DMCA, DRM & Piracy

What do the labels think they’re accomplishing with CD-based copy protection? Here’s a story about the first copy-protected CD to reach #1 on US charts:

Like other recent copy-protected albums, the Velvet Revolver disc includes technology that blocks direct copying or ripping of the CD tracks to MP3 format. It also comes preloaded with songs in Microsoft’s Windows Media Audio (WMA) format, which can be transferred to a computer or to many portable digital music players.

As in earlier tests by BMG and SunnComm, the copy protection on the Velvet Revolver disc can be simply disabled by pushing the “Shift” key on a computer while the CD is loading, which blocks the SunnComm software from being installed. The companies say they have long been aware of the work-around but that they were not trying to create an unhackable protection…

The inability to move songs to Apple’s popular digital music player, as well as to other devices that don’t support Microsoft’s Windows Media digital rights management services, is a serious shortcoming. Jacobs says SunnComm recognizes that–and that the company’s next version will go beyond the Microsoft files and be able to create multiple kinds of digital files that will be compatible with the iPod.

But for now, iPod-owning Velvet Revolver fans don’t have a direct alternative.

“We are actively working with Apple to provide a long-term solution to this issue,” a posting on SunnComm’s Web site reads. “We encourage you to provide feedback to Apple, requesting they implement a solution that will enable the iPod to support other secure music formats.”

What is this supposed to accomplish? Obviously, it’s not going to deter anyone with a reasonable amount of technical savvy, given that pressing the shift key isn’t rocket science. So it’s hard to see this having a significant effect on piracy. On the other hand, preventing people from transferring their music to their iPods is a significant inconvenience that mostly affects legitimate users. Even if we set aside the privacy and security problems with SunComm’s technology, does it even make any sense from a business perspective to use this software? It’s not likely to slow any determined pirates down, but it’s guaranteed to piss off those of us who just want to listen to our music on the portable device of our choice.

Incidentally, it’s worth mentioning that SunComm could enable iPod compatibility tomorrow if it were willing to allow users to put songs on their iPods in MP3 format. Why don’t they? I’m not sure. Extracting an unprotected MP3 from an iPod is at least as technically difficult as pressing the shift key. So it’s not clear to me how enabling iPod compatibility would make any real difference in the “security” of their DRM scheme, even if they had to put the music on the iPod in an unencrypted format.

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What’s really frustrating about Google’s decision to include DRM in its new video software is how unnecessary it was. Look at the content they’re offering: basketball games, reruns of “I Love Lucy” and “The Brady Bunch,” and music videos. This isn’t content for which there’s a strong aftermarket at present. People don’t, as a general rule, cruise eDonkey looking for copies of last year’s basketball game. Music videos are mostly played for free on cable. Shows like “I Love Lucy” have been available on Nick at Night for decades.

Moreover, these video files are too big to be easily and casually swapped among friends. It seems unlikely that very many people would download a 200 MB basketball game and then try to email it to their friends. Sure, a few would probably upload them to P2P networks, but much of this content was on P2P networks already, and it’s only a matter of time before someone hacks Google’s DRM and puts this content up anyway.

So exactly how would it have hurt CBS or the NBA’ bottom line to offer some of this content in a DRM-free format? My guess is: not one bit. They’d have lost a few sales to people who share the content with friends, but this would likely have been a small fraction of the overall sales. On the other hand, they’d increase customer satisfaction by allowing users the freedom to freely make legal uses of their content. Without the impediment of DRM, Google could easily implement seamless transfer of videos to iPods and other portable devices. Geeks like me would feel more comfortable knowing we could watch the videos with third-party video players.

Perhaps most importantly, in a year or two when consumers start to realize that they’re being locked into proprietary formats by Apple, Microsoft, and their ilk, it would be a fantastic marketing opportuinty to be able to point out that their products, in contrast, don’t lock them into one company’s proprietary products.

Unfortunately, Google instead took the easy way out and acquiesced to Hollywood’s demands. Google, Hollywood, and consumers will all be worse off for it.

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Ars Technica crunches the numbers and finds that the end of the CD era is fast approaching:

Sticking with twelve tracks to an album, 16 million full albums equal 192 million tracks, or 35 percent of all paid downloads. Also, remember that album sales figures lump the downloads in with the regular CD sales, and 2.6 percent of all album sales were really downloads, just not on a piecemeal basis. With all of these numbers in hand, we can calculate the total market share downloads enjoy today, and it’s a healthy 7.3 percent. If we can assume that the ratio of full-album to single-track downloads stays relatively stable over time, the online market share was 2.3 percent in 2004. The 149 percent sales growth sounds good all right, but it’s nothing compared to a 220 percent market share gain from one year to the next.

So online downloading’s share of the overall music market tripled between 2004 and 2005. If growth comtinues at that pace, online download revenue should outpace physical CDs sometime in 2008, and CDs are likely to be an inconsequential fraction of the overall music market by the end of the decade.

The record industry would do well to think hard about how this tidal wave will affect their business strategies. In particular, they should be careful not to hand technology companies like Apple a dominant position in their industry using a misguided DRM strategy. If they think negotiating with Steve Jobs was tough last year, when he was generating 5% of their revenue, it will be much worse next year when it’s 25%!

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I’m with Mike:

Google’s copy protection scheme sounds just as bad as we feared. It is their very own, and it will limit what you can do with the video significantly. You can’t transfer the video to mobile devices. It doesn’t work on a Mac. And, you can only view the video when you’re online, as the copy protection obviously is calling home first (which, of course, opens up the potential of security holes).

On the flip side, Google will (I’m sure) quickly point out that their DRM offers more “flexibility” than others, in that you don’t have to use it, and if you do, you have choices about how restrictive it is. In other words, Google is basically going to say that they built the locks, but it’s up to the content provider to be evil with those locks. As part of this whole offering of letting anyone sell videos through their system, they’re also offering more payment options so that (unlike iTunes) content providers can choose how much things cost, and even allows some variability (for example, Charlie Rose will offer free streaming for a day after his shows air, and then unencumbered downloads for $0.99 after that). Google takes a 30% cut of any sale. It’s nice that they’re giving content providers some choice, but it’s still quite worrisome that there’s now yet another incompatible copy protection scheme that will be making the rounds. This isn’t good for anyone and shrinks the overall market. Google may think that it was “necessary” to simply give content providers the option to hang themselves with bad copy protection, but it’s a cop out position. Google, at this point, should have a strong enough market position to let content providers know that there’s a better way to offer content without copy protection–and if content providers are too scared, that’s their problem. Eventually they would come around when they saw success stories without copy protection.

So now if I want to build a personal library of legally-purchased digital video, I have to decide whether to buy them in iTunes, Windows Media, or Google formats. Whichever company I choose, I can only play my videos on that company’s proprietary products. If I choose iTunes, then I can’t play it on a PSP, and I’m subject to the whims of Steve Jobs. If I choose Google or Windows Media, I can’t play videos on my Mac or my iPod. None of them will work with Linux. And if I ever decide I’m fed up with Apple, Microsoft, or Google, and want to switch to a different platform, that’s tough: I can’t take my videos with me.

This is progress?

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Here is yet another example of software patent abuse. A patent trolling firm called Rates Technology is suing Google alleging patent infringement by its Google Talk program.

I haven’t found a copy of the lawsuit, but according to the Register, one of the two patents at issue is Patent Number 5,519,769, “Method and system for updating a call rating database”:

The advantages and features of the present invention now allows the database that stores billing rate parameters in a rate table for call rating devices to be updated. The call rating device is connected at a predetermined time and date via a data transfer line to a rate provider having billing rate parameters for a plurality of calling stations. Indicia identifying the call rating device and the date and time of the last update of the billing rate parameters is transmitted over the data transfer line to the rate provider. The rate provider verifies that the billing rate parameters should be updated, and it transmits to the call rating device the updated billing rate parameters when the rate provider determines that an update is required.

It goes on in this vein for paragraphs and paragraphs. Skimming the entire patent, I don’t really understand how this could be considered an “invention.” Obviously, if you wanted to find the lowest-cost route for a particular call, you would poll each possible service provider seeking their rates, and then store their answers in a database, which would be updated periodically. If any idea is “obvious,” that surely is.

I’m also bewildered about how Google Talk could be considered to have infringed this patent, unless anyone who routes calls over a switched network is considered to be an infringer. If that’s what’s going on, then this is a pretty good example of why a “no software patents” rule would good policy: whatever the merits of this patent as applied to telecommunications hardware, it’s pretty clearly an impediment to innovation when applied to a software-only product like Google Talk.

Update: Here is the complaint. It doesn’t appear to give any details about how Google Talk infringes the patents.

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Richard Epstein has a new essay on the DMCRA, Rep. Boucher’s DMCA-reform legislation:

But means as well as ends matter in the constant struggle to deal with copyright piracy. In looking at the structural problem, the key question is just how much noninfringing use is there relative to the torrent of illegal copying. In answering this question, it’s not appropriate to look at the issue of interoperability, because that has already been dealt with first by the DMCA and second by the standard end user licenses. So it is not likely that there is much fair use to worry about.

Once the first of these two provisions is in place, then someone can circumvent the device for the appropriate purpose. But unfortunately H.R. 1201 does not say one word about how the circumvention in question will be limited just to those cases. Nor does it indicate what penalties will be given to individuals who first circumvent for fair use and then proceed, as is likely to be the norm, to circumvent for all other purposes. So if equipment can be sold for good purposes, then it can be used for bad ones, and the DMCA has lost its teeth. It is not too much to say that this stealth provision, which is never referred to in the findings of the act could work a comprehensive repeal of the DMCA. Much too much is lost, and very little is gained.

He’s wrong about interoperability: although the DMCA does purport to carve out an exemption for interoperability, that exception is of virtually no help in practice. The reasons are a bit complex, and I deal with them extensively in my forthcoming Cato Policy Analysis, so I won’t rehash them here. Suffice it to say that despite the reverse-engineering exception, the DMCA effectively makes it illegal to interoperate with DRMed products, and that’s a very bad thing.

I think the professor is being a bit too clever with his mock surprise at the “stealth provision” repealing the DMCA. I was under the impression that everyone understood that was its purpose. Indeed, I’ve heard that the primary reason that the labeling provisions were included were so that the bill could be considered in the Commerce Committee, chaired by a sympathetic Rep. Barton, rather than the Judiciary committee, which is less friendly to DMCA reform. If the Judiciary Committee were more sympathetic, Boucher would doubtless be happy to introduce just the DMCA-reform portions of his legislation there. There’s certainly nothing “stealth” about the bill, given that commentators routinely cite Boucher’s bill as effectively repealing the DMCA’s anti-circumvention provisions.

He does, however, have an interesting point about the section that codifies the Betamax rule:

Continue reading →

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Perhaps the most striking thing about the Sensenbrenner bill is this passage:

PROFESSIONAL DEVICE.–(A) The term”professional device” means a device that is designed, manufactured, marketed, and intended for use by a person who regularly employs such a device for lawful business or industrial purposes, such as making, performing, displaying, distributing, or transmitting copies of audiovisual works on a commercial scale at the request of, or with the explicit permission of, the copyright owner.

(B) If a device is marketed to or is commonly purchased by persons other than those described in subparagraph (A), then such device shall not be considered to be a ”professional device”.

“Professional” devices, you see, are exempt from the restrictions that apply to all other audiovisual products. This raises some obvious questions: is it the responsibility of a “professional device” maker to ensure that too many “non-professionals” don’t purchase their product? If a company lowers its price too much, thereby allowing too many of the riffraff to buy it, does the company become guilty of distributing a piracy device? Perhaps the government needs to start issueing “video professional” licenses so we know who’s allowed to be part of this elite class?

I think this legislative strategy is extremely revealing. Clearly, Sensenbrenner’s Hollywood allies realized that all this copy-protection nonsense could cause problems for their own employees, who obviously need the unfettered ability to create, manipulate, and convert analog and digital content. This is quite a reasonable fear: if you require all devices to recognize and respect encoded copy-protection information, you might discover that content which you have a legitimate right to access has been locked out of reach by over-zealous hardware. But rather than taking that as a hint that there’s something wrong with the whole concept of legislatively-mandated copy-protection technology, Hollywood’s lobbyists took the easy way out: they got themselves exempted from the reach of the legislation.

This reminds me of nothing so much as the McCain-Feingold campaign finance law. McCain and Feingold, like Sensenbrenner, faced a difficult problem: a straightforward reading of their legislation, which prohibited people from spending large sums of money on political advocacy, would seem to prevent corporate entities like the New York Times and Fox News from talking about politics in the closing weeks of the election. Clearly, that wouldn’t do. But rather than taking this as evidence that there was something fundamentally wrong with their approach, they simply created a class of journalists to whom the rules did not apply. If Michael Moore wants to spend a million dollars promoting John Kerry’s election, that’s free speech. But if you or I spent a million dollars on anti-Bush ads in the closing weeks of the election, we could wind up in jail.

Like McCain and Feingold, Sensenbrenner demonstrates a profound contempt for ordinary Americans, whom his legislation literally makes second-class citizens. It seems that he can’t imagine that ordinary consumers might ever have legitimate reasons to use “professional” video editing tools for personal projects. Consumers, after all, are just that–passive recipients of the culture made for them by the professional magic-makers of Hollywood. We wouldn’t want the riffraff to make culture of their own.

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John at the Commons Music Blog has an artist’s perspective on the dark side of digital rights management technology. He highlights three reasons why he doesn’t use DRM to “protect” his content. I thought the first reason was particularly on point:

I detest not having control.

“But,” say some, “DRM gives you control, not takes it away.” Silly rabbit.

DRM is not something that can be grabbed from the aether and implemented. It’s run by a series of companies, each with different platforms and technologies implementing themselves in various ways…

If I sold someone an MP3, I am quite certain that they will be able to use that MP3 on almost every computer, and in pretty much every portable device on the market. If I sell an Apple iTunes DRM’d file, that plays in iTunes, on a few cell phones, and the iPod.

Speaking of Apple, they are currently in a dispute with the record industry to allow different pricing structures and usage terms, depending on the songs. They want Apple to share its DRM so that a multitude of devices (not just the iPod) will work with it. The labels can’t force them, because the songs that millions have bought are intricately tied to Apple’s DRM, for which they fought viciously. Now, they’re stuck. They’ve lost control.

This is an important point. DRM almost never gives artists control of their own work. Hell, DRM rarely gives record labels or movie studios control over the work they publish. Rather, DRM empowers third-party technology companies–Apple, Microsoft, Real, TiVo, the cable industry, etc–who didn’t produce the content their DRM “protects,” yet thanks to DRM they have the final say on how the content is used.

Obviously, no one forces artists, labels, and studios to sign deals with the likes of Apple and Microsoft. But given all the rhetoric about how DRM is about protecting artists’ rights, it should give us pause that, in practice, DRM almost never gives artists meaningful control over how their content is used, and that, in fact, some of the restrictions placed on consumers by DRM are directly contrary to the interests of copyright holders.

Think about it: when you purchase a song on iTunes, you’re pretty much only allowed to listen to the song with iTunes or an iPod. Who does that benefit, the artist who recorded the song, the label that distributed it, or just Apple? As I’ve said before, the recording industry is being taken for a ride.

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