fact that they don’t have [anti-piracy controls] on them is absolutely a major plus,” he said. “I don’t have to segregate my music into various ghettos.”
The rest of the article is equally good. The only thing that’s frustrating is that he never mentions the DMCA. DRM is not a fact of nature that magically prevents consumers from converting their music between different formats. The reason that incompatible DRM formats are such a pain in the butt is that writing a utility to transfer music from one format to another is effectively illegal. If the DMCA weren’t on the books, someone could write a slick little utility that would take the music in your iTunes folder and convert it to Plays for Sure or Zune formats. But because the DMCA prohibits circumvention regardless of the reason, that’s illegal, and so we’re stuck segregating our music into various ghettos.
We’re getting slammed with comment spam, so comments are temporarily closed. We’ll re-open them once we have a better solution. Thanks for your patience.
I’m reading Avi Rubin’s Brave New Ballot. I’ll have more to say about it when I’ve finished reading it (it’s excellent so far) but I wanted to comment on a passage that caught my eye. On pp. 185-189 Rubin discusses a proposal by Brit Williams to secure voting machines by comparing a hash of each voting machine’s software to a pre-computed hash in a centralized repository:
In the library that Williams envisioned, a cryptographic hash, also called a fingerprint, would be computed on the binary after the software is compiled. The hash would be stored in a secure location, and whenever a machine is rolled out, its software would be rehashed and the hash compared to a stored value, just as fingerprints might be compared. If they match, the software is authentic. If they don’t match, officials are alerted to a problem and can deal with it through predetermined procedures.
Rubin identifies several problems with this idea. He notes that software binaries can change frequently for legitimate reasons, so the library would have to be constantly updated with additional hash values. In addition, he notes that this does nothing to counter threats from insiders; if somebody is in a position to introduce malicious code into machines, he might also be able to introduce a malicious hash value into the library.
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James recently pointed out that The Economist had editorialized about how America’s recent Internet gambling ban, The Unlawful Internet Gambling Enforcement Act of 2006, would actually do little to deter online betting. This week, Business Week picks this silly law apart. As Business Week’s Catherine Holahan reports:
Indeed, the new law will do little to stop online gambling, say gamblers, betting companies, and industry analysts alike. Instead, the law will drive out regulated, publicly traded companies like PartyGaming, the Gibraltar-based parent of PartyPoker, and make way for private gambling companies and banks based in nations where such industries are loosely policed at best. As a result, the new law could ultimately make billions of dollars in U.S. online gambling transactions more difficult to trace, and increase the likelihood that funds end up in criminal hands. “It leaves an opening for some of the more unscrupulous companies coming in from unregulated places,” says Frank Catania, past director of New Jersey’s Division of Gaming Enforcement and president of Catania Consulting Group.
The exodus is under way–and the companies that are on the way out are those with the most financial transparency. PartyGaming, 888Holdings, and SportingBet, all of which are traded on the London Stock Exchange, have said they’re exiting the U.S. market. Roughly 70% of PartyGaming’s $319 million in second-quarter sales and 50% of 888 Holdings’ revenue came from the U.S.
Private online gambling companies, on the other hand, have been defiant in the face of the new law, arguing it does not apply to them and cannot be enforced. Bodog Entertainment Group, which operates a Costa Rican online gambling site, has no plans to bar U.S. customers. “We’ve structured our business in such a way that we’ll have no problems adapting to any changes in the online gaming environment,” says Bodog founder Calvin Ayre. Similarly, PokerStars released a statement saying its lawyers had “concluded that these provisions do not alter the U.S. legal situation with respect to our offering of online poker games.
Now you know why our TLF colleague Tom Bell labels the measure “The UnInGEn-ious Act.” Read his excellent analysis here and here.
Yesterday I was in Richmond to participate in a focus group to help the Virginia courts system run better through IT (it’s good to see governments using information technology to help their citizens–I’m for limited government, not Luddite government). Virginia recently created a commission to look 10-15 years into the future and make recommendations that will position the Supreme Court of Virginia to address upcoming challenges. And as I learned, Virginia’s judicial system can certainly benefit from IT solutions.
Most judges, court clerks and lawyers that I have known place a good deal of emphasis on the integrity of the judicial system and view our courts to be almost sacred institutions. This mentality means that change can come slowly, even if it is for the better–and courts have ample opportunity to incorporate technology into their operations.
In particular, videoconferencing has HUGE possibilities for quick face time in front of a judge, mostly related to routine stuff like determinations of indigency in criminal cases or pre-trial scheduling and discovery. Anything that minimizes the need for attorneys and their clients to appear in court reduces costs all the way around–to clients, lawyers that have to travel to different courthouses, and taxpayers that fund courthouse operations and salaries to bailiffs, court reporters, sheriffs that transport prisoners, etc.
From my perspective, the judiciary is an untapped opportunity for IT-minded entrepreneurs. Perhaps there’s a company already out there that will improve the filing of court forms in a similar way that TurboTax and Quicken did for electronic tax filings?
Antitrust enthusiasts thought they scored a coup in 2004 when they persuaded Congress to encourage the courts to conduct more assertive reviews of corporate mergers (with rights of participation for gadflys, busybodies and others) pursuant to the Tunney Act (see my previous post). Apparently, the move was too clever by half. The Antitrust Division sidestepped this feature of the Tunney Act completely by approving the AT&T-BellSouth merger with no conditions. The New York Times claims the Bush Administration has abdicated its responsibility to act as a “referee,” as if one is needed. The newspaper complains the administration hasn’t brought a single major monopoly case under the Sherman Act, as if that proves anything. Most amusing of all, it notes that career officials were “demoralized” when the administration cleared Whirlpool’s acquisition of Maytag, inferring this could happen again. The Times didn’t explain the relevence of that. Apparently, some believe, bureaucrats ought to be able to perform their jobs as they see fit, or at least their judgment is superior to elected politicians or officials who’ve been confirmed by the Senate.
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The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.