March 21, 2007

Straining Credulity [9:52 pm]

TechDirt relates a terrible tale: UK Judge Rules That Selling Consumers Cheaper CDs Is Illegal

[...] Just to be clear: CD-Wow was selling legitimate discs, not pirated copies. They’d simply found a cheaper supplier in another part of the world, and passed the lower costs onto consumers. The labels argue this is somehow a violation of their copyright, but it seems much more like a handy bit of protectionism. Many music buyers are familiar with “import” CDs that often feature different or additional material from releases in their own country, and record labels don’t really seem to have a problem with American buyers shelling out $30 for a Japanese version of a CD, or $12 for a UK import single. But when imports come at a lower price, then it’s a problem. [...]

The articles from the BBC that come up from doing a search include this most recent one: Judge rules against cheap CD site

The High Court in London ruled that the site’s owners, Music Trading Online, were “in substantial breach” of a 2004 agreement to stop selling such albums.

Record companies complained that the site broke a deal not to buy cheap CDs in places like Hong Kong and re-sell them in the UK without permission.

CD-Wow said the judgement “spelled disaster for millions of music fans”.

The company will be fined in July after an inquiry into how much it owes the record labels who complained of copyright infringement.

*sigh* Violating the terms of an out of court settlement. This should be ugly. A little more detail from the Channel Register (?): CD WOW! fined for contempt of court

The recordings were not pirated discs but their sale in the UK broke copyright law. Record labels typically create regional companies to whom they licence the copyright in music for sale in those regions. Those companies can then match their prices to particular market conditions, and through copyright law the parent label can ensure that those markets which can bear a higher price are forced to pay that.

Though CD WOW! maintains that it has never deliberately engaged in parallel importing, it promised a court in 2004 that it would not conduct parallel importing in the future in order to settle its case with the BPI.

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“How I Became A Music Pirate” [9:31 pm]

A first person account - and the real tragedy is that it’s Rhino that appears in the role of the villain: How I Became A Music Pirate [via Slashdot]

So I headed to Rhino’s online store, purchased the music, and downloaded the files.

A little later that evening, I tried to move the .WMA files into iTunes, when I received an error message telling me that iTunes could not import them because they were copy protected. I downloaded the files again (which took another 12 minutes) and again, the same message.

So I called Rhino customer support and after an 8 minute wait spoke with a representative. She informed me that the files were indeed copy protected so that I could only play them on specific music players, most notably not iTunes.

“You don’t understand,” I said, “These files were not copied or pirated, I actually purchased them.”

“Well” she responded, “You didn’t actually purchase the files, you really purchased a license to listen to the music, and the license is very specific about how they can be played or listened to.”

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Draft EU Copyright Directive Scrutiny [9:24 pm]

Apparently, Viacom’s call for the end of safe harbors has found a sympathetic ear, at least if what’s being said about this draft directive is true: EU Weighs Copyright Law - pdf

Companies from across IT face criminal sanctions, including prison time for employees, if their networks, software programs or online services are ever used to carry illegally copied material such as music or film, according to a draft law from the European Commission supported Tuesday by a committee of the European Parliament.

The proposed directive switches the onus from end users to the technological conduits, which could include ISPs (Internet service providers), mobile phone operators, instant-messaging services, video- and music-sharing Web sites such as YouTube, as well as open-source software producers.

The controversial draft law has sparked an outcry, uniting rivals within the IT industry, ranging from free and open-source software advocates, the Foundation for a Free Information Infrastructure, at one end to a lobbyist for the world’s biggest software companies, the Business Software Alliance (BSA), at the other.

Slashdot discussion: EU Weighs Copyright Law

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Understatement of the Day [5:50 pm]

Now it’s Cisco who wants to straighten things out between Silicon Valley and the Copyright Cartel: Hollywood and Silicon Valley — online allies?

The sticking point on the new outlets often comes down to owners’ rights to content, according to [Fox's Senior VP of business development, Sarah] Harden, whose company has to pay artists for the right to distribute their works online. Negotiations are hard now because it isn’t clear yet how much those rights are worth, she said.

“You have content owners, sometimes realistically and sometimes not realistically, trying to put a value to those digital rights,” Fox’s Harden said. “There’s a huge disconnect … the market is very frothy right now.”

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VoIP Regulation Ruled A Federal Task, Preempting States [5:39 pm]

Court backs FCC over states in VoIP case - pdf

A federal appeals court on Wednesday upheld a decision by the Federal Communications Commission that barred states, including Minnesota, from regulating Internet-based phone services.

A three-judge panel of the 8th Circuit Court of Appeals agreed with the FCC’s determination in 2004 that companies like Vonage Holdings Corp. of Edison, N.J., provide an interstate service that puts them outside state control.

The ruling: MN Public Utilities v. FCC - local copy

[PUBLISHED] [Bye, Author, with Colloton, Circuit Judge]

Agency - petition for review of FCC order. FCC order which determined that Voice over Internet Protocol technology was impossible or impractical to separate intrastate components from interstate components and thus preempted state regulation was not arbitrary or capricious. It was not arbitrary or capricious for FCC to fail to classify VoIP as either information service or telecommunications service. FCC properly considered economic burden of identifying geographic endpoints. Any inconsistencies with 911 Order did not render FCC order arbitrary. FCC did not arbitrarily determine state regulation of information service conflicted with federal policy of nonregulation or preempt 911 requirements. NYPSC appeal challenging fixed nomatic VoIP was premature.

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MIT Rejects SAE’s DRM-Crippled ePublications [4:17 pm]

Some of my students brought this fight (in my own backyard!) to my attention: MIT Faculty and Libraries Refuse DRM; SAE Digital Library Canceled

The MIT Libraries have canceled access to the Society of Automotive Engineers’ web-based database of technical papers, rejecting the SAE’s requirement that MIT accept the imposition of Digital Rights Management (DRM) technology.

[...] “It’s a step backwards,” says Professor Wai Cheng, SAE fellow and Professor of Mechanical Engineering at MIT, who feels strongly enough about the implications of DRM that he has asked to be added to the agenda of the upcoming SAE Publication Board meeting in April, when he will address this topic.

In addition to Professor Cheng, the MIT Libraries consulted with other faculty members who publish or use SAE content. The responses were uniformly against accepting DRM, even if it meant losing ready access to SAE papers. When informed that the SAE feels the need to impose DRM to protect their intellectual property, Professor John Heywood, the Director of MIT’s Sloan Automotive Lab, who publishes his own work with the SAE, responded with a question: “Their intellectual property?” He commented that increasingly strict and limiting restrictions on use of papers that are offered to publishers for free is causing faculty to become less willing to “give it all away” when they publish.

Echoing Professor Heywood, Alan Epstein, Professor of Aeronautics and Astronautics, believes that “If SAE limits exposure to their material and makes it difficult for people to get it, faculty will choose to publish elsewhere. [...]”

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The WSJ on Music and the Internet [2:38 pm]

I don’t subscribe to the WSJ (now it’s free - pdf), but I’m sure Andrew Leonard isn’t overstating their position in this blog entry: Music industry slain by Internet: YouTube clip at 11

The economics of the music business have never been worse, the Wall Street Journal tells us today in a front-page story. CD sales in the first three months of 2007 have “plunged” 20 percent compared to last year. The top-selling albums, as measured by SoundScan, are only moving 60,000-65,000 copies a week, totals that wouldn’t have been able to crack the top 30 as recently as 2005.

It’s all the Internet’s fault, of course. [...]

Ah! The AP paid for it, so I don’t have to: Sales of music, long in decline, plunge sharply - pdf

In a dramatic acceleration of the seven-year sales decline that has battered the music industry, compact-disc sales for the first three months of this year plunged 20 percent from a year earlier, the latest sign of the seismic shift in the way consumers acquire music.

The sharp slide in sales of CDs, which still account for more than 85 percent of music sold, has far eclipsed the growth in sales of digital downloads, which were supposed to have been the industry’s salvation.

The slide stems from the confluence of long-simmering factors that are now feeding off each other, including the demise of specialty music retailers like longtime music mecca Tower Records. About 800 music stores, including Tower’s 89 locations, closed in 2006 alone.

[...] Jeff Rabhan, who manages artists and music producers including Jermaine Dupri, Kelis and Elliott Yamin, says CDs have become little more than advertisements for more-lucrative goods like concert tickets and T-shirts. “Sales are so down and so off that, as a manager, I look at a CD as part of the marketing of an artist, more than as an income stream,” says Mr. Rabhan. “It’s the vehicle that drives the tour, the merchandise, building the brand, and that’s it. There’s no money.”

The music industry has found itself almost powerless in the face of this shift. Its struggles are hardly unique in the media world. The film, TV and publishing industries are also finding it hard to adapt to the digital age. Though consumers are exposed to more media in more ways than ever before, the challenge for media companies is finding a way to make money from all that exposure. [...]

And here, of course, is the business opportunity:

Meanwhile, with music sales sliding for the first time even at some big-box chains, Best Buy has been quietly reducing the floor space it dedicates to music, according to music-distribution executives.

Whether Wal-Mart and others will follow suit isn’t clear, but if they do it could spell more trouble for the record companies. The big-box chains already stocked far fewer titles than did the fading specialty retailers. As a result, it is harder for consumers to find and purchase older titles in stores.

TechDirt’s take: The Shift From CDs To Downloads Is So Much More Than A Format Change

Also, when it comes to reading the tea leaves, here’s an important signal to consider: Starbucks signs Paul McCartney to new record label - pdf; BBC’s Starbucks label unveils McCartney (Hear Music; no press release yet); McCartney Signs With Starbucks for His Next Album

A Pho-ster points to this earlier WSJ article on Apple: Music’s New Gatekeeper - pdf

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Tackling A Trend [8:52 am]

It will be interesting to see how the debate around S.236, “The Federal Agency Data Mining Reporting Act of 2007,” evolves — and how the discussion is framed. For example, will the phrase “Total Information Awareness” come up? Senate Bill Would Mandate Disclosure of Data Mining - pdf

The Justice Department is opposing bipartisan Senate legislation that would require federal agencies to disclose to Congress data-mining programs they use to find patterns of criminal or terrorist activity, saying that it duplicates a reporting requirement mandated in the 2006 renewal of the USA Patriot Act.

The department, however, missed the March 9 deadline to report on its data-mining programs as required by the law. Senate Democrats, who have pressed for disclosure to ensure that privacy and civil liberties were not violated, are not pleased.

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The Joys of Having Something to Measure [8:28 am]

Who cares who’s watching and doing the data collection? Customer relationship management enters a new phase: Google Tests an Ad Idea: Pay Only for Results

Google is experimenting with a new proposition for advertisers: if you don’t get results, you don’t pay.

The company said Tuesday that it would expand a test of a system that allows advertisers to pay only when an ad spurs a consumer to take an action, be it purchasing a product, subscribing to a newsletter or signing up to receive a quote from a mortgage broker or car dealer.

The vast majority of advertisers now pay Google when a user clicks on ads that are displayed alongside its search results or on other Web sites, while some are billed based on how many people view the ads.

And approaches to retaining share: And Now, a Commercial Break That Doesn’t Seem Like One

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More on the “1984″ Remix [8:14 am]

Framing the debate over this: Campaign spots get special treatment on Web - pdf

As hundreds of thousands of people view a brief, provocative video clip on the Internet slamming Sen. Hillary Rodham Clinton’s run for the presidency, federal election law suggests that whoever paid for, produced and posted the spot might never be known.

The reason: The Federal Election Commission last year issued regulations leaving Internet political communications all but unfettered.

As such, the anti-Clinton spot that has generated buzz on YouTube, in blogs, and in the mainstream media in the last few days will probably be followed by many more, with potential political impact.

[...] “Free speech. That simple,” said Andrew Rasiej, founder of Personal Democracy Forum of New York, which tracks the confluence of politics and the Internet. “Posting a video is no different than sitting in a coffee shop and voicing your opinion.”

Others see dangers.

“When it is not regulated, you can take any amount of money from any source, including foreign entities, and you are not required to disclose it,” said Carol Darr of the Institute for Politics, Democracy & the Internet at George Washington University.

“There are a lot of people around the world who care about who the next president is,” she said. “If they can have an effect without leaving fingerprints, it is naive to think they won’t.”

And the LA Times states its position: YouTube enters the 2008 fray - pdf

The potential for anonymous potshots and dirty tricks online is real and always will be. But the answer isn’t more regulation.

The Federal Election Commission already requires those who pay for ads online to disclose their spending, and its rules against contributions by corporations and unions apply equally to the Web as to the airwaves. Those strictures will be buttressed by the blogosphere’s penchant for rooting out fakes online. Besides, candidates can always console themselves with the fact that attention spans online are short, and the best way to counteract a message you don’t like is to respond with one of your own.

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