David Friedman has an insigtful post about the nature of technological protection:
Intellectual property in digital form is easy to copy. In a networked world, it is also easy to distribute. It is therefore likely that copyright enforcement will become increasingly difficult. Tie-ins are a good solution for some forms of intellectual property but not for all. That leaves technological protection, ways of selling access to intellectual property without letting the purchaser reproduce it.
There is an important limit to such protection: It only works for forms of I.P. that are not entirely revealed in one use. However strong the encryption on the digital file containing your song, a customer can still tape record it when he plays it–or record the signals his computer is sending to its speaker, thus eliminating the sonic middleman. However well encrypted your novel, I can still, if I really want to, photograph my screen as I read it and run the pictures through OCR software.
There are other forms of I.P. that are not fully revealed in one use. What I get from Lexis or Westlaw is not a download of their database but the answer to a query. I can make a copy for a colleague but it is unlikely to be of much use to him, since he wants answers to different questions than I do. A computer program can be similarly protected, by running it on a webbed server and selling not copies but access.
I think this last point is very interesting: web-based applications like Google’s search engine don’t have much need for copyright protections, because they have a more direct way of protecting their intellectual property: it never leaves their servers. Moreover, even if an insider did steal their code, it’s complex enough that it would take quite a bit of work to set it up, and it would quickly fall behind Google’s latest version.
Similarly, Google can afford to make its map service freely available without worrying too much about someone ripping off the data because of the sheer size of the database: it would take hours (if not days or weeks) of continuous querying to get all the data, and Google can pretty easily monitor usage and cut off any user who uses too much data.
Friedman finishes his post with some interesting observations on MMORPGs like World of Warcraft as another exemplar of this technique.
(Hat tip: Mike)
Glen Whitman points out a great example of misleading statistics on music piracy:
It’s from an article titled, “The Digital Music Blues.” The graph is supposed to demonstrate that, in spite of the growth in legal music downloads, illegal downloads are still cutting into the record industry’s bottom line.
Notice how only a tiny 1% of iPod capacity is filled with legally purchased iTunes songs! I guess the remaining 99% percent must all be illegal downloads, right? That’s certainly the implication of the accompanying article: “What’s filling all that excess capacity? Well, despite the efforts of the Recording Industry Association of America, nearly a billion songs are traded on P2P networks every month.”
I checked my own iPod, and sure enough, the songs I bought on iTunes account for only about 1.5% of the 20GB memory. What’s filling the rest? Turns out 62% of it is filled by, um, nothing. I just haven’t filled it yet. The other 36% or so is almost entirely filled with music I ripped from my own legally purchased CDs or those of my relatives.
(Did I mention that most of the data for the WIRED article came from music industry sources?)
Julian Sanchez puzzles out the economics of Steve Jobs’s stubborn insistence on 99 cent music:
One reason is the flip side of an idea Markels broaches: Prices signal quality. People might conclude that an expensive song is likely to be better (because more in demand), and conversely, might be willing to take a chance on an unknown at a lower price. Yet there’s a pheonomenon familiar to marketers where you can sometimes sell more of a product by raising the price, precisely because peoople do sometimes take prices as a proxy for quality. Maybe not for big-ticket items like cars, where you’re going to do a lot of investigating before dropping tens of thousands of dollars, or for items where the quality can be easily measured by casual observation. But I’m willing to bet that, say, for a pair of headphones, a lot of people who want to get good sound but aren’t devoted audiophiles will follow a heuristic like: “Walk into Best Buy and grab the second most expensive pair.” Now music, like a lot of other cultural goods, is a long tail product: Sure, there are those megahits at the top that sell disproportionate numbers, but most of the action and the sales, especially online, where you’ve got a bottomless inventory, is going to be in the aggregate sales of large numbers of smaller niche artists. (This is especially the case as a kind of online feedback effect kicks in, where record industry economics no longer tend to push convergence for most consumers on a relatively narrow mainstream.) If that’s the case, you might not want to signal that a huge portion of your inventory, which when added up actually accounts for most of your sales, is in the digital equivalent of the remainder bin, especially when you’ve got other sophisticated means of suggesting songs tailored to a person’s specific tastes.
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Last month, Corey Doctorow pointed out that by the RIAA’s reckoning, President Bush is a music thief. As part of the DMCA rule-making proceedings, the RIAA said that ripping a CD to your portable music player without authorization is against the law. And since the Beatles haven’t allowed their music on Apple’s iTunes Music Store, the only other ways to get Beatles music onto your iPod is by ripping a CD (illegal) or using a peer-to-peer downloading service (also illegal).
Now Radley points out that Hillary Clinton’s a lawbreaker too.
David Berlind defends himself against critics who argue he’s selling us out by endorsing efforts like DReaM:
Here on ZDNet, and in email, I’ve been taking some heat for my idealism, or in this case, my lack thereof, when it comes to DRM: er: CRAP. Follow this thread for an example. Some readers would rather see me stick to the hard line of buying and advocating nothing that includes DRM. In essence, donning a hazmat suit like the CRAP-fighters above (personally, what better metaphor can you ask for.. hazmat suits, crap:get the picture?). So, just to be clear, I haven’t personally purchased any DRM-related material since first figuring out the downside for myself (not being able to play 99 cent songs on a $20K whole home audio system). That said, I’ve had people come up to me and ask which MP3 player they should buy for themselves or someone else as a gift and, invariably, they’re not open to the idea of not buying one at all, buying one that takes a lot of work (circumventing DRM, digitizing music yourself), or breaking the law. I know. They must be from another planet. Freaks.
OK, back on Earth, these people exist. And so, the question is, do you stick to your ideals, walk away, and let them suffer from their own lack of enlightenment. Or, do you at least try to guide them to something that’s a fender bender compared to a fatal accident? I will vote with my dollars. But, at the same time, if there are people out there that refuse to heed the ultimate advice, I can’t let my idealism stand in the way of steering people away from the trainwrecks. That’s why I’ll try to guide people like that to solutions like Navio or Project DReaM, only after giving up on convincing them to not buy any of this CRAP. CRAP is a dirty business and in the end, it’s we, the users, who get dumped on. But there are some things we can do to control the extent to which that happens.
People shouldn’t reject DRMed products because of some kind ideological hippy crusade. They should reject DRMed products because it’s in their own interests to do so. Right now we’re in the throes of format wars: iTunes vs. Windows Media, BluRay vs. HD-DVD, CinemaNow vs. Google Video, etc. If you buy DRMed content in one of those formats, you’re committing yourself to buying devices compatible with that format for as long as you own that content.
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Seven Hollywood studios and TV networks are suing Cablevision over its new network DVR service. To a consumer, the service is just like TiVo in that they choose programs to record and watch at a later time. The difference is that there is no set-top DVR on the consumer’s premises; it’s all recorded at Cablevision’s end and sent to the customer when they request it. The studios and networks claim that this is not like TiVo but instead like video-on-demand, which would require Cablevision to license the shows it broadcasts to its customers. Cablevision counters that time-shifting is a well-established consumer fair use right.
William Patry wonders if this is the next Betamax case. I think two things are key to establishing that this is consumer time-shifting. First, does Cablevision record only one copy of a show that is requested by customers and does it then multicast that copy? (Isn’t this how MP3.com did it?) The news accounts I’ve read have been sketchy on the technology, but the WSJ reports that “Rather than recording all content automatically on a centralized device, the Bethpage, N.Y., company would create individualized storage within the network for each subscriber that paid for the service.” Second, is a show available only to a customer that had the foresight to record it, or can you simply say, “You know, I’d like to watch the last two episodes of 24 even though I never recorded them, but the cable company did, so I’ll just call them up.” If not, and if each customer has hard drive space on the server that they fill up with their own copies, there’s a good case that this is just like TiVo and thus a fair use by consumers that are merely using Cablevision as their tool for recording.
But who knows, the Ninth Circuit decided this week that when Congress wrote the word “less” in a statute they really meant “more.”
CNet blithely reports the BSA’s latest study purporting to show that piracy is costing software companies $34 billion.
The Inquirer, on the other hand, is not so credulous:
It says the highest piracy rates are found in Zimbabwe and Vietnam, where it reckons 90 percent of the software in use is illegitimate.
A quick squint at the CIA World Fact Book shows that the unemployment rate in Zimbabwe is 80 percent, as is the estimated proportion of the population living below the poverty line. Other estimates put the average income in the country at around $500 per annum. A further quick squint through the windows of PC World in the UK shows that a copy of Windows Home costs £89 – $168. We’ll let you do the math[s].
While we’re at it, the BSA cobbles together its figures in a manner not wholly approved of by its hired researcher IDC.
IDC says it used “proprietary statistics” for software and hardware shipments, conducted 5,600 surveys and enlisted IDC analysts in 38 countries to confirm software piracy trends.
IDC, however, is on record as suggesting that perhaps one in 10 unauthorized copies might be a lost sale. John Gantz, director of research for IDC, is on record as saying that, in developing nations, many users cannot afford imported software from the West. “I would have preferred to call it the retail value of pirated software,” he said of last year’s BSA report.
As Jim wrote last time the BSA published a wildly exaggerated report on this subject, a bit of skepticism is called for when reporting a study like this. When an industry trade group funds a study that’s transparently in their self-interest, you would think the reporter would give some thought to the ways it might be exaggerating the result to the benefit of the client. He might even call someone who’s not in the pay of the software industry to get an independent opinion.
Ars profiles eMusic, the world’s number 2 online music retailer. And they don’t use digital rights management, choosing instead to sell their songs in unprotected MP3 format. Yes, you read that right: the world’s #2 music download service doesn’t use DRM technology. Why not? Their focus is on smaller labels:
The majors are terrified of piracy and so insist on strict DRM controls to safeguard their music. The indie labels that eMusic works with generally don’t have that fear. “The indies have always viewed the world differently,” says Pakman. “You know, the indies struggle for attention, for customers, so the notion of someone actually digging a track and e-mailing it to 10 of their best friends–doing self-promotion–that’s music to the ears of the indie record labels. Whereas an RIAA member says, ‘We’ve got to sue that guy.’
This, it seems to me, is the future of the music industry. The large market shares of the major labels is an artifact of 20th century distribution and marketing technologies, which had huge economies of scale. Only a large firm with a national distribution network could hope to compete effectively in a world in which you had massive up-front capital expenditures before you could sell your first record or CD. But that’s no longer true. I can upload an MP3 to my website and I’m a music distributor. Which means that the monolithic structure of the music industry is likely to be under pressure.
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David Levine points out a post from James DeLong last week in which he identifies a real problem but comes up with a peculiar diagnosis:
Once of the risks of the P2P culture’s ethics–“it’s our music and we have a right to steal it”–is that consumers will end up worse off. Content creators, to obtain any return on their investment of time, energy, and money, will be forced to partner with particular hardware makers or distributors and tightly tether content to the specific channel. The result would be a loss of flexibility and interoperability.
You mean, like, the iTunes Music Store, which won’t work with non-Apple devices? Or Google’s video store, CinemaNow, Moviebeam, and MovieLink, none of which will easily play videos on an ordinary HDTV?
Every DRM scheme works by “tightly tethering” content to a specific platform. A few of them, such as CSS and Microsoft’s Windows Media, at least allow some third party licensees under the tent, but every single one of them contributes to “a loss of flexibility and interoperability.” DRM is the reason that you can’t play DVDs on an iPod, or iTunes songs on high-end stereo systems.
It’s not clear to me what DeLong thinks we ought to do about the growing balkanization of media technologies. As far as I can see, we’re currently trying all of the anti-piracy measures he supports: the courts are shutting down Grokster and company, we have the DMCA on the books, and the recording industry is suing thousands of individuals engaged in file sharing. If, after all of that, we see continued balkanization of media technologies, might that be a sign that our approach is wrong?
The last major topic of Solveig Singleton’s defense of the DMCA that I want to address is the interoperability issue. Here’s her take on it:
The main obstacle to more interoperable DRM or reverse engineering is not the DMCA, it is a business problem. DRM has an advantage in security and speed to market when only one company need be involved in its development. A more open process is slow and the result is not usually cutting-edge. There are endless negotiations, a host of issues with compatibility with legacy equipment, and serious trust issues. CSS protection for DVD’s was jeopardized partly because a licensee, Xing, neglected to encrypt a key (though the system had other weaknesses as well). The more players, the more risk.
Let us examine the example of Apple and the iPod/iTunes model more closely. Apple has the idea of selling music at a low price and making money on the hardware, just as radio broadcasters once sponsored programming in the hope of selling radios. To offer a library of music, Apple needs to convince music rights-holders that the files aren’t going to show up free everywhere. This they are most likely to be able to do if they control the security technology. Furthermore, would Apple bother if it anticipates other companies coming in and cutting into the profits they want on the hardware? Unlikely; this was the reason that radio broadcasters were moved to advertising to fund radio, but this won’t work in a digital world if advertising can easily be stripped out. Finally, what gains do we get if, say, Real Networks hacks the iPod, Apple puts out a fix, Real Networks hacks it again, and Apple fixes it again? There’s nothing there for consumers or entrepreneurs but quicksand. We have not Schumpeter, describing the process by which the candle is replaced by the light bulb, but Hobbes’ war of all against all. Meanwhile, there is plenty of competition in the tunes market without breaking Apple’s code. There are many different kinds and levels of competition.
Now, what’s most interesting about this passage is that it concedes one of the central contentions of my paper: that the DMCA doesn’t merely assist in the enforcement of copyrights, but actually creates a new kind of quasi-property right in technology platforms. In my paper, I spend a fair amount of time talking about the IBM PC example as a model for how interoperability and reverse engineering worked before the enactment of the DMCA. IBM would have loved to prevent competitors from building PC clones, but copyright law didn’t give them any way to do that.
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