BW’s Take on the RIAA’s Latest

Big Music’s Worst Move Yet [via e-mail from Lisa Langsdorf of Trylon Communications — !thanks!]

One has to admit: The RIAA sure is tenacious in pursuing its strategy. What it doesn’t seem to realize, though, is that it has already lost the war (see BW Online, 1/16/04, “Did Big Music Really Sink the Pirates?“). The recording industry’s hardball tactics have fueled a technological shift that’ll make it nearly impossible to pursue file swappers in the future.

How so? The culture of fear and loathing that the RIAA has created is starting to put encryption on the must-have list of every Joe and Jane Internet user. The results will be wide-ranging and will pose a threat to the movie industry, the software industry, and just about any other industry involved with the creation and sale of intellectual property.

[…] By ripping off the thin veil of anonymity and hitting hundreds of users for thousands of dollars per case in settlement costs, the RIAA has inspired the most tangible fear yet seen among Web users — something neither credit-card thieves, nor hackers, nor even the U.S. government has managed to inspire.

[…] In the end, large chunks of computing and the Internet will go behind a much stronger curtain of anonymity, and the pirates will remain untouchable underground — thanks to the RIAA’s misguided legal missiles.

XML Patents? Don’t You Trust Us?

Microsoft: XML patent moves are no big deal (See also Remember Microsoft’s “Embrace” of XML?)

Recent patent applications filed by Microsoft are routine moves and don’t reflect a change in the company’s position on Extensible Markup Language, according to a spokesman for the software maker.

[…] Microsoft spokesman Mark Martin said the company couldn’t comment on how the patents, if granted, might be applied or licensed. But he said such applications are standard moves for the company to protect its innovations and don’t affect its commitment to openly sharing the XML schemas used by Office.

“While the XML standard itself is royalty-free, nothing precludes a company from seeking patent protection for a specific software implementation that incorporates elements of XML,” Martin said. “The presence of this patent application…does nothing to change the commitment Microsoft made this past November when it announced the available of a royalty-free licensing program for our Office 2003 XML reference schemas.”

So, snafu — "situation normal — all fscked up"

A Little Summary on VoIP Regulation

Hey Michael Powell, you’re too late!

Financially strapped states like California are already exploring the possibility of taxing VoIP, especially since revenue streams from taxing PSTN phone calls will diminish, as VoIP services expand without contributing to the public coffers. Thus, there is political and economic pressure to impose some sort of tax-tariff paradigm, either at the state level or the federal level.

The federal courts are split on the issue. The Ninth Circuit Court of Appeals, on Oct. 6, 2003, classified cable operators as providing “telecommunications” services as defined in the Communications Act, when Internet access is involved. Thus, cable operators would be subject to FCC regulations that affect telecommunications companies.

Then on October 16, a federal district court judge in Minnesota ruled to the contrary and declared that Vonage, a VoIP service provider, is an information service provider. The court noted “Congress’s mandate that the Internet remain unfettered by regulation.”

With these two inconsistent court decisions, a vitally important policy debate has been stopped in its tracks, at least until the Supreme Court reverses one of these decisions–or until Congress decides to act.

More on MUDDA from AP

Just Say ‘No’ to Record Labels (see this from yesterday)

“Unless artists quickly grasp the possibilities that are available to them, then the rules will get written, and they’ll get written without much input from artists,” said Eno, who has a long history of experimenting with technology.

By removing record labels from the equation, artists can set their own prices and set their own agendas, said the two independent musicians, who hope to launch the online alliance within a month.

Their pamphlet lists ideas for artists to explore once they’re freed from the confines of the CD format. One might decide to release a minute of music every day for a month. Another could post several recorded variations of the same song and ask fans what they like best.

Gabriel, who has his own label, Real World Records, said he isn’t trying to shut down the record companies — he just wants to give artists more options.

A Look at the State of the Record industry

By considering the reveral of fortunes of Arista’s Antonio Reid: A Casualty of a Roiling Music Industry

On Jan. 13 he unexpectedly resigned. Arista, which is owned by BMG, the music division of the German conglomerate Bertelsmann, would not elaborate on his departure. But an executive familiar with Mr. Reid and Arista said that during the last two years Arista had operating losses above $200 million.

In an industry desperate for some good news, Mr. Reid’s reversal of fortune has done little for morale. His exodus sent a message to many: No one, not even a hitmaker, is safe.

“If he can get fired,” said an entertainment lawyer who spoke on condition of anonymity, “what does that say for people who haven’t had the year that he has?”

[…] As the record business experiences record losses — United States album sales were down in 2003 for the third year in a row — the days of the Teflon executive, larger-than-life characters whose celebrity and lavish spending rivaled that of their artists, appear to be waning. Stand-alone labels are beginning to dwindle because of imminent mergers. A proposed merger of Sony, No. 2 in the world, and BMG, No. 5, is under review by European regulators. Warner Music Group was recently acquired from Time Warner by a private investors’ group led by Edgar Bronfman Jr. Such mergers would make it harder to land a top job , said Richard Grabel, a veteran entertainment lawyer.

“Historically the major criterion for hiring an executive was if the person had experience in the business,” Mr. Grabel said. “It often seemed success or failure at previous posts was less relevant. That’s going to change.

“It will be based less on where they worked previously,” he said, “and more on if they made a profit while they were there.”

An executive at a major label who demanded anonymity said: “It’s not about hits. It’s about the bottom line. That’s what L.A.’s departure means. It is the operators verses the creatives now. Chalk one up for the operators.”

Another Look at Eldred Arguments

Stan Liebowitz (of P2P’s effects on record sales analysis fame) has a paper out with Stephen Margolis that argues that the economics of copyright were incorrectly characterized in the briefs submitted in Eldred: Seventeen Famous Economists Weigh in on Copyright: The Role of Theory, Empirics, and Network Effects [via LawMeme]

From the abstract:

More important, we believe, than the particulars of this case, is the articulation of the economic issues involved in copyright extension. The articulation of those issues is not well framed in the brief. Nor is the case as one sided as the Eldred economists have claimed. First, private ownership of creative works may internalize potentially important externalities with respect to the use of existing works and the creation of derivative works. Second, the Eldred economists neglect the elasticity of the supply of creative works in their analysis, focusing instead solely on the benefits received by authors, leading to potential underestimation of additional creativity that confers benefits immediately. Third, the Eldred economists neglect certain features of copyright law, such as fair use, the distinction between idea and expression, and the parody exemption, which mitigate the costs of copyright. Finally, we present data that counters a common claim that copyright extension so far out in the future can have little effect on creativity. The small fraction of books that have the majority of commercial value when they are new appear to remain valuable for periods of time that are consistent with the expanded term of copyright under CTEA.

A quick scan of the paper indicates that the authors put a lot of weight on what has been cited by Lessig as a problematic element of the copyright term extension argument — the notion that a marginal increase in the value of copyright "incentivizes" enough new creators to get involved as to make it worth the social cost of the restrictions that come along with it. Without support, the authors use an incredibly narrow distribution of creators to argue that there must be a huge benefit.

As Lessig points out, the "marginal creator" argument has no particular governor on its application; there’s no way to argue whether there are enough benefits to their creations to actually offset the social costs to the public domain. Essentially, it’s a "more is better" argument, and I’m not convinced (on this admittedly short reading) by the paper.

It will be interesting to see what kind of response (if any) this paper gets from the economists to whom the authors offer up their advice…..

IFPI Statistics Discussion

Derek points out that the IFPI statistics for the year are out with their expected spin: IFPI Report on International Digital Music Market. In The Register’s Not yet time for record labels to be smug about the end of piracy from Faultline, there’s a little deconstruction of that spin:

f these three million paid-for downloads were increasing at 25 per cent per month through 2003, then they began on about 55,000 downloads in January 2003 and ended on 640,000 in December 2003. Taking the number on from there, growing at 25% per month, this 3 million will go up to 43 million downloads in 2004, and if that same growth continued through 2005, this would take paid music downloads in Europe to 631 million, grossing some $1.1 billion. Once again if half of that belonged to EMI (and it won’t) and half of that was taken by the distribution process (which it will) then that might add up to $250 million, about half of what EMI has lost. Hardly time for dancing in the streets at the EMI shareholders meeting.

And we have more problems with this. No growth, including the original take up of browser technology on the internet, sustains a growth rate of 25% per month (the world wide web once had 15 per cent a month growth for about two years, but nothing else has come close).

See the article also for a careful discussion of the chicken and egg problem the industry faces in the deployment and exploitation of DRM schemes.

Declan McCullagh On Dean, and Andrew Orlowski’s Rebuttal

At least, that’s the spin that The Register puts on Declan’s piece in CNet: Dean should come clean on privacy. In The Register piece, Who told Dean to scream for lock-down, TCPA computing?, Andrew Orlowski suggests that this proposal from Dean cited by Declan:

Embedding smart cards into uniform IDs was necessary to thwart “cyberterrorism” and identity theft, Dean claimed. “We must move to smarter license cards that carry secure digital information that can be universally read at vital checkpoints,” Dean said in March 2002, according to a copy of his prepared remarks. “Issuing such a card would have little effect on the privacy of Americans.”

Dean also suggested that computer makers such as Apple Computer, Dell, Gateway and Sony should be required to include an ID card reader in PCs–and Americans would have to insert their uniform IDs into the reader before they could log on. “One state’s smart-card driver’s license must be identifiable by another state’s card reader,” Dean said. “It must also be easily commercialized by the private sector and included in all PCs over time–making the Internet safer and more secure.”

is just the Trusted Computing Platform Alliance writ large, to wit:

As it turns out, Dean was doing more to advocate locking down the “edge of the network” than any other Democrat candidate. And the finger of suspicion for feeding the Presidential Candidate this line of argument points firmly to his campaign manager, Joe Trippi.

[…] In the speech, which you can read on uh, Wave Systems website, Dean describes privacy as an “urban myth” and explains “little has been spent to secure the most vulnerable part of the network – the PC, the laptop, the government and corporate desktop computers – all at the perimeter of the computer network system.” Yes, it’s the national security angle that TCPA-vendors have been peddling, with the active encouragement of the law enforcement lobby.

Open PCs are dangerous, Dean argued.

Update: See Donna’s comments — Geek the Vote

DoubleUpdate: Even better, see Larry’s comment — what declan doesn’t get (how to read)

TripleUpdate: Ed Felten’s take — Dean’s Smart-Card Speech

EC To Find Against Microsoft: The Register

EC to find against Microsoft

Granted, it’s a preliminary decision and granted the ruling is not expected to be published until March, but EC officials feel confident enough to brief favoured news outlets, that yes, Microsoft broke Community competition law by abusing its dominance of the PC market.

[…] The unbundling of Windows Media Player is a hobby horse of the European Commission and it is where it parts company from its US anti-trust counterparts.

The NYTimes’ take: Antitrust Ruling Near for Microsoft in Europe

Slashdot discussion: EU’s Mind ‘made up’ on Microsoft, jumping off from this BBC article

The Commission is likely to decide that the firm illegally tied audio and video software, as well as server systems, to its Windows operating system.

While continuing talks with Microsoft, it is now circulating the decision to the parties involved.