The Joys of Entertainment Industry Accounting

‘Frasier’ back as legal drama [pdf]

How can a hit television series like “Frasier” gross $1.5 billion and yet be $200 million in the red?

That’s the issue at the center of a recent lawsuit filed against Paramount Pictures by two talent agencies seeking answers to how “Frasier” — the Emmy-winning NBC sitcom starring Kelsey Grammer that ran for 11 seasons — can claim that it never turned a net profit even though it was one of the most successful shows in television history.

[…] Such cases usually end in an out-of-court agreement, said attorney Pierce O’Donnell, who represented humorist Art Buchwald in the “Coming to America” case and went on to co-write a 1992 book titled “Fatal Subtraction: How Hollywood Really Does Business.”

“The studios typically do not want to air their dirty-accounting laundry,” he said. “Many a settlement of these kinds of suits occurs on the courthouse steps.”

But if the “Frasier” case goes forward, it’s sure to be followed by those who have long suspected that the industry’s odds are stacked in favor of the studio.

Balkanizing DVD Encryption

An object lesson in the importance of standards. I’m sure that the Cinea system is going to be embraced this time around — let’s see how well Disney does in the Academy voting (did they actually put out anything worthwhile this year?). Disney Picks Encryption Technology [pdf]

Opening the next round in the battle against pre-Oscar piracy, Walt Disney Co. today plans to become the first Hollywood studio to commit to using custom-encrypted DVDs for its Academy Award “screeners.”

The Burbank studio will announce its partnership with Cinea Inc., a Reston, Va.-based Dolby Laboratories Inc. subsidiary that has a system it says will protect the DVDs if they fall into the wrong hands.

[…] “Last year, pretty much every awards screener found its way to the Internet,” said Jeff Miller, an executive vice president at Disney who oversees post-production, explaining why the studio has made a long-term commitment to use Cinea’s technology.

“We’re committed to this system and it’s the first of many steps for the entire industry to get even more serious about theft than we have been,” Miller said.

[…] Last year, with the blessing of the academy, Cinea sent almost 12,000 of its high-end DVD players to academy members. Though the $500 machines were offered free of charge, members gave them a lukewarm reception.

Some grumbled about having to hook up yet another gadget. Some fretted about registering their players with Cinea, whose system marks each disc with a unique watermark that identifies the user. And because Cinea discs can be viewed only on Cinea players, many chafed at having to lug the 11-pound players to far-flung vacation homes in Aspen and Hawaii during the holiday screening season.

Patents, Life and Death

As we have seen with AIDS drugs, now we get the same with Tamiflu: Taiwan to ignore flu drug patent

Taiwan has responded to bird flu fears by starting work on its own version of the anti-viral drug, Tamiflu, without waiting for the manufacturer’s consent.

Taiwan officials said they had applied for the right to copy the drug – but the priority was to protect the public.

[…] A top health official said Taiwan had demonstrated its goodwill to Roche in talks – and the country hoped it would eventually secure permission to copy the drug.

“We have tried our best to negotiate with Roche,” Su Ih-jen told Reuters news agency.

Slashdot’s headline is a little confusing, as I would call it a public health choice, but there you go: Violating A Patent As Moral Choice

Speaking of (c) and Transactions Costs …

Some good questions about copyright and the purposes/meaning of fair use in educational contexts: Between What’s Right and What’s Easy [pdf]

Last week, the Copyright Clearance Center announced that it would integrate a “Copyright Permissions Building Block” function directly into Blackboard’s course management tools. The service automates the process of clearing copyright for course materials by incorporating it directly into the Blackboard tool kit; instructors post materials into their course space, and then tell the application to send information about those materials to CCC for clearance.

For many, this move offers welcome relief to the confusion currently surrounding the issue of copyright. […] As Tracey Armstrong, executive vice president for CCC, put it, “This integration is yet another success in making the ‘right thing’ become the ‘easy thing.'”

Certainly, anything that helps get intellectual resources into the hands of students in the format they find most useful is a good thing. I have no doubt that both the CCC and Blackboard genuinely want the practical details of getting course materials together, cleared, and to the student to be less and less an obstacle to actually teaching with those materials. But I’m skeptical of whether this “easy thing” actually leads to the “right thing.” Making copyright clearance work smoothly overlooks the question of whether we should be seeking clearance at all — and what should instead be protected by the copyright exception we’ve come to know as “fair use.”

[…] [T]here is a dispute, among those who dispute these kinds of things, about exactly why it is we need fair use in such [educational] circumstances. Some have argued that fair use is a practical solution for the complex process of clearing permission. […]

Others argue that fair use is an affirmative protection designed to ensure that copyright owners don’t exploit their legal power to squelch the reuse of their work, especially when it might be critical of their ideas. […]

This distinction was largely theoretical until organizations like CCC came along. With the help of new database technologies and the Internet, the CCC has made it much easier for people to clear copyright, solving some of the difficulty of locating owners and negotiating a fair price by doing it for us. The automatic mechanism being built into Blackboard goes one step further, making the process smooth, user-friendly, and automatic. So, if fair use is merely a way to account for how difficult clearing copyright can be, then the protection is growing less and less necessary. Fair use can finally be replaced by what Tom Bell called “fared use” — clear everything easily for a reasonable price.

If, on the other hand, fair use is a protection of free speech and academic freedom that deliberately allow certain uses without permission, then the CCC/Blackboard plan raises a significant problem.

An “Old” Napster VP Speaks Up

And offers some odd lessons, IMHO: Napster’s learning curve

We were naive about what the labels would or could agree to. It was not reasonable to expect that we could challenge their fundamental business model, and then agree to work together as partners. It is now clear that they couldn’t have made a deal with Napster even if they wanted to. Their existing contracts with the artists had no royalty provisions for digital distribution of individual songs. The payments to artists were all based on CD sales through the normal retail channels. It took them several years to rewrite their contracts with artists to get to the point where today you can buy a single song via digital download.


Kill them all and let God sort them out!

Man, this is going to make for some interesting court cases (“emergency” — to whom?): Net pirates will face stiffer punishment

The U.S. Sentencing Commission on Wednesday approved an emergency set of rules that would boost prison sentences by roughly 40 percent for people convicted of peer-to-peer infringement of copyright works “being prepared for commercial distribution.”

The changes also say judges may “estimate” the number of files shared for purposes of determining the appropriate fine and sentence. Larger numbers typically yield longer sentences.

[…] The law was supported by major media organizations, including the Motion Picture Association of America and the Recording Industry Association of America. It imposes fines of up to $250,000 and prison terms of up to three years, regardless of whether any downloading of a prerelease work took place.

Another change in the sentencing guidelines alters the definition of “uploading” to make it clear that merely having a copyright file available in a shared folder–such as those used by popular file-swapping programs like Kazaa and BearShare–can count as illegal distribution.

Now HP *Wants* To Let People Copy?

Wonder how they came to this new position after all their support of DRM? Is this a post-Fiorina shift? Hewlett Urges Compromise in Battle Over New Formats for DVD

The Hewlett-Packard Company, a member of the Blu-ray Disc Association developing the next-generation DVD, urged the group yesterday to adopt software that has already been included in the rival format.

[…] “At the end of the day, H.P. will support the optical formats that support this technology, so we would have to look at alternatives” if the Blu-ray group rejects its request, said Maureen Weber, the general manager of personal storage at Hewlett and the chair of the promotions committee for the Blu-ray Disc Association.

Hewlett wants the Blu-ray group to incorporate the software because it allows consumers to legally copy DVD’s onto their PC’s, transfer movies to other devices and watch video in a greater variety of ways.

Google Map Mashups

A Journey to a Thousand Maps Begins With an Open Code

You can still search Google Maps to figure out how to get from here to there, but why would you, when you can use it to pinpoint kosher restaurants in Cincinnati, traffic cameras in Dublin, or hot spring spas anywhere in the United States? How about finding coffee shops in Seattle that provide free wireless Internet access? Or would you prefer to locate the McMansion your boss just bought and find how out exactly how much he paid for it?

An army of programmers, most of them doing it just for fun, has grabbed the software code that generates the distinctive maps with their drop-shadowed virtual pushpins, and combined it with other data like the locations of potholes, taco trucks and U.F.O. sightings, and even the sites of murders and muggings.

The result is Google map mash-ups, the latest form of Internet information repackaged for entertainment and, perhaps, profit. […]

[…] Why are people doing this? The flippant answer is also the honest one: because they can. Google has revealed the map-generating software, called an A.P.I., or application programming interface. (You can find it at And with that A.P.I., a programmer can create a mash-up by combining it with other data – like apartment listings on Craigslist, or demographic data from the United States census. The programming technique, itself a mash-up of programs, is also known as Ajax, for Asynchronous JavaScript and XML.

[…] The difference, he said, is that it is now even more democratic because it is so simple to do. “It still takes a programmer to write these kinds of Google maps, but it is easier because you can go to another site and copy the code,” he said.

It just got a lot easier. A company started by Marc Andreessen, a co-founder of Netscape, hopes to democratize map mash-ups even more. He created, which automates the tools needed to create a Google-based map so almost anyone can make one.

Fighting Zombie Farms

The Zombie Hunters: On the trail of cyberextortionists

Prolexic, which was founded in 2003 by a twenty-seven-year-old college dropout named Barrett Lyon, is a twenty-four-hour, seven-days-a-week operation. An engineer is posted in the [network operations center] at all times, to monitor Prolexic’s four data hubs, which are in Phoenix, Vancouver, Miami, and London. The hubs contain powerful computers designed to absorb the brunt of data floods and are, essentially, massive holding pens for zombies. Any data travelling to Prolexic’s clients pass through this hardware. The company, which had revenues of four million dollars in its first year, now has more than eighty customers.

Lyon’s main business is protecting his clients from cyberextortionists, who demand payments from companies in return for leaving them alone. Although Lyon is based in Florida, the attackers he deals with might be in Kazakhstan or China, and they usually don’t work alone.

[…] Only a few years ago, online malfeasance was largely the province of either technically adept hackers (or “crackers,” as ill-intentioned hackers are known), who were in it for the thrill or for bragging rights, or novices (called “script kiddies”), who unleashed viruses as pranks. But as the Web’s reach has expanded real-world criminals have discovered its potential. Mobsters and con men, from Africa to Eastern Europe, have gone online. Increasingly, cyberextortionists are tied to gangs that operate in several countries and hide within a labyrinth of anonymous accounts.

[…] Examining the list of zombie addresses, Lyon picked one and ran a command called a “traceroute.” The program followed the zombie’s path from MensNiche back to a computer called—part of the United States Navy’s Network Operations Center for the Indian Ocean Region. “Well, that’s great,” he said, laughing. Lyon’s next traceroute found that another zombie was on the Department of Defense’s Military Sealift Command network. The network forces of the United States military had been conscripted in an attack on a Web site for penis enlargement.

[…] Less than five years ago, experts considered a several-thousand-zombie botnet extraordinary. Lyon now regularly faces botnets of fifty thousand zombies or more. According to one study, fifteen per cent of new zombies are from China. A British Internet-security firm, Clearswift, recently predicted that “botnets will, unless matters change dramatically, proliferate to the point where much of the Internet . . . comes to resemble a mosaic of botnets.” Meanwhile, the resources of law enforcement are limited–the N.H.T.C.U., for example, has sixty agents handling everything from child pornography to identity theft.

Extortionists often prefer to target online industries, such as pornography and gambling, that occupy a gray area, and may be reluctant to seek help from law enforcement. Such businesses account for most of Prolexic’s clients. I asked Lyon how he felt about the companies he defended. “Everybody makes a living somehow,” he said. “It’s not my job to worry about how they do it.”

I asked whether that applied to extortionists as well. After a pause, he said, “I guess I’m partial to dot-commers.”

Several weeks later, he called me to say that he’d reconsidered his answer. “The Internet is all about connecting things, communicating and sharing information, bits, pieces of data,” he said. “A denial-of-service attack is the exact opposite of that. It is taking one person’s will and imposing it on a bunch of others.”