Timothy B. Lee (Contributor, 2004-2009) is an adjunct scholar at the Cato Institute. He is currently a PhD student and a member of the Center for Information Technology Policy at Princeton University. He contributes regularly to a variety of online publications, including Ars Technica, Techdirt, Cato @ Liberty, and The Angry Blog. He has been a Mac bigot since 1984, a Unix, vi, and Perl bigot since 1998, and a sworn enemy of HTML-formatted email for as long as certaincompanies have thought that was a good idea. You can reach him by email at leex1008@umn.edu.
Chris Anderson points out another thriving sector of the music industry:
Music as a digital product enjoys near-zero costs of production and distribution–classic abundance economics. When costs are near zero, you might as well make the price zero, too, something thousands of bands have figured out.
Meanwhile, the one thing that you can’t digitize and distribute with full fidelity is a live show. That’s scarcity economics. No wonder the average price for a ticket was $61 last year, up 8%–in an era when digital products are commodities, there’s a premium on experience. No surprise that bands are increasingly giving away their recorded music as marketing for their concerts, which offer something no MP3 can match.
Live performance is the fastest growing part of the music industry (up 16% in 2006 to a record $3.6 billion in North America) and with services such as SonicLiving (brilliantly described as a “digital-to-analog lifestyle converter”) and TourFilter that notify you when some band in your library is coming to town, that’s only going to grow more.
So there’s big money in live shows (92% of the Rolling Stones’ revenues comes from performance, not recorded music). Sadly for the labels, they don’t get any of it. No wonder they’re so against free music. It only helps the bands (and consumers)!
When discussing the economics of copyright, it needs to be constantly kept in mind that the interests of artists and the companies that distribute their content are not always aligned. The distributor only benefits from the revenues generated by the product being sold. The artist, however, also receives publicity benefits from wide distribution of his product. It makes perfect sense, then, that many bands especially up-and-coming ones put a higher priority on getting their music to as many fans as possible than they do to maximizing revenue in the short term. Being less concerned about piracy is one aspect of this phenomenon. But even in a world with no piracy, many bands would find it in their interest to give a lot of their music away for free in order to build their fan base.
As the recording industry flirts with releasing music in MP3 format, Ed Felten points out that the labels have become a victim of their own twisted rhetoric about DRM technology:
Of course the industry won’t sell music “with no copying restrictions” or “unrestricted”. The mother of all copying restrictions–copyright law–will still apply and will still restrict what people can do with the music files. I can understand leaving out a qualifier in the headline, where space is short. But in a 500-word article, surely a few words could have been spared for this basic point.
Why did the Times (and many commentators) mistake MP3 for “unrestricted”? Because the industry has created a conventional wisdom that (1) MP3 = lawless copying, (2) copyright is a dead letter unless backed by DRM, and (3) DRM successfully reduces copying. If you believe these things, then the fact that copyright still applies to MP3s is not even worth mentioning.
The industry will find these views particularly inconvenient when it is ready to sell MP3s. Having long argued that customers can’t be trusted with MP3s, the industry will have to ask the same customers to use MP3s responsibly. Having argued that DRM is necessary to its business–to the point of asking Congress for DRM mandates–it will now have to ask artists and investors to accept DRM-free sales.
The phrase “using DRM responsibly” calls to mind an analogy to “drinking responsibly.” In particular, most drivers would find it intolerably paternalistic for their cars to be fitted with breathalyzers that prevented the car from being started up if the driver was intoxicated. Only a minority of drivers drive drunk, and so it’s unreasonable to impose the inconveniences of a breathalyzer system on everyone.
Given that driving drunk is a much more serious crime than sharing a copyrighted song, why should consumers be any less angry that they’re being subjected to a similarly intrusive scheme with respect to the music they purchase. The vast majority of people who buy music online have no intention of engaging in mass piracy, yet each and every one of them is subjected to the indignities of DRM restrictions.
Ryan Paul at Ars has a fantastic illustrated timeline of the Microsoft/Novell deal and the subsequent flamewar among tech companies. Here’s his conclusion:
Now that the steady stream of accusations has died down, the implications of the deal are beginning to become more apparent. Although Ballmer validated the critics’ concerns with unsubstantiated patent infringement claims, the claims themselves haven’t negatively affected Linux adoption. Microsoft has been making baseless claims about Linux since 2004, and it seems apparent at this point that few outside of the Linux community really take those claims seriously. It is ironic that the Linux community itself raised the profile of Ballmer’s patent infringement assertion and perpetuated its relevance with such a vehement response. Regardless of the motivations behind Ballmer’s actions, the most detrimental consequence of the entire deal and subsequent fallout is the fragmentation that has resulted from the prevailing divisive attitude that it has engendered in members of the Linux community.
The success of the Linux operating system is largely predicated on the collaboration of the Linux development community, and this petty squabbling impedes that collaboration. What the corporate executives of these companies have declared, with stentorian vehemence, is that they are all abundantly willing to abandon collaboration and take advantage of each other whenever it is convenient.
You should check out the rest of it for the pictures, if nothing else.
I’ve finished reading Bill Herman’s paper. It’s got a lot of interesting material in it, so I’ll be discussing it in several posts over the next few days.
Having finished the paper, I remain convinced that Herman hasn’t given much thought to the details of how the discriminatory pricing regime he envisions would actually work. He seems to imagine that AT&T can simply send Google a bill for ten million dollars and Google will whip out its checkbook and pay it. This, it seems to me, is highly improbable. To see why, let’s look at the other end of the market—the millions of tiny websites like this one that are only frequented by a few hundred people every day.
Via Mike, here’s an L.A. Times article on the thriving music industry. No, not the one represented by the RIAA, the other one:
While the U.S. recording industry continues to slide under pressure from illegal downloaders and file-sharers, the other side of the music world–businesses catering to those who create the music–has nearly doubled over the last decade to become a $7.5-billion industry. The key difference in their contrasting fortunes is a simple physical reality: You can’t download a tuba. But new technology has also been a boon: Digital home recording has played a large role in the industry’s growth and helped a new generation of hobbyist music-makers move out of the garage and onto the Internet.
As I’ve argued before, I think people overestimate the role of piracy in the long-term decline of the music industry. The fundamental problem is that their core competence–pressing and shipping little plastic disks around the country–is becoming increasingly obsolete. It’s true that piracy is accelerating their decline, but the decline would happen regardless, as musicians increasingly discover they don’t need to ship plastic disks around the country in order to get music to their fans.
But I think this illustrates the silliness of the thesis that the music industry is dying, from two perspectives. First, there’s the article’s main point that only some segments of the music industry are hurting, and those gains are largely being made up elsewhere. This suggests that there’s little reason for the average musician to be fearful–as music becomes more popular, there there will continue to be plenty of opportunities for teaching music lessons, giving live performances, etc.
But more fundamentally, I think this is a pretty powerful counter to the notion that musicians need to be paid to ensure we continue to have good music. The vast majority of the people purchasing musical instruments never intend to make a living at it. Many others hope they’ll be able to make a living at it, but realize full well that their odds are long. Yet millions of people still spend billions of dollars training to become better musicians. It’s awfully hard to see how strong copyright protection could explain this. More likely, most people make music because they enjoy making music. And they’ll continue doing so regardless of how copyright law is changed.
Thinking about Bill Herman’s argument that network discrimination threatens freedom of speech, and his broader point that broadband ISPs can use their control over the “last mile” to force Internet users to do or not do certain things (mostly, give them more money), it occurs to me that Hayek’s discussion of coercion in chapter 9 of The Constitution of Liberty has some relevance:
Coercion occurs when one man’s actions are made to serve another man’s will, not for his own but for the other’s purpose. It is not that the coerced does not choose at all; if that were the case, we should not speak of his “acting.” If my hand is guided by physical force to trace my signature or my finger pressed against the trigger of a gun, I have not acted. Such violence, which makes my body someone else’s tool, is of course, as bad as coercion proper and must be prevented for the same reason. Coercion implies, however, that I still choose but that my mind is made someone else’s tool, because the alternatives before me have been so manipulated that the conduct that the coercer wants me to choose becomes for me the least painful one.
Now, I should say at the outset that Hayek would not have regarded an ISP trying to manipulate its customers as coercion, as he was thinking about cases where a coercer was able to exert broad control over peoples’ lives through threats of violence. But I think that what Herman claims AT&T will do to Internet users is analogous (albeit much less severe) to Hayek’s description of how states can coerce their citizens.
Every week, I look at a software patent that’s been in the news. You can see previous installments in the series here. This week, my starting point is this story reporting that one of National Instruments’ patents on its LabVIEW software has been upheld. I have not been able to determine for certain which patent was upheld, but I’ve arbitrarily chosen this one as a likely candidate. If anyone knows for sure which patent was upheld, or how I can look that up, please let me know.
Here’s the abstract for this week’s patent:
A method for programming a computer to execute a procedure, is based on a graphical interface which utilizes data flow diagrams to represent the procedure. The method stores a plurality of executable functions, scheduling functions, and data types. A data flow diagram is assembled in response to the user input utilizing icons which correspond to the respective executable functions, scheduling functions, and data types which are interconnected by arcs on the screen. A panel, representative of an instrument front panel having input and output formats is likewise assembled for the data flow diagram. An executable program is generated in response to the data flow diagram and the panel utilizing the executable functions, scheduling functions, and data types stored in the memory. Furthermore, the executable functions may include user defined functions that have been generated using the method for programming. In this manner, a hierarchy of procedures is implemented, each represented by a data flow diagram.
Since I’ve been criticizing a paper opposing neutrality regulation lately, it seemed only fair to criticize the other side for a change. A reader wrote in to point out that Bill Herman has recently released a new version of his paper advocating neutrality regulations. Before I get started with my critique, I want to mention that I’ve interacted with Herman in the past, and he’s a smart and thoughtful guy. I didn’t find myself persuaded by his paper, but it’s a well-written and thorough argument for his position.
In this post, I’ll critique one of the two arguments he makes in parts II and III of the paper, in which he sketches out the dangers posed by network discrimination: the contention that without new regulations, ISPs will begin censoring Internet content. It seems to me that the paper demonstrates one of the same shortcomings I noted in the Hahn/Litan paper: although it talks a lot about network discrimination in the abstract, it’s extremely vague about the details of how such a regime would actually work.
Also, I’m pleased to see that EFF are demanding hearings to ensure that the Bush administration is telling the truth when they claim they’re finally complying with the law.
Kahle plans to appeal the ruling to a larger panel of the Ninth Circuit, but their prospects don’t look good. With three Ninth Circuit judges already ruling against him, Kahle will face an uphill battle convincing the full Ninth Circuit that his arguments are different from those the Supreme Court raised in Eldred.
That’s a shame, because Kahle’s lawsuit highlights a serious and growing problem. New technologies are greatly enhancing the opportunity to make better use of older creative works. Books that have traditionally sat unread on dusty library shelves can now be made available in searchable form via the Internet. Old films that once languished unwatched in vaults could be digitized and made available for consumers to view in their living rooms. The main thing standing in the way is copyright law.
If the courts ultimately reject Kahle’s arguments, the battle to free orphan works will shift back to Congress. Some scholars have suggested that Congress should enact an orphan works defense that would shield individuals who reproduced a copyrighted work after making a diligent effort to find the copyright holder. The UK’s Gowers Review has recommended that a similar rule be adopted in the European Union. Although this would not make orphan works as widely available as placing them in the public domain, it might be enough for the likes of Kahle and Google.
Since it was a quasi-news article, I didn’t spend much time discussing the case on the merits. Although I certainly hope they prevail, their argument didn’t strike me as terribly strong. And even if the courts are sympathetic to their argument on the legal merits, it’s hard to see what remedy the courts could fashion. They certainly can’t throw all works created between 1964 and 1977 into the public domain, nor could they realistically reinstate a registration system that’s atrophied over the last decade. About all they could conceivably due is rule that the works will fall into the public domain by some particular date unless Congress acts first to reinstate the registration system. But it seems unlikely that a Supreme Court that shied away from locking horns with Congress in Eldred would take the even more confrontational stance that’s urged in this case.
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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.