UltraViolet Gets Two Lifelines January 12, 2012
Posted by Bill Rosenblatt in Economics, Fingerprinting, Services, Standards, Video.add a comment
A panel at this week’s CES show in Las Vegas yielded two pieces of positive news for the DECE/UltraViolet standard, after a launch several months ago with Warner Bros. and its Flixster subsidiary that could charitably be called “premature.” Of the two news items, one is a nice to have, but the other is a game-changer.
Let’s get to the game-changer first: Amazon announced that a major Hollywood studio is licensing its content for UltraViolet distribution through the online retail giant. The Amazon executive didn’t name the studio, though many assume it’s Warner Bros. Even if it’s a single studio, the importance of this announcement to the likelihood of UltraViolet’s success in the market cannot be overstated.
Leaving aside UltraViolet’s initial technical glitches and shortage of available titles, the problem with UltraViolet from a market perspective had always been a lukewarm interest from online retailers. As I’ll explain, this hasn’t been a surprise, but Amazon’s new interest in UltraViolet could make all the difference.
UltraViolet is the “brand name” of a standard from a group called the Digital Entertainment Content Ecosystem (DECE), headed by Sony Pictures executive Mitch Singer. It implements a so-called rights locker for digital movies and other video content. Users can establish UltraViolet accounts for themselves and family members. Then they can obtain movies in one format (say, Blu-ray) and be entitled to get it in other formats for other devices (say, Windows Media file download for PCs). They can also stream the content to a web browser anywhere. The rights locker, managed by Neustar Inc., tracks each user’s purchases.
In other words, UltraViolet promises users format independence and a hedge against format obsolescence, while providing some protection for the content by requiring it to be packaged in several approved DRM and stream encryption schemes. It includes a few limitations on the number of devices and family members that can be associated with a single UltraViolet account, but in general UltraViolet is designed to make video content more portable and interoperable than, say, DVDs or iTunes downloads.
Five of the six major Hollywood studios (all but Disney*), plus the “major indie” Lionsgate, are participating in UltraViolet.
One of the design goals of UltraViolet was to ensure that no single retailer could attain a market share large enough to be able to control downstream economics — in other words, to avoid a replay of Apple’s dominance of digital music downloads (and possibly Amazon’s dominance of e-books). To do this, the DECE studios pushed for ways to thwart consumer lock-in by online retailers that would sell UltraViolet content.
The most important example of this is rights locker portability: users can access their rights lockers from any participating retailer. UltraViolet retailers must compete with each other through value-added features.
Amazon’s Kindle e-book scheme offers a good illustration of platform lock-in and how it differs from other features that a retailer can build or offer. If you buy an e-book on Amazon, you can download and read it on a wide variety of devices: not just Kindle e-readers but also iPads, iPhones, Android devices, BlackBerrys, PCs, and Macs — in other words, pretty much everything but other e-reader devices. You get e-book portability — it will even remember where you last left off if you resume reading an e-book on another device — but you are still tied to Amazon as a retailer. If you want to read the same e-book on a Nook, for example, you have to buy it separately from Barnes & Noble (and then you can read that e-book on your PC, Mac, iPhone, Android, etc.).
This lock-in gives Amazon power in the market as a retailer; it had 58% market share as of February 2011 (by comparison, Apple has over 70% of the music download market). UltraViolet wants to make it as difficult as possible for a single digital video retailer to assert such market power.
The downside of that policy has been a lack of enthusiasm among retailers to sell UltraViolet-licensed content — which entails significant development investment and operational expenses. A good shorthand way to evaluate the potential impact of a standards initiative is to look at the list of participants: what points in the value chain are represented, how many of the top companies in each category, and so on. In DECE’s case, members have included most of the major movie studios, plenty of consumer device makers, lots of DRM and conditional access technology vendors, and so on, but few big-name retailers… one of which (Best Buy) already had a different system for delivering digital video content via Sonic Solutions.
Warner Bros. tried to jump-start the UltraViolet ecosystem by acquiring Flixster, a movie-oriented social networking startup, adding digital video e-commerce capability, and using it as an UltraViolet retailer for a handful of Warner titles. This has been little more than a proof-of-concept test, which was plagued by some technical glitches and suboptimal user experience — all of which, according to Singer, have been fixed.
It would be unworkable for Hollywood to pin its hopes for its next big digital format on a small unknown retailer owned by one of the studios. It has been vitally necessary to attract a big-name retailer to both validate the concept and provide the necessary marketing and infrastructure footprints. There had been talk of Wal-Mart entering the UltraViolet ecosystem, although it already has its own video delivery scheme through VUDU. But otherwise, the membership list had been short on major retailers.
Of course, Amazon is the major-est online retailer of them all. And it so happens that Amazon’s digital video strategy is a good fit to UltraViolet in two ways. First, Amazon currently runs a streaming service (Amazon Instant Video), whereas UltraViolet is primarily focused on downloads, a/k/a Electronic Sell Through (EST): the idea of UltraViolet is to buy a download and only then be able to view it via streaming.
Second, Amazon Instant Video does not look particularly successful. Of course, Amazon does not reveal user numbers, but it is telling that Amazon included Instant Video Unlimited as a perk in its US $79/year Amazon Prime program… and that when people extol the virtues of Amazon Prime, they tend to emphasize the free overnight shipping but rarely the streaming video.
The biggest winner thus far in the paid online video sweepstakes is Netflix, with about 24 million subscribers as of mid-2011. Netflix’s subscription-on-demand model is most likely far more popular than Amazon Instant Video’s pay-per-view (except for Amazon Prime members) model. Thus Amazon may be looking for ways to improve its market position in video without having to hack away at the Netflix streaming juggernaut.
The video download market is in comparative infancy. It has no runaway market leader a la Netflix, or Apple in music. If this situation persists long enough, and if Amazon’s trial run with UltraViolet is successful, then other retailers might see UltraViolet as a viable format as well… precisely because it will make them better able to compete with the Online Retailing Gorilla.
Yet the other dimension of UltraViolet that is currently lacking is availability of titles. And that’s where the other CES announcement comes in. Samsung announced a “Disc to Digital” feature that it will incorporate into new Blu-ray players later this year. With this feature, users can slide in their Blu-ray discs or DVDs, and if the content is “eligible,” they can choose to have that content available in their UltraViolet rights lockers for delivery in any UltraViolet-compliant format.
The Disc to Digital feature is a collaboration between Flixster (i.e. Warner Bros.) as online retailer and Rovi as technology supplier. It works in a manner that is analogous to “scan and match” services for music such as Apple iTunes Match: it scans your DVD or Blu-ray disc, identifies the movie, and if the movie is available in the UltraViolet library of licensed content, gives you an UltraViolet rights locker entry for that movie. Rovi’s content identification technology and metadata library are undoubtedly at the heart of this scheme.
There are two catches: first, users will have to pay a “nominal” fee per disc for this service, which is even larger (and as yet unspecified) if they want it in high definition; second, it is limited to “eligible” content, and no one has offered a definition of “eligible” yet (beyond the fact that the content must come from one of the DECE participating studios). But surely the “eligible” catalog will exceed the current list (19 titles) by orders of magnitude, or the service will not be worth launching.
Nevertheless, these developments are very positive news for DECE/UltraViolet after months of embarrassments and bad press. DECE still has lots of work to do to make UltraViolet successful enough to be the major studios’ designated successor to Blu-ray, but at last it’s on track.
*Yes, I’m aware of the irony of using a tag line from “Who Wants to Be a Millionare” in the title of this article: Disney owns the home entertainment distribution rights to that hit TV game show.
ReDigi Gets RIAA Nastygram November 15, 2011
Posted by Bill Rosenblatt in Economics, Law, Music, Services, United States.8 comments
Last week the RIAA issued a cease-and-desist letter to a music startup called ReDigi, which has been attempting to create a market for “used” digital music files. It allows users to sell their music files for prices below those of “new” files on iTunes or Amazon, and gives a portion of the proceeds to record labels. (It does not have licenses from the labels to do this.)
I had been paying attention to ReDigi since it had gotten some attention on the tech blogs when it issued a beta release a month ago, and I consulted a couple of copyright law experts about the legality of what they are doing. Based on the results of my research, the RIAA’s actions towards ReDigi were about as surprising to me as an announcement that the sun will rise tomorrow morning.
Who were the “legal experts” that ReDigi claims told it that what it does is within the law? What investors were credulous or rash enough to finance this venture? Or did everyone involved do this just to try to make a point? Regardless of the motivation, ReDigi’s legally embattled state has been a foregone conclusion.
ReDigi purports to implement something called Digital First Sale. The First Sale Doctrine (a/k/a Section 109 of the U.S. copyright law, and known as Exhaustion in most other countries) says that if you obtain a copy of a copyrighted work legally, you can do as you wish with it – keep it, lend it, sell it, give it away, use it to line a birdcage – as long as you obtained it legally and you don’t do anything with it that infringes copyright law, such as make unauthorized copies.
The issue is that this law was designed to apply to physical goods; no one is quite sure about its applicability to piles of bits. The U.S. Copyright Office was asked for an opinion on Digital First Sale a decade ago. The Office stated that Digital First Sale would require a complex technical mechanism that ensured that once you gave your copy of a file to someone else (whether for money or not; whether permanently or not), you had no further access to the file. The technical shorthand for such a mechanism is “forward and delete.” The Office opined that such a mechanism might be feasible at some point in the future but wasn’t then, so it declined to endorse the concept of Digital First Sale.
ReDigi claims to have implemented a robust forward-and-delete mechanism. It uses acoustic fingerprinting from Gracenote to ensure that once a user has sold a file, the same song no longer exists on the user’s PC or iPod. There are ways to hack the system, but that’s somewhat beside the point.
Digital First Sale remains very much unsettled law, even according to copyleft legal scholars, such as Jason Schultz of Berkeley (formerly of the Electronic Frontier Foundation), who would generally like to see Digital First Sale become reality.
Even putting First Sale aside, there’s another legal issue with ReDigi’s model. ReDigi only lets users sell files that they bought on sites such as iTunes and Amazon, in order to ensure that users are only reselling legally-obtained files. (The source of a file can be determined by examining metadata or watermarks.) There’s just one little problem with that: these sites have Terms of Use that expressly forbid resale of purchased digital files. (Here are Amazon’s and iTunes’s.) In other words, users who sell files on ReDigi may or may not be infringing copyrights, but they are certainly running afoul of iTunes or Amazon’s Terms of Use, which are contracts between the retailer and the user.
But wait a minute: if the Terms of Service forbid users from doing something that copyright law allows, which one prevails? Apparently that’s an unsettled question as well, according to both a senior legal authority at the Copyright Office and one of America’s leading copyright litigators. The latter told me “the ink is not dry” on this area of copyright law.
Yet one thing is very clear: Digital First Sale scares the media industry to death. Think about it: if anyone could resell their digital content at any price, then ReDigi would only be the beginning. There would be many competing content-resale marketplaces. People could auction their “used” files on eBay. People could “donate” them to public libraries with virtually no cost or effort – and get a tax deduction for a charitable donation. All perfectly legal. The result of this would be a rapid acceleration of what I have called the race to the bottom: the price of legal content would drop to near its cost of coping and distribution, i.e., virtually nothing. Furthermore, the major copyright owners would lose a lot of control over distribution; for example, Hollywood studios’ release windows would become virtually meaningless.
It’s also evident that the media industry would much rather nip this trend in the bud than endure years of litigation with uncertain outcomes. Even attempting to negotiate a license with a service like ReDigi would imply some comfort with Digital First Sale at a conceptual level, which is something that the media industry would surely want to avoid. Thus the RIAA’s actions against ReDigi come as no surprise.
The RIAA’s “nastygram” points to file copying that must take place in order for ReDigi’s system to work as evidence of copyright infringement, even though, of course, that’s not the real issue here. Other litigation concerning Digital First Sale, such as Vernor v. Autodesk (commercial software), is working its way through the courts. Whatever happens with Digital First Sale, the law will take years to reach clarity — and until then, services like ReDigi will continue to be in limbo.
Incidentally, Digital First Sale is going to be a topic at our Copyright and Technology conference week after next (Wednesday November 30). We will have legal experts on this topic as well as Paul Sweazey of the IEEE 1817 standards initiative, which is another attempt to implement something approximating Digital First Sale. The discounted registration offer I made last week still stands.
Irdeto Acquires BD+ Technology from Rovi July 7, 2011
Posted by Bill Rosenblatt in DRM, Economics, Technologies, Video.add a comment
Irdeto announced that it has acquired the BD+ content protection technology for Blu-ray discs from Rovi Corp. (formerly Macrovision). This includes the team and patents related to Cryptography Research Inc.’s Self Protecting Digital Content (SPDC), which Rovi acquired in 2007.
Given the string of recent acquisitions that Rovi has unwound (eMeta, InstallShield, FlexNet, TryMedia, and others), most of which have to do with content security or license management, this deal would seem to be yet another in the same vein; and in fact, BD+ was the last content security asset that Rovi owned, apart from its legacy serial copy management technology. Rovi is apparently paring assets to focus on its metadata (acquired from All Media Guide and Muze) and Electronic Program Guide (Gemstar) businesses; Rovi has dominant market shares or IP positions in both areas.
But a conversation I had with Irdeto revealed an entirely different purpose for this deal: one of the major Hollywood studios brokered it in an attempt to fix Blu-ray security, which has been seriously hacked. Irdeto did not name the studio, but those who follow the industry closely can probably guess which one it is.
BD+ is one of two sets of security technologies used in the Blu-ray disc format. The other, AACS, has been hacked — but the impact of the hack is not as severe as that of other hacks, such as the hack to CSS for DVDs. Nevertheless, the security of Blu-ray discs is apparently so poor that Hollywood is concerned enough to find a solution.
The idea in this deal is that Irdeto will bolster the security of Blu-ray by applying the Cloakware software-security technology that it acquired in 2007. According to Irdeto, this is a nontrivial engineering challenge but one that it believes it can solve in a few months’ time.
When Blu-ray first hit the market, with its multiple layers of content security, I had thought it was a real breakthrough for Hollywood. It looked as though Hollywood had not only learned its lesson about approving content security schemes that are too easy to hack (such as CSS for DVDs) but also had figured out a way to get downstream entities, such as consumer electronics makers, to pay for truly superior security.
Yet now we know that Hollywood has, once again, gotten what it paid for. Now that the latest intelligence about the Blu-ray format says that rumors of its demise are exaggerated, Hollywood wants to shore up the format’s security and protect its release windows. It wants to rely Irdeto’s Cloakware technology to plug the holes.
This is a great vote of confidence in Irdeto. But relative to the bigger picture, one must ask: does it really change Hollywood’s behavior so that this kind of thing doesn’t happen again? To put the question another way: what does Irdeto get out of this deal that would create incentives for it and other vendors to produce truly superior content protection — technology that is secure and affords a decent user experience?
Irdeto isn’t offering an answer. The terms of the acquisition from Rovi are undisclosed. It is unlikely that Blu-ray equipment and software makers will pay more for a license to Cloakware-enhanced BD+ technology than they pay now. Irdeto says that it will get “something” if it completes the Blu-ray fix successfully, but it won’t say what that something is.
I get the feeling that it will mostly be bragging rights. Irdeto will get the cachet of having “fixed Blu-ray,” which will (so the logic goes) lead to other opportunities with future formats; such is the power of Hollywood studio endorsement of content protection technology. And there is certainly some value in the elegant SPDC technology and the patents and engineering team that came with Irdeto’s acquisition.
But — putting aside the price of the acquisition vis-à-vis the value of the Blu-ray revenue stream that comes with it — the value of this deal strikes me as illusory. It’s the analog of user advocates who say that Hollywood studios should give away their content online so that consumers can “engage with the brands.” Both Hollywood studios and content protection vendors are in business to make money from their products. The major studios generally operate on the proposition that more money makes for a better product. Why can’t they apply the same principle to content protection?
Don’t Know Much about E-co-no-my February 2, 2011
Posted by Bill Rosenblatt in Book reviews, Economics, Music.add a comment
I have read many studies, articles, books, etc., about how digital technology affects copyright, and I’ve come to a conclusion: the writer’s opinion about the subject is heavily dependent on who he or she is.
This may sound extremely simple-minded, and at the first level, it is. A musician who wants to quit her day job will care much more about strong copyright than a tenured professor. A think tank report commissioned by the RIAA will espouse a hugely different position than one from Public Knowledge.
But there are deeper levels to this seemingly inane assertion. The National Academies’ Impact of Copyright Policy on Innovation in the Digital Era project group was really onto something when it asserted that in order to make progress on digital copyright, emotions and philosophies need to be removed from debate. As a corollary, those writers who deal as much as possible in hard facts and the real world are more likely to be right than those who deal in abstract principles.
To be specific, I’ve found that economists have the firmest grasp on reality in the digital copyright debate, and they deserve more attention than they are getting. (Bear in mind that this “insight” comes from someone who took only one economics class in college and did very poorly indeed.) For example, the academic researcher at the National Academies’ workshop last October who struck me as the most knowledgeable about real-world digital copyright developments was not a legal scholar but the lone economist at the event, Mark MacCarthy of Georgetown University.
The latest example of this is a new book: The Price of Everything: Solving the Mystery of Why We Pay What We Do
One of his chapters, “The Price of Free,” considers the momentum towards free content on the Internet. He cites the famous 2007 “pay what you wish” experiment by the rock band Radiohead — and while his immediate observations are somewhat off base, he gets it right by the end of the book.
As an economic thinker, Porter believes in homo economicus, i.e., that people make economically rational decisions. This leads him to incredulity that 38% of the people who downloaded Radiohead’s In Rainbows album from Radiohead’s site paid more than zero for it.
The Radiohead In Rainbows experiment has become a sort of Rorschach Test for those interested in digital copyright. Those on the “free culture” side claim that it was a huge success, while those on the “strong copyright” side claim that it was proof that the free content model doesn’t work. To sum up arguments on both sides, here is a variation of a chart I made for a conference talk last year:
| “Free Culture”: It Was a Success! | “Strong Copyright”: It Was a Failure! |
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Porter ends up deciding that Radiohead could only get away with this because they were already famous — a position similar to that of Jaron Lanier in his book You Are Not a Gadget last year. To back up this point, Porter finds another case that the free culture types don’t like to talk about: Trent Reznor (Nine Inch Nails) tried a similar experiment, which achieved more or less the same results as Radiohead. But when he got his friend, the far-less-famous Saul Williams (a/k/a Niggy Tardust), to try the same thing, the results were dismal.
The same could be said of the thousands of unknown indie bands who give their content away on MySpace every day. Because these artists are unknown, and MySpace gives them “some” exposure as opposed to “none,” Porter finds that giving away content is worthwhile to indie bands. Yet later in the chapter, Porter predicts that content will ultimately suffer from the move towards free because there will be no way to pay for the cost of its production.
Unfortunately, Porter fails to connect the dots between these two ideas. Indie bands on MySpace also have to pay to produce their music, though admittedly orders of magnitude less than the cost of a Hollywood movie. So, just as it is with the free software movement, if you look at it on strict economic terms, indie music on MySpace is subsidized by indie musicians’ day jobs.
So why did 38% of visitors to Radiohead’s website pay more than zero for music they knew they could get legally for free? The answer is perceived value of content, which has been ingrained in people’s minds (in industrialized societies, at least) over a very long time. Strong copyright advocates are gravely concerned that such value will erode as the price of music online floats downwards towards zero. Porter doesn’t cover this at all.
Yet elsewhere in The Price of Everything, Porter deftly analyzes another major area where people pay for intangibles: religion. People pay for their faiths with money, time, and restrictions on their behavior. He makes a solid case that religions succeed to the extent that they impose such demands in a cogent way, and moreover that if they relax the demands, they lose adherents.
If one applies this logic to music and other forms of artistic output, the conclusion is inescapable: it must have a perceived value in order to survive. Content producers do themselves no favors in the long run by allowing that perceived value to erode. Although Eduardo Porter looks at this argument purely in terms of justifying the monetary cost of producing content in the first place, the overall arguments he makes in The Price of Everything bolster this conclusion.
The National Academies’ Workshop on Copyright in the Digital Age October 17, 2010
Posted by Bill Rosenblatt in Economics, Law, United States.3 comments
The National Academies held a workshop last Friday at its headquarters in Washington as part of its efforts to launch a research program into copyright policy in the digital age. A total of 17 invited presenters gave 10-minute talks followed by Q&A. There were a few revelations and surprises among these.
The committee overseeing the research program sought input on what issues they should be addressing in their research. My own presentation (audio available) identified two areas: the lack of understanding of costs and benefits of rights technologies, and the ambiguity inherent in US copyright law that makes it difficult for technology to decide whether uses of content are legal or not.
The biggest surprise among the presentations came from Cary Sherman, President of the RIAA, representing the music recording industry. He called for the US to revert to a copyright system that requires registration in order to get the benefit of copyright protection. The current system makes registration automatic and only requires it as a precondition to infringement litigation. Automatic registration is a feature of the Berne Convention, an international copyright agreement that dates back to 1986 and which the US adopted in 1989.
Sherman’s call for “opt-in” copyright registration was a shocker, especially considering that Larry Lessig and other copyleft icons have been advocating this position for years. Lessig’s rationale is that intellectual property protection should only be necessary for those who actually care enough to register their copyrights.
Other media industry representatives were at odds with Sherman’s newfound opt-in religion. (Among other things, making this change in copyright law would put the US at odds with international copyright laws.) Even the MPAA (represented by Fritz Attaway), whose movie-studio members routinely register their copyrights, was against this idea.
Why would the major record companies be interested in reverting to opt-in copyright registration? Essentially for the same reason that Lessig is, but viewed from a slightly different angle: to make copyright the exclusive province of those who want it; to keep out the riff-raff, if you will.
The RIAA’s rationale is that the world is flooded with user-generated and indie content that overwhelmingly outnumbers the recording industry’s output; the vast majority of such content comes from people who aren’t interested in protecting copyrights or aware of the benefits of doing so. If registration is made mandatory, then the likely outcome is that a much higher proportion of copyrighted music will come from major labels.
Frankly, I don’t see the point. The only practical advantage of having a copyright in music in the digital age is to be able to sue for infringement. There would be other advantages if there were an online database of copyrighted music works, analogous to the database for books that Google intends to fund as part of its settlement with publishers and authors. With such a database, it would be possible, say, for a digital music service to restrict sharing of music tracks that have copyrights while allowing unlimited sharing of those not in the database. But — as several presenters at the workshop noted — such a database does not exist.
Another surprise at the National Academies workshop was the antagonistic stances of scholarly publishers and academic researchers. Presenters representing the American Chemical Society (John Ochs) and the Professional and Scholarly Publishers division of AAP (Bill Cook) made impassioned speeches about the need for stronger copyright protection, the devastating effect of piracy, the important roles their businesses play in disseminating scholarship, and the unfairness of open-access policies. These hard-line presentations were like throwbacks to Jack Valenti speeches from a decade ago, while today’s MPAA and RIAA (see above) have moved on to more nuanced dialog and engagement with the technology community.
Meanwhile, Columbia University statistics professor Victoria Stodden bemoaned the restrictions that copyright laws place on free sharing of research data. One of the research committee members hammered away at the scholarly publishers for being beneficiaries of the academic tenure system who don’t pay their authors. The exchanges did not put the scholarly publishing community in a very positive light.
The National Academies project committee was mainly interested in finding sources of data that they could draw on for their research — either existing data or places from which to mine fresh data. Their goals are extremely worthy, but some of the data they would like to get may be hard to come by. For example, one of the common threads of the discussion was the “amateurization” of content creation and its effect on culture. Do professionals create “better” content than nonprofessionals? How do you measure quality — or should that be judged at all?
One of the law-professor types noted that any differentiation of treatment of content based on some notion of quality runs counter to the First Amendment. But that wasn’t the point. The point was whether it’s possible to measure the effect of the explosion of user-generated content on culture by assessing quality of the works that are available. No one was able to identify a reliable measure. In the end, the argument put forth by Derek Slater of Google that “one man’s trash is another man’s treasure” — which more or less defines the success of YouTube — was hard to refute.
Nevertheless, the research that the National Academies proposes to do should be very worthwhile. In the prospectus for the research program, they state that one of the motivations for the research is to offer facts and economic principles to frame the debate on digital copyright, rather than the philosophical and emotional arguments that have largely framed it thus far. I could not agree more.
My Remarks at the National Academies October 17, 2010
Posted by Bill Rosenblatt in Economics, Events, Law, Technologies, United States.add a comment
Remarks made at the National Academies’ workshop on the Impact of Copyright Policy on Innovation in the Digital Era, October 15, 2010, Washington, DC.
Good morning. First I would like to thank the committee for the opportunity of being invited here today. It’s an honor to be here. The issues being discussed here are ones that I have studied and cared deeply about for years. I’m thrilled to see the potential for research to solve some of the pressing issues around copyright policy in the digital age.
My name is Bill Rosenblatt. I’m president of GiantSteps Media Technology Strategies, a consulting firm based in New York. I consult on rights technologies, among other things. I’m the author of a book on DRM, which is ancient history by now, I suppose. I’ve worked with clients from across the spectrum of these issues for many years.
As a consultant, I try not to take sides in this debate. My only personal bias is that I was raised by professional musicians, so I am in favor of content creators being able to make a living. I’m a computer scientist by training, but also an author and editor, and someone who has worked in the content as well as technology industries.
The prospectus for this Workshop notes that debates over digital copyright have been philosophical and emotional rather than economic or fact-based. I was happy to see this acknowledged, because it’s absolutely what I see too.
I would like to draw attention to two particular issues that I have focused on, and that I believe are particularly in need of objective research.
- The economic imbalance that I perceive between demands for rights technologies and the costs of implementing them.
- Something I call the trap door between laws and technologies.
For each of these, I’d like to describe the problems that I believe can be addressed by appropriate research.
Regarding the first one, the economic imbalance: copyright owners demand that downstream entities in the content value chain, such as distributors, retailers, and consumer electronics makers, implement digital rights technologies in order to get licenses to use content. But in general, the downstream entities pay for those technologies; the content owners don’t. This has led to two common outcomes, both of which are not optimal: first, downstream entities implement the cheapest and simplest rights technologies that they can get away with, or second, in many cases, they implement technologies that benefit them at least as much as they benefit content owners.
One example of the first outcome is the CSS protection for DVDs, which was, in my view, designed primarily to be cheap to implement rather than to actually protect content well. It was hacked in a matter of weeks after its release, the hack was applicable to all protected DVDs worldwide, and it was easy to use. An example of the second outcome is Apple’s FairPlay DRM technology for iTunes, which was designed to promote platform lock-in as well as content protection. I don’t mean to pick on these particular technologies; they are just examples, and there are others.
No one really knows how to fix this problem, because no one actually understands the value of these technologies – to content owners, to retailers, device makers, or to consumers. Various studies have been done on related subjects, such as losses to content industries from copyright infringement, the effect of DRM on content pricing to consumers, the effect of file-sharing on music piracy, contributions that Fair Use has made to the Gross Domestic Product, and so on.
How helpful are these studies? Well, the Government Accountability Office released a report this past April that not only cast doubt on their validity but expressed skepticism that the economic impact of IP infringement can be measured at all with any kind of accuracy. I had seen some of the studies mentioned in the GAO report and also felt that their methodologies and objectivities left much to be desired.
I’m not the only one who sees this imbalance. A couple of years ago, Professor Jonathan Zittrain of Harvard Law School said at a conference that the key issue in Viacom’s copyright litigation against YouTube was the cost and responsibility of implementing copyright filtering technology. Litigations such as that one and similar ones like Universal Music Group v. Veoh are really attempts to obtain or rebuff technological mandates, so that the government decides (or doesn’t decide) who has to pay for what technology. There may well be legal and philosophical principles that guide such decisions, but there are economic ones as well, and these go largely unexplored.
Despite the GAO report’s pessimism, I believe that if the questions are posed carefully and the research is done well and objectively, we can get some answers to questions like these:
- How much better is a content protection system that costs more to implement, in terms of both content security and the consumer experience?
- What are the differences in cost-effectiveness and user experience between proactive and reactive solutions to infringement? (DRM is an example of a proactive technology. Forensic watermarking is an example of a reactive one.)
- What is the appropriate economic consideration or incentive in requiring network operators to be accountable for their users’ copyright infringements through means such as filtering technologies and “progressive response” laws?
- And many others that I could think of.
The second issue that I’d like to mention today is what I call the trap door between laws and technologies.
It’s the digital age; everything about digital content is automated and instantaneous: copying, distribution, storage, searching, browsing, playback, etc. Everything, that is, except decisions about copyright infringement. You can do whatever you want with content, but in a large and growing number of cases, you have to call lawyers in to decide questions of legality. Or as Larry Lessig once said, “Fair Use is the right to hire a lawyer.”
I prefer to say that Fair Use is a trap door into the legal system. Whenever you get to a copyright gray area, you fall through the trap door, and you have to stop doing what you’re doing.
The problem is not just that people have to hire lawyers and embark on potentially long legal proceedings. It’s also that consumers and especially entrepreneurs tend to shy away from activity that may or may not be legal, because of the fear of going through a legal process to get the question decided.
My view is that the trap door is itself a chill on expression and innovation. It’s as if you’re driving; speed limits aren’t posted, and you have to guess how fast you can drive based on the width of the road, type of road surface, presence of pedestrians, and so on – and if you aren’t sure, you could pay a traffic lawyer to go spend a year figuring it out for you — all so that you can drive to the mall one afternoon or, as Google apparently just did, invent a new type of self-driving car.
Wouldn’t it be easier if we had a copyright legal system that enabled at least some degree of automation of decisions on fair use and other issues? Apparently not, according to most lawyers. When I raised this possibility on a panel at my last conference, the attorneys on the panel – who represented a broad range of copyright interests – reacted with a mixture of bemusement and annoyance.
But my view is that this step is unavoidable given the realities of the digital age. And in fact, like it or not, our legal system does introduce rule-based judgments about appropriate use. For example, the Copyright Office’s triennial rulemaking on DMCA 1201 produces a list of legally permitted uses. But of course these are severely constrained and don’t have much practical impact.
The problem, once again, is that arguments are being made on philosophical or emotional rather than fact-based grounds. People say that Fair Use shouldn’t be made more automatable because business models and technologies change too rapidly, and it’s the flexibility that gives the law its staying power. That may be true, but to me it’s a cop-out.
The issue has just not been explored properly. It may well be that our principle-based Fair Use system is better, in some sense, than, say, the European system or some other type of copyright regime. But we don’t really know one way or another. And by the way, what I’ve said applies not only to Fair Use but to Section 109 and other parts of the copyright law.
A nonprofit organization called the Digital Media Project tried to solve this problem several years ago. The DMP was created by Leonardo Chiariglione, the founder of the MPEG standards body. They tried to do something that could have been great, if only they had finished the job.
The DMP created an open standard DRM technology. One of its design goals was that this technology should support what they called Traditional Rights and Usages (TRUs), which vary from one country to another according to copyright laws. From what I can tell from reading their documents, the DMP made some progress on mapping TRUs to digitally expressible and automatable constructs, but it essentially abandoned the effort three years ago. They did create a long list of TRUs but only came up with a few examples of the mapping.
Someone ought to try to continue the work that the DMP started — though with a different goal: not to try to shoehorn existing copyright constructs into a DRM system, but just to see how far it could reasonably go. Right now — the Copyright Office’s DMCA rulemaking notwithstanding — rules about appropriate use arise primarily from a very ad hoc combination of settled case law precedents (such as parody or criticism being fair use) and industry convention (such as for music sampling). Research could be done to explore both the boundaries of how current copyright law can be made more amenable to technological implementation and the pros and cons of changing copyright law so as to make the trap door smaller.
Those are the two sets of issues in digital copyright that I believe would benefit from the research that the committee contemplating. Thanks for your attention, and thanks again to the committee for inviting me today.
U.S. Rights Technologies Poll Results Updated August 30, 2010
Posted by Bill Rosenblatt in Economics.add a comment
By a quirk of calendar timing, the week-long doldrums before the Labor Day holiday in the US are extended to two weeks this year. This means that the slow end-of-summer news period will extend for a while. In the meantime, I noticed that more people voted in the U.S. Rights Technologies Deficit poll that I put up several weeks ago. The results were altered enough to make me want to revisit my conclusions from the numbers, so I updated that story.
After Labor Day, we will expect an onslaught of news during the run-up to the IBC broadcasting trade show in Amsterdam and new consumer electronics product rollouts in September. (Personally, I’m waiting for Verizon Wireless to release its “world edition” Android devices that have GSM as well as CDMA. Then we’ll have a few interesting things to talk about.)
Poll Results: The U.S. Rights Technologies R&D Deficit July 26, 2010
Posted by Bill Rosenblatt in Economics.1 comment so far
[Revised August 29, 2010 to reflect additional poll results. The poll is now closed.]
Thanks to all who voted in the recent poll on why the United States is lagging in research in rights technologies — not just DRM, but also content identification, licensing automation, and so on — compared to other countries.
The results so far are in line with what many rights technology vendors have known for years: there’s no money in it. The most popular response: “Limited commercialization opportunities.” If you add to this the respondents who chose “No money available from grant sources,” you get a total of 41%. The “Researchers find the topic distasteful” response polled just 12%. I would have expected higher, but those researchers who don’t like the idea of rights technologies might not be reading this in the first place.
There was also some ambiguity — or difference of opinion, perhaps — over what qualifies as R&D: 24% responded “R&D is still happening in the US, just not being published in scientific journals.”
My reasoning on this point is as follows: Rights technologies have various problems today; we needn’t enumerate or dwell on them here. Some claim that the problems are unsolvable, so why bother trying. To me, that’s a disingenuous rationalization — or put more plainly, a cop-out. We take countless technologies for granted today that were deemed “impossible” not too long ago — cheap speech recognition, just as one example. If people see a light at the end of the research tunnel, they’ll find resources to solve problems. And admittedly, some technical problems get asymptotically closer to solutions without actually being solved — music recommendation and highly targeted contextual advertising, say — but certainly not for lack of trying, because someone sees opportunity in it.
Solving problems calls for fundamental research, the kind with longer-term impact. Most of the “R&D” done by corporations or consortia is designed to meet short-term or tactical market needs and thus does not qualify under my definition of research. (Yes, there are exceptions; for example Intertrust, owned by Sony and Philips, does research — and publishes some of it in respected journals.) And many of the problems that people cite about rights technologies are best solved by seeking entirely new approaches rather than tweaking existing ones.
All this is a long way of asserting that the best place to look for research output is scientific journals, which best represent research done with a longer view — and happen to be publicly visible. (Conversely, patents are publicly visible but, in my opinion, a poor indication of actual research output.)
But in any case, the answer is clear: in the United States and elsewhere, there’s no money to do research, and no money at the end of the pipeline for the research that gets done. There’s the problem in a nutshell.
This leads us to another interesting wrinkle to the Rights Technologies R&D Index that I charted a few weeks ago. Notice that the countries with the biggest relative R&D output are “device maker” countries like Taiwan, China, and Korea. Spain is another country with a high R&D Index, mainly because of an active research group at the Universitat de Catalunya in Barcelona and the presence of the global telecommunications powerhouse Telefonica. In contrast, “content producer” countries like the US, UK, Germany, and France have low R&D index numbers. Japan, with strong activities in both camps, is accordingly in the middle.
What’s happening is clear, and it’s the same old story: content owners require DRM and other rights technologies; device makers pay for them. The economic incentives are out of balance.
Let’s face it: money does drive research. (My own graduate-level research in the late 1980s was partially funded by Strategic Defense Initiative money, and some who dipped into that river of cash did tend to skew their personal principles to get it.) Researchers in countries like China , Taiwan, and Korea get funding and/or job offers from the major consumer device makers there; or they launch entrepreneurial ventures that partner with or are acquired by those companies.
If anyone wants to fix fundamental problems with rights technologies, then here’s more evidence of the answer: those who want it should fund its development.
The US Rights Technologies R&D Deficit July 19, 2010
Posted by Bill Rosenblatt in Economics.7 comments
I’ve received a number of emails from people who were intrigued by the analysis in the previous piece of the dwindling of research and development in rights technologies in the United States in recent years.
So I decided to do a little more research. Using mostly figures from the Organization for Economic Cooperation and Development (OECD), I have come up with a Rights Technologies R&D Index that takes into account two factors by country:
- Number of relevant papers published in IEEE and ACM journals and conference proceedings.
- Gross Expenditure on Research & Development (GERD*).
The index takes the number of papers published during a given time period and divides it into GERD. In other words, it gives an indication of how much effort a country spends on rights technologies research (including DRM, watermarking, fingerprinting, rights expression languages, licensing automation, etc.) that’s proportional to overall R&D spending as opposed to population or even GDP.
I examined IEEE and ACM search results from 2008 to date, the year from which the latest GERD figures are generally available.
The chart below shows the results. GERD (blue columns) is shown in US $Billions, with index on the left. RT Output (red columns) is shown as a proportion of the world’s rights technologies research output coming from that country, normalized to GERD for an “apples to apples” comparison. Finally, the green line is the Rights Technologies R&D Index, which is a ratio of research output to GERD.
Rights Technologies R&D Index by Country. ©2010 GiantSteps Media Technology Strategies.
By the way, the countries with the next tiers of activity behind these are mostly European: Greece, Slovakia, Germany, Italy, Netherlands, Morocco, Finland, Ireland, Singapore, and UK.
Why is the US so far behind? What do you think? Here’s a poll. Feel free to add a comment if you have other ideas.
*Not to be confused with Gastroesophageal Reflux Disease, which is what you find if you do a Google search on GERD.
The ROI of RIAA Lawsuits July 15, 2010
Posted by Bill Rosenblatt in Economics, Law.2 comments
Tax returns discovered by p2pnet reveal that the RIAA spent over US $16 Million on legal fees during 2008 alone to sue individuals for illegal downloading, and netted less than $400,000 in settlements.
This has provided fodder for big yuks and told-you-sos around the techblogocracy. On the one hand, I’ve always said that the biggest problem with all so-called antipiracy efforts, whether technological, legal, or otherwise, is that no one has successfully measured their efficacy — if indeed it’s even possible to do so, which is doubtful. In fact, even the long line of commenters on Slashdot are collectively ambivalent about whether or not the $16 Million was well spent on instilling FUD into the downloading public.
But this is not really anything new: it’s a continuation of the major music companies’ insistence on funnelling large amounts of money into legal departments to fight infringement while spending virtually nothing on technological innovation to protect rights while providing users with decent value for money.
Recall that in 2007, Universal Music Group alone likely spent millions of dollars a year to thwart unauthorized file-sharing of only its frontlist music tracks, as shown by leaked emails from the antipiracy services company MediaDefender (now part of Peer Media Technologies). Other media companies, such as Viacom, spend equal (or higher) sums of money on such services to keep their videos off of sites like YouTube, which is one reason why they are suing to change the laws so that those websites are required to pay for the policing.
As I’ve said before, it’s part of a trade association’s job to say and do that which its members find too distasteful to do themselves. But such tasks are normally “inside baseball” such as lobbying governments and managing relationships with related industries. The RIAA’s lawsuit campaign resulted in a public backlash, which has outlasted the actual lawsuit campaign and which this revelation about expenditures perpetuates.
Antitrust law limits what any trade association can do in promoting technological R&D. Yet I still say that the worst thing the RIAA has done to date in this vein was to threaten Ed Felten of Princeton University with a lawsuit for hacking the SDMI watermark back in 2001. Because of this action, academic research into DRM and other rights technologies in the United States has diminished to virtually nil.
(For example, a search of IEEE shows that of all digital rights-related research papers published from 2008 to the present, 40% were from China, 27% were from the rest of Asia, 20% were from Europe, and less than 4% were from the United States. Spain by itself had more activity than the US.)
In addition to scaring US researchers away, the SDMI episode served to radicalize Felten and energize the anti-media-industry element. None of this has served the music industry well. Some of it will be very difficult to undo.
Bill Rosenblatt
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