April 21, 2004

I Hope Larry’s Watching West Wing [9:32 pm]

Tonight’s episode has one plotline that is all about media consolidation — and the writers seem to have been out for blood. TelevisionWithoutPity will have a good writeup in their section for the show for anyone who’s interested and missed the episode.

(Update: Note that copyright (enforcement?) also plays a role, as something Josh wants to take away from an offshoring treaty after he gets the wool removed from his eyes.)

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NES Tunes At Clubs [9:24 pm]

A fun story from Salon, with a copyright angle: Nintendo rocks!

The opening act has just finished at Northsix, a Brooklyn, N.Y., hot spot, and the crowd of 300-plus is crying out for more. But as the next band, the Minibosses, climbs onstage for its set, something seems a little odd. The players move all the vocal mikes off to the side. And once they’re ready to begin, frontman Aaron Burke, 27, announces the first number, one that you’re not likely to hear in your average club: a song from the video game “Goonies 2.”

[...] Lawyers at Nintendo “either don’t know what the answer’s going to be [to the rights question], or they’re waiting to see how it plays out,” says Anthony Berman, an entertainment attorney in San Francisco.

“Honestly,” Burke says, “no one is going to do anything about it until someone starts making some major money off of it.”

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Music Industry Contracts [9:09 pm]

Madonna’s contract with Warner for her company, Maverick, must be a doozy — Madonna’s Label A $66 Million Loser

Last month, Maverick sued Warner Music for $200 million, claiming breach of contract and fraud. The Warner documents were part of a pre-emptive claim filed in a Delaware court asking a judge to find that the company had fulfilled its commitment to Maverick.

The documents claim that in order for Maverick to get out of its joint venture with Warner Music, which is up at the end of the year, Maverick will have to pay $92.5 million, in addition to the value of Warner’s interest in the label. The price tag includes the $66 million in losses, a $20 million loan and $6.5 million in unrecouped fees.

According to Warner Music’s filing, if Maverick cannot raise the money needed to buy itself out the joint venture, Warner can convert the label into a “purely passive economic interest,” taking all control of the label away from Maverick. In this case, Maverick would reap no profits from the label until the losses were repaid.

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Streamripping [9:03 pm]

Slashdot has a posting on the evolution of stream-ripping — software that captures streamed online content: Shifting From P2P To Stream Ripping. Is it really covered under the AHRA? If this continues to gain in popularity and capability, then I’m sure we’ll get a chance to find out.

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EU: DRM or Fees; But Not Both? [7:56 am]

EU referees digital royalties spat

The European Union is moving to defuse a clash between technology companies and national agencies over who should collect payments for digital royalties.

The battle is brewing between companies that use digital rights management (DRM) services — such as Apple’s FairPlay — that limit copying, and royalties collection societies in individual European countries that are seeking to impose new fees on digital devices, such as the iPod.

Chairman of the DRM and copyright task force of the European Information, Communications and Consumer Electronics Technology Industry Association Jens-Henrik Jeppesen told the International Herald Tribune (IHT): “Europe has to decide if it wants to go for DRM or go for a taxation model, but consumers should not be hit with both.” [emphasis added]

There are concerns that as levies are increased, consumers using DRM systems that incorporate payment systems may find themselves paying royalties twice – once when they purchase new digital recording equipment, like the iPod, and again when using a downloading service that uses digital rights management.

But levy collection agencies and the IFPI (an international recording industry group), argue that it will be years before DRM is widespread enough to ensure copyrights are adequately protected and that in the meantime levies are playing a crucial role. European legal counsel for IFPI Olivia Regnier told IHT: “Not everyone is paying twice - there are still plenty of cases where there is no payment and no levy.”

The DRM Working Group’s efforts are generally documented here. Here’s the press release that led to the MacWorld article: Copyright: the Commission advocates European legislation on the governance of collecting societies, which points to Intellectual Property > Official Documents (legal texts in force and new proposals).

And, from there, we find the report: The Management of Copyright and Related Rights in the Internal Market From page 10:

Member States also have to take into account the application or non application i.e. the degree of use (Recital 35) of technological measures when providing for fair compensation in the context of the private use exception as permitted under Article 5(2)(b). The Directive requires Member States to arrive at a coherent application of the exceptions. The extent to which this has been achieved in relation to the application of the requirement for fair compensation will be assessed when reviewing implementing legislation. Any such review will include, in particular, the criteria which Member States refer to or will refer to in order to take such application or non-application of technological measures into consideration when determining remuneration schemes in the context of the exception for private copying. The Commission has a specific mandate to do so within the context of the Contact Committee established under Article 12. A wider availability of DRM systems and services can only bring additional value to both rightholders and consumers if it contributes to the availability of protected content and facilitates the access of end-users to protected content. Transparency on the criteria and elements that Member States use or will use to take into consideration the application or non-application of technological measures must therefore be ensured and clarification provided through the required implementing measures.

Arguably, the widespread deployment of DRMs as a mode of fair compensation may eventually render existing remuneration schemes (such as levies to compensate for private copies) redundant, thereby justifying their phasing down or even out. At the same time, in their present status of implementation, DRMs do not present a policy solution for ensuring the appropriate balance between the interests involved, be they the interests of the authors and other rightholders or those of legitimate users, consumers and other third parties involved (libraries, service providers, content creators …) as DRM systems are not in themselves an alternative to copyright policy in setting the parameters either in respect of copyright protection or the exceptions and limitations that are traditionally applied by the legislature. In this respect, the Commission is also under a duty to examine within the context of the Article 12 Contact Committee, whether acts permitted by law are being adversely affected by the use of effective technological measures (so called “technological lock up”).

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Ed Felten on the Nonsense of Universal, Compatible DRM [7:40 am]

A Perfectly Compatible Form of Incompatibility

Scientific American has published an interview with Leonardo Chiariglione, the creator of the MP3 music format and formerly head of the disastrous Secure Digital Music Initiative. (SDMI tried to devise a standard for audio content protection. The group suffered from serious internal disagreements, and it finally dissolved after a failed attempt to use DMCA lawsuit threats to suppress publication of a research paper, by my colleagues and me, on the weaknesses of the group’s technology.)

Now Chiariglione is leading another group to devise the ultimate DRM (i.e., anti-copying) music format: “a system that guarantees the protection of copyrights but at the same time is completely transparent and universal.” He doesn’t seem to see that this goal is self-contradictory. After all, we already have a format that is completely transparent and universal: MP3.

The whole point of DRM technology is to prevent people from moving music usefully from point A to point B, at least sometimes. To make DRM work, you have to ensure that not just anybody can build a music player — otherwise people will build players that don’t obey the DRM restrictions you want to connect to the content. DRM, in other words, strives to create incompatibility between the approved devices and uses, and the unapproved ones. Incompatibility isn’t an unfortunate side-effect of deficient DRM systems — it’s the goal of DRM.

A perfectly compatible, perfectly transparent DRM system is a logical impossibility.

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Internet Router Security Issues [7:35 am]

At this point, I’m just going to post links until I figure out what they’re talking about, although it appears that this is largely a challenge to the border gateway protocol, something that helps work routing as we develop workarounds for the limits on IPv4 addressing.

Slashdot offers up some insider information: Secret Repairs Preceded TCP Flaw Release

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Is It Just Me…. [7:09 am]

Or does this seem like one of the nastier sorts of boondoggles, raising some important questions about just how the FCC goes about its work? Not to mention revisiting the question of spectrum allocation overall…. NextWave Pact With F.C.C. Ends Airwave Dispute

“This is telecom’s version of ‘Bleak House,’ which is to say the litigation has gone for so long that it’s hard to remember what it was about,” said Blair Levin, an analyst at Legg Mason and former senior official at the F.C.C. “The great irony is that mistakes were made by every party. The government made some mistakes. The parties themselves made some bad calculations. Yet competition in the wireless sector has done well.”

NextWave was founded in 1995 by Allen B. Salmasi, a former top executive at Qualcomm, and financed by a group of veterans of Drexel Burnham Lambert, the defunct investment banking firm, and a group of hedge funds. A year later, NextWave won the licenses in two auctions under a plan in which it agreed to pay $4.7 billion over 10 years.

But the company said the licenses were devalued by later F.C.C. auctions. It refused to pay for them and sought bankruptcy protection under Chapter 11. A stream of litigation and lobbying by the company and industry rivals ensued.

The government ultimately confiscated the licenses, and resold them in an auction in 2000 for about $16 billion. The biggest winner was Verizon, which bought $9 billion in licenses. Other winners included business partners of AT&T Wireless, Cingular, VoiceStream and Sprint.

But NextWave challenged the auction and said that federal bankruptcy law prohibited the F.C.C. from taking the licenses back. When the Supreme Court agreed to hear the case, Mr. Powell reached a preliminary deal to settle the dispute that failed after Congress refused to adopt the necessary legislation to put it in place. (No such legislative action is required for the deal announced today.) The court ultimately concluded that the F.C.C. violated bankruptcy law by taking the licenses and auctioning them again.

The long-running fight has yielded millions of dollars in fees to lobbyists and lawyers and also provoked a significant political battle in which both sides raised huge sums of money for many of Capitol Hill’s top lawmakers.

[...] “The Department of Justice, Chairman Powell, and his colleagues at the F.C.C. should be applauded for clearing up these unsettled issues and finally bringing to an end the eight years of uncertainty regarding the use of this valuable spectrum,” said Steve Largent, president and chief executive of the Cellular Telecommunications and Internet Association, the industry’s main trade organization. “It is great news for American consumers that the wireless industry can now put this extremely valuable spectrum to use in delivering innovative, competitive services to urban and rural areas.”

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Competing Views on the Future of the Movie Biz [6:49 am]

Studios Rush to Cash In on DVD Boom

Not since the advent of the videocassette in the mid-1980’s has the movie industry enjoyed such a windfall from a new product. And just as video caused a seismic shift two decades ago, the success of the DVD is altering priorities and the balance of power in the making of popular culture. And industry players, starting with the Writers Guild, are lining up to claim their share.

[...] “There’s not a sector of the entertainment industry to which DVD is not a significant, if not the dominant, contributor of revenue,” said Scott Hettrick, editor in chief of DVD Exclusive, a trade paper, pointing to the movie and television libraries being released on DVD. Even in the ailing music industry, he noted, music DVD’s are an area of growth.

“This is an unprecedented, huge influx of new money into the motion picture business,” Dan Petrie Jr., president of the Writers Guild of America, West, said of the DVD boom. Union negotiators are demanding higher royalty payments in contract talks under way with the Alliance of Motion Picture and Television Producers, which represents the studios. Whatever deal is finally struck when the contract runs out on May 2 is expected to be followed by all the other Hollywood guilds.

While few dispute that DVD’s are low-cost, high-profit items for the studios, the studios say they need every penny to survive in a time of dwindling profit margins, and with the menace of piracy looming large. The average movie now costs $64 million to make and another $39 million to market, according to the Motion Picture Association of America.

[...] The profit margin for studios is significantly higher on the laser disk format. A new study by Jessica Reif-Cohen, an analyst at Merrill Lynch, found that studios make an average of 66 percent profit margin on the DVD, compared with just 45 percent profit on the videocassette. She concluded, “We believe the perception of low returns on feature film production is no longer valid.”

[...] “Right now the studios are making money hand over fist,” said Mr. Lesher. “But in five years when you can download a movie as fast as a song, that will go away.”

Mr. Gianopulos disagreed. DVD’s will last “because of the uniqueness of that experience,” he said. “It’s no longer `I saw that movie.’ It’s `I saw that movie, now I’m going to see multiple dimensions of that movie.’ That’s why you want to own it.”

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