Cory Doctorow in Popular Science

Go Ask Hollywood: Why can’t you back up your DVDs? Because entertainment execs don’t want you to

The holiday shopping guides were all atwitter over the new DVD formats, Blu-Ray and HD-DVD–competing systems for recording and playing back high-definition movies. Both feature hugely increased pixel counts, more bit-depth and a surfeit of storage. But here’s an important question that goes unasked in all the hype: What features won’t your next-generation DVD device have?

It won’t have a button for making a backup copy of the DVD you just bought, or for sending the movie to any portable video player. And if you put one of these long-awaited new discs in your PC, you won’t have the option to rip it to your hard drive the way you do when you insert a CD.

[…] We can’t rely on the vendors to act in our interest these days, dragging the entertainment execs kicking and screaming to the money tree. The irony is that the tech companies say that this is all done in your interest, that by pleasing the studios, they can give you a device for which Hollywood might make a few movies available. But it will be on their terms, not yours. With friends like that, who needs the Boston Strangler?

A Look At Online Distribution Economics

From IEEE Spectrum Online – Selling Music for a Song: Online music stores make at most a dime per track — where does the money go?

Who’s getting all the cash? Back in November 2003, Apple CEO Steve Jobs said the then 7-month-old service was falling shy of merely breaking even. He explained that out of the 99 cents that Apple charges for a song, about 65 cents goes to the music label that recorded it. Another 25 cents goes for “distribution costs”—mainly credit card charges, but also for the servers, bandwidth, and other expenses needed to operate a large online service. Marketing, promotion, and the amortized cost of developing the iTunes software itself eats up the rest. In the first quarter of 2004, the iTunes Music Store finally made a “small profit,” Jobs claimed recently.

Other online digital music retailers aren’t minting money either. This summer, RealNetworks Inc., in Seattle, quickly sold a million songs at a promotional rate of 49 cents. It’s clear, though, that even at its regular price of 79 cents per song, with about 65 cents going to the music label, the service cannot be profitable. Others, such as Musicmatch (recently purchased by Yahoo! Inc. to invigorate its own music service) and the now commercial Napster, fare no better.

[…] NOR ARE MUSICAL ARTISTS getting rich from online sales. Industry experts believe that those who have signed with a major record label end up with only 3 to 5 cents of the 65 cents that the iTunes Music Store and others pass on. That’s about the same as what they get per song when a CD is sold. Even as they complain about digital “piracy,” the record labels seem to be using the new technologies to propel their profit margins toward the stratosphere. After all, they’re getting about the same revenue, with much lower costs.

Working A New Business Model

The Most Merchandised: $50 Million for 50 Cent

Recording artists who endorse products or license music to advertisers used to be labeled sellouts; now they are entrepreneurs. The year 2004 will be the first in four that the music business has managed to increase American album sales. But sales are up about 2 percent, a meager showing over last year’s weak figures. That places high pressure on artists to ferret out other sources of income. The stars-turned-marketers range from Britney Spears (television movie, fragrance) to Lil Jon (energy drink, adult film and soon an authorized Halloween costume). But few have out-hustled 50 Cent, the Queens-bred rap star who has been striking deals with the urgency recommended so starkly in the title of his debut CD, “Get Rich or Die Tryin’.” Sources close to the artist say 50 Cent’s forays into fashion, entertainment and even beverages in the last 12 months or so generated income in the $50 million range. Here’s a rundown of his ventures.

What’s Cool?

A look at kid culture [via the Pho list]: Cool to pay for ringtones, not downloads say teens as 2004 draws to a close [pdf]

A funny thing happened this year in the digital music universe – teens were inspired to pry open their Hello Kitty wallets for 30-second ringtones while four-minute song downloads still couldn’t shake loose a single penny.

And the threat of the heavy hand of the law continued to unfaze the notoriously irreverent group. At least one teen finds it funny that so much cash is wasted on music pirates.

“I’m soooo not worried,” says Jami, a spunky 17-year-old Toronto student who, like many of her peers, consumes heaps of music round the clock.

[…] Jami and her friends pose the latest conundrum for music makers, who want to encourage music revenue from new sources like cellphone ringtones but also want to throttle teens who don’t pay for their song downloads.

[…] “The nature of the beast is such that whether it’s a court decision or whether it’s a legislative amendment, the matter is not just overnight going to stop being an issue,” said [Gilles] Daigle, an Ottawa lawyer who specializes in the copyright law. “The pace of technology is changing so quickly that it’s almost such that by the time you solve one problem, the underlying issues have completely changed because of advances in technology.”

He equates downloading music to the practice of photocopying textbooks in school libraries. Both should be illegal, yet the activities continue on a daily basis, he says.

NPR Series on Online Music

I’m barely keeping up, but I’ll try to accumulate the names and the URLs of the program here — you have to click-through to their page to spawn the Real streams. (Hmm – it seems that the tsunami has pushed this series off their schedule, for the moment anyway.)

  • Monday, Dec 27, 2004:

    Online Music Services Still Face Major Hurdles

    Apple’s digital music player, the iPod, was one of this holiday season’s hottest gifts, with many retailers selling out. But online music sales haven’t seen the success of the iPod and continue to be dwarfed by the amount of music traded for free unauthorized sites. NPR’s Neda Ulaby reports.

  • Tuesday, Dec 28, 2004:

    CD Baby Finds Success in Online Music Niche

    Though online sales make up only about 4 percent of overall music sales, one Oregon company has found success in the Internet market. CD Baby has found a middle ground between corporate record labels and the independence of the Internet. Marcie Sillman of member station KUOW reports.

  • Wednesday, Dec 29, 2004:

    Tracking Royalties for Online Music

    Songwriters and musicians get royalties when their music is played in public, on the radio or in clubs. With the advent of Internet radio and digital cable broadcasts, performers are also entitled to royalties. In the final story in our online music series, NPR’s Neda Ulaby reports on Sound Exchange, a company dedicated to tracking the music and sending royalties to musicians.

  • Thursday, Dec 30, 2004: Looks like there wasn’t anything today, probably pushed aside by the increasingly detailed news about the tsunami disaster.

  • Friday, Dec 31, 2004:

Food For Thought

Via CoCoFighting Keywords: Translating the First Amendment to Protect Software Speech by Robert Plotkin at SSRN

In the following sections I propose an alternative analytical approach in which the kind and degree of First Amendment protection afforded to source code in particular cases depends upon the intent of the speaker-programmer and the strength of the causal connection between the speaker-programmer’s speech and the alleged harm. This approach incorporates conventional principles of tort law, criminal law, and First Amendment jurisprudence, thereby preserving as much freedom of expression as possible while promoting the legitimate public interest in regulating harm, in addition to avoiding the need to answer the question of whether source code is speech or a device.

I focus on the issues of intent and proximate cause because both would be critical elements in any civil or criminal claim brought against a programmer for harm allegedly caused by the distribution of his or her source code, and because First Amendment jurisprudence takes intent and proximate cause into account when determining whether and to what extent the First Amendment shields a particular defendant-speaker from liability. […]

The hypotheticals are very instructive, but I need to think a bit more on the notion of software as “powerful” speech meriting distinguishing treatments. Since the “power” of software arises from the degree to which actions are delegated to (and thus alientated through) technological instruments, there’s a question of responsibility and intent to resolve, I would say.

Vonage Wins Appeal, Too

Court Bars Regulation of Web Phone Service

A federal appeals court upheld a lower court ruling yesterday that prohibits the state of Minnesota from regulating Internet-based phone calling as if it were a traditional telecommunications service.

[…] In a lower court decision in this same case, the Federal District Court of Minnesota ruled in October 2003 that Vonage should be properly defined not as a telecommunications service but as an information service, a designation that would free it from some state regulations.

Last month the Federal Communications Commission issued its own rules on the subject, stating that Internet phone services should not be governed by the same state regulations as traditional telephone companies. The F.C.C. decision left open the possibility that the states could still tax Internet phone businesses.

The Minnesota Public Utilities Commission then asked the appeals court to consider whether the F.C.C. ruling pre-empted the lower court’s decision. But the appeals court wrote in its two-page order issued yesterday that the F.C.C. rules actually supported the district court’s injunction against the commission.

The order gives a slightly different picture, IMHO

The FCC concluded that the interstate and interstate components of Vonage’s service are inseverable, such that it is not possible for MPUC to regulate the intrastate component of the service without impermissibly regulating the interstate component. See id. ¶ 31. We sought supplemental briefing on the impact, if any, of the FCC Order on our disposition of this case. Because we conclude that the FCC Order is binding on this Court and may not be challenged in this litigation, we now affirm the judgment of the district court on the basis of the FCC Order.

The Administrative Orders Review Act (“Hobbs Act”) prescribes the sole conditions under which the courts of appeals have jurisdiction to review the merits of FCC orders. See 28 U.S. C. § 2342(1); 47 U.S.C. § 402(a); see also FCC v. ITT World Communications, 466 U.S. 463, 468-69 (1984). An aggrieved party may invoke Hobbs Act jurisdiction by filing a petition for review of the FCC’s final order in an appropriate court of appeals naming the United States as a party. See 28 U.S.C. § 2342; id. § 2344. No collateral attacks on the FCC Order are permitted. Id. The case before us is not a Hobbs Act petition for review. Therefore, this is not the appropriate forum for MPUC to dispute their merits of the FCC’s filing.

Later: TechDirt notes that California has filed an appeal to the FCC ruling, citing this blog entry. Slashdot discussion: Federal Appeals Court Sides With VoIP Providers

Even later – related: Another sort of argument: Wireless Firms Fight Taxation In Maryland [pdf]

Cingular, T-Mobile, Sprint and Verizon Wireless are challenging the right of Montgomery County and the City of Baltimore to impose local taxes on wireless telephone lines.

In letters filed yesterday with the departments of finance in both jurisdictions, the four companies requested a refund of more than $12 million in taxes. The taxes are imposed on companies, which pass them on to consumers.

[…] The refund request is the first step before the companies can file a court challenge. If the departments of finance deny the requests, the companies have 30 days to bring the matter to tax court. If the departments don’t respond, the companies can go to court after six months, Silverberg said.

The companies cited two reasons for their challenge. First, the county and city can impose sales taxes only on utilities, and cellular phones are not defined as utilities, Silverberg said, adding that only the state can impose taxes on anything else.

Also, the county and city can’t tax activities that occur outside its boundaries, Silverberg said, noting that cell phones can be used outside the county.

First of Several From Jan 2005 Wired

The January Wired magazine (got it for free with my Salon subscription) has several pertinent articles – here’s the first: The BitTorrent Effect

BitTorrent lets users quickly upload and download enormous amounts of data, files that are hundreds or thousands of times bigger than a single MP3. Analysts at CacheLogic, an Internet-traffic analysis firm in Cambridge, England, report that BitTorrent traffic accounts for more than one-third of all data sent across the Internet. Cohen showed his code to the world at a hacker conference in 2002, as a free, open source project aimed at geeks who need a cheap way to swap Linux software online. But the real audience turns out to be TV and movie fanatics. It takes hours to download a ripped episode of Alias or Monk off Kazaa, but BitTorrent can do it in minutes. As a result, more than 20 million people have downloaded the BitTorrent application. If any one of them misses their favorite TV show, no worries. Surely someone has posted it as a “torrent.” As for movies, if you can find it at Blockbuster, you can probably find it online somewhere – and use BitTorrent to suck it down.

With so much illegal traffic, it’s no surprise that a clampdown has started: In November, the Motion Picture Association of America began suing downloaders of movies, in order to, as the MPAA’s antipiracy chief John Malcolm put it, “avoid the fate of the music industry.”

[…] You could think of BitTorrent as Napster redux – another rumble in the endless copyright wars. But BitTorrent is something deeper and more subtle. It’s a technology that is changing the landscape of broadcast media.

“All hell’s about to break loose,” says Brad Burnham, a venture capitalist with Union Square Ventures in Manhattan, which studies the impact of new technology on traditional media. BitTorrent does not require the wires or airwaves that the cable and network giants have spent billions constructing and buying. And it pounds the final nail into the coffin of must-see, appointment television. BitTorrent transforms the Internet into the world’s largest TiVo.

See Cory Doctorow’s thoughts on the article, and the overall spin it puts on DRM. Then, his first and second followup postings.

Convergence Train Leaving Station

Playing Net movies on your TV

As 2004 comes to a close, the world is at once very different and much the same for video enthusiasts wanting to take movies from the Internet, store them on their PCs and shoot them over to giant TV screens. What’s new is the growing list of devices coming out that can connect the two worlds, either wirelessly or with cables. But one thing that hasn’t changed, Cai said, is the dearth of high-quality legally available content that would justify the investment for most people.

“The idea of the digital-media adapter has been around for years through devices like Sony’s RoomLink, but they never really took off,” Cai explained. “One problem has been a lack of consumer awareness. But the bigger problem is the lack of content–not self-created content like home movies, but premium content, meaning first-run Hollywood movies.”

Efforts to make more legal content available are underway, but it will be awhile before they catch up with the hardware.