The Game Front In The Digital Media Wars

Sony Has Much Riding on Console [pdf]

So although Sony will spend this week promoting PS3’s technical credentials to the 100,000 or so gamers attending the annual Electronic Entertainment Expo at the Los Angeles Convention Center, the company’s real aim is to anchor the device at the hub of the digital living room.

“The PS3 is Sony’s Trojan horse,” said Michael Pachter, an analyst at Wedbush Morgan Securities.

Central to Sony’s strategy is to use PS3 to win rapid acceptance of its high-definition DVD technology, called Blu-ray. In a fight reminiscent of the battle between VHS and Sony’s Betamax format, Blu-ray is jockeying for consumer favor with a rival standard called HD DVD.

[…] History is not on Sony’s side as it tries to roll out PS3. In three decades of home video games, no company has been able to maintain hegemony as long as Sony has with PlayStation.

And no company would like to dethrone Sony as much as Microsoft Corp., which in November started selling its rival machine, Xbox 360.

By the time Sony launches PS3, Xbox 360 — which has many of the same entertainment features as the Sony device — will have had a year’s head start in the market.

Unlike Sony, which subsidizes its other businesses with PlayStation profit, Microsoft supports the money-losing Xbox operation with its highly profitable software products — notably its Office productivity package. Like Sony, though, Microsoft has aspirations beyond games: It seeks broad acceptance of its digital media software.

Paying For Content

Someone Has to Pay for TV. But Who? And How?

Philips’s pay-to-surf proposal may be the first of its kind, but we should expect to see other ideas that would not have appeared in days past, when advertising-based television thrived. Today, the digital video recorder is slowly, but surely, tunneling through the television industry’s foundation. Ten million homes had DVR’s in 2005, according to Forrester Research; the number is expected to jump to 15 million this year, 30 million next year and 42 million in 2010. Scientific-Atlanta, which supplies set-top boxes to all the major cable companies, reports that fully half its boxes going out today are equipped with DVR’s.

What this means for traditional advertising can be divined in data collected by TiVo, which has 4.4 million subscribers. Davina Kent, a TiVo vice president, said that when its customers watch recorded programs, they skip 70 percent of the commercials.

This has not escaped the notice of advertisers. Josh Bernoff, a principal analyst at Forrester, predicted that “next year, you’ll see significant decline in TV ad spending as a result of digital video recorders.”

The television industry has not figured out how best to respond. Four years ago, Jamie Kellner, then head of the Turner Broadcasting System, remarked in an interview in CableWorld magazine that viewers who used DVR’s to fast-forward past commercials were committing “theft,” then a moment later described it as “stealing the programming.” He did allow trips to the bathroom as a noncriminal exemption.

[…] WOULD indisputable evidence that DVR’s facilitated ad-skipping make a difference if the Sony case were decided today? Paul Goldstein, a professor at Stanford Law School, thinks that it might. “If you were working with a clean slate, and everything was the same except for the ad-skipping rate — that’s a compelling fact that could have made a difference,” he said.

Randal C. Picker, a law professor of the University of Chicago, pointed to the commercial availability of network programs at places like iTunes as another enormously important change to be considered by the court if a case like Sony were litigated today.

How to pay for free television is the overarching but unanswered question, Professor Picker said. Speaking as a viewer, he said: “I want the other guy to watch advertising. But we can’t all not watch.”

A Great Line

From an article analyzing the upcoming Google/Microsoft search spat: Goliath vs. Goliath  [pdf]

“Just because they’ve killed a couple of people already, you can’t automatically convict them of a third murder,” said Robert H. Lande, a University of Baltimore law professor who has closely followed Microsoft’s antitrust cases. “Of course, if you’re Google, you’re going to be nervous. They fear what Microsoft will do to them is exactly what Microsoft did to Netscape, to RealNetworks.”

In those instances, Microsoft used its lock on operating systems to dethrone the technology companies that dominated Web browsers (Netscape) and streaming media (RealNetworks).

But Google is a much different rival.

Reading the Tea Leaves

Court skeptical of FCC on broadband wiretap access [pdf]

U.S. telecommunications regulators on Friday faced tough questioning from a federal appeals court about whether the government can force broadband Internet service providers to give law enforcement authorities access for surveillance purposes.

One of the three judges hearing the case called the government’s rationale for the surveillance requirement “gobbledygook,” and another also expressed reservations.

“This is totally ridiculous. I can’t believe you’re making this argument,” Judge Harry Edwards told the Federal Communications Commission lawyer.

The issue before the U.S. Court of Appeals for the District of Columbia is a decision by the FCC in August requiring facilities-based broadband providers and those that offer Internet telephone service to comply with U.S. wiretap laws.

Familiar Arguments

Almost a mere global search-and-replace away from a discussion of municipal broadband: Maker of Tax Software Opposes State Filing Help [pdf]

When the state offered to take some of the agony out of tax season for thousands of low-income and elderly Californians by filling out their returns for them, the reaction was overwhelming.

Most of the taxpayers who voluntarily participated in a test run of the state’s ReadyReturn program said it alleviated anxiety, saved time and was something government ought to do routinely. More than 96% said they would participate again, according to a state survey.

Then a legislative committee tried to kill the program, leaving Stanford law professor Joe Bankman, who helped design it, bewildered. He had thought the logic of it was so obvious, and the enthusiasm from participants so great, that lawmakers would rush to embrace it.”I can’t believe how naive I was,” said Bankman, a tax-law scholar with a tendency toward rumpled suits who has temporarily traded the ivory tower for the hallways of the Capitol. “It’s unbelievable how little I knew about how things are really done.”

Bankman had underestimated how much influence one Silicon Valley company could have on the lawmaking process.

[…] Intuit spokeswoman Julie Miller said in a written statement that ReadyReturn is a bad idea, and it is “a fundamental conflict of interest for the state’s tax collector and enforcer to also become people’s tax preparer.”

“The debate over this issue is not — and should not be — about politics,” she wrote. “It should be about what is the best public policy for every California taxpayer.”

Lawmakers opposed to ReadyReturn say it confuses people, creates privacy concerns and could scare taxpayers away from legitimate deductions.

[…] Tom Campbell, a former budget director who served in Congress and the state Senate, said he has “never seen the public interest being overborne by private interest as clearly as it has been in this case.”

Campbell, who as budget director sat on the state tax board that launched ReadyReturn, said the only argument opponents made to him that wasn’t a red herring was that ReadyReturn threatened their business.

“The argument was never presented in terms of the public interest,” he said. “It was stark. It was: ‘We are doing it and we don’t want the competition.’ ”

Industry officials endorse that position.

“A dynamic, innovative free market is in everybody’s interest,” said Ed Black, president and chief executive of the Computer and Communications Industry Assn. in Washington, D.C. “That kind of market is interfered with when … government enters as a competitive player. The government always has the advantage.”

Rise of the Zombies

Old news, I know, but you do what you can: Beware the sophisticated ‘spam zombies’ to come [pdf]

Canadian researchers have figured out a way to create spam that could bypass the best filters and trick even the most savvy computer users into opening messages they would normally delete.

Mischief makers would use this kind of spam — which employs hijacked computers to make sophisticated e-mail messages that appear to be from people known to computer users — to release viruses, worms or spyware on unsuspecting users or expose them to theft of personal information.

“It’s very much an arms race between the good guys and the bad guys,” said study co-author John Aycock, a computer scientist at the University of Calgary.

Spam is always evolving, but the kind of high-tech stuff once thought to be too much work for spammers was easily demonstrated by Aycock and student-researcher Nathan Friess in their study, “Spam Zombies from Outer Space.”

Lala gets some Globe Ink

Music CD swappers turn to snail mail [pdf]

It may be a crime to swap digital music over the Internet, but there’s no law against doing it through the Postal Service. That’s the theory behind La La Media Inc., an Internet start-up that encourages music lovers to trade tunes by mail.

[…] There are none of those free but illegal Internet file downloads. Nguyen’s lala.com website charges its members a small fee to barter the actual music disks among themselves.

Members publish ”have” lists of the music CDs they own. Because so many music lovers copy their CDs to their computers, lala.com provides software that can generate a list of albums on a computer’s hard drive.

In addition, users can log into the Lala website and type in the names of the albums in their collections. Users also create ”want” lists of CDs they’d like to own. Lala members can then search each other’s lists.

Members also get postage-paid mailing envelopes suitable for shipping CDs.

[…] Lala is hardly a shoestring operation. It’s funded by $9 million in venture money from Boston-based Bain Capital LLC and Ignition Partners of Seattle. With a staff of just 17 workers and low start-up costs, Nguyen predicted that Lala would soon be profitable.

But he plans to cut into those profits by paying 20 percent of the company’s income to the recording artists. Used-music dealers aren’t required to do this. But Nguyen said musicians too often get a raw deal from the industry, and wants Lala to do better.

”We’re trying to lead by example,” he said.

Experiment in Collective Action?

Or trying to put toothpaste back into the tube?  Red Hot Chili Peppers angered by Internet leak [pdf]

The Red Hot Chili Peppers have lashed out at a music pirate who leaked the funk-rock band’s upcoming album onto the Internet, and urged fans not to download it illegally.

The band’s spokeswoman said on Wednesday the offender was being tracked down. The group’s highly anticipated first studio album in four years, “Stadium Arcadium,” is still on track to go on sale on Tuesday via Warner Music Group Inc.s Warner Bros. Records, she said.

In a rambling open letter, the band’s bass player, Michael “Flea” Balzary, said he and his colleagues would be heartbroken if fans downloaded the album beforehand.

[…] If caught, the leaker could face the same fate as two men indicted by the U.S. government in March on allegations of making parts of an album by rock singer Ryan Adams available on the Internet before it was released.

Under a provision of the 2005 Family Entertainment and Copyright Act, which makes it a separate crime to pirate music and movies before their official release date, they each face up to 11 years in prison if convicted.

The band’s spokeswoman said she did not know how the album was leaked. Warner Bros. often distributes advance copies of albums to journalists in special envelopes that declare the recipient responsible for any misuse of the CD once the seal is broken. The discs are watermarked and bear the recipient’s name, which makes leaks easier to trace.

This Should Be Fun (Not)

One of the key questions for the deployment of many of these new technologies is the degree to which the availability of new “ways of doing” exposes gaps in our existing social institutions. Here’s an effort to test whether such a gap exists in the domain of cellphones and privacy: FTC Says 5 Firms Sold Cellphone Records

The Federal Trade Commission said yesterday that it sued five Internet companies, alleging that they broke a federal law by selling cellphone records, an issue that has touched off privacy concerns on Capitol Hill and among privacy-protection groups.

The lawsuit, filed in five federal district courts, seeks to stop sales of the logs, which include records of incoming and outgoing cellphone calls and, sometimes, the times of those calls. The FTC also seeks to reclaim money made by the five companies that allegedly collected, advertised and sold the information to third parties.

Related: Beware Your Trail of Digital Fingerprints

Experiments in Distribution

Sites Let Amateurs Be Published Authors Without the Book Deal

Shane Gilreath, an amateur poet and artist, wasn’t planning on becoming a book author — until he met Lulu. Neither were Karen and Walter Del Pellegrino, a couple who tapped Lulu to publish their guide to Italian ceramics as an anniversary present. And before Lulu, entrepreneur Pete Edwards was still printing test-preparation guides for students one-by-one on his office printer.

Lulu is not a book agent, publisher or publicist. Lulu is an on-demand publishing service that prints and ships each book as it is ordered, then offers online tools for authors to market their books on the Web. With no upfront fees, Lulu ( http://www.lulu.com/ ) takes a commission only when each book is sold.