May 14, 2004

Charlie: Pressing Issues [4:01 pm]

<< Warning — this is bound to be sketchy — especially if previous year’s experience is any guide >>

Larry, Terry and Jonathan are at the front table; and Charlie is standing behind them

Charlie calls us to order

OK - so what do we mean by pressing issues? In part, what aren’t we covering that you would like to hear us speak more about. So, you need to think about some of them, while I prime the pump - Jonathan Z announces he will be blogging via PowerPoint

Charlie has some provocative questions: Why should we care about the trivial SETI thing? There’s only one Apache: what are you expecting to get from this organization

Y: If you think of Larry’s talk this morning, it describes a certain silliness/messiness that emerges out of rent-seeking in a certain way of thinking — the market and the price system is there to solve our problems. And the market worked better than the “other” - communist society.

Now, we are seeing a change in technology, but we are failing to take advantage of it fully because we are waiting for a market to develop that helps solve it. Well, maybe the market is not the way to handle the new opportunities.

It’s not about Apache: it’s about the kind of ways that we organize society to make us all better off. With this technology, we are increasingly limiting our freedom in order to make the technology fit the current market ideology.

Charlie: C’mon, I want to make money. How does this help me?

Y: You want a degree of respect; you want a set of services and nowadays, you need to separate what you do as a producer and sell it, getting money that allows you to acquire these things. Money is a means to something else.

C: Maybe; but what are we going to get from this new way of organizing

Y: We’re going to get a way to speak our minds to others rather than only accepting what others say, we will be able to make amovie, rather than just watch; we get to filter what we want, rather than rely on others; we get to create and produce with having to raise capital — that barrier to entry will fall;and we will be better off .

You can still earn money; but you have a larger universe for doing something else

Tim Denton: All this P2P stuff will allows us to test propositions across huge populations; science may return to something that amateurs can engage in. There are inquiries that depend upon thousands of experiments — a new way to do science

As products and services get to be less material, the economy may become something that is also less dependent upon physical transformation

Jay McCarthy: It’s interesting that we can’t do all those things; even though Yochai says we can’t. And what if your job is in an industry that we’re talking about blowing away?

Luke Sheppard: Important to some of us is the question of operating systems. Linux v. Microsoft. There are other ones, say BSD Unix. Mac OS X as a commercial derivative. To the average user, it may be irrelevant. But in the computer world, this is really important.

A while ago, it seemed like your only options were Win98 or command line Unix. Training wheels, or a helicopter. Lots of interations since then; some innovated to create something that they wanted

So this is something that we get out of P2P production.

Charlie: granted, but Yochai says this is something new at a higher level

Yochai: Why is this distnguishable? We;re getting new useful thngs, without the notions of property that so many assume we have to rely on

Larry: Here’s a bit of research being done thatmight suggest something new — play as work, or work as play. (Ender’s Game) We give kids a “game” to do, that turns out to be doing really useful things - so by making “games” be productive could be really effective.

But, what stops us from doing this is a set of assumptions about how the world works (ideology) - we need markets, rents, etc to organize an effective way to do this. It might work, but it might not — but right now, we aren;t even trying

Chuck Rosenberg: Where does government fit into this scheme? Google may be social networks, but there is hardware at the root.

Yochai: Pure plays are rare — mixed strategies are more common (Yochai avoids ideology as a word, even though I would argue that’s exactly what he’s talking about — ‘models’ instead)

(Note, capitalism is not a pure play either, by the way — there’s lots we do that has little to do with idealized pure market economies)

Yes, there are some government interventions that may incent certain kinds of actions — but how do you predict? You need to separate out the effects of social production

Dave Winer: I want to make money doing software. We had BloggerCon — no speakers, no audience — instead we had some leaders and a bunch of participants. The attendees were participants, and their participation made it work.

Can’t we try that here? Come down off the stage and let Charlie make us discuss, for real. Let’s do it.

Why shouldn’t software developers get paid? Law professors get paid.

Apache is a tool we write for each other; writing for uses is hard work, and we programmers won’t do it for free.

<<the humm vote leads to a split — yochai and larry sit down >>

Charlie points to the Amy Harmon article I cited this morning before I came to ILAW — digital technologies changing the flow of information; and less control by the government; individuals set us up to learn more.

<dead silence>

Q: A market change; the media is no longer thrust upon us; we can now participate. Everyone can create the story collaboratively; participating in the story collection and maing the story.

Charlie: The Berg video was downloaded; the NYTimes gives us a URL to consumption junction — When I went there, it was a porn site (who fooled Amy?)

Q: Margaret Stock — Prof at West Point; national security law; — In the past, the government could achieve this kind of control; not so easy these days. In the Pentagon Papers, Ellsberg had to put in days and days of xeroxing to get the information out. The NYTimes had to intervene to turn it into a usable story.

Today, an individual with a digital camera can make the news.

Charlie: I represented Ellsberg in the CA case. I met him when he tried to peddle the information to Harvard; Harvard Law wouldn’t let him release it through the Law School Ames (competition) (www.ellsberg.net)

The NYTimes ended up firing the lawyers that spoke about what couldn’t be done; and got lawyers who wanted to see what could be done. A kind of permissions culture problem

“When in doubt, take it out” — the lawyers are asked to be conservative

Prof: I’m told that the Senate Intelligence Cmte Staff wanted to read the Taguba report; classified secret, no foreign; can only be read on a secret authorized computer — need special comptuers. The Intelligence Cmte members, even though they could read it at NPR, they couldn’t look at it on their computers — the law and the structure of the network said it was illegal to view it on their computers.

Denise Lear of NPR: I chose to put this report on NPR’s WWW site. I note that you said it was a national security issue; the government always says that when we aren;t supposed to see something. This is a weird and continuing problem

Will Eldred lead to a more expansive fair use construction.

Larry: The problem is that fair use is only as broad as the most conservative lawyer thinks it is — until it’s litigated, a lawyer cannot know for sure; and the consequences are huge — that’s a lot of exposure to ride on your judgment.

Posner and Larry argued about the Free Culture example of the Simpson’s clip in the opera documentary - $10,000. Posner wrote that this is clearly fair use; Larry told him,. forget theory and see what the practice is. So he did, and then wrote an article that the lawyers are being too restrictive in their construction of fair use in their advice.

So without a fix, fair use is unusable.

But that’s the wrong question — we need something else; fair use is unworkable for the kind of creativity that we want to engender and promote.

Will Richardson, high school IT: This is an education issue for me. How to teach this to kids? What sort of strategic teaching is needed to get these ideas across. The freedom/information literacy/information creativity thing - how to sort it, filter it and teach it

Larry: This is about bringing together the producer and the consumer. Learning how, in the context of a film, is show how presentation changes the meaning of the facts presented. Teaching kids how to understand the content of media in new ways

By participating, they get to see what’s “inside” of creativity; learning how this stuff really works. It’s not truth, it’s what is presented. That teaches something crucially important for participating in modern society; how to tell the truth; how to acculturate what the truth is.

Participation in the construction of the truth.

Right now, most of what kids do in blogs and other things, people will say it’s illegal — and that’s a problem

Terry: I agree, but I have another point.

The primary way that educational materials are distributed to kids is in the form of hardbound books made by major publishers; established by school boards/districts. There are disadvantages to this mechanism — expensive, and a disincentive to update; got to buy the expensive update — finally, it’s poor for disabled students

There exists a narrow provision that allows for conversion into media suitable for students with handicaps (braille, read aloud, etc). And there are companies that capitalize on this - they buy the textbook, and convert –usually with a digital intermediate form

SO there’s an initiative afoot to facilitate the more rapid distribution by standardizing and liberalizing the digitizing of the material — via a standard XML markup system.

OK - sounds good; but if you’re doing that, why doesn’t everyone get the advantages of digital formats? In digital form, the upgrades are now available; other advantages.

Income problem for hardware, but can be overcome. Will the publishers go along?

They see some advantages, but some threats. Unencrypted content, p2p corrosion. Not so bad; but a bigger one is this. Once the idea that books should be digital, the idea that a SINGLE book is the way to learn a subject weakens — a collection of several pieces would be a better way to assemble the necessary pieces. Publishers fear this

Why? Because of the collapse of the idea that a single source is the way to teach — educationally liberating, but upsets the industry.

Will: WikiText is a site that let’s teachers do this kind of thing

Yochai: Turning this into a teaching tool, the teachers will learn this technology; and possibly this way of working

Celebrating free software is no more a criticism of writing software, than blogging is a criticism of professions journalism

Jim Flowers: I just spent the last legislative session pushing this very agenda (digital texts) - One of the obstacles was the idea that, once it’s on the computer, it should be easy to make a digital form. Well, not exactly. Formats are NOT common; and this is a constraint.

Following the rules, these kind of format issues make this terribly hard to accomplish.

Moreover, there is a structural problem — the way that teachers teach, and how accountability works within the system. A statewide curriculum for K-12. On one hand, it’s vague — master this material. But, interpretation in the context of accountability leads to a very mechanistic implementation.

Until that culture gets broken, these kinds of innovations won’t be prevalent.

Charlie: What about you , Jonathan

Jon Z: Well, let’s look at H20 - a set of GPL code that gives people a way to discuss a topic and exchange ideas. Dovetails with CC and other ideas we’ve heard about today. A way to build up a thinking community; to exchange and compare notes about how it’s going, and how it’s being done. A framework for sharing teaching and learning experience

Many of us are optimists; technology is cool; finding opportunity in the new tech. Next, if it takes off, the question of who gets threatened. And threats are perceived, and usually more urgent. And, as the urgent gets us away from thinking about the important.

Charlie: This idea, H20, is another example of Yochai’s new kind of production.

Rebecca McKinnon (KSG): I’m interested in the digital divide. How relevant is this discussion of the last two days to you and your country? We are talking about this possibly great wired society, but the reality is that there will be huge gaps of opportunity out there that will be a huge problem.

(Beruit): The topics are relevant, but the digital divide is a real factor. For us, the issue is access to the internet. The resources aren’t there

(Venezuela): Access to internet is one of our major goals. Few people have such access. Copyright and IP are also key problem — how to develop software / free software. We see this as being an important issue — how to get tools that are not protected. Income is a huge barrier to progress in this area

South Africa; Phillip Schmidt: While the story has been about the means of production being in the hands of the consumer, this is not the case in Africa.

Can such countries leapfrog the evolutionary path that countries have trakced in the past

(Uzbekistan): A more general question — history says that technology and copyright have been antagonists; c.f., Sony. Will technology win, or will this new scheme win?

(Senegal): There are lots of issues in Africa that have been touched on. But some could be adapted to be discussed more specifically in that context. Licensing/pirating means that people have access to these tools, but I’m not sure what happens with these licensing regimes we promote here; people aren;t going to give them up. Music, as well. People will rip/mix/burn.

In an open air market, people with their own art/crafts have to compete with the copyists — and the competition will make these goods better overall. Protecting IP also means that there will be losses if creativity is lost.

Trade practices: treaties are built used to introduce IP rules by “backdoors” and trade agreements end up having surprising consequences for the cultural development in these countries.

Heather Ford (South Africa): I’m from the CC South Africa Project at Stanford — wanted to use the opportunities of CC in other contexts. Trying to get African culture shown in such a way as to get outsiders to recognize the culture of africa, to show the africans the value of what it is that they do

(Colombia): (1) Concepts like free culture are important for developing countries; access to a public domain to build upon is key for us to develop

(2) Free trade agreements increasingly are introducing the US IP regimes into developing countries; so it matters to us that you get it right; because we will all end up in the same place via the trade agreements that we all have to sign

(Philipines): The present internet technology has brought a new notion of national security — cyberterrorism, cybercrimes. Human security should be a greater focus of the efforts that we put into internet development and policy.

(Poland): In Poland, an issue is the problem of commercial piracy. Poland is an IFPI target right now. As a result, CC has a tougher row to hoe. Doing innovative things in IP is hard and viewed with suspicion.

Peer production — sharing and copying essays in school; they work hard together to develop a product and share it; poor for pedagogy, but cooperative efforts.

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Yochai: Peer Production [1:57 pm]

<< Back from lunch, although we seem to be assmbling a little slowly given our late start >>

Yochai preps us for a technical presentation (after lunch!)

Free software and peer production, generally. Comparison and contrast with other patterns of sharing in private goods - distributed computing, carpooling

These things confront us with a set of economic puzzles

1) Why do people share? Mainstream models say that in market relations we usually make things; but sharing is something else that is not a market relation, yet production still seems to happen in a sustainable fashion

2) What are the feasibility conditions for large scale effective sharing and social exchange

3) Why is it efficient / can it be efficient?

4) We are reaching a stage where “social production” will become a more important part of the production system in advanced market economies.

Free software is a demonstration that this kind of production does seem to work

For example: Apache — continues to hold dominant share

Note: it’s not something that people use to save a little bit of money. It’s used because it works — well

So, free software is measuarably effective

Another example: GNU/Linux (He’s been talking to R. Stallman!)

Harder to measure, but it still seems to make the point that free software development is effective and a working model.

An odd model — no exclusive property control; yet it works. Copyleft, more or less, is the operating mechanism. Not all, but the majority - 80%+ of SourceForge projects

So - it works. The first generation of responses to this surprising result is that there is something special about software development. Another one is that software developers are a quirky lot.

Both of these theories are wrong. We see peer production all around; software is easier to see, but it’s in a lot of other places, done by lots of other sorts of people. And it’s starting to spread out of the realm of cultural products and into the world of material/physical goods

Not completely new: academic work is a peer production process; when you search on Google, the results come from a kind of collective effort to point to “good” sites.

There are, however, some more formal ways where this happens.

Things we want:

- content

- accreditation

- distribution

For example: Mars Clickworks - used to be that images of mars were sent to NASA and PhDs would mark craters on the pictures and map them. Idea: let’s distribute a bunch of little pieces of these pictures and let volunteers help to mark craters.

6 months later, they compared the volunteers work with the PhD’s work. Results, practically indistinguishable — one by PhDs, one by volunteers.

OK, that’s cool, but not really clever.

OK - how about something subtler, like op-eds. So, we get kuro5hin. A group of moderators keep looking over writing, add comments and eventually some of them rise to the “top” — the front page. A collective effort for peer review of editorial content — co-produced opinion page. Content production + accreditation/certification. See also Slashdot.

Then we get the Wikipedia — an online collective effort to construct an online encyclopedia - about 140k essays for far in English. You get to edit text online; transparently. Discussion of the sources, authorities. Anyone can get in; anyone can contribute; comment. All held together by social norms and standards of communication.

How good is the Wikipedia? Maybe not Britannica, but on the order of other online encyclopedia.

Google outsources its single most important function to Google. Pagerank is based on how many other web pages point to a particular site. The more links, the higher the rank, based on an idea that many other people thought it was worth pointing to this particular URL. Accreditation and relevance based on peer production.

Note that Google is not neutral — political notions can also be incorporated into this ranking system, and we get ranking that reflects something other than pure accreditation. Overture, a market driven indexer, suppresses some of these political angles of a search

How about Yahoo!? Yahoo!’s list versus the open directory project - note that the results are different, in that the open directory project notably points to many many more sites than Yahoo! does - say, online legal journals

Let’s examine other domains; like material things. SETI@Home (distributed computing); Open Wireless Networks; KaZaA/Freenet; Skype; Carpooling

KaZaA is a social network for music distribution — sharing of bandwidth, storage, content. A major data storage and retrieval system, including the medium of storage, the retrieval systems, and the communication system

Skype - VoIP on top of the KaZaA system. Carpooling; shared resource on a social basis, rather than pricing

Details: Distributed computing - SETI@Home - top 500 supercomputers in the world - SETI@Home has a huge amount of processing power that is comparable to these supercomputers. 4.5 million users giving away their unused CPU clock cycles to achieve supercomputer-level performance. Folding@Home - about 572,000 users

Very interesting phenomena–how do you get people to do it?

All sorts of different mechanisms.

(1) A little feedback on how much work you’ve done

(2) A little information on the scientific context/content of your work - climateprediction.net - you’re running your own little world model; and you can see what your world is doing - a pretty interface that is very attractive

Note that doing this takes a lot of work. Reframing a problem to distributed computing requires a lot of effort to figure out how to decompose the problem into smaller ones that could be apportioned out to other machines, whose results can be reassembled to answer the original problem.

The original developers of parallel computing algorithms assumed that the machines needed to be nearby - an assumption of careful coordination of problem.

Another design criterion could be that we don’t want to require that the individual problems can be done without coordination — more autonomous. With a network, this becomes distributed computing.

What kind of motivations?

- Agonistic giving - I give, that means I’m great

- Non-agonistic giving - pure sharing; higher goals; help humanity

- Individualist and solidaristic — teams; assertion of my individuality

- Reciprocity? — p2p networks; OWLs

Seeing these sorts of motivations in the systems, is this organized? Or just random shots at getting it to work?

There are some “pay” to participate systems. These interfaces are generally focused on how much $$ you’ve raised. The data is not quite there, yet, so it’s hard to measure their success, but there is not an upsurge in this yet. (Gomez performance network) But they do seem to demonstrate a proof-of-concept — it can be done, just doesn’t seem to be big

Carpooling: Most of us travel in single occupancy vehicle; of the remaining 25% that are high occupancy; around of them 2/3 carpool. A commuter transport system that is organized around a social, rather than a market, network

Operations of carpools — money is not generally a part of the system; when it is, it seems to be more about “let’s share the cost” rather than a price system, where there are auctions for service to the highest bidder.

Slugs — people who wait for a ride from complete strangers so that the driver can occupy the HOV lane; some norms — no $$, no talking, no smoking — complete strangers engage in this to get to work

These things exist; 3 kinds of questions

1) What are the motivations — who pays what to whom for what

2) What are the feasibility conditions - why more now than earlier

3) Is this a good idea? Bad one? Efficient? (Leaving out the politics for the moment — the politics matter and may mean something important from larger perspectives of “good” or “bad” ideas — so, even though I’m not going to talk about it, don’t mistake that I personally think it’s a good idea <G>)

Motivation:

Lots of motivations - intrinsic ones (it’s fun, part of community); extrinsic (learning to program; we’re making our servers run better so we can sell more)

This maps onto a broader set of debates on motivations that are rooted in an argument between Titmuss and Arrow - study of blood supply; Titmuss claimed that using market incentives to give blood, you crowd out those who would donate. Arrow argued that true altruists shouldn’t care, so adding money just increases the supply. Less money just means less tainted blood.

30 years of research later have explored this in more detail. Bruno Frey takes social psychology to explore this problem. If you are in a cultural context where people believe that there are things that well adjusted and respecatble people ordinarily do, and you offer money to them to do it, they get insulted and decide to stop,

Another model: Benabou and Tirole — when people are incentivised by people who can evaluate them more effectively than they can themselves; and we add money to the evaluation process ($ for grades) you actually disincentivize the activity — some people will opt out while the money brings in some

If it’s only a little bit of money, you lose more to (insult | ego loss) than you get from the market incentive - so you end up worse off

Lots of emprical evidence says there is something there; money leads to people to “buy leisure” rather than “work harder” (lots of Bruno Frey)

Here’s an odd one — Frey and Oberholzer Gee 19977; Kunreuther and Easterling 1990 — offer money and the NIMBY opinion increases

This is not entirely fulfilling an explanation — barter seems like it would also be a part of this. Essentially an instrumental exchange with social underpinnings. (social exchange and social capital) We invest in networks of social production so that we can become more effective overall. Social capital is not fungible (money can’t buy you love). You need to invest in a social network to be effective overall. Some empirical evidence for this explanation as well.

Possibly we need to combine these –

1) diversity of motivation

2) reward derives from more than money

3) the relationship of all these rewards is complex; they are not purely additive

(go to a friend’s home for dinner and leave some money for the meal — a net loss)

the presence of money is culturally mediated - it may be nice to get, it may be an insult or worse

What does this mean: given this diversity, organization is a key piece of thinking about the nature of the motivation. What is the organization that makes this work? (just as you have to work to turn problem solving into parallel problem solving into distributed problem solving, so too you have a design problem in peer production to get the motivations to reinforce effectively)

The key to this organization seems to be separability of the task into a small set of tasks, and being able to reassemble. (transaction costs)

Enabling characteristics of this:

1) Human creative labor (individualistic, self-actualizing activities that are “mine”)

2) Shareable goods — goods that come in units that are not necessarily equal to the functions that we want to get out of them (computer more powerful than you generally need) (lumpy good); goods that are also cheap enough to buy without much pain, even if they do more than we really want most of the time (mid-grained).

3) the first two are feability conditions; if, in addition, there is then a social network that allows for/enables transactions that would otherwise have been too expensive to undertake, we can begin to have this kind of social production. Now that the technology is in the hands of many many people, it becomes possible not only to do this, but to produce something noticeably important

Next question: Is it efficent?

Creative labor is highly variable; lots of internal motivation required; hard to manage and organize.

Peer production instead is an open invitation to create; and we self-select as to when we’re ready; and what we’re ready to try to do

Moreover, firms and markets require crisp definitions of the content of the transation - what is being offered and what is being taken. Details are needed. In social exchange systems, we can operate more loosely

Both social systems and markets have high setup costs. At the level of the transaction, the little offerings are hard to handle in a market (micropayments and the associated microcontracts are expensive to negotiate and enforce)

We also get allocation gains; self selection means that the person most interested and most capable can “float to the top” of the community

Pooling of people and tasks increases the combinatorical opportunities to get the best match between people and tasks (we hope)

How to avoid free riders? How to avoid the “tragedy of the commons?”

the cluster of approaches are:

1) Formal rules - e.g. the General Public License (GPL)

2) Social norms - if you want to write your opinion, go elsewhere; we’re doing an encyclopedia (enforcement?)

3) architecture (Slashcode) - in KaZaA there is a measure of productivity; degree of functionality is related to how well you have met the expectations of the community

4) route around free riders; use redundancy to filter out troublemakers

Important is the role of culture (Yoda?)

The culture of societies have to be taken into account when playing these games

1-Levels of trust

2-relative attractiveness of market and non-market rewards

3-experience with, and investments in, social and/or market systems

Up to the abstract level — we are seeing that social exchange can be an alternative modality of exchange that exists in parallel with market systems; and that under certain conditions, these social methods can be reasonably effective and economically significant

Interesting features - decentralization of control and reliance upon social information flows rather than market and firm structures - yet, they seem to occupy the same sort of space in that they are focused on special purpose, decentralized functions that are mediated on the basis of fairly weak personal relations

Is this a special moment in history? Or a tipping point in some way?

It’s hard to tell. So much of what we do still depends on large, capital intensive structures. Moreover, we don’t know how stable a system that uses both of these ways of producing might be. Is there a reason that one should dominate the other? (Note, for example, that the copyright fight, in some ways, seems to argue that they cannot — remember this morning’s discussions with Larry in particular — war, etc)

Summary

- technology has enabled special capabilities

- these interactions have started to move outside of the market

- resource sharing (computation, communication) happening

- emergence of social sharing and social exchange as a way to operate; if we can do so alongside the existing system, we may end up in a very attractive place

Save the Q&A for the last session

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Larry: Free Culture [11:18 am]

I don’t want to compete with lunch, so let’s get started

A response to Yochai’s question should have been, there is no copyright clause; it’s the progress clause

What is progress? The two core ideas of progress are advancing andspreading — advance knowledge and spreading it

Law can both benefit and burden progress; ditto for technology

By raising costs/lowering costs

By offering protections like (C)

Spreading: Libraries - little cells of piracy that allow people, for free, to get access to other people’s work. Free public libraries was Jefferson’s notion of how the government might spread knowledge. For most of our history, this way was burdened by technology — it was costly to implement the notion of a library. It can be done, but a lot of resources are consumed.

Technology, in this case, was the enemy. On the other hand, the burden of the law on this was relatively light. Most uses, in the pre-digital age, didn’t produce a “copy” so the law has nothing to say about it. Resell, sleep on, whatever - until you make a copy, that’s restricted.

There are some kinds of copies that *are* allowed, such as excerpting for criticism, as fair use

Libraries are built upon this notion of “free” and “unregulated” uses of creative works. Technology was a strong constraint; law was a light constraint.

Example: Disney - a fabulous creator; Mickey Mouse leading to Disney, Inc. Of course, “Steamboat Willie” is a mimicry of Buster Keaton’s “Steamboat Bill, Jr.” This mimicry is a kind of creativity that embraces the notion of “rip. mix. burn.”

All the Disney Corp’s creativity is based upon this kind of effort

Again, technology was a limiting factor in this kind of creativity. And, again, the law was a light burden, largely because of the protection of the notion of the public domain. Copyright terms were 32 years or less before 1978; the public domain was largely and routinely enriched. And, the legal culture was relatively free in this respect — lawyers did not chase complex notions of ownership in creative work

Enter the Digital Age — and we start to comprehend the magic of “bits” — the world is going to change, because the costs of the technologies are going to decrease.

In 1930, there 10027 books, 137 still in print today. Brewster Kahle in 2001 decided he wanted to expand his Internet archive to cover books. Take out of print books, scan them, put them on the net for free. Asks his lawyers, how do we do that?

Lawyers say - we have to clear all the rights. Kahle points out that the costs of the technology to distribute these out of print books are small, while the progress is huge. A new kind of library can be created, and its cost will be extremely low. The opportunities for advance, for disney style creativity, can explode.

Several examples: Hey Ya, Charlie Brown; The Grey Album; “Read My Lips” (Tony Blair and Dubya “singing” to each other)

Creativity

Creativity enabled by digital technology; that alters the democratic potential of a wide range of people who get to participate in this kind of creativity that they could not have been able to afford and undertake in the past

Changing the way that culture can be made/or remade

Bottom up democracy; peer to peer communication - to advance and to spread in the sense of progress. Much bigger than the Framers had imagined — if the law allows it

Now, it’s the law that is the potential instrument to block this — the copyright war

In the mind of certain industries, “digital == death” — and successful lobbyists have manged to convince the lawmakers that digital technology is an assault that must be stopped

Copyright law has radically changed in its power

(1) term - started as 14 years, now life + 70 or 95 for corporations;

(2) renewal - there used to be a renewal requirement; no longer

(2) scope - there used to be some formalities, you had to ask for copyright protection, otherwise you lost it - registration, a symbol (c), and a fee for renewal

In the past no more that 10% of works before 1800 asked for (and got) copyright protection; up to 25% in 1976

After 1976, no more formalities, everything is protected by definition - locked up under a system that says you have to ask for permission to use

(4) force - used to be that the law regulated; courts and humans; discussion (e.g., the Marx Brothers v. Warner Brothers over Casablanca) meant that insane claims had to get a public hearing and get a judge to agree

Now, technology can be this without asking a judge about it - the eBook reader example - limits on copying, printing, read aloud - set in the program, not in the law.

And, you can’t hack around this constraint, because of DMCA anti-circumvention — example, the Aibo hacks to teach the dog how to dance

Law protecting the extremes of code

In the digital age, everything that you do requires the creation of an image (not exactly - “communicating” a digital object does this - playing a CD in a CD player/or computer doesn’t create a copy)

(5) concentration - never before have so few been in a position to control the way that all people can create

This expansion burdens progress. So, back to Brewster Kahle - how do you go through clearing copyright when there’s no record of ownership; presumptively owned, but you don’t know how. The property has become unusable; permission seeking limits speech - “:to speak, you have to get permission first”

2002 - Uncovered - documentary about the Iraq war - was to be released on DVD this year - wanted to include a 1 minute clip of the President’s interview with Tim Russert on Meet the Press - “does not make the President look good” so, no.

Here’s a speaker on the subject of a issue of political concern; but you can’t use the president’s words. What happens if the President only appears on shows that can use copyright to restrict speech; what happens?

If this were just about getting music for free, it would not be worth the time se’ve spent. There are deeper problems here. In the digital realm, the law has become the more restrictive element, and the technology has relaxed the limits dramatically.

Where is the justification for giving the law this power to limit speech so powerfully? Since 1976, the copyright regime has changed the nature of our ability to speak - increasingly we are a permission culture, rather than a free one

It burdens progress for what? What are we getting in exchange for this?

Direct costs: progress, libraries, economic growth

Collateral costs:

(1) the prohibition war - they sue 12 year olds, we say “fine, reject the law” (Pepsi’s I Fought the Law and the Law Won) - freedom is the right to download (IDC Films satire) whatacrappypresent.com

Extremism on one side, extremism on the other side. The rule of law is an unjust rule - so the hell with it. This is terribly corrosive to our society

This was a problem in eastern Europe and communist Russia — living a live that denies the legitmacy of our government and its laws. Their response was to “pacify” the violators - wars of prohibition never work

Rather, we need to write a law that makes peace. Terry has supplied a way to make a kind of peace in this space - and 60 million people a day no longer break the law routinely every day

Radical idea - write a law that people will obey.

(blipvert on Creative Commons - to save time)

To conclude:

While CC is hopeful — look at steamboat willie - the goat has eaten the music; the music stops - so, should we kill the goat? Or should we find a way to use the way that the goat/internet works, we can still get progress

HR107 (larry testified wednesday) the DMCRA - technology can’t block non-infringing use. So there was a hearing. Ignorance in Congress about fair use; worse the bill is not about defining fair use — the bill about making sure that fair use can’t be blocked by technology.

But, Congresspeople wouldn’t get past the problem of fair use; other definitional elements (like, is copyright property or not). Irrelevant debate dominated the discussion, rather than the question at the forefront.

Larry says that the subtle approach to explaining the problem isn’t even working — people don’t even understand what the problem is

Charlie: to lead the discussion

First, a bit about Larry’s latest — Free Culture (I need to get my copy signed today, BTW)

Charlie draws a few things from the text: “anarchy is not what I advance here”

Larry: so, p2p alternatives are needed

Charlie: “no one should condone [piracy]” (as in making & selling illegal CD)

Larry: Absolutely

Charlie: “Why Hollywood is Right?”

Larry: Absolutely

Charlie: Expand?

Larry: Well, they are right. The technology makes it possble to infringe in ways and affect their economic interests in new and powerful ways. But, the focus should not be on terminating the technology, but finding a new balance that preserves the necesary elements of the things that both industry and the technology provide.

Charlie: So what is the solution?

Larry: This is hard to get people to understand — we are in the middle of a transition in the architecture of the network — in the way that we get access to content on the network. So, because of inefficiencies in the net, hoarding is the efficient way to have access.

If the FCC doesn’t screw it up, we may have a future in which we are always connected to a high speed internet. In that world, there is much less of an incentive to hoard - people would rather do something other than manage a database of files.

I share with Terry the idea that Congress might be willing to try compensation if they see it as a transition action, rather than a permanent state

Set up a council to estimate the losses; multiply by 5 or X; write them a check in exchange for them getting out of the way of the development of the technology. We aren’t replacing the loss; we’re just compensating them as the industry structure changes - we did it for steel, for the automoible industry. Why not the recording industries

Charlie: If you could change the copyright law, what one thing would you change, right now?

Larry: There are some small changes that would have a big effect.

(1) 50 years after something is published, you need to pay a $1 to retain your copyright. Or it enters the public domain. (The Eldred Act). We also get a registration out of that, so you can track them down and figure out who to ask to clear copyright.

(2) Promote kids learning how to make movies; have the parents in the audience; ask the lawyers to critique the movies — parents would then see how copyright as a restriction on their kids’ ability to create

Charlie: Derivative works?

LArry: Spread (which is not) and advance (which is) knowledge

Q: You want to make copyright law more like trademark?

A: In the sense that registration and rationalization of the rights. Note that the MPAA opposes this $1 registration because it unfairly burdens poor copyright owners - nonsense. People cannot believe that this argument is being made, but yes, indeed, it is made.

Q: One of the things going on in copyright law is that they are shifting to contracts and licensing models to protect rights and expanding their rights, using DMCA to protect some of their mechanisms. What about this?

A: A very important problem. It’s only terrible to the extent that these restrictions get encoded into the technology. In the law, there will be a suit and the contract will eventually be declared unenforceable.

If it gets encoded into the technology, there’s no opportunity to appeal - (no discretion, either).

Contract is not a likely effective tool, in my view. It’s the license that is more potent. That’s why the GPL and CC work - that’s the idea they are built upon. Violate the license, and then you have to answer - not a contract at all. (I missed something here)

Q: Free v Permission Culture — What is the role of constitutional law in this story

A: What is the constitution’s value here? The reason that I took Eldred as a case is that the SC has at least three originalists on the bench — those who adopt strict interpretation of the language of the constitution when adjuducating.

The original intent was to limit the power of publishers - to restrict the permission culture.

Moreover, copyright did not regulate uses of copyrighted material; rather it was specific and limited kinds of uses - regulating publishing/making copies. A tiny set of rights.

So the thought was to work this angle. Particularly since the court tends to want to restrict Congress’ power in many respects.

So the worst moment was seeing the chief justice asking me a question that showed that he didn’t get the question — and that politics will influence the behavior of the strict constructionists (Scalia, Thomas, Rhenquist)

Moreover, the court had developed a separate notion of how property and freedom of speech interrelate. Such that copyright should be favored — and that the “idea people” need to be left out of this kind of argument

The Foreign Affairs article — but, “when is the last time that the court voted against all the money in the world?” Larry rejects that as a construction, but it is hard to find a case where that happened.

It depends upon when these values become salient to the public again. When the public starts to recognize that creativity is something that they are invested in, and that until it becomes a part of the public discourse, the court won’t decide in favor of these values.

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Terry and Charlie: Content Layer & Copyright [8:51 am]

<<Charlie’s getting his sound ready, and Yochai’s around, so we’re getting close to starting; Terry’s at the podium…..>>

Legal Regulation of Digital Media

Terry:

Possible business and legal responses to the problems in the entertainment industry. We assume that you’re familiar (either as common knowledge, or as a viewer of the DVD)

Assumption: The recording industry has been losing money over the past four years. A recent blip, but most observers see it only as a blip. Movies, while successful at the box office, are also anticipating this problem.

Something must be done — and the industry is working furiously to do that. The view is that the record companies waited too long, and are reaping the consequences of their tardiness. They won’t make the same mistakes.

Terry wills start with one of the approaches; Terry’s book expected in August. Terry’s alternative compensation scheme will be his focus for the next 30 minutes.

Charlie will then outline the difficulties he sees with Terry’s approach, and he’ll make a counter proposal.

With luck, we will then get to discuss this in earnest.

Terry: The here are the elements of the book

On the left: (how we got to the current situation)

A-Structure of the Entertainment Industry

B-Technological Destabilization

C-Defense of the Old Order

On the right: (strategies out)

Solution #1: Taking Property Rights Seriously

Solution #2: A Regulated Industry

Solution #3: An Alternative Compensation System

Terry’s alternative compensation system:

Theory — The primary justification for IP is: 1) inventions are public goods, in that they are non-rivalrous and that they are nonexcludable. These features mean that the conventional mechanisms for compensating inventors are inadequate — governments must inject themselves into the system to ensure that inventors will get the opportunity to extract enough rents to justify their efforts to invent

Possible government actions to deal with public goods:

  1. Government supply the good itself (armies)

  2. Govt subsidizes private parties to produce (NEA, NIH, NSF) ex ante stimulus
  3. Government issues prizes/rewards - ex post rewards
  4. Goverment protects producers against competition - private toll roads, patents, copyrights - note that we are generally opposed to monopoly, but this is an exceptional context
  5. Government assists producers in increasing excludability - trade secret laws, DMCA § 1201

For the last 200 years, entertainment industries have been protected through strategy #4; lately, copyright law, as a system, has been failing in the face of the tidal wave of unpermitted copying. So far, this has not gone terribly well

Strategy #5 has become a new approach. DRM and encryption and penalties for those who circumvent.

This is also failing. Once a hacker cracks a code and a clean copy gets out, then it’s all over.

We can keep trying to shore it up; or we can try something else.

How about #3 - the rewards system?

First component: Registration process - back to registration with the copyright office; pay a fee and get a number

Second: govt raises money to pay creators. How much? and How?

Possible criteria: (1) total social surplus, (2) Fair amount, (3) Make creators whole (assume that there’s an appropriate benchmark), (4) Preserve a creative culture

How to do #3 - need some send of what the injury has been up to this point?

Looking at the state of the current industry structure — Composers and artists license their creations to publiishers and record companies; money gets made from selling products using these creations. Money flows back to the creator.

Digital copying hurts which paths? (Figures for both recording industry and movies) Key distinction is that the movie biz all channels into the producer and studio, who aggregate all rights management

Estimation of harm, based on 2000; 479 million for movies (2.067 / 1.2 net is records)

How to raise - taxation.

1-Income tax - $27/houshold/year (vs average of $500/household spent on entertainment today) - politically unpalatable

2-Tax devices and services that are used to enjoy digital content - players, media, broadband internet access — about $5/month on bband (major element of the tax)

Now that it’s been collected - how to distribute it to the artist?

Principle: distribute the sum to artists in proportion to the relative value of the entertainment work to the consumer. Tries to maintain consumer soverignty - i.e., try to incorporate consumer demand notions/signals

How to determine this value? Count the frequency at which the creation is consumed. Get streamers to keep records. CD burning requires us to take surveys and count CD. Hardest is counting P2P distribution volume.

Just counting downloads is poor - testing and discarding is a common mode; download is not a measure of how often it is listened to; note that the current industry also fails to take this into account; finally, ballot-stuffing is also possible (musicians can game the system) Challenges to the system

A possible one would be a sampling regime - look at Neilsen-style regime. Complex and imperfect — we’ll discuss later, but lets move on

OK - money collected ; figured out how to pay it to artists; growth in the monies will come as people move to bband. Same value? No: digital distribution is far cheaper - less than half they currently pay, if fully implemented

Pluses for consumers: Cost savings to consumers; more entertainment available to them; no price discrimination; promotes cultural diversity and semiotic democracy

PLuses for artists: reliable source of income; direct distribution to consumers (eliminates middlemen); expanded opportunity to create derivative works; BUT “moral rights” concern — a loss of control.

Supplier of devices and services: cost of service increases, so demand will fall in the sort term; long term increase in demand will eventually offset this through opportunities; decreased law breaking

Problems:

1) Cross-subsidies, distortions and deadweight losses — the taxes will be paid by groups that do not correspond exactly to those who benefit from the service - unfairness

2) Discretionary government power in the system - temptation by the government to impose their own judgement, rather than leaving it up to the market — lockout/dial down porn

3) Rent seeking - lobbying for more money

4) National/international jurisdiction problems - (issue 1 writ large, worldwide)

Variants: NUL (Netanel)

Will this happen? Not in the US — current political economy of copyright depends upon unanimity among stakeholders in order to accomplish a change in the law

Why explore this, then? Well:

1 - it could get worse, so that they might like this after all

2 - the subscription model of music distribution around this scheme might make a showing that this is workable (Berkman project)

3 - Non-US organizations might get there first - Brazil has a program going on to build the database and the software necessary to implement this

Over to Charlie:

John perry Barlow signaled the tension in 194 when he talked about the move from atom to bits, upon the copyright regime. Entertainment products as “bits” no longer encased in physical bottles like CDs and vinyl. It would be foolish to try to protect the copyright system. 10 years later, what have we got.

Consider Napster, and seminal event in internet history. It was fun, it was terrific; the entire catalog of recorded music was available. Instant gratification; a blast

Three possible outcomes:

1) The industry figures out how to re-bottle the bits - note that this makes copyright irrelevant, because total lockdown means that the trusted system will take care of all uses - the free rider problem disappears;

Can they do it? SDMI/Felten says not yet; Palladium? And what about the “analog hole” — after all, if you can hear it, you have instruments that will still allow you to make copies, ones that are pretty good, if not “perfect” These are all horribly difficult task to accomplish technically, and we’re not close

2) Total surrender (Terry’s system) — give up on copyright; everything is out there, make your copies, do what you like. The premise is that the war is unwinnable, so this system at least makes the artist whole.

But consider the problems: (1) Can’t count well; (2) can’t get the tax right as time passes; (3) can’t keep legislature out of the music picking business; (4) What about derivative works — who gets how much?; (5) What about the global reach of the network

And, when you’re done - we now have a mega-international-government taxation system that controls all the money in entertainment. A good thing?

Maybe there’s a mid-position — what might it look like

Because there’s a terrible problem that we are raising a generation of children who are learning to have utter contempt for the (copyright) law. This is a social problem for us all. Copyright has changed all out of proportion to what it was expected to accomplish. But, there is something to that system, and we should try to see how we might preserve that.

The common culture has changed the way we think about music and ownership. The norm is that we don’t buy, we get.

So, we finally start to get potentially viable business music models. With tolerable leakage, albeit one where it remains unavoidable.

Carrots and sticks - contrast KaZaA with iTunes along these axes of performance - let’s explore these, particularly the “sticks”:

  1. price

  2. Ease of use

  3. flexibility of choice

  4. richness of choice

  5. quality of service

  6. legal risk

  7. sense of justice

RIAA lawsuits - 1500+ with high rhetorical impact, changing at least some ideas about the legality of downloading. But there are some problems with these actions.

Confusion between uploading and downloading — is the offense downloading? Uploading?

How to prove that the file that the defendant was offering was authentically a copyrighted work? Is merely a share folder screenshot enough? The name of the file proves that the file is the copyrighted song? Probably not, since RIAA certainly spoofs bogus files that only match in terms of the titles.

Could be overcome with an audio signature analysis, but the screenshot, which is all that they have presented as evidence (since all these suits have been settled), is not sufficient evidence.

There is then a legal problem: is “making available” the same as “distribute?” Until the transaction takes place, it’s not distribution. The Canadian courts have, so far, decided that making available is not the same as distribution, and therefore, there is no copyright harm.

US argues that, by becoming signatories of TRIPS, making available is now in the US law. Similarly, there’s something about this in the Napster case, but that was Napster, rather than an individual, where the standard of proof might be expected to be higher

So, lawsuits - imperfect instrument, yet very burdensome

Another stick: a “first in line auto-competition” system

The objective is to protect new releases that have immediate commercial value. Preservation incentive for novelty.

At T0, the file exists only at the artist’s. Someone gets a copy, and puts it into the P2P net. As soon as that happens, it is now visible - until then, it’s invisible. So, we set up a system that searches the net, and finds the first release of the file on the network, and then — here’s the big deal — (1) the program starts hogging access to that single file excluding others and (2) notifying the poster that s/he’s been identified as the source of the infringing copy.

This technology has been developed and is being tried out. Stats for three weeks of protecting a file on KaZaA and Gnutella. 20 seeds (initial drops into the net); total sharers: 500 — others. What we see is that, on a day by day basis, there’s a big bounce when radio plays start up. And the program seems to be effective at getting people to take the file down. Only a few evaders.

So, this is a proof of concept — it is possible to inject something into the technology so that you can get ahead of the rate of “seeding” the network; downloads may behave exponentially, but uploading does not - so it can be attacked. Stopping the seeder seems to have meaningful effects - so the trick is to monitor all networks (and thus, a problem, IMHO)

Some problems:

1) Is this legal? Note that this is very similar to a denial of service attack. Differences are that it’s closer to self-help(, although it could also be seen as vigilante action, IMHO). There are some legal guidelines, but it may be manageable. Seems like it’s at least a credible/winnable case to argue self-help, particularly since it’s about blocking a presumptively illegal act. Does “autocompetition” exceed “authorized access” - trespass to chattels, etc? Computer Fraud and Abuse Act? “Forced access,” “Access authorization” seem like they would turn on the question of who’s the offender — and thus, which offense is more troubling to the law. Current case law clearly builds on the notion that the defendent is in the wrong. When both defendent and plaintiff are in the wrong, there’s a need for interpretation — but a good chance of coming down in favor of the copyright protector

2) Equity - the poor artist who cannot afford this service loses out.

3) Copyright limiting - that’s a good or bad, depending on which side of the argument you’re on

4) Vigilantism? Or self-help?

Is this a technique that can be a part of the arsenal of copyright that will counter the trend that has been up to this date? Is this about inching along, in “spy v. spy” mode, attacking and counterattacking and escalating the technological barriers and countermeasures? After all, Joe Sixpack will turn to iTunes at the first moment that he comes up against a countermeasure; that takes care the bulk of the problem doesn’t it?

All the current strategies have beeb stupid and brutal; this is an approach out

Terry:

There is much to commend in Charlie’s system. And, while I might agree in part, I;m going to go with the point-counterpoint presentation.

I do have answers to Charlie’s objections to my system

1) The hardest one is the ballot stuffing problem. A decent solution is that of sampling.

Take a large sample of households; have them agree to allow software to monitor their entertainment usage. This software then reports back and aggregates the data (to preserve piracy) and the aggregated results will be used for compensation.

Read the book <laugh>

Standing back, the P2P networks are incredible efficient distribution system. Charlie wants to gum this system up with DDNS attacks

Review: Terry’s system gets consumers more film and more music for less money; all artists would be paid better than they are presently; the distribution of bband would accelerate, leading to other benefits; consumers get to do lots with their music - semiotic democracy

Charlie’s system; no cost savings; litigation of stubborn downloaders will continue; the arms race will continue; DRM forever; spoofs everywhere; and cultural conflict would continue

Charlie’s is more likely in the current political climate; but tragic - can’t we try something

Q&A

((Charlie demos KaZaA - as well as Madonna’s “WTF do you think you’re doing?”))

Q: Dave - the spoof is the perfect demo is why we shouldn’t do this. This medium is so different; and the artists have failed to use it well. The industry should not be changing the network to match their model; maybe it’s all over for these industries.

A: Charlie - You may be right. I love P2P, but the record labels are unwilling to use this network promotionally. A spoof is all about ANGERING the supposed fan who SOUGHT OUT the artist in the first place — this is a death spiral in many respects.

Dave: They decide to make this a death battle - that’s not our problem, it’s their problem. The internet “says” let the record companies die

Q: A comment - the possibility that this - you made a parallel to a riot when describing the era of Napster - it may be that the consumers are questioning the value of the music itself. Is this the beginning of our culture being taken away from the control of corporations and back to (patronage) or some other form of economic support of cultural content. And if so, it this potentially unsolvable

A: Terry - it may well be unsolvable. What has been the business of record companies are the cost of conventional distribution and the cost of high quality production of music. Both of these have been corroded. Now you can deliver through the internet and the cost of recording production has fallen dramatically. The technolog has changed\

But the legal and business models have not changed

A: Charlie: I’m not sure that’s true - there are bands that are using these instruments and flourish

Q: The problem with Terry’s model yielding on privacy; the problem with Charlie’s is that it protects the current distribution system and we all get screwed; artists get crowded out. Change is needed, but these both seem to preserve or engender things that we know we don;t want. P2P may be the only real thing that can be used

A: Charlie - in my model, the P2P model competes; it will take more trouble but it will be there

Q: Charlie’s regime maight unlock competitive modes of distribution. This is a way to enforce price. P2P for now has no pricing instruments; Charlie’s thing might scale well, but it certainly can help to set up pricing on the P2P nets.

A: Great

Q: I want to expand on what you both said. The reduction in cost that you spoke of; the artists want to disintermediate the labels; what you’re going to see is that, as musicians get more skilled and technologically able, this disintermediation will happen. The technology will take the labels out of the picture, irrespective of the current issues

A: Great

Q: I’m curious about your model (Charlie). How to tell good DoS mobsters from bad ones? And how is this different from Berman’s bill?

A: Charlie - Berman’s bill explained as selfhelp. We’re not frying people’s machine - no damage to someone’s machine; although you will slow their machine down (and you have to pay for collateral damage, BTW). How to tell bad guys from good guys -

A: Terry - the self-help framing that Charlie has set up is pretty useful and effective. There is a hazard here, which is fair use — and the strict liability elements of self-help might make this approach particularly risk. The collateral damage scope might be broader than just the machine and his sharers — say the rest of the DSL network

Charlie: What’s a fair use way to post a song to a p2p net

Terry: Say I put it up on the network so I can space shift

Charlie: Seems like a sloppy way to do that - I think I win

Terry: The Napster arguments also suggested that sampling was a way to figure out what to buy - a fair use; and there is substantial evidence to suggest that there are, under Sony, noncommercial use that does not harm the financial interest of the copyright holder

Fair use + contributory copyright infringement should have let Napster win; the 9th Circuit changed the doctrine in their decision to ensure that Napster loses to favor the intermediaries in these cases. The courts are possibly dialing up

Yochai: Music wasn’t born with the phograph, nor will it die with p2p - the record companies might, though. Both of these presentations are conservative of the current record industries. The pushback is definitely about the question of why shouldn’t the record companies just die? Tip jars; performances; artists have existed without record companies. Why should we be attracted to sustaining them with these conservative proposals?

Charlie: So you would favor eliminating the copyright clause altogether? People just have to pay as they hear?

Yochai: There are other instruments that can provide value in conjunction with supporting copyright. Your proposals are about killing off p2p as a way to disintermediate system. When you say it’s only new releases, there’s really nothing to limit it to that.

It’s a mechanism for kiling p2p

Terry:

1) you’re right that one of the circumstances that underlies this approach is that we need to recognize political reality; we have to protect these interests

Why? Because it could get a LOT worse - full lockdown will ensue CBDTPA-like things (broadcast flag) — this will be catastrophic for the internet by killing e2e

2) my hope in the alternative compensation system would be that the record companies will initially be preserved. But, the side effect is that, in the long run, the record companies will be squeezed out as artists, using the infrastructure that is sustained and strengthened by this model, will eventually avoid the record companies altogether

3) I support Larry’s desire to get around the copyright law’s current ability to stifle derivative works in ways that critically limit creativity. This system sets up a kind of compensation that sustains cultural development.

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Lies, Damned Lies and Statistics [8:49 am]

Slashdot | RIAA Loss Report Contradicts Nielsen Sales Record

From the triggering article:

When speaking this month to a representative from Soundscan, the company that provides much of the data for the Billboard Top 200 Chart, I learned things that would contradict reported statements by the RIAA. Mainly that US labels have had a significant reduction in sales over the past three years. Cary Sherman, president of the RIAA, responded personally, put his rebuttals on the record and in the process exposed intriguing insight into the way the RIAA calculates “losses.”

[...] So, I asked the Soundscan rep, who would only speak to me if I didn’t use his name, “Would you disagree with what the RIAA is implying?”

“I would NEVER disagree with the RIAA,” he said.

Of course he wouldn’t; the RIAA is, after all, arguably Soundscan’s biggest sycophant. But he did do the most amazing thing; he proceeded to explain the rational that would allow both of these seemingly inconsistent realities to exist in the same universe, “The RIAA reports a sale as a unit SHIPPED to record stores. Whereas Soundscan reports units sold [to the consumer] at the point of purchase. So, you’re talking about apples and oranges.”

Really!?! I fact-checked this with Cary Sherman, who confirmed, “He is correct,” and added, regarding RIAA and Soundscan data, that “The two sets of numbers tend to be similar, but because of timing differences, they’re usually a little different at any point in time.”

Similar?!?! How is a 10% increase for first quarter of 2004 similar to, or a premonition of, a 7% decrease for the entire year of 2004?

[...]There is only one logical integration of all these statistics with the recent Soundscan data: even though actual point-of-purchase sales are up by about 9% in the US - and the industry sold over 13,000,000 more units in 2004 (1st quarter) than in 2003 (1st quarter) - the Industry is still claiming a loss of 7% because RIAA members shipped 7% fewer records than in 2003.

Forget the confusing percentages, here’s an oversimplified example: I shipped 1000 units last year and sold 700 of them. This year I sold 770 units but shipped only 930 units. I shipped 10% less units this year. And this is what the RIAA wants the public to accept as “a loss.”

I’ll go a step further. This fact, that Sherman seems to confirm, should logically mean a smaller percentage of returns. But, shouldn’t fewer returns mean higher profit margins and faster turnaround; and shouldn’t that be good for both the retail and wholesale side of the industry? “Sure,” admits Sherman today, “but I have no idea what US shipments looked like in the first quarter.” Then how can he claim world-wide “losses” in his March speech to Financial Times New Media?

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Digital Tech and Instruments of Control [7:52 am]

The Internet: New Technology Loosens Controls Over Images of War

Digital technology, Internet experts and military historians said, is forcing a major shift in the expectation of what can be kept private, and it may ultimately hold everyone more accountable for their actions.

[...] “This [Abu Ghraib] is, as far as I know, the first instance where digitally generated images made by an amateur photographer have erupted onto the scene of current events and had an impact,” said A. D. Coleman, a New York photography critic and historian. “But it won’t be the last.”

In some ways, the pictures from the Abu Ghraib prison are part of a long amateur tradition among military personnel. During World War II, German soldiers photographed the concentration camps, and it was common during the Vietnam War for soldiers to carry cameras. But most of those pictures were circulated only privately, Mr. Coleman noted, or are still moldering in shoe boxes.

The searing images of previous wars — like the photograph of a naked Vietnamese girl running from the flames of a napalm-bomb attack — were filtered by governments or news organizations, the only entities that could reach large audiences. But digital technology allows individuals an equivalent power.

A Defense Department spokesman said e-mail from the troops in Iraq was usually not monitored because it would be too cumbersome. Military regulations state only that “operationally sensitive” information cannot be sent over the Internet.

Paul Saffo, director of the Institute for the Future, said technology had turned some of the dire predictions of total government surveillance on their head. “Little Brother has a cellphone camera and he is watching back,” Mr. Saffo said. “Like it or not, the military has just turned extremely transparent.”

As Amy Harmon’s article goes on to say, though:

But one major problem with digital pictures, Mr. Rosen cautioned, is the ease with which they can be doctored.

For example: Britain Says Photos Showing Abuse Are Fake

The British government said Thursday that its investigation into a series of published photographs purporting to show the brutal treatment of an Iraqi prisoner has concluded that the photos were not taken in Iraq and had been faked.

The images of the reported abuse were emblazoned on the pages of The Daily Mirror earlier this month under the headline “Vile!” at roughly the same time similar photos emerged of American soldiers abusing prisoners at the Abu Ghraib prison near Baghdad.

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An Interesting Software Development Route [7:46 am]

Something to ask Yochai about when he gives his “Peer software development” talk? Adapting a Company’s Tools and Selling Them to Others

Conventional wisdom holds that the most ingenious technology innovations are found inside fledgling start-up companies, if not the dormitories of Stanford University.

Yet the core product of Epitome Systems, a company based in Wayne, Pa., that will introduce that item and its business next week, was developed by software engineers at the General Motors Acceptance Corporation’s commercial mortgage division, one of the world’s largest lending operations.

Vincent J. Rogusky, the founder and co-chief executive of Epitome, was convinced that commercially valuable software could be found in established American companies. Mr. Rogusky, a 46-year-old engineer, approached several large companies in the fall of 2001 in search of promising technologies.

[...] “Corporations spend millions and millions of dollars and have great teams developing all this valuable intellectual property,” said Mr. Rogusky, who spent most of his career at large commercial real estate firms, “but typically these are businesses that aren’t geared up to take these technologies into the marketplace.”

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The Market Speaks? [7:43 am]

Recalling Yochai’s discussion yesterday (see legitimate pressures on e2e) about the extent to which the logical layer may get dumbed-down to satisfy social demands, we get this article that suggests a network that offers that as a feature may be starting to lose out to other options: Broadband leaps ahead of AOL

While the shift does signal considerable change in the character of the mainstream Internet, analysts say AOL’s influence remains strong despite its recent corporate struggles.

“Keep in mind this is 20 companies reaching 27 million people, as opposed to one company reaching 25 million,” said Bruce Leichtman, an analyst who closely follows the high-speed Net market. “Clearly a shift is happening. But you can’t throw away the power that AOL has.”

From its position as just one of a half-dozen “online services” in the late 1980s and early 1990s, AOL grew to become the unchallenged king of the mainstream Internet in the late 1990s, attracting close to 30 million subscribers.

Often despised by the most tech-savvy Web users, the company appealed to the broad mainstream of America with simple software that helped many technophobic citizens go online for the first time.

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