Why Does Apple Want to Halve the Price of On-Demand Music? October 26, 2014Posted by Bill Rosenblatt in Business models, Music, Services, United States.
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Apple is asking record labels to agree to a $5/month subscription price for its Beats Music on-demand service, instead of the going rate of $10/month that it and others (Spotify, Rhapsody, etc.) charge in the US market. This development started as rumor a few weeks ago, then rose to specific evidence of record label conversations confirmed by musician and artists’ rights champion David Lowery at the recent Common Ground intellectual property conference at George Mason University near Washington DC. As of this past Friday, the evidence became strong enough for the Wall Street Journal to treat it as fact.
Re/code also reports that despite the major labels’ apparently cool reception to the new pricing, Spotify is already responding by offering a family plan in which additional family members can add their own subscriptions to a $10/month plan for $5/month. (Beats Music has been offering discounted family plans through AT&T wireless accounts for a while.) As Re/code reports, one reason that Apple has given for the change to $5/month is that it has found that its best iTunes customers spend about $60/year on the service. Given that music download revenue has begun to drop rapidly, Apple apparently believes that it can entice iTunes users to an all-you-can-eat subscription service at the same spending level, instead of losing those users to free music services (or illegal downloads). In other words, $5/month subscriptions are being offered to labels as a way to shore up revenues at $60 ARPU (annual revenue per user) from people who actually still pay for music .
This reasoning is clearly designed to appeal to record labels, which are known to be unhappy about the accelerating decline in purchases. But is it Apple’s real motivation for halving the price of on-demand subscriptions? I don’t think so.
The first thing to understand about on-demand music services is that despite all the talk about monthly subscription fees, the vast majority of users do not pay for them. Research from Edison Research and Triton Digital has determined that the use of YouTube as a de facto on-demand music streaming service draws a US audience of four times all other on-demand services combined – including Spotify (paid and free). Put another way, only about 8% of US users of on-demand music services actually pay for them. Spotify’s percentage of paying US users has stabilized at 25% — which I am proud to say that readers of this blog predicted three years ago — while Google Play, Rhapsody, Rdio, and Beats Music do not offer free tiers for on-demand music.
On-demand music use is growing rapidly, but Apple only has a tiny piece of the market. Beats Music has merely a few hundred thousand users, compared to the estimated 60 million who use YouTube as an on-demand music service and Spotify’s 12 million total US users. Even when one counts only paying users, Beats Music still accounts for well below 10% of the market.
Apple clearly must do something dramatic to become a serious contender. Integrating Beats Music into iTunes (and thereby marketing it heavily to the enormous iTunes audience) by itself isn’t going to expand the market enough to be meaningful to Apple. And even if Apple thinks it can increase the paying user base disproportionately by halving the price, that’s not much of an increase in audience size — especially since the vast majority of the on-demand audience already gets it for free.
No, my view is that Apple’s primary purpose in halving the price is to throw the on-demand market into disarray. Services like Spotify and Rhapsody have been operating their businesses based on the expectation of $10/month revenue for years. Obviously, if Apple comes out with a rebranded Beats Music (iTunes On Demand, iTunes Beats, iTunes Unlimited, iTunes Jukebox, or whatever they end up calling it) at $5/month, all of the other on-demand services will have to offer the same price. Spotify, Rhapsody, and Rdio would find themselves with unsustainable financial structures and/or the necessity of renegotiating their record label deals. The best that any of these “pure play” services could hope for is to become acquisition bait for companies that are big and diverse enough to be able to cross-subsidize them (Yahoo and AOL come to mind). A move to $5/month could even cause Google to rethink its plan to launch a paid subscription music service associated with YouTube.
In short, I predict that if Apple gets record companies to agree to $5/month for on-demand music, we will see a repeat of the shakeout that occurred around 2007-2008, which left only a handful of on-demand services in the market. When the smoke clears, Apple could well find itself with a much larger chunk of the on-demand music market than if it were to try to grow its share organically.
The remaining mystery is whether Apple intends to add a free tier to Beats Music, such as a limited on-demand capability under the iTunes Radio banner. The advent of free, legal on-demand music from Spotify and (effectively) YouTube in 2011 did cause the on-demand model to grow from a niche product for music geeks to a mainstream offering. On-demand is still not quite as popular as Internet radio — I estimate the on-demand audience to be about 60% of the size of the audience for Pandora, iHeartRadio, etc. — but it has surpassed the user base for paid digital downloads.
On-demand is clearly a big part of the music industry’s digital future. Apple is behind in the transition from downloads to access-based models and needs to catch up. Only dramatic, disruptive gestures can make this happen, and halving the price is certainly one of them.
Adobe’s Latest E-Book Misstep: This Time, It’s Not the DRM October 10, 2014Posted by Bill Rosenblatt in DRM, Publishing, Technologies.
A few days ago, it emerged that the latest version of Adobe’s e-book reading software for PCs and Macs, Adobe Digital Editions 4 (ADE4), collects data about users’ reading activities and sends them to Adobe’s servers in unencrypted cleartext, so that anyone can intercept and use the data, even without NSA-grade snooping tools.
The story was broken by Nate Hoffelder at The Digital Reader on Monday. The Internet being the Internet, the techblogosphere was soon full of stories about it, mostly half-baked analysis, knee-jerk opinions, jumped-to conclusions, and just plain misinformation. Even the usually thorough and reliable Ars Technica, the first to publish serious technical analysis, didn’t quite get it right. At this time of writing, the best summary of it comes from the respected library technologist Eric Hellman.
More actual facts about this sorry case will emerge in the coming days, no doubt, leading to a fully clear picture of what Adobe is doing and why. My purpose here and now is to address the various accusations that this latest e-book gaffe by Adobe has to do with its DRM. These include a gun-jumping post by the Electronic Frontier Foundation (EFF) that has inadvertently dragged Sony DADC, the division of Sony that is currently marketing a DRM solution for e-books, into the mess undeservedly.
Let’s start with the basics: ADE4 does collect information about users’ reading activities and transmit it in the clear. This is just plain unacceptable; no matter what Adobe’s terms and conditions might say, it’s a breach of privacy and trust, and (as I’ll discuss later) it seems like a strange fit to Adobe’s role in the e-book ecosystem. Whether it’s naivete, sloppiness, or both, it’s redolent of Adobe’s missteps in its release of the latest version of its e-book DRM at the beginning of this year.
But is ADE4’s data reporting part of the DRM, as various people have suggested? No.
The reporting on this story to date has missed one small but important fact, which I suspected and then confirmed with a well-placed source yesterday: ADE4 reports data on all EPUB format files, whether or not they are DRM-encrypted. The DRM client (Adobe RMSDK) is completely separate from the reporting scheme. By analogy, this would be like Apple collecting data on users’ music and movie playing habits from their iTunes software, even though Apple’s music files are DRM-free (though movies are not).
Some savvier writers have pointed out that even though DRM may not be directly involved, this is what happens when users are forced to use media rendering software that’s part of a DRM-based ecosystem. This is a fair point, but in this particular case it’s not really true. (It would be more true in the case of Amazon, which forces people to use its e-reading devices and apps, and unquestionably collects data on users’ reading behaviors – although it encrypts the information.)
Unlike the Kindle ecosystem, users aren’t forced to use ADE4; it’s one of several e-reader software packages available that reads EPUB files that are encrypted with Adobe’s Content Server DRM. None of the major e-book retailers use or require it, at least not in the United States. Instead, it is most often used to read e-books that are borrowed from public libraries using e-lending platforms such as OverDrive; and in fact such libraries recommend and link to Digital Editions on their websites.
But other e-reader apps, such as the increasingly popular BlueFire Reader for Android, iOS, and Windows, will work just as well in reading e-books encrypted with Adobe’s DRM, as well as DRM-free EPUB files. BlueFire (who can blame them?) sees the opportunity here and points out that it does not do this type of data collection. Users of library e-lending systems can use BlueFire or other apps instead of ADE4. Earlier versions of ADE also don’t collect and report reading data.
A larger question is why Adobe collects this data in the first place. The usual reason for collecting users’ reading (or listening or viewing) data is for analytics purposes, to help content owners determine what’s popular and hone their marketing strategies. Yet not only is Adobe not an e-book retailer, but e-book retailers that use its DRM (such as Barnes & Noble) don’t use Digital Editions as their client software.
One possible explanation is that Adobe is expecting to market ADE4 as part of its new DRM ecosystem that’s oriented towards the academic and educational publishing markets, and that it expects the data to be attractive to publishers in those market segments (as opposed to the trade books typically found in public libraries). Eric Hellman suggests another plausible explanation: that it collects data not for analytics purposes but to support a device-syncing feature that all of the major e-book retailers already offer — so that users can automatically get their e-books on all of their devices and have each device sync to the last page that the user read in each book.
Regardless of the reason, it seems unsettling when a platform software vendor, as opposed to an actual retailer, collects this type of information. Here’s another analogy: various video websites use Microsoft’s Silverlight web application environment. Silverlight contains a version of Microsoft’s PlayReady DRM. Users don’t see the Microsoft brand; instead they see brands like Netflix that use the technology. Users might expect Netflix to collect information about their viewing habits (provided that Netflix treated the information appropriately), but they would be concerned to hear (in a vacuum) that Microsoft does it; and in fact Microsoft probably does contribute to the collection of viewing information for Netflix and other Silverlight users.
In any case, Adobe can fix the situation easily enough by encrypting the data (e.g., via SSL), providing a user option in Digital Editions to turn off the data collection, and offering better explanations as to why it collects the data in the first place (at least better than the ambiguous, anodyne, PR/legal department-buffed one shown here). Until then, platform providers like OverDrive can link to other reader apps, like BlueFire, instead of to Adobe Digital Editions.
Finally, as for Sony DADC: the EFF’s web page on this situation contains a link, as a “related case,” to material on a previous technical fiasco involving Sony BMG Music, one of the major recording companies in the mid-2000s. At that time, Sony BMG released some albums on CDs that had been outfitted with a form of DRM. When a user put the disc in a CD drive on a PC, an “autorun” executable installed a DRM client onto the PC, part of which was a “rootkit” that enabled viruses. After a firestorm of negative publicity that the EFF spearheaded, Sony BMG abandoned the technology. (In one of its more savvy gambits, the EFF used momentum from that episode to cause other major labels to drop their CD DRMs as well; the technology was dead in the water by 2008.) In this case, unlike with Adobe, the problem was most definitely in the DRM.
Apparently some people think that because this incident involved “Sony,” Sony DADC — which is currently marketing an e-book DRM solution based on the Marlin DRM technology — was involved. Not true; the DRM that installed the rootkit came from a British company called First4Internet (F4I). Not only did Sony DADC have nothing to do with this (as I have confirmed), Sony DADC actually advised Sony Music against using the F4I technology.
That Old Question Again September 28, 2014Posted by Bill Rosenblatt in DRM, Economics, Music, Services, United States.
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I’m looking at the U.S. music revenue numbers that the RIAA just released for the first half of 2014; at the same time, I’m reading Download: How Digital Destroyed the Record Business, a 2013 book by the noted UK music journalist Phil Hardy, who tragically passed away in April of this year. For “numbers guys” like me, the book is a bonanza of information about the major labels’ travails during the transition from CDs to purely digital music. It’s a compendium of zillions of hard facts and opinions delivered with Hardy’s typical dry British wit — though (like his other books) it would have benefited from a copy editor and, occasionally, fact checker.
One of the statements in Hardy’s book that sits somewhere between fact and opinion is his assertion — as recently as last year! — that the elimination of DRM from music downloads boosted sales. Sigh… that old question again.
The question of whether DRM-free music download sales helped or hindered the music industry (no doubt it was good for consumers) served as a sort of Rorschach test back in the late 2000s after Apple and Amazon started selling DRM-free downloads — rather like the Rorschach test of Radiohead’s “pay what you wish” experiment in 2011. If you hated DRM, DRM-free was going to usher in a bright new era of opportunity for everyone; if you liked it, removing DRM was going to spell the end of the music business.
So I thought that with the RIAA revenue statistics database in hand, I could put the old question to rest. Here is what I found:
In this chart, “Downloads” includes singles plus albums; “Streaming” includes both paid and ad-supported on-demand services (Spotify, Rhapsody, YouTube, Vevo)* as well as Internet radio (Pandora, iHeartRadio, Slacker, TuneIn Radio), plus satellite radio and a few other odds and ends. I estimated totals for 2014 by taking the RIAA’s newly released numbers for the first half of this year and applying growth rates from the second half of 2013 to the first half of this year.
The relevant dates are:
- April 2003: Apple opens the iTunes Music Store.
- May 2007: Apple launches iTunes Plus, selling tracks from EMI without DRM for $1.29.
- January 2008: Amazon launches AmazonMP3 with DRM-free MP3s from all labels.
- May 2009: iTunes goes completely DRM-free in the US.
- 2011: Spotify launches its “freemium” model in the US; major labels complete ad revenue share deals with YouTube, so that virtually all major-label music is available on YouTube legally.
Before we get into the analysis, let’s get one thing out of the way: the biggest change in music industry revenues from 2003 onwards was, of course, the dramatic drop in revenues from CDs. Those numbers aren’t shown here; for one thing, they would dwarf the other numbers. This is all part of the move from physical products to digital products and services, which has affected both downloads and streaming.
Now let’s look at what happened after 2007. Growth in download sales began to slow down a bit, while streaming remained fairly flat. Starting in 2008, growth in paid downloads remained virtually unchanged until the ad-supported on-demand year of 2011. 2008 was a transitional year for DRM, as Apple only offered a small amount of music DRM-free (and at higher prices), while Amazon offered all DRM-free music but had only a single-digit share of the market. The real post-DRM era for paid downloads started in May 2009.
So, to see what happened after the major labels agreed to sell digital files without DRM, we need to look at the period from May 2009 to the start of 2011, which is highlighted in the chart. What happened then? Not much of anything. Growth in download sales was essentially unchanged from the preceding two years.
One could argue that if streaming hadn’t ever existed, download revenues might have grown after January 2009, given that streaming revenues from 2009-2011 started to grow faster. But given that streaming growth didn’t accelerate immediately after January 2009, I wouldn’t make that causality.
So there you have the answer to the old question: removing DRM from music files had little or no effect on download sales.
As a postscript, my 2014 projections included an interesting factoid: vinyl album sales, if current growth rates continue, should reach about $340 million this year. That takes the resurgence of vinyl from a mildly curious hipster phenomenon to almost 5% of total music revenue. For comparison purposes, it makes vinyl almost as valuable as ad-supported on-demand streaming (YouTube, Spotify Free, Vevo) and puts it on track to exceed that segment in 2015. Vinyl could even end up equaling CD revenue sometime around 2016-2017 — for the first time since the late 1980s!
*Paid subscription on-demand services include download features, which use DRM to tie files to users’ devices and make them playable as long as the user pays the subscription fees. But the RIAA reports these as part of “subscription services,” lumping them in with streaming on-demand music.
Ghosts in the UltraViolet Machine September 24, 2014Posted by Bill Rosenblatt in Business models, Music, Publishing, Services, Video.
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A few brief items of interest this week. First is a reminder about Copyright and Technology London 2014 next Wednesday – there’s still time to register! We have a great lineup of keynote speakers, including Shira Perlmutter, Maria Martin-Prat, and Dominic Young of the Copyright Hub, as well as panels on hot issues such as ISP responsibility for policing infringement and content protection for “4K” video content. I look forward to seeing some of you in London next week.
Apple and Amazon Add UltraViolet-Style Family Accounts
Amazon and Apple recently announced the addition of “family accounts” for sharing content. These enable up to six users who share a billing address to link accounts and get access to each other’s content, including e-books, apps, music, and video. Apple’s Family Share is a feature of the new version of its mobile operating system, iOS 8, while Amazon’s Family Library feature is expected to launch later this Fall.
The primary difference between the two is that Apple Family Share enables the sharing of all videos downloaded from iTunes while Amazon only allows sharing of video streamed via Amazon Prime Instant Video, as opposed to videos purchased by non-members of Amazon Prime. (In other words, this is yet another gambit to entice more users into Amazon’s US $99/year Prime service.) Some websites have commented that Amazon’s service does not allow sharing of purchased music, while Apple’s does; but this is a bit silly given that music downloaded from both services is DRM-free.
It’s not particularly surprising that Hollywood studios have given both Amazon and Apple the rights to extend purchases to family accounts. That’s because the rights are similar to those that the studios already extend for the same types of content under UltraViolet usage rules. In fact, the availability of family access to video content from two of the biggest digital movie retailers eats into the advantages that UltraViolet offers. (UltraViolet’s principal retail partners are Nook (Barnes & Noble), Target, and Best Buy).
More surprising is that one of these retailers decided it was worth the development effort to add this feature (causing the other to add it as well); perhaps this is a sign that UltraViolet is catching on? Either way, this is yet another example of how the mainstreaming of digital content products and services has exposed deficiencies in the rights that users get to digital content compared to physical products such as DVDs (not to mention print books) and has led to innovation. I would expect a similar announcement from Google Play in time for the holiday shopping season.
Garth Brooks Launches GhostTunes
Finally, a minor hypestorm erupted in the music industry recently over the beta launch of GhostTunes, a new digital music retail site spearheaded by country music superstar — and longtime digital holdout — Garth Brooks. Contrary to initial reports, GhostTunes does not only sell albums; it also sells single tracks — though only at artists’ or labels’ discretion. Purchased music is available in an online locker and can be streamed or downloaded as DRM-free MP3s. Some items are multi-album packages that contain multimedia items, in the vein of Apple’s iTunes LP.
Many musical artists will surely like GhostTunes’ willingness to sell single tracks only if the artist permits it. The recorded music industry has been looking for ways to prop up the sales of albums in the digital age — just as UltraViolet was originally intended to help Hollywood studios prop up sales of movies while all of the growth is in streaming. According to RIAA statistics, single track sales accounted for about 1% of unit volume when the iTunes Music Store opened in 2003 and have grown to over 80% today.
Yet GhostTunes looks like it is shaping up to be the music industry’s Pluto Nash moment: an expensive undertaking whose primary function is to cater to the whims of a big influential star rather than to be successful as a business. Although GhostTunes is billed as an “artist-friendly” retail site, there’s little reason for anyone to go there other than the exclusive availability of Garth Brooks’s music in digital form… legally. The music selection comes from all three major labels but is limited: the press release touts “a million tracks” (compared to more than 20 million on iTunes or Spotify), while the site itself appears even more limited to a few dozen releases in each of several genres. The highlight of the current catalog is a bundle of a dozen albums plus a concert video from Brooks himself for $30.
GhostTunes received a moderate amount of attention two weeks ago, ranging from neutral and factual to critical and skeptical. The press release contains a combination of vague hype (“music fans and artists deserve more”) and either falsehoods or anachronisms (“Just as it seemed fans would be left buying music in an increasingly more restrictive configuration without the ability to take the music they purchase anywhere they please, GhostTunes.com offers a new way.”)
It’s hard to see what GhostTunes can possibly offer that isn’t available on iTunes or Amazon — other than low prices for album bundles — but we’ll see what it does offer when (or if) it goes from beta to full launch.
Digimarc Launches Social DRM for E-books September 17, 2014Posted by Bill Rosenblatt in Fingerprinting, Publishing, Technologies.
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Digimarc, the leading supplier of watermarking technology, announced this week the release of Digimarc Guardian Watermarking for Publishing, a transactional watermarking (a/k/a “social DRM”) scheme that complements its Guardian piracy monitoring service. Launch customers include the “big five” trade publisher HarperCollins, a division of News Corp., and the e-book supply chain company LibreDigital, a division of the printing giant RR Donnelley that distributes e-books for HarperCollins in the US.
With this development, Digimarc finally realizes the synergies inherent in its acquisition of Attributor almost two years ago. Digimarc’s roots are in digital image watermarking, and it has expanded into watermarking technology for music and other media types. Attributor’s original business was piracy monitoring for publishers via a form of fingerprinting — crawling the web in search of snippets of copyrighted text materials submitted by publisher customers.
One of the shortcomings in Attributor’s piracy monitoring technology was the difficulty in determining whether a piece of text that it found online was legitimately licensed or, if not, if it was likely to be a fair use copy. Attributor could use certain cues from surrounding text or HTML to help make these determinations, but they are educated guesses and not infallable.
The practical difference between fingerprinting and watermarking is that watermarking requires the publisher to insert something into its material that can be detected later, while fingerprinting doesn’t. But watermarking has two advantages over fingerprinting. One is that it provides a virtually unambiguous signal that the content was lifted wholesale from its source; thus a copy of content with a watermark is more likely to be infringing. The other is that while fingerprinting can be used to determine the identity of the content, watermarking can be used to embed any data at all into it (up to a size limit) — including data about the identity of the user who purchased the file.
The Digimarc Guardian watermark is complementary to the existing Attributor technology; Digimarc has most likely adapted Attributor’s web-crawling system to detect watermarks as well as use fingerprinting pattern-matching techniques to find copyrighted material online.
Digimarc had to develop a new type of watermark for this application, one that’s similar to those of Booxtream and other providers of what Bill McCoy of the International Digital Publishing Forum has called “social DRM.” Watermarks do not restrict or control use of content; they merely serve as forensic markers, so that watermark detection tools can find content in online places (such as cyberlockers or file-sharing services) where they probably shouldn’t be.
A “watermark” in an e-book can consist of text characters that are either plainly visible or hidden among the actual material. The type of data most often found in a “social DRM” scheme for e-books likewise can take two forms: personal information about the user who purchased the e-book (such as an email address) or an ID number that the distributor can use to look up the user or transaction in a database and is otherwise meaningless. (The idea behind the term “social DRM” is that the presence of the watermark is intended to deter users from “oversharing” files if they know that their identities are embedded in them.) The Digimarc scheme adopted by LibreDigital for HarperCollins uses hidden watermarks containing IDs that don’t reveal personal information by themselves.
In contrast, the tech publisher O’Reilly Media uses users’ email addresses as visible watermarks on its DRM-free e-books. Visible transactional watermarking for e-books dates back to Microsoft’s old Microsoft Reader (.LIT) scheme in the early 2000s, which gave publishers the option of embedding users’ credit card numbers in e-books — information that users surely would rather not “overshare.”
HarperCollins uses watermarks in conjunction with the various DRM schemes in which its e-books are distributed. The scheme is compatible with EPUB, PDF, and MOBI (Amazon Kindle) e-book formats, meaning that it could possibly work with the DRMs used by all of the leading e-book retailers.
However, it’s unclear which retailers’ e-books will actually include the watermarks. The scheme requires that LibreDigital feed individual e-book files to retailers for each transaction, rather than single files that the retailers then copy and distribute to end users; and the companies involved haven’t specified which retailers work with LibreDigital in this particular way. (I’m not betting on Amazon being one of them.) In any case, HarperCollins intends to use the scheme to gather information about which retailers are “leaky,” i.e., which ones distribute e-books that end up in illegal places online.
Hollywood routinely uses a combination of transactional watermarks and DRM for high-value content, such as high-definition movies in early release windows. And at least some of the major record labels have used a simpler form of this technique in music downloads for some time: when they send music files to retailers, they embed watermarks that indicate the identity of the retailer, not the end user. HarperCollins is unlikely to be the first publisher to use both “social DRM” watermarks and actual DRM, but it is the first one to be mentioned in a press release. The two technologies are complementary and have been used separately as well as together.
This Year’s Copyright Society Honoree to Keynote Copyright and Technology London Conference September 5, 2014Posted by Bill Rosenblatt in Events, UK.
A quick postscript to my previous piece about Peter Menell’s Brace Lecture for the Copyright Society of the USA: this year’s honoree is none other than Shira Perlmutter, who will be one of the keynote speakers at our Copyright and Technology London 2014 conference on October 1.
Perlmutter has been an international copyright luminary for many years. When I first met her in 2003, she was chief IP counsel at Time Warner. Prior to that she had posts at the U.S. Copyright Office, WIPO, the Administration of President Bill Clinton, and Catholic University as a law professor. After Time Warner, she went on to IFPI and the U.S. Patent and Trademark Office, where she is now. (The USPTO advises the Executive Branch of U.S. government on all intellectual property issues, including copyright.) She also has adjunct appointments at Oxford and the University of London.
She will be sharing keynote duties with Maria Martin-Prat, who is the chief copyright official at the European Commission and has an equally distinguished career. The two worked together at WIPO. They will also be on a panel in the afternoon on American copyright reform and its impact on the European scene. I’ll be moderating that panel, which will also include the eminent American copyright litigator Andrew Bridges of Fenwick & West and the UK copyright expert Stephen Edwards of ReedSmith.
Other panels I’m particularly excited about include one on the role of ISPs in copyright enforcement, given that the UK is planning on implementing a graduated response regime that’s purely “educational,” with no punitive component as in France, South Korea, and elsewhere. One of our panelists there is Thomas Dillon, an attorney — now at WIPO — who is one of the leading experts on graduated response programs worldwide. We’ll also have an interesting discussion about the content protection methods that Hollywood intends to require for its latest generation of ultra-high-resolution (“4K”) content, featuring Ron Wheeler of Fox — known as one of the most stringent of the major studios on content protection. And we’ll have a special keynote by Dominic Young, CEO of the UK Copyright Hub, to give us an update on that.
Please join us in London on October 1 – register today!
Improving Copyright’s Public Image September 3, 2014Posted by Bill Rosenblatt in Law, United States.
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The Copyright Society of the USA established the Donald C. Brace Memorial Lecture over 40 years ago as an opportunity to invite a distinguished member of the copyright legal community to create a talk to be given and published in the Society’s journal. The list of annual Brace Lecture givers is a Who’s Who of the American copyright community.
Last year’s lecture, which made it into the latest issue of the Journal of the Copyright Society, is well worth a read. It was given by Peter Menell, a professor at Berkeley Law School who co-directs the Berkeley Center for Law and Technology. It’s called This American Copyright Life: Reflections on Re-Equilibrating Copyright for the Internet Age. Since giving the lecture at Fordham Law School in NYC, Menell has been touring it (it has music and visual components) around various law schools and conferences.
Two things about Menell’s talk/paper caught my attention. First was this sentence, early on in the paper, regarding his love for both copyright and technology during the outbreak of the Copyright Wars in the 2000s: “I was passionately in the middle, perhaps the loneliest place of all.” Second was his focus on the public reputation of copyright and how it needs to be rehabilitated.
Menell’s basic thesis is that no one thought much about copyright when the limitations on copying media products were physical rather than legal; but when the digital age came along, the reason why you might not have made copies of your music recordings was because it was possibly against the law rather than because it took time and effort. He says: “‘My Generation’ did not see copyright as an oppressive regime. We thrived in ignorant bliss well below copyright’s enforcement radar and
were inspired by content industry products. The situation could not be more different for adolescents, teenagers, college students, and netizens today. Many perceive copyright to be an overbearing constraint on creativity, freedom, and access to creative works.” (The latter category apparently includes Menell’s own kids.) In other words, copyright law has appeared in the public consciousness as a limiter of people’s behavior instead of as the force that enables creative works to be made.
Here’s a figure from his paper that captures the decline in copyright’s public approval:
The icons in the figure refer respectively to the 1984 Universal v. Sony “Betamax” Supreme Court decision, the 2001 Ninth Circuit Napster decision, and the defeat of the Stop Online Piracy Act in 2012 from Silicon Valley-amplified public pressure.
Compare this with a slide from a guest lecture I gave at Rutgers Law School last year:
Menell provides a number of personal reflections about his engagement with technology and copyright over the years, including a story about how he and a friend created a slide show for their high school graduation ceremony with spliced-up music selections keyed to slide changes via a sync track on a reel-to-reel tape recorder. This combination of hack and mashup ought to establish Menell’s techie cred. In fact, the “live” version of the paper is itself a mashup of audio and video items.
He takes the reader through the history of the dramatic shift in public attitudes towards copyright after the advent of Napster. My favorite part of this is a fascinating vignette of copyleft icon Fred von Lohmann, then of the Electronic Frontier Foundation (EFF), stating on a conference panel in 2002 that many users of peer-to-peer file-sharing networks were probably infringing copyrights and that the most appropriate legal strategy for the media industry ought to be to sue them, instead of suing the operators of P2P networks as the RIAA had done with Napster. Menell’s reaction, including his own incredulity at the time that “EFF did not use its considerable bully pulpit within the post-Napster generations to encourage ethical behavior as digital content channels emerged,” is just as fascinating.
(Of course, the RIAA did begin doing just that — suing individuals — the very next year. Five years after that, the EFF posted an article that said “suing music fans is no answer to the P2P dilemma.” Fred von Lohmann was still there.)
He also provides examples of the general online public’s current attitudes towards copyright, which has gone long past “Big Media is evil”; he says that “the post-Napster generations possess the incredible human capacity for rationalizing their self-interest” by their implications that individual content creators should not get paid because they are “lazy” or “old-fashioned” or even “spoiled” — even while he admits that the sixteen-year-old Peter Menell might have fallen prey to the same sad rationalizations.
In the rest of the paper, Menell lays out a number of suggestions for how copyright law could change in order to make it more palatable to the public. These include what for me is the biggest breath of fresh air in the article: some of the only serious suggestions I’ve ever seen from copyright academics about using technology as an enabler of copyright rather than as its natural enemy. He touts the value of creating searchable databases of rights holder information and giving copyright owners the opportunity to deposit fingerprints of their content when they register their copyrights, in order to help prove and trace ownership. He also mentions encryption and DRM as means of controlling infringement that have succeeded in the video, software, and game industries, but he does not claim that they are or should be part of the legal system.
Menell also makes several suggestions about how to tweak the law itself to make it a better fit to the digital age. One of these is to establish different tiers of liability for individuals and corporations. He says that the threat of massively inflated statutory damages for copyright infringement has failed to act as a deterrent and that courts have paid little attention to the upper limits of damages anyway. Instead he calls for a realignment of enforcement efficiency, penalties, and incentives for individuals: “Copyright law should address garden variety file-sharing not through costly and complex federal court proceedings but instead through streamlined, higher detection probability, low-fine means — more in the nature of parking tickets, with inducements and nudges to steer consumers into better (e.g., subscription) parking plans.”
Another topic in Menell’s paper that brought a smile to my face was his call for “Operationalizing Fair Use” by such means as establishing “bright-line ‘fair use harbors’ to provide assurance in particular settings.” (I’ve occasionally said similar things and gotten nothing but funny looks from lawyers on all sides of the issue.)
One suggestion he makes along these lines is to establish a compulsory license, with relatively fixed royalties, for music used in remixes and mashups. That is, anyone who wants to use more than a tiny sample of music in a remix or mashup should pay a fee established by law (as opposed to by record labels or music publishers) that gets distributed to the appropriate rights holders. The idea is that such a scheme would strike a pragmatic and reasonable balance between rampant uncompensated use of content in remixes and unworkable (not to mention creativity-impeding) attempts to lock everything down. The U.S. Copyright Office would be tasked with figuring out suitable schemes for dividing up revenue from these licenses.
It goes without saying that establishing any scheme of that type will involve years and years of lobbying and haggling to determine the rates. Even then, several factions aren’t likely to be interested in this idea in principle. Although musical artists surely would like to be compensated for the use of their material in remixes, many artists are not (or are no longer) in favor of more compulsory licenses and would rather see proper compensation develop in the free market. And the copyleft crowd tends to view all remixes and mashups as fair use, and therefore not subject to royalties at all.
In general, Menell’s paper calls for changes to copyright law that are designed to improve its public image by making it seem more fair to both consumers and content creators. Changing behavioral norms in the online world is perhaps better done in narrowly targeted ways than broadly, but the paper ought to be a springboard for many more such ideas in the future.
Rights Management (The Other Kind) Workshop – Chicago, Sept. 11 August 20, 2014Posted by Bill Rosenblatt in Events, Rights Licensing.
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I will be co-teaching a workshop in rights management for DAM (digital asset management) at the Henry Stewart DAM conference in Chicago on Thursday, September 11. I’ll be partnering with Seth Earley, CEO of Earley & Associates. He’s a longtime colleague of mine as well as a highly regarded expert on metadata and content management. (This is another iteration of the workshop that Seth and I did in April in NYC.)
This isn’t about DRM. This is about how media companies — and others who handles copyrighted material in their businesses — need to manage information about rights to content and the processes that revolve around rights, such as permissions, clearances, licensing, royalties, revenue streams, and so on. Some large media companies have built highly complex processes, systems, and organizations to handle this, while others are still using spreadsheets and paper documents.
Rights information management has come of age over the years as a function within media companies. It has taken a while, but it is being recognized as a revenue opportunity as well as an overhead task or a way of avoiding legal liability — not just for traditional media companies but also for ad agencies, consumer product companies, museums, performing arts venues, and many others.
The subject of our workshop is “Creating a Rights Management Roadmap for your Organization.” We’ll be discussing real-world examples, business cases, and strategic elements of rights information management, and we’ll be getting into various aspects of how rights information management relates to digital asset management. Attendees will be asked to bring information from their own situations, and we’ll be doing some exercises that will help attendees get a sense of what they need to do to implement workable practices for rights management. We’ll touch on business rules, systems, processes, metadata taxonomies, and more.
For those of you who are unfamiliar with it, Henry Stewart (a publishing organization based in the UK) has been producing the highly successful DAM conferences for many years. I’ve seen the event grow in attendance and importance to the DAM community over the years. Come join us! (Use registration code EA100 for a discount.)
UPDATE: This workshop has been cancelled.
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President Obama recently signed into law a bill that allows people to “jailbreak” or “root” their mobile phones in order to switch wireless carriers. The Unlocking Consumer Choice and Wireless Competition Act was that rarest of rarities these days: a bipartisan bill that passed both houses of Congress by unanimous consent. Copyleft advocates such as Public Knowledge see this as an important step towards weakening the part of the Digital Millennium Copyright Act that outlaws hacks to DRM systems, known as DMCA 1201.
For those of you who might be scratching your heads wondering what jailbreaking your iPhone or rooting your Android device has to do with DRM hacking, here is some background. Last year, the U.S. Copyright Office declined to renew a temporary exception to DMCA 1201 that would make it legal to unlock mobile phones. A petition to the president to reverse the decision garnered over 100,000 signatures, but as he has no power to do this, I predicted that nothing would happen. I was wrong; Congress did take up the issue, with the resulting legislation breezing through Congress last month.
Around the time of the Copyright Office’s ruling last year, Zoe Lofgren, a Democrat who represents a chunk of Silicon Valley in Congress, introduced a bill called the Unlocking Technology Act that would go considerably further in weakening DMCA 1201. This legislation would sidestep the triennial rulemaking process in which the Copyright Office considers temporary exceptions to the law; it would create permanent exceptions to DMCA 1201 for any hack to a DRM scheme, as long as the primary purpose of the hack is not an infringement of copyright. The ostensible aim of this bill is to allow people to break their devices’ DRMs for such purposes as enabling read-aloud features in e-book readers, as well as to unlock their mobile phones.
DMCA 1201 was purposefully crafted so as to disallow any hacks to DRMs even if the resulting uses of content are noninfringing. There were two rationales for this. Most basically, if you could hack a DRM, then you would be able to get unencrypted content, which you could use for any reason, including emailing it to your million best friends (which would have been a consideration in the 1990s when the law was created, as Torrent trackers and cyberlockers weren’t around yet).
But more specifically, if it’s OK to hack DRMs for noninfringing purposes, then potentially sticky questions about whether a resulting use of content qualifies as fair use must be judged the old-fashioned way: through the legal system, not through technology. And if you are trying to enforce copyrights, once you fall through what I have called the trap door into the legal system, you lose: enforcement through the traditional legal system is massively less effective and efficient than enforcement through technology. The media industry doesn’t want judgments about fair use from hacked DRMs to be left up to consumers; it wants to reserve the benefit of the doubt for itself.
The tech industry, on the other hand, wants to allow fair uses of content obtained from hacked DRMs in order to make its products and services more useful to consumers. And there’s no question that the Unlocking Technology Act has aspects that would be beneficial to consumers. But there is a deeper principle at work here that renders the costs and benefits less clear.
The primary motivation for DMCA 1201 in the first place was to erect a legal backstop for DRM technology that wasn’t very effective — such as the CSS scheme for DVDs, which was the subject of several DMCA 1201 litigations in the previous decades. The media industry wanted to avoid an “arms race” against hackers. The telecommunications industry — which was on the opposite side of the negotiating table when these issues were debated in the early 1990s — was fine with this: telcos understood that with a legal backstop against hacks in place, they would have less responsibility to implement more expensive and complex DRM systems that were actually strong; furthermore, the law placed accountability for hacks squarely on hackers, and not on the service providers (such as telcos) that implemented the DRMs in the first place. In all, if there had to be a law against DRM hacking, DMCA 1201 was not a bad deal for today’s service providers and app developers.
The problem with the Unlocking Technology Act is in the interpretation of phrases in it like “primarily designed or produced for the purpose of facilitating noninfringing uses of [copyrighted] works.” Most DRM hacks that I’m familiar with are “marketed” with language like “Exercise your fair use rights to your content” and disclaimers — nudge, nudge, wink, wink — that the hack should not be used for copyright infringement. Hacks that developers sell for money are subject to the law against products and services that “induce” infringement, thanks to the Supreme Court’s 2005 Grokster decision, so commercial hackers have been on notice for years about avoiding promotional language that encourages infringement. (And of course none of these laws apply outside of the United States.)
So, if a law like the Unlocking Technology Act passes, then copyright owners could face challenges in getting courts to find that DRM hacks were not “primarily designed or produced for the purpose of facilitating noninfringing uses[.]” The question of liability would seem to shift from the supplier of the hack to the user. In other words, this law would render DMCA 1201 essentially toothless — which is what copyleft interests have wanted all along.
From a pragmatic perspective, this law could lead non-dominant retailers of digital content to build DRM hacks into their software for “interoperability” purposes, to help them compete with the market leaders. It’s particularly easy to see why Google should want this, as it has zillions of users but has struggled to get traction for its Google Play content retail operations. Under this law, Google could add an “Import from iTunes” option for video and “Import from Kindle/Nook/iBooks” options for e-books. (And once one retailer did this, all of the others would follow.) As long as those “import” options re-encrypted content in the native DRM, there shouldn’t be much of an issue with “fair use.” (There would be plenty of issues about users violating retailers’ license agreements, but that would be a separate matter.)
This in turn could cause retailers that use DRM to help lock consumers into their services to implement stronger, more complex, and more expensive DRM. They would have to use techniques that help thwart hacks over time, such as reverse engineering prevention, code diversity and renewability, and sophisticated key hiding techniques such as whitebox encryption. Some will argue that making lock-in more of a hassle will cause technology companies to stop trying. This argument is misguided: first, lock-in is fundamental to theories of markets in the networked digital economy and isn’t likely to go away over costs of DRM implementation; second, DRM is far from the only way to achieve lock-in.
The other question is whether Hollywood studios and other copyright owners will demand stronger DRM from service providers that have little motivation to implement it. The problem, as usual, is that copyright owners demand the technology (as a condition of licensing their content) but don’t pay for it. If there’s no effective legal backstop to weak DRM, then negotiations between copyright owners and technology companies may get tougher. However, this may not be an issue particularly where Hollywood is concerned, since studios tend to rely more heavily on terms in license agreements (such as robustness rules) than on DMCA 1201 to enforce the strength of DRM implementations.
Regardless, the passage of the mobile phone unlocking legislation has led to increased interest in the Unlocking Technology Act, such as the recent panel that Public Knowledge and other like-minded organizations put on in Washington. Rep. Lofgren has succeeded in getting several more members of Congress to co-sponsor her bill. The trouble is, all but one of them are Democrats (in a Republican-controlled House of Representatives not exactly known for cooperation with the other side of the aisle); and the Democratically-controlled Senate has not introduced parallel legislation. This means that the fate of the Unlocking Technology Act is likely to be similar to that of past attempts to do much the same thing: the Digital Media Consumers’ Rights Act of 2003 and the Freedom and Innovation Revitalizing United States Entrepreneurship (FAIR USE) Act of 2007. That is, it’s likely to go nowhere.
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Registration for Copyright and Technology London 2014 is now live. An earlybird discount is in place through August 8. Space is limited and we came close to filling the rooms last time, so please register today!
I am particularly excited about our two keynote speakers — two of the most important copyright policy officials in the European Union and United States respectively. Maria Martin-Prat will discuss efforts to harmonize aspects of copyright law throughout the 28 EU Member States, while Shira Perlmutter will provide an update on the long process that the US has started to revise its copyright law.
We have made one change to the Law and Policy track in the afternoon: we’ve added a panel called The Cloudy Future of Private Copying. This panel will deal with controversies in the already complex and often confusing world of laws in Europe that allow consumers to make copies of lawfully-obtained content for personal use.
The right of private copying throughout Europe was established in the European Union Copyright Directive of 2001, but the EU Member States’ implementations of private copying vary widely — as do the levies that makers of consumer electronics and blank media have to pay to copyright collecting societies in many countries on the presumption that consumers will make private copies of copyrighted material. Private copying was originally intended to apply to such straightforward scenarios as photocopying of text materials or taping vinyl albums onto cassette. But nowadays, cloud storage services, cyberlockers, and “cloud sync” services for music files — some of which allow streaming from the cloud or access to content by users other than those who uploaded the content — are coming into view regarding private copying.
The result is a growing amount of controversy among collecting societies, consumer electronics makers, retailers, and others; meanwhile the European Commission is seeking ways to harmonize the laws across Member States amid rapid technological change. Our panel will discuss these issues and consider whether there’s a rational way forward.
We have slots open for a chair and speakers on this panel; I will accept proposals through July 31. Please email your proposal(s) with the following information:
- Speaker’s name and full contact information
- Chair or speaker request?
- Description of speaker’s experience or point of view on the panel subject
- Brief narrative bio of speaker
- Contact info of representative, if different from speaker*
Finally, back over here across the Atlantic, I’ll note an interesting new development in the Aereo case that hasn’t gotten much press since the Supreme Court decision in the case a couple of weeks ago. Aereo had claimed that it had “bet the farm” on a court ruling that its service was legal and that “there is no Plan B,” implying that it didn’t have the money to pay for licenses with television networks. Various commentators have noted that Aereo wasn’t going to have much leverage in any such negotiations anyway.
As a result of the decision, Aereo has changed tactics. In the Supreme Court’s ruling, Justice Breyer stated that Aereo resembled a cable TV provider and therefore could not offer access to television networks’ content without a license. Now, in a filing with the New York district court that first heard the case, Aereo is claiming that it should be entitled to the statutory license for cable TV operators under section 111 of the copyright law, with royalty rates that are spelled out in 17 U.S.C § 111(d)(1).
In essence, Aereo is attempting to rely on the court for its negotiating leverage, and it has apparently decided that it can become a profitable business even if it has to pay the fees under that statutory license. Has Barry Diller — or another investor — stepped in with the promise of more cash to keep the company afloat? Regardless, in pursuing this tactic, Aereo is simply following the well-worn path of working litigation into a negotiation for a license to intellectual property.
*Please note that personal confirmation from speakers themselves is required before we will put them on the program.