DMCA, DRM & Piracy

For a long while I’ve been bemused by the running rivalry over intellectual property issues between some of the writers on this blog and the folks at PFF. While sometimes entertaining, I often shake my head when Tim takes the time to painstakingly refute an argument from Jim DeLong that on the surface was already patently erroneous. Now, as I prepare to take the bait myself, I think I understand the feeling of exasperation that prompts such replies.

Yesterday DeLong posted an entry entitled “Another Urban Legend Shot Down.” He wrote that “One of the arguments against extended copyright terms, made in Eldred and other places, has been the charge that there are piles of books, films, etc., moldering away unseen because no one can get permission to look at them and the copyright holders are too oblivious to find and exploit useful items.” He then says that the fact that Amazon sells DVD packs that contain 50 classic movies for just $16.47 refutes the idea (or “urban legend” as he puts it) that there are other movies out there that are being harmed by extended copyright terms. He goes on, “Would such treasures be available if there were no money to be made from making them so? Doubtful.”

FIrst DeLong implies that there are no such works disintegrating out of sight and hints that such an idea is just an “urban legend.” I would point him to the Library of Congress’s report on film preservation. It catalogs precisely the fact that a great number of films are literally disintegrating. It is a fact, not a myth.

Continue reading →

SHARE: 10 comments

Danny O’Brien of EFF gives us another reason we should just say no to a new telecom bill:

the broadcast flags, both video and audio, have been wandering the halls of Congress, looking to smuggle themselves into law, like tramps looking for an empty boxcar. For nearly a year, neither the MPAA and RIAA have been able to find them a ride. The MPAA failed to introduce the broadcast flag language into an appropriations bill, or the reconciliation bill, nor could they sneak it into last year’s urgent digital television transition bills. The RIAA’s audio flag has been rebuffed at every turn.

But early this week, Senator Ted Stevens (R-AK) introduced a long awaited 125-page draft reform of the Communications Act to the Senate Commerce Committee last week, and both flags found their lift. With telecom reform likely, it’s critical that you take action now to stop these dangerous proposals from coming along for the ride.

The flags are stuck in a crowded carriage with a handful of other controversial causes: net neutrality, universal service, municipal broadband. The bill is already a product of much behind-the-scenes wrangling, and there will be jostling and bargaining before a vote takes place. Though supposedly bi-partisan, Senator Inouye gave it the most unenthusiastic endorsement a sponsor could give.

Many members of Congress still don’t understand the danger to innovation and fair use posed by these government technology mandates. Experts agree that neither flag mandate will prevent continued leakage of music and TV onto the Internet, but it will give FCC bureaucrats, acting in the interests of the entertainment industry, the power to meddle in what you do with bits in your own home.

Whatever your views on DRM more generally, I think it’s clearly bad policy for Congress to mandate the use of a particular DRM technology or to give the FCC the power to set DRM standards. There are a handful of good things Congress could do with a new telecom bill, but as the sausage-making process grinds on, it’s becoming more and more clear that the best we can hope for is for Congress to leave well enough alone.

SHARE:

Anyone who could describe America’s drug laws as “lax and unenforced,” in a nation where hundreds of thousands of people are arrested every year for minor drug offenses, either doesn’t know what he’s talking about or isn’t a libertarian. And if the drug war is like copyright, doesn’t that mean the libertarian position on copyright is to repeal it?

SHARE: 40 comments

My friend Alex Singleton points me to this essay on the “free lunch economy.” Madsen Pirie uses the clever example of matches to illustrate the trend of more and more things being made available to consumers at zero cost:

When George Orwell was Down and Out in Paris and London, he observed that homeless people, then called “tramps,” would pick cigarettes from the gutter and sometimes roll their own from the residual tobacco (there were few filter tips in his day). The problem was matches; these were a valuable commodity among the destitute community, for few would spend the few coppers a box cost, even if they had the money. Now, of course, free matches are widely available, and not as many people buy them. They use free boxes which carry advertising, or they use cheap disposable lighters at a tiny fraction of what a lighter used to cost.

This is obviously a genuine trend, especially online. We’ve come to expect search engines, web browsers, blogs, phone calls, and many other digital products to be available to us for free. The marginal cost of such products has become so low that many firms have found that they can sustain their business models with just a trickle of advertising.

Some people have also come to expect music and movies for free:

Record companies made money by selling at several pounds each pieces of plastic which cost pennies to produce. The value lay in the intellectual property. The physical object that changed hands in the form of a vinyl disc, a tape, or a CD, was the way value was exchanged. The rise of the personal tape recorder caused some concern, because teenagers didn’t regard it as stealing to copy a friend’s music. Record companies began insisting that DJs talk over the opening of the records they played so that listeners could not record a “clean” copy.

The rise of the internet and of file sharing caused a major change in the dynamics of that market. Purchasers, many of them young people anxious to stretch their pounds, found they could share files with each other, and that advancing technology gave them top-quality copies. Music sales went into decline, and there were fears for the industry itself. The solution has been paid-for downloads such as those bought through Apple’s iTunes. Purchasers have been found to be ready to pay a small sum to download legally, with increased numbers of them making up the lower price they pay. The music industry is breathing more easily, but no one doubts that it was the free product which forced the change.

Unfortunately, the author doesn’t seem to notice that this is a fundamentally different phenomenon. Google gives its search engine for free on purpose, and they have a business model that allows them to profit from doing so. One reason they do so is because other search engines are also offering their own product for free. Market competition keeps the price at zero.

The music example is quite different. In that case, what’s driving the price down isn’t competitors offering their products at a lower price, but consumers simply taking the products without paying. Whatever the ethics of the situation (I tend to think taking music you haven’t paid for is wrong) what’s clear is that the economic dynamics of this situation are rather different. The reduced price doesn’t necessarily reflect reduced costs on the part of the music industry, and so there’s no reason to think that the resulting revenues will be sufficient to support continued music creation. We might end up in a situation where there are so many free-riders that the music industry is forced to dramatically cut back its activities.

I happen to think that in the long run, the market price for most music will be zero. That’s because music is rapidly getting less expensive to produce, and there are probably thousands of people who would gladly produce music gratis if only they could get a substantial audience, just as there are millions of bloggers who give away their blog posts for free. But that doesn’t mean that musicians shouldn’t be free to charge for their music if they want to. And I don’t think the increasing tendency of people to take music without paying for it is anything to celebrate. It’s certainly not “market competition” as we ordinarily understand the term.

SHARE:

Mike from TechDirt has done a thorough write-up of last week’s copyright conference at the Cato Institute. It’s a fair assessment of things, but naturally skewing toward his perspective, which was a welcome contribution to the event. One can’t help but suspect that the length of his assessment is due to the fact that he had a whole bunch of time on a plane returning to California, when he could have been networking.

SHARE: 2 comments

Here’s David Levine’s response to the King Kong question:

The short response is pretty simple: until they lost the VHS tape case, the only source of revenue for movies was for theatrical releases. Even if DVDs can be freely copied and given away for free, the revenue from theatrical releases can still sustain large scale productions. The key point is that it is wrong to focus on the copies to which copyright applies as the sole source of revenue to pay for creative efforts. Open source software works because the complementary good produced – “expertise” – in the process of producing software, is scarce and so commands a premium in the market. So even if copies generate little revenue, as long as something else complementary is scarce, there is still a revenue source to pay for creation. In the case of movies the obvious candidate is theatrical sales.

I don’t think this works because the scarcity of theater viewings is based on the fact that most movie theaters still rely on primitive 20th century technologies to play movies. Canisters with photographic film in them are bulky, expensive, hard to steal, and difficult to duplicate if you don’t have the master. So it’s reasonable to expect that you can protect all (or virtually all) the film copies of a movie from piracy, and thereby ensure that only authorized theaters can offer customers the big-screen experience.

But this is changing fast. As projector technologies improve and bandwidth costs fall, theaters will increasingly move to all-digital distribution technologies. A theater will download a (probably encrypted) copy of a movie from the studio and play it on a high-end LCD projector. Once that happens, the task of preventing leakage without the benefit of copyright would become all but impossible.

Here’s how I imagine the theater industry would work in a copyright-free world: There would be large chains of pirate movie theaters, who specialize in showing bootleg copies of movies. They offer large cash payments to anyone who can slip them a pristine, illicit copy of the copyrighted movie. Once they get the copy, they redistribute it to all the theaters in their chain, and begin showing the movies for free (they can make the money up on popcorn).

Now, the relevant question is how quickly the pirate theaters could get their hands on the movie? In the status quo, the peer-to-peer networks generally have copies of movies (albeit far from perfect) before the theatrical opening, leaked by studio insiders or people who went to previews. Clearly, the studios would tighten up their operations, but on the other hand there would also be a much stronger financial incentive to pirate, since the illicit copy would be so valuable. So it’s hard to predict with any precision whether leaks would become more or less common.

But the important point, I think, is that a lot of big-budget movies would leak within weeks, if not days, of their release. That would mean two things. First, the window of opportunity for charging full freight on them would be rather short. For the majority of movies, opening weekend would probably be the only weekend in which authorized theaters would have exclusivity. Secondly–and more devastatingly–consumers would know that if they waited a week or two, they would be able to see the movie for free. So even if you did have a monopoly for a week or two, you’d only get the consumers who were aching to see your particular movie. Most consumers would simply wait the extra week or two when it would be available for free.

So I don’t think I buy it. In the absence of copyright, I think it’s unlikely there would be any movies with 9-figure budgets. We can debate whether that’s a bad thing (I think it would be for reasons I hope to lay out in a future post) but I think that’s definitely what would happen.

SHARE:

Wednesday’s Cato conference Copyright Controversies: Freedom, Property, Content Creation, and the DMCA has been posted on the Web in various formats for your viewing and listening pleasure. Interesting ideas and moments abound.

SHARE:

Here’s Patrick Ross’s take on today’s Cato conference:

I wonder how some of the Cato fellows and alums in the audience felt, then, when twice Cato was welcomed into the fold as a copyfighter. Rep. Zoe Lofgren and the CEA’s Gary Shapiro both did so. Lofgren said she didn’t recall ever stepping foot into Cato before, but “this might be one area where Cato and I form a working partnership.” Shapiro urged Cato to take the issue to the Hill. What Lofgren and Shapiro are referring to is a recent paper published by Cato that calls for, essentially, a repeal of the DMCA. The paper takes a very cynical view toward intellectual property rights and creators.

To be honest, I’m not sure what he’s talking about in that last sentence. At no point in my paper do I write anything that could be plausibly described as a “cynical view toward intellectual property rights.” As I’ve tried over and over to emphasize, my concern is with the ways the DMCA has interfered with the marketplace in realms outside the traditional scope of copyright, such as preventing interoperability and stifling competition. I can easily imagine Mr. Ross having legitimate policy disagreements with my analysis, or arguing that the benefits of DRM technology are worth these downsides. I think that would be an interesting and productive debate. But for some reason, he doesn’t seem very interested in it.

Instead, Ross seems determined to knock down a straw man of my views. When I argue that the DMCA is a poor method of protecting copyrights, he describes that as being “cynical” about intellectual property. As in his epic three part critique to my paper last month, Mr. Ross’s primary mode of argument seems to be to misrepresent my arguments and positions.

I should mention he’s not the only one who responds to criticism of the DMCA by refuting straw men. On my own panel today, Emory Smith of the Business Software Alliance seemed not to have listened to the others on our panel, as he spent virtually his entire speech refuting the position that piracy was hunky-dory– a position that no one on the panel had taken. The defenders of the DMCA seem determined to avoid having a serious debate about the law’s effectiveness or unintended consequences. It’s so much easier to simply paint those who disagree with them as “copyfighters,” “intellectual property skeptics,” or IP anarchists who want to “abolish IP rights in favor of some mystical commune wherein all IP is free as the air and creators are compensated by government.”

I think that “cynical” is a reasonable way of describing this rhetorical strategy. I can only imagine that they’ve adopted it because they don’t have good responses to the actual arguments against the DMCA. For example, despite several requests, Mr. Ross has yet to substantiate his claim that I made a mistake when I wrote that “the DVD CCA never approved any software DVD players for Linux [and] that the DVD CCA must approve DVD software players.” I think documenting that accusation might be a good starting point for a debate based on facts and arguments rather than name-calling.

SHARE:

The Heartland Institute’s IT&T News has published my latest article on the DMCA:

Intel, which manufactured the processors at the heart of the first PCs, encountered the same kind of unauthorized competition in its platform in the early 1990s. Several companies, including Advanced Micro Devices, began producing chips that could run software designed for Intel chips. The result has been rapid innovation and constantly falling prices in the market for processors.

In short, intra-platform competition among the likes of Intel and AMD has contributed even more to innovation in the PC industry than inter-platform competition between Windows and Macintosh. The law ought not to stand in the way of analogous competition in the market for digital media devices. An entrepreneur who wants to compete with the iPod by building an MP3 player that works with the iTunes Music Store should not be prevented from doing so by copyright law. Yet that is precisely what the DMCA does.

SHARE: