October 16, 2003

It’s Kind of Interesting To Search One’s Own Archives [7:00 pm]

While looking for the IEEE Spectrum article I cited below, I came across this March, 2003 article. What do you think about this excerpt from Congress questions FCC copyright plan

Rep. Lamar Smith, R-Texas, the panel’s chairman, said the FCC “might issue rules that impact the Copyright Act.”

Although Smith’s intellectual property subcommittee is responsible for drafting copyright laws, the Energy and Commerce Committee has jurisdiction over the FCC. Smith and other panelists expressed concern that copy-protection rules were being set by an executive branch agency instead of by the appropriate committee in Congress.

The FCC has not yet decided to go forward with a broadcast flag rule. The movie studios say that a law or FCC rule will be necessary to require that televisions sold after a certain date recognize the flag and, if it is present, limit consumers’ rights to distribute digitally transmitted shows without restrictions.

Democrat Rep. Howard Berman, whose Southern California district borders Hollywood, said he was worried that the FCC could veer in a direction that might mandate “fair use” rights that would not be favorable to the entertainment industry. “I’m opposed to the FCC attempting to…limit the exclusive rights of copyright holders in its broadcast flag rule making,” he said.

Berman said the FCC must not require that “copyright owners surrender any of their exclusive rights to consumers…I’m unaware of any precedent for a federal agency doing so. The closest precedent involves the Copyright Office, not the FCC.”

For a more sane perspective, let’s turn to that leftist publication, Business Week. From its January 3, 2003 issue we have: Will Your TV Become a Spy?: Hollywood wants every new digital set to include technology that would stop people from putting its shows on the Net. Bad idea

Simply put, the digital flag is a bad idea and a serious threat to consumer privacy. Only Hollywood’s interests would be protected. The consortium’s report doesn’t mandate protection of consumer information, only that the technology chosen should be flexible and robust. History has shown that the most powerful and adaptable copy-protection technology is also privacy-invasive.

Take Thomson Multimedia’s SmartRight technology, a copy-protection scheme that’s gaining momentum in Europe and Asia. Every time you watch a movie or transfer a video from a digital TV to a PC, it reports back to the copyright owner.

Spying on customers wouldn’t only infringe on individuals’ privacy but it could also lead to new revenue streams for Hollywood. Today, studios get paid only once when you buy the DVD of When Harry Met Sally — no matter how many times you watch it or how many friends borrow it from you. New technology would conceivably allow the studios to charge you every time you view the film, since a record is created from a technology monitoring your viewing habits from inside your home.

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A Call To Arms Over The Broadcast Flag! [6:20 pm]

Donna Wentworth has put together a great posting on the pending push for the Broadcast Flag by the end of this month: It’s About Control. The Kind We Won’t Have. She links both to Ernest’s post on the subject, Broadcast Flag Rule by the End of the Month as well as several important links showing just how noxious a mechanism this can be. It’s a technology mandate and a pernicious infringement upon fair use, all wrapped up in one package.

While Hollywood is only focusing upon their profits, they are asking the US Government to mandate a set of technological blocks that they believe will help to prevent copying of over-the-air broadcasts of their content. What they fail to realize is that consumers, already staggered by the cost of HDTV, are going to be terribly pissed once they find that their expensive digital TV does less than their old TV did. Just like copy-protected CDs, the consumer will reject the product.

Of course, who gets to bear that risk? Not the movie companies! Rather, its the consumer electronics industry, not the most robust of US industries in the first place. The broadcast flag will just kill digital TV, just like the limits on digital audio tape killed DAT sound recording. And it’s going to mean a lot of lost money, lost sales and other disagreeable consequences — none of which the movie industry will have to bear.

The EFF is hoping that the same kind of groundswell that has made Congress get involved in media consolidation can be mustered to block this pending FCC mandate as well. They have set up a WWW site, Stop the Broadcast Flag!, and are inviting the public to help to send a message. See also the site at DigitalConsumer.org, with a surprisingly similar name: Stop the Broadcast Flag

For more background, see this IEEE Spectrum article: The Copyright Wars: A new world of digital entertainment beckons, but industry clashes impede progress. I quoted this before, but it’s worth repeating:

From Hollywood’s point of view, the best way to prevent copying from getting out of control is to prevent copying at all. “What we really want to do is not to stop copying, simply to stop redistributing. But the technology available doesn’t distinguish between the two,” said Larry Kenswil, president of the eLabs division of Universal Music Group (Universal City, Calif.), speaking at the January Consumer Electronics Show (Las Vegas, Nev.).

Meanwhile, the consumer electronics industry, while working with the entertainment industry on copy protection technologies, is not willing to make copying outright impossible. Without the freedom to copy music from CDs to digital jukeboxes and portable players, for instance, entire categories of products, like MP3 players and hard-disk recorders, would disappear. People just aren’t going to pay for the same album three or more times—once to use in their car CD player, again to use in their home audio jukebox, and once again to listen to while jogging.

At the same time, the electronics industry is not going to put out technology for totally unrestrained digital copying, in case the content owners retaliate. So the introduction of new products, such as portable TV players that download content from home video recorders into pocket-sized devices, is reportedly being delayed. The fear is that systems will never even be imagined because of the copy control constraint. Consider the broadcast flag, a technology intended to prevent unauthorized retransmission of digital TV broadcasts by inserting a coded signal into programs (though the signal may also end up preventing copying). Had some form of it existed 30 years ago for analog products, the consumer VCR, sales of which were worth over US $2 billion annually in the late 1990s, might never have reached the market, says Joe Kraus, cofounder of DigitalConsumer.org (Palo Alto, Calif.). [emphasis added]

…So wave your broadcast flag, load your DVD burner, or pack up the CDs you filled with MP3 tracks and send them with a letter of apology to the MPAA or the Recording Industry Association of America. It is time to pick a side; the fight for the future is now.

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The P2P & Child Pr0n Argument [5:29 pm]

To follow up on something I mentioned in the lecture I taped yesterday (and that, according to the e-mail traffic I’ve seen, is held up in Customs!), Ernest Miller reports that Orrin Hatch is working to maintain and promote this pernicious meme: Confusing P2P Pornography Arguments

The hearing in question, Indecent Exposure: Oversight of DOJ’s Efforts to Protect Pornography’s Victims, is ostensibly about a larger topic, but Senator Hatch’s statement ensures that the connection is made:

I am currently considering legislative solutions to the many risks inherent in the use of peer-to-peer networks. Almost half of the people who use these networks are minors. Recent studies have shown that millions and millions of pornographic files are available for downloading on these networks at any given time. Even more disturbing is that searches on these networks using search terms that a child would be expected to use, such as Harry Potter or Pokemon, turn up an enormous percentage — over 50% in one study according to the GAO — of pornographic materials including child pornography. This is simply unacceptable. Many parents — possibly the majority of them — are unaware of this problem. I think this requires our immediate attention.

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J. Boyle on the 2nd Enclosure Movement [11:19 am]

I came across this article as I was putting together the reading list for TP5: The Second Enclosure Movement and the Construction of the Public Domain. This is a terribly interesting article that uses a fair amount of the history of intellectual property thought and economics to raise the important questions about what the construct of intellectual property is actually supposed to accomplish, as well as offering up some excellent prose that helps to challenge some of the conventional assumptions about control and rent in non-rivalrous and non-excludable goods.

We seem to be shifting from Brandeis’s assumption that the “noblest of human productions are free as the air to common use” to the assumption that any commons is inefficient, if not tragic.

The expansion is more than a formal one. It used to be relatively hard to violate an intellectual property right. The technologies of reproduction or the activities necessary to infringe were largely, though not entirely, industrial. The person with the printing press who chooses to reproduce a book is a lot different from the person who lends the book to a friend or takes a chapter into class. The photocopier makes that distinction fuzzy, and the networked computer erases it altogether. In a networked society, copying is not only easy, it is a sine qua non of transmission, storage, caching, and, some would claim, even reading. As bioinformatics blurs the line between computer modeling and biological research, digital production techniques blur the line between listening, editing, and recreating. “Rip, mix, and burn,” says the Apple advertisement. It marks a world in which the old regime of intellectual property, operating upstream as a form of industrial unfair competition policy, has been replaced. Intellectual property is now in and on the desktop and is implicated in routine creative, communicative, and just plain consumptive acts that each of us performs every day. The reach of the rights has been expanded at the same moment that their practical effect has been transformed.

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A New Ziemann Installament [10:17 am]

In his series of articles paralleling Edison’s travails with his record player and the RIAA’s actions in the digital age: RIAA Sequentially Repeating Edison’s Mistakes.

After watching the RIAA’s public Dance of Death closely for only about a year, everything they do is so predictable that I’m beginning to wonder if they even have any control over their own destiny. For some inexplicable reason, they seem compelled to follow through until the final scene, perhaps unaware that there’s been a rewrite in the ending over the last 90 years.

While suggested reading is the series I did earlier on Thomas Edison, here is a synopsis of how Edison’s approach to running an entertainment industry so closely parallels what the RIAA is trying to do. After all, the goal is the same — to maintain a monopoly.

Slashdot discussion: RIAA Sequentially Repeating Edison’s Mistakes?

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The Price of a Private Internet (For Gaming, Anyway) [8:09 am]

The Globe describes a growing trend - online gameplaying services that are used to keep lamers OUT: Using private servers, clubs keep serious players in, headaches out [pdf]. The jargon is a hoot:

But in gaming, as in that play by Jean-Paul Sartre, ”No Exit,” hell is other people. Serious clan players find themselves burdened by the presence of incompetents and outright jerks, cluttering gaming systems with their infantile insults and incessant cheating.

[...] Moore can’t stand ”chat-killers,” players who send so many instant messages that they distract players and get them massacred. Then there are those who cheat by running ”aimbot” software that automatically kills other players as soon as they appear onscreen. Where’s the fun in that? Of course, aimbotters and other riffraff get kicked to the curb on sight. There’s even a technology called Punkbuster that assigns a digital ID to all players. Anyone caught cheating can be barred from the server permanently — a sort of digital death penalty.

Running a private game server is like having your own Colosseum. And you get to be Nero.

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iPod Accesories [8:04 am]

The Register speculates that Apple will announce, along with their Windows iTunes service, add-on hardware for the iPod. Interestingly enough, today’s NYTimes gives a rundown of the third party add-ons already out there: Finishing Touches for the ‘Pod [pdf]

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A Couple of CNet News pieces [7:51 am]

  • SCO backs off Linux invoice plan

    SCO’s licensing plan has been lambasted by open-source advocates, criticized by analysts, and ignored by 84 percent of chief information officers Credit Suisse First Boston polled in a September survey. Nevertheless, SCO has signed up an unnamed Fortune 500 company with a “large number” of Linux servers.

  • Sony, Intel harmonize for mobile music — which side of Sony will get to set the agenda? A continuing question. See this Register article — Sony to work with Intel on mobile music tech

  • Patent fight shadows Microsoft lawsuit — a patent interference proceeding in a dispute over DRm patents held by Intertrust and Macrovision. One gets along well with Microsoft and one wants to hurt them — and Microsoft’s Windows Media DRM technology is in the crossfire.

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Record Company Woes [7:41 am]

I taped a lecture for a University of Cambridge class on the economics of distribution networks that included a discussion of industry restructuring and consolidation in the face of a changing technological climate for record companies. Here’s an example from today’s NYTimes: Universal Music to Cut Jobs as Industry Slump Lingers [pdf]

The Universal Music Group, the largest music company in the world and home to acts like U2, Eminem and Mariah Carey, is expected to announce a restructuring Thursday that will eliminate 11 percent of its work force.

In the next several months, 800 jobs will be cut across all of Universal Music’s divisions, according to company executives. Combined with the 550 jobs trimmed earlier this year, Universal Music’s work force will shrink to 10,850 people. Executives said the cuts would eventually save the company $200 million a year.

[...] Universal Music is not the first of the five major labels to refocus its business. Earlier this year, Sony Music Entertainment said it was laying off 1,000 people after several quarters of losses, and it hired a new chief executive from outside the music business. (The new chief, Andrew Lack, was a top executive at NBC.) Last year the London-based EMI Group cut 1,800 people, 20 percent of its staff. And the Warner Music Group has also restructured its business, while its parent company, Time Warner, weighs a sale or merger with either EMI or the BMG unit of Bertelsmann. The sale of a controlling interest to EMI for about $1 billion in cash appears to be the most likely outcome.

Although many analysts and industry executives say they believe that further global consolidation is necessary, those financial benefits can go only so far. In September, Vivendi Universal said its music group had an operating loss of $48 million for the first half of the year, attributing the results to the decline in the dollar and increased file sharing.

[...] “The moment for the outrageous deal has gone the way of the dinosaur,” said Doug Morris, chief executive of Universal Music.

For an industry that has built a business model around finding/creating a single home run to carry the bulk of its money-losing product (remember, a CD breaks even only after 500,000 units sold), it’s about time!

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The NYTimes on Napster v. 2.0 [7:29 am]

And the hardware that’s expected to make the economics work (see the Boston Globe article below for more details)

Digital Jukebox Ties the Knot With a Reformed Napster [pdf]

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Derek’s Sick of Hiawatha Bray [7:01 am]

But who isn’t? See what Derek has to say here as he responds to Bray’s column and SunnComm’s continued posturing: Thanks But No Thanks for the License, SunnComm

See also Ernest Miller’s rundown of the current rhetoric in Ernest Miller’s new weblog, showing a certain affinity for Oscar Wilde. (Project Gutenberg reference, a prettier layout)

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The Globe Handicaps the Music Services [6:56 am]

As a counterpoint to Derek’s rundown, see this Boston Globe article: Online music may finally play a tune of profit [pdf]

This fall could finally mark the arrival of online music as a legitimate, profitable business, after two years of false starts, dead ends, and legal salvos in the recording industry’s quest to stop the trade of pirated music over the Internet.

As the holiday shopping season nears, two vanguards of digital music, Apple Computer Inc. and Roxio Inc.’s Napster, are launching services that many analysts say may succeed where others have failed: selling pay-per-song services to the Internet masses.

”It’s a threshold event,” said Milton Olin, an entertainment lawyer with Manatt, Phelps & Phillips in Los Angeles who served as chief operating officer of the original Napster. ”The launch of these two brands in the PC market is really going to demonstrate what the real demand is for paid digital distribution.”

[...] Selling music via downloading is less expensive than manufacturing compact discs and selling them in stores. Customers can listen to 30-second clips of songs before buying them and purchase only one song instead of a whole album. Most services sell CD-quality songs for 99 cents and full albums for about $10.

But in the same way the entertainment industry fought the advent of radio and VCRs, record labels have sought to slow digital distribution because it threatens their current business of selling tapes and compact discs. ”The music industry has fought technology at every turn,” said Jerry Goolsby, a business professor at Loyola University New Orleans.

[...] Profit margins are thin in selling music online. After the credit card company, song publisher, and record labels take their share of the 99 cents per song, only 8 to 10 cents are left for the digital storefront’s operator, Wolf said. So Apple and others hope to make their money selling hardware for playing the songs. Roxio, Napster’s owner, also sells CD burners and recently struck a deal with Samsung to sell music players under the Napster brand name. Dell said it plans to create a paid download service and begin selling portable music players before the holidays.

So far Apple has been succeeding, as its iPod sales have risen sharply since introducing the music store. Analysts say opening the service to Windows users can only help. Apple said yesterday that it sold 336,000 iPods last quarter, a 140 percent increase from the same period last year, making it the best-selling digital music player on the market.

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