Yes, Piracy Does Cause Economic Harm January 27, 2013Posted by Bill Rosenblatt in Economics, Uncategorized.
Back in 2010, the Government Accountability Office (GAO) published a meta-study of the economic effects of intellectual property infringement (including counterfeit goods as well as copyrighted works). The GAO concluded that IP infringement is a problem for the economy, but it’s not possible to quantify the extent of the damage — and may never be. It looked at many existing studies and found bias or methodological problems in every one.
More recently, Michael Smith and Rahul Telang, two professors at Carnegie-Mellon University, published another meta-study that serves as a sort of rejoinder to the GAO study. This was the subject of Prof. Smith’s talk at the recent Digital Book World (DBW) conference in NYC.
Assessing the Academic Literature Regarding the Impact of Media Piracy on Sales summarizes what has been a growing body of studies on the economic effects of so-called media piracy. Their conclusion is that piracy does have a negative effect on revenue — if for no other reason than the vast majority of studies come to that conclusion.
Smith’s presentation at DBW listed no less than 29 studies on media piracy that take actual data into account (as opposed to merely theoretical papers such as this one). Of those, 25 found economic harm from piracy, while 4 didn’t. When the list is restricted to papers published in peer-reviewed academic journals, the ratio is similar: 12 found harm; 2 didn’t. Interestingly, almost half of the cited studies were published after the GAO’s 2010 report.
(When Smith and Telang’s paper was originally published last year, many discredited it instantly because the MPAA helped fund the research. Yet I take the researchers at their word when they say that the funding source had no effect on the outcomes — an assertion bolstered by the paper’s exclusion of the MPAA’s own study from 2006.)
The paper explains why some studies’ methodologies are better than others and discusses shortcomings in some of the studies, such as the Oberholzer-Gee & Strumpf paper from 2007 that showed no harm to sales of music from piracy and therefore has been widely cited among the copyleft.
It’s easy to poke holes in the methodologies of studies that have to rely on real-world data over which the researchers have little or no control. And as someone who wouldn’t know an “endogenous dependent variable” if one bit me in the face, I find it hard to look at criticisms of these studies’ methodologies and determine which ones to believe. Yet it’s obvious that any study on piracy must rely on real-world data in order to have any credibility at all.
Decisions about business and policy have to be made based on the best information we have available. After a certain point, simply poking holes in studies — particularly those whose results you don’t happen to like — isn’t sufficient.
It may indeed, as the GAO suggested, be impossible to measure the economic effects of piracy with a large amount of accuracy. But if dozens of researchers have tried, all using different methodologies, then their conclusions in the aggregate are the best we’re going to do. Put another way, it will henceforth be very difficult to dislodge Smith and Telang’s conclusion that piracy does economic harm to content creators.
The Artists’ Rights Movement July 10, 2012Posted by Bill Rosenblatt in Music, Uncategorized.
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The phenomenon that I called the Loweryquake has survived the press’s news-cycle rhythm and the proverbial 15-minute time limit. It continues to reverberate throughout the mainstream press and techblogosphere. It has led to a lot of what New York magazine last week called “actually pretty thoughtful online discussion.” And it has engendered what can only be called a movement in favor of artists’ rights.
This has nothing to do with the RIAA, MPAA, or any other representative of Big Media. The Artists’ Rights Movement is the product of actual content creators, real people who make the copyrighted works and receive the royalty checks… or not, as the case may be. They are in favor of stronger copyright enforcement, eager to expose technology industry profitability on the backs of recorded content, and deeply skeptical of many of the schemes that have been suggested to make up for lack of compensation from content in the digital age, from T-Shirts to “True Fans.” (They also sometimes espouse extreme positions such as curtailing First Sale.)
David Lowrey’s blog The Trichordist is fast becoming the unofficial house organ of the Artists’ Rights Movement. The Trichordist Random Weekly Reader, a weekly post of links to relevant articles around the web, is becoming as useful in its way as the lamented Rightscom Daily Briefing was before it was discontinued a few years ago. The Trichordist also aggregates other sympathetic blogs such as Copyhype and Fareplay, and more mainstream columnists such as Andrew Orlowski of The Register and Helienne Lindval at The Guardian.
Through The Thrichordist Random Weekly Reader I learned, for example, that the Center for Copyright Information (CCI) — the United States’ private-sector analog to graduated response regimes in countries like France — has appointed an Executive Director and is gearing up to launch later this summer. The surprising tidbit about this news is that they have appointed an advisory board that includes people representing consumers, privacy issues, and so forth — including Public Knowledge CEO Gigi Sohn.
It’s good to see Gigi Sohn doing something constructive like this. My opinion of Public Knowledge had been declining since its excellent white paper on 3D printing over a year ago. Its output has shifted towards shrill fire-up-the-base scare tactics. Its attempt to tie its Internet Blueprint to SOPA and PIPA was a particularly disingenuous piece of opportunism. Sohn has said that she will try to influence the CCI to stay away from copyright enforcement through suspensions of users’ ISP accounts. But more generally, the CCI advisory board will benefit from her point of view and, frankly, her presence will serve to blunt accusations that it’s a cabal between Big Media and ISPs and that consumers’ concerns aren’t being heard.
An article in today’s New York Times suggests that a main theme of this week’s annual exclusive Sun Valley media/tech summit will be constructive engagement on copyright infringement. On the one hand, RIAA CEO Carey Sherman has stated that he’s giving up on legislation as a remedy, now that SOPA and PIPA have failed (ACTA, which was soundly voted down in European Parliament last week, had long ago lost its teeth on copyright enforcement). He is more optimistic about “best practice” solutions arising from the private sector.
On the other hand, a top Google executive said, “we do not want to be building a business based on piracy.” Google also cosponsored an interesting new study of online copyright infringement carried out by BAE Systems Detica in the UK, and while — like all such studies — the methodologies can be questioned, this is another pleasantly surprising development.
These are all hopeful signs that, in the wake of the SOPA/PIPA defeat, the media and tech industries may be ending their hyper-partisanism, and in particular that the tech community may soften its “Party of No” stance regarding using technology to solve problems that were born of technology in the first place. Meanwhile, The Trichordist is clearly growing in influence; it may (to extend an analogy) even become an MSNBC to the likes of TechDirt’s Rush Limbaugh.
P.S. one organization that really needs to get the memo on the Artists’ Rights Movement is the Future of Music Coalition, which purports to represent independent musicians and songwriters. They could start by taking a hard look at their own advisory board.
The Loweryquake June 27, 2012Posted by Bill Rosenblatt in Economics, Law, Music, Uncategorized.
David Lowrey is a semi-legendary musician in one of techdom’s most beloved genres, indie rock. He sits on Groupon’s advisory board. He’s neither a rich rock star nor a spokesman for the RIAA. As a university professor, he is more a beneficiary of what Larry Lessig calls “the academic patronage system” than of copyright. In other words, you’d expect David Lowrey to be one for “sticking it to the man.” Yet last week, he wrote a 3800-word masterpiece about the dire state of musical artists in the digital age and the moral compromises that got us there.
As everyone involved with music knows by now, Lowery’s “Letter to Emily White” was originally occasioned by a blog post by an intern of that name at National Public Radio, who admitted to being a big music fan and possessing 11,000 tracks of digital music but only having paid for less than 2% of them (which puts her well below the generally-accepted figure of 5%). It went viral online and got mentions in the New York Times as well as other major media and blogosphere outlets.
Paul Resnikoff in Digital Music News said it best, in perhaps the most cogent piece of analysis I’ve ever read from him:
Our digital innocence just died … after a decade of drunken digitalia, this is the hangover that finally throbs, is finally faced with Monday morning, finally stares in the mirror and admits there’s a problem. And condenses everything into a detailed ‘moment of clarity’.
Over the years, I have written occasionally about the “race to the bottom,” in which the price of content is tending inexorably towards zero. The massive amount of free and illegal content available now, coupled with legal content services’ needs to “compete with free,” has led to more and more legal content offers for less and less money. Emily White’s frank admission shows that, for a growing number of young people, the race to the bottom in music is over, and musicians and songwriters have lost.
I won’t comment on Lowrey’s piece per se, except to recommend strongly that you read it. And I will say that as I read more of the posts on his blog, The Trichordist (by other authors as well as Lowrey himself), I found some attitudes about intellectual property that I felt were a little extreme and/or ignorant in their own ways.
Instead, I want to focus on the range of comments people have posted about Lowrey’s Letter to Emily, particularly the negative ones. The Trichordist curates comments by hand (and has been “accused” of favoring positive comments heavily as they cope with comment volumes that are orders of magnitude higher than usual), but they have appeared unfiltered on other sites — thousands of them.
Some of the negative comments are sober economic arguments that conclude with “This is just the way it is, and we can’t change it, so we all just have to adapt,” citing principles such as supply and demand, value migration, or cost of goods sold. While I disagree with the “we can’t change it” part, the economics are hard to argue with.
Yet the bulk of the negative comments are remarkable for their defensive attitudes, as expressed through smugness, arrogance, misinformation, rationalizations, and most telling of all, outright hostility towards Lowery. Many of them remind me of the rhetoric of right-wing political extremists when backed into a corner. Apart from the ad hominem attacks against Lowrey, the negative comments fall roughly into the following buckets:
- Economic rationalization (record companies): The record companies rip artists off anyway. Lowrey rips this one apart in his piece.
- Economic rationalizations (artists): Musicians can make money touring instead. Ditto. (Did the people who wrote these comments actually read Lowrey’s piece?)
- Economic rationalization (users): Emily is just a poor young intern and isn’t able to pay for that music anyway. See below on the perceived value of music.
- Legal rationalization: What Emily did was “fair use.” When your prom date gives you a “present” of 15GB worth of digital music, it’s probably not fair use. (Of course, that this is even a question is a problem with fair use itself, but that’s another subject.)
- Terminological distractions: So-called piracy is not “stealing” because the original remains once you have copied it. As even TechDirt’s Mike Masnick points out, what you call it doesn’t matter; it’s copyright infringement, which is against the law.
- Exceptions that prove the rule: So-and-so has figured out how to thrive under the new system, so there must be ways to do it. This one is Masnick’s specialité de la Maison. He seeks out these examples in order to encourage others to follow them. That’s fine, but they continue to be few and far between.
- Market research cherry-picking: I saw a study that says that piracy actually benefits music sales and/or the RIAA/MPAA’s piracy studies are biased. Let’s agree that no study of the economic effects of copyright infringement is both methodologically unassailable and unbiased, and perhaps that the “real” effect may be unmeasurable. But if we’re going to cite studies, we should at least look at all of them instead of putting up strawmen for the purpose of knocking them down. I have looked at all of the studies (and not just those about music) and found that those that claim economic damage from infringement outweigh those that claim economic benefit by a wide margin, even when studies commissioned by the RIAA or MPAA are ignored.
I am also reminded of a conversation that took place at the Copyright and Technology conference last week in London. The eminent copyright litigator Andrew Bridges echoed the common copyleft refrain that “copyright infringement is not a problem” except perhaps that “some companies are losing money.” He also asserted that the sky-high statutory damages under United States law act as an effective deterrent to copyright infringement because they scare people.
I disagreed with both statements. The case of Emily White is the best counter-argument I could have made to both points if I had known about it at the time. For every Joel Tenenbaum or Jammie Thomas-Rasset who makes headlines getting nailed for copyright infringement (and getting Harvard Law professors to defend them), there are millions of Emily Whites who don’t, and millions more who have no idea about copyright infringement, let alone statutory damages.
However, none of these arguments addresses the real problem. The real problem is that the value that people perceive in music has virtually disappeared. As Jaron Lanier pointed out in his book You Are Not a Gadget and subsequent writings, there is a profound cost to society as the perceived value of original content goes to zero. And the cost goes well beyond questions of whether there is “enough creative content” if artists can’t make livings.
Lowrey’s Letter to Emily is more about morals and ethics than about the inherent value of content. The problem is that simply preaching ethics to people in order to get them to change their behavior doesn’t work. At best, as Ben Sisario points out in the New York Times, this gets musicians to the status of charity recipients.
A more recent post on The Trichordist, by Lowrey’s Camper Van Beethoven bandmate Jonathan Segel, focuses exclusively on perceived value — after providing an illuminating history of musicians’ compensation since Beethoven. Killer quote:
What is happening here seems to be a willful ignorance that the inherent value is still there, not being paid for in the distribution of additional copies. These same individuals would certainly make the claim that they are copying the music in order to listen to it … but are refusing to admit the relevance of the social contract that says that that inherent value is what is used in the exchange rate with monetary currency. I see this as a hypocrisy: either music has no value at all, (in which case why copy it to begin with?), or it has value and the copiers are refusing to admit that it does, simply because it is a copy.
Once this behavior becomes normal — i.e. becomes standard practice for the Emily Whites of the world — then the taint of hypocrisy disappears. Once that happens, concern over the value of content evaporates, as then does the value itself.
The time for questioning whether or not this is a problem is over. The proper question is how to solve it.
The Harry Potter Watermarking Experiment April 8, 2012Posted by Bill Rosenblatt in Uncategorized.
As more users explore the magical world of Pottermore, J.K. Rowling’s site for all things Harry Potter, we are finding out that the EPUB e-book files it sells may be DRM-free, strictly speaking, but are not devoid of rights technology. Instead of encryption-based DRM, Pottermore is using a watermarking scheme that the Dutch vendor Booxtream markets as “social DRM.”
Users can purchase each Harry Potter e-book title once and download it up to eight times, in multiple formats. That’s a real convenience; it’s a “rights locker” scheme reminiscent of UltraViolet for movies. As I mentioned previously, the Kindle and Nook versions have DRM. The EPUB version that I downloaded is not DRM-protected; instead it contains two things: “This book is watermarked and was acquired by user ec107c00b9577436d6354e54cd9da5c9 on 31 March 2012″ on the copyright page, and various bits of data inserted invisibly into images and other places inside the book.
This data ought to be easy to remove without trace. The files appeared on torrent sites very shortly after the Pottermore Shop went live. A programmer with middling skills could write code that detects and removes the data; even if the illustrations in the book were a bit damaged, readers wouldn’t care. Such a hack for Booxtream doesn’t exist yet (at least publicly), but the irony is that if this scheme catches on with more authors and publishers, it surely will.
Such a program would be perfectly legal; it would not violate anticircumvention law such as DMCA 1201 in the United States. It would be what I call a “one-click hack,” like the (illegal) DeCSS rippers that hack the weak CSS encryption on DVDs, which the non-tech-savvy can easily use and which is permanent. In other words, it would impose the same level of effort on users as a format conversion tool, such as the free Calibre, which can (among other things) convert EPUB files to MOBI files for Kindles so that users can get DRM-free Harry Potter titles for their Kindles after all.
Furthermore, even though Section 1202 of the DMCA forbids removing “copyright management information” from files, the watermark does not qualify as copyright management information as defined in the law. This means that under U.S. copyright law, the user is free to apply such a hack.
Some would argue that watermarks are no different from weak DRMs (like CSS) in terms of the “speed bump factor” because both have one-click hacks available. But the fact that watermark removal tools are legal and DRM strippers aren’t makes a difference. DRM strippers must hide in the shadows, but watermark removal tools can exist out in the open. If they are available for free (which seems very likely), then it would be difficult to try to stop them through legal channels. I could even see a watermark removal feature built into a popular application like Calibre, since it’s free and open-source.
Pottermore’s Terms and Conditions forbid altering or removing the watermark data, but this may not mean much. It is possible that copyright law may prevail over such terms; this is a legal gray area.
The legal principle here is First Sale (Section 109 of the U.S. copyright law), known as “exhaustion” outside the U.S. This says that the publisher has no further control over a work once a person has obtained it lawfully. While this law enables libraries, used book/record/video stores, and other such institutions for physical goods, its applicability to digital files is unsettled — although as I said previously in connection with ReDigi, the digital music resale service, both media companies and digital retailers are highly motivated to ensure that Digital First Sale never happens. This Harry Potter case is yet another example of why.
(By the way, an update on ReDigi since I wrote about it last November: EMI sued the company back in January. The following month, the judge in the case denied EMI’s request for preliminary injunction, meaning that ReDigi can keep operating as the case goes to trial.)
This all leads me to question why Pottermore bothered with this watermarking scheme in the first place. It seems rather pointless.
I assume that “user ec107c00b9577436d6354e54cd9da5c9″ is an obfuscated version of my user account ID on Pottermore. I also expect that Booxtream lets the retailer use whatever character strings it wants. If Pottermore really wanted to discourage me from infringing the copyright on the e-book, it would put my email address, or even the number of the credit card I used to buy it (which was an option in the now-discontinued Microsoft Reader e-book technology). Even the vehemently anti-DRM publisher O’Reilly & Associates uses a watermarking scheme for its downloaded PDFs that puts the user’s real name on every page of the books.
Instead Pottermore, put a character string that means nothing to nontechnical users, presumably to avoid privacy complaints (which would also encourage hacking), and put it in a single place that most readers ignore. This “social DRM,” at least the way Pottermore has implemented it, is a shy and retiring beast. There is also a standard legalese copyright notice in the e-book, but no one pays any attention to those either.
Given that non-EPUB versions of the Harry Potter e-books have DRM, I suspect that Pottermore would have used DRM if it were possible to have a seamless user experience with EPUB files, as is the case within the Kindle and Nook ecosystems. (Pottermore could have chosen to do without DRM for those formats too, but it didn’t.) The lack of a standard DRM for EPUB integrated with EPUB reader apps makes such an experience unobtainable; hence Pottermore’s use of Booxtream instead of DRM. In other words, Pottermore is not against DRM, but it intentionally traded off the best possible user experience and respect for user privacy against some level of protection.
I fail to understand what behaviors Pottermore is trying to prevent here. Even a plain-language message to purchasers — which involves no technology and costs nothing to implement — would alert them to legal and contractual limitations on use. Instead, the current scheme, with its cryptic message, legalese, and hidden data, doesn’t really alert anyone to anything, let alone prevent anyone from doing anything. At best, it’s a “Gotcha!” for nontechnical users who upload files to places where Pottermore presumably pays Booxtream to look for watermarked files. Those aren’t the users whom Pottermore should be most interested in targeting, and if Booxtream does catch anyone and cause a nastygram to be sent, then backlash will ensue. And isn’t Pottermore trying to prevent backlash in the first place?
Retailers that pay for rights technology ought to get something for their money. Booxtream might be effective if used differently; otherwise I don’t see much benefit to Pottermore for this watermarking scheme.
Hadopi Becomes un Ballon de Football Politique February 21, 2012Posted by Bill Rosenblatt in Europe, Law, Uncategorized.
Those of us who deal with the so-called copyright wars here in the United States can take comfort in one thing: the battles between Big Media and Big Tech have mostly avoided getting sucked into this country’s corrosive, debilitating party politics.
The “balanced copyright” movement has some alignment with leftist politics — not for nothing do many call it “copyleft” — but that’s mostly confined to academics and a handful of not-very-industry-aligned advocacy groups. Now that SOPA and PIPA are dead, the Republicans who run Congress can’t decide whether to continue to align themselves with the politically entrenched media industry and promote further legislation, or to tout individual liberties (and appease the burgeoning Big Tech lobby) and repudiate such legislation. Nobody involved in this year’s presidential election has touched the online copyright issue.
France, however, shows a completely different picture. As a recent New York Times article describes it, the Hadopi progressive response legislation has been in place for two years, warnings have been issued to consumers caught downloading illegally, and the first group of repeat offenders — 165 of them — have been handed over to the justice system for potential fines and suspension of their Internet accounts. The first warnings were sent out in October 2010, about 1-1/3 years ago.
First of all, let’s compare this with the RIAA’s campaign of individual lawsuits in the US: the RIAA appears to have gone after between 18,000 and 35,000 people over a period of five years, or 3600-7000 per year on average. Even if one allows for the fact that France has 19% of the Internet-using population of the US, the number of French Internet users thus affected by Hadopi is only 18-35% of the proportionate number of US Internet users sent nastygrams by the RIAA.
Every study of the Hadopi system that has been done so far has shown the system to be successfully reducing illegal downloading and increasing legitimate consumption of content, particularly music sales on iTunes. (The effect of the law on subscription streaming services like Deezer and Spotify hasn’t been measured.) One would expect the “usual suspects” to debunk the studies, but they haven’t. Instead, there have been statements such as “the effects are undeniable but hard to quantify” (the liberal newspaper Le Monde) and “Apparently some of its intimidation is having a psychological effect” (La Quadrature du Net, a French advocacy group which otherwise argues that Hadopi is a waste of taxpayers’ money to solve a nonexistent problem).
In other words, like it or not, the Hadopi system seems to be working so far.
French President Nicolas Sarkozy, who actively supported the Hadopi law, is up for re-election himself. As a result, online copyright has become in France what we in America call a political football. Socialists have been the most vocal enemies of the Hadopi law in France and have been calling for flat-tax statutory licenses, following the ideas of the Electronic Frontier Foundation, Terry Fisher of Harvard Law School, and other copyleft figures. Yet now that the right-wing candidate Marine Le Pen is now stealing the socialists’ thunder by calling for a statutory license herself, the socialists are backing away from the idea, calling instead for some hazy combination of taxes and crackdowns on sites that enable illegal copying. Nevertheless, both anti-Sarkozy parties have professed Hadopi hatred, as both a populist gesture and a Sarkozy differentiator.
This is just a little bit crazy. Conservatives are supposed to be for individual liberties, low taxes, and small government. So what is a hard-right politician doing embracing a system that amounts to a tax on content, no matter how much each consumer uses, and that distributes money to content creators through opaque, government-entrenched entities like the collecting society SACEM? And what are the socialists, who are supposed to be for big government and equitable distribution of resources, doing opposing it? I’m sure that I, as an American, do not have a proper understanding of French politics. But to me, this smacks of political opportunism and demagoguery of the type that we are deluged with in this US election year on issues such as healthcare, taxes, gay marriage, etc., etc. It’s sad.
I think five years is a reasonable timeframe in which to judge the success of Hadopi, so it’s premature so far. Die-hard infringers will find ways around the system, such as through anonymizers, virtual private networks, and file encryption; we have yet to see how popular such methods become. The fairness and effectiveness of the enforcement and appeal mechanisms have yet to be established. But one hopes that Hadopi’s educational effect coupled with the fear of getting caught will reduce infringement enough to make it worthwhile; in that case, other countries should adopt progressive response with a strong educational component too.
Let Hadopi-haters do their own serious quantitative studies, and let’s compare the results. Let’s make the judgments on facts, and for God’s sake let’s not let political posturing pollute the atmosphere. Then let’s see the Copyright Alert System assess what’s working in Hadopi and adopt it here in the United States, where — at least for the moment — no one need worry about the issue being demagogued to death in election years.
Who’s Subsidizin’ Who? February 9, 2012Posted by Bill Rosenblatt in Business models, Music, Publishing, Services, Uncategorized, United States.
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Barnes & Noble has just announced a deal offering a US $100 Nook e-reader for free with a $240/year subscription to the New York Times on Nook. Meanwhile, MuveMusic, the bundled-music service of the small US wireless carrier Cricket Wireless, passed the 500,000 subscriber mark last month. MuveMusic has vaulted past Rdio and MOG to be probably the third largest paid subscription music service in the United States, behind Rhapsody and (probably) Spotify at over a million each.
MuveMusic isn’t quite a subsidized-music deal a la Nokia Ovi Music Unlimited, but it does offer unlimited music downloads bundled with wireless service at a price point that’s lower than the major carriers. (The roaming charges you’d incur if you leave Cricket’s rather spotty coverage area could add to the cost.) Cricket is apparently spending a fortune to market MuveMusic, and it’s paying off.
It looks like the business of bundling content with devices is not dead; on the contrary, it’s just beginning. The fact that both types of bundling models exist — pay for the device, get the content free; pay for the content, get the device free — means that we can expect much experimentation in the months and years ahead. Although it’s hard to imagine a record label offering a free device with its music, we could follow a model like Airborne Music and think of things like, say, a deal between HTC and UMG offering everything Lady Gaga puts out for $20/year with a free HTC Android phone and/or (HTC-owned) Beats earbuds. Or how about free Disney content with a purchase of an Apple TV?
As long as someone is paying for the content, any of these models are good for content creators. device makers, ane consumers alike. Bring them on!
Updated DRM Reference Table Now Available January 19, 2012Posted by Bill Rosenblatt in Uncategorized.
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I have updated the GiantSteps DRM and Content Protection Reference Table that I have been maintaining for the past three years. This version updates the previous version from April 2010. The update includes updated information on over three dozen DRM, conditional access, and other content protection technologies, as well as an expanded section on independent protection technologies for PC games and software.
You can get a copy of the table in PDF (4 x 2 page layout) for free here (scroll down to the form and choose “DRM and Content Protection Reference Table (PDF)” from the dropdown menu). Or, if you would like the unprotected Excel spreadsheet, the cost is USD 300 (PayPal accepted), click here to order.
Public Library E-Book Lending Must Change to Survive December 4, 2011Posted by Bill Rosenblatt in DRM, Law, Publishing, Uncategorized.
A few events over the past few weeks illustrate the downward arc that I have suggested is in store for public libraries in the e-book age. First, Amazon introduced its own e-book “lending library” for members of its $79/year Amazon Prime service, which allows users to “borrow” one e-book at a time, with no due dates. Second, yet another major trade book publisher, Penguin, got into a spat with public libraries over e-book lending. Penguin stopped offering new titles and withheld Kindle access to all titles, out of unspecified security concerns with OverDrive (the service that powers most U.S. e-book library lending) and Amazon. (Penguin subsequently restored access for existing titles, but not for new ones.)
The Penguin incident is only the latest in what will undoubtedly be a long series of squabbles between publishers and libraries over e-book lending. In fact, five of the “Big Six” U.S. trade book publishers are now either limiting their e-book licensing to libraries or not licensing at all — and the sixth (and largest), Random House, is reportedly reconsidering its library e-book licensing policies. Such spats may well lead to a world of off-putting restrictions and confusion for libraries and their patrons.
Libraries have two fundamental problems here: they have less control over the situation than publishers do, and they are about to get some serious competition from the private sector. An article in Publishers Weekly gives an overview of Amazon’s e-book lending feature and its implications for publishers and authors. In a nutshell, the program is currently limited to a few thousand titles that originate either from Amazon itself or from smaller publishers that still sell e-books to Amazon under a wholesale model, as opposed to the “agent” model used by most major trade publishers, which forbids such activity.
But the Publishers Weekly piece only covers the impact of e-book lending on publishers and authors, many of whom are raising a fuss about Amazon’s program. It says nothing about the program’s impact on public libraries. The executive director of the American Library Association (ALA), Keith Fiels, has publicly expressed a lack of concern over the impact of Amazon’s lending program, given its limited range of titles and that it’s part of a subscription program that includes other features such as streaming video and free expedited shipping. The ALA is more concerned about major-publisher moves like Penguin’s.
Indeed, public libraries are experiencing major growth in e-book lending, especially since Amazon joined the e-lending world by opening up its DRM to enable lending and integrating it with OverDrive’s library lending service. Another piece of evidence that library e-lending is expanding is the entry of a Seattle-based startup called BlueFire Productions as the first serious competitor to OverDrive in the public library space.
At bottom, this is about two things: ways to make e-books available legally for free, and the promotional value of free distribution. That’s why libraries should be worried. First, consumers generally don’t care where they get free legal e-books, as long as they are available conveniently and can be read on their favorite devices. Second, what Amazon has started as a limited service that’s only available to an elite tier of customers will surely become more widely available and with more titles, especially with competitors like Barnes & Noble constantly looking for ways to differentiate themselves from the market leader.
Amazon subsidizes the wholesale cost of e-books that it lends to Amazon Prime members. It does this to make its own services and devices more attractive, not to spur sales of those e-books. If and when B&N offers an equivalent feature, it will undoubtedly do the same.
If I were Keith Fiels at the ALA, I would be very, very afraid. The e-book publishing world may be about to split up into the equivalent of the music industry’s major and indie labels: major labels tend to make deals that maximize revenue and limit free promotion, while indies try for maximum promotion in hopes of getting revenue later. When you apply this dichotomy to publishers and e-books, you will see that libraries will inevitably get squeezed out.
The majors will make life increasingly difficult for public libraries through refusal to license or restrictive and confusing licensing terms. Meanwhile, smaller publishers will “lend” their titles through Amazon and other e-book services — and will most likely be happy with the arrangement for the promotional value it gets them. And some indie publishers will give their e-books away outright — through e-book retailers or through sites like Facebook — in hopes of getting exposure for their authors and selling hardcopy titles, just as thousands of indie musicians used to give away MP3s on MySpace. And let’s not forget that e-book prices are often much lower than their hardcopy counterparts to begin with.
Then it will only be a matter of time until some publishing industry equivalent of Michael Robertson (the music industry’s digital provocateur) will create a search engine for finding free e-books from all of these sources in a single convenient place, storing them in an online locker, sharing them with friends, etc.
If you extrapolate from these changes, you can see how public libraries could become virtually irrelevant for e-book readers.
It’s all because publishers get to decide what e-book titles libraries may lend and (to some extent) under what terms. Again, think of this in music terms: radio stations get the right to play whatever music they want under a license granted by law — a so-called statutory license. Online equivalents of radio (e.g., Pandora, iHeartRadio) get similar rights. Library lending of digital music is virtually nonexistent; radio remains the primary promotional channel for record companies. Perhaps it’s time to think more carefully about public libraries in this light for e-books, as I’ll explain.
There is no equivalent of a statutory license for e-books that would allow libraries to lend them without explicit, title-by-title permission from publishers. As I’ve discussed previously, libraries do get rights under Section 108 of the copyright law to lend e-books under certain conditions. But because most publishers only give libraries e-books to lend as DRM-protected files with license terms attached to them, and Section 108 requires libraries to abide by those license terms, libraries can’t exercise those rights. In effect, those rights have no value for libraries.
Libraries simply do not have enough leverage against major publishers and retailers to improve this situation in the private sector. If they are to remain relevant in the e-book age, they are going to need to push for significant legal reforms, which both publishers and retailers will undoubtedly resist.
I previously suggested one option, albeit in a somewhat tongue-in-cheek manner: push for the Copyright Office to define an exemption to the law that criminalizes hacking of DRMs (Section 1201 of the Copyright Act) so that public libraries can legally remove DRM for the purpose of lending e-books if they repackage them with DRM to enforce lending terms. However, this has two disadvantages: exemptions to Section 1201 only last for three years, until the Copyright Office considers a new set of exemptions, and publishers could push for stronger DRMs that are harder to hack.
The “cleanest” solution to this problem would be to enact Digital First Sale, i.e., an extension to Section 109 of the copyright law that lets anyone do whatever they want with digital downloads once they have acquired them legally. (We had a great discussion on this subject at last week’s conference.) Public libraries owe their existence to First Sale (on physical goods) in the first place. But that won’t help for e-books as long as publishers distribute them with DRM and DRM hacking is still illegal; and anyway, as I discussed recently, Digital First Sale isn’t likely to happen anytime soon. Therefore it would be worth libraries’ while to investigate changes to the law that help them lend e-books while leaving Digital First Sale off the table.
One option would be to push for additional rights for libraries under Section 108. At a minimum, Subsection (f)(4) would have to be relaxed so that libraries may lend e-books even if the licenses they come with forbid this activity. This would be tantamount to a statutory license for libraries to lend e-books without explicit permission from publishers.
As a practical matter, this wouldn’t really change the way things are done today. Libraries lend e-books through third parties like OverDrive, which already get e-books from publishers without DRM and package them with DRM — just like music and video retail services. And provisions already exist in Section 108 that hold libraries liable if they make their own unauthorized copies of e-books. OverDrive and its ilk use DRM to enforce one-copy-at-a time lending as well as the lending time limits that are in libraries’ own best interests.
This change in the law would improve the situation for libraries substantially. However, the economics may have to change to make it palatable to publishers. For example, libraries acquire e-books for their collections by paying for them title by title, just as they pay for printed books. Radio stations, on the other hand, typically get free copies of recordings from record labels but pay royalties to the music industry for playing them on the air.
If publishers acknowledge the promotional value of library e-book lending, then they might be willing to accept a statutory license to lend e-books if they can negotiate a per-loan royalty rate in lieu of upfront purchase prices. The Copyright Clearance Center, for example, would be in a good position to manage these payments and royalty disbursements, just as ASCAP, BMI, and SoundExchange do for music.
This type of arrangement would enable libraries to maintain huge collections of e-books (through service providers like OverDrive and BlueFire, which would actually house and distribute the e-books) and thus serve the public well. At the same time, the negotiations would have to resolve questions of how many copies of an e-book a given library could lend out concurrently; one copy per library doesn’t reflect the fact that big libraries acquire multiple copies of popular titles. Is it possible for the numbers to defined so as to be fair to both publishers and libraries? That would be a good question for the Section 108 Study Group, the venue for recommending changes to that section of the copyright law, which used to convene every five years but was disbanded by Congress after its last report in 2008.
A limited form of just such a statutory license-type solution has actually been suggested in the private sector already, in the proposed settlement to publishers’ and authors’ lawsuits against Google. It includes giving public libraries rights to make every book scanned on Google’s behalf — over 12 million titles at last count — available on a single terminal within each library. Libraries would not even have to pay for this. However, this doesn’t allow e-books to be available outside of libraries’ physical confines, it doesn’t allow libraries to acquire multiple copies of e-books they want to make available to more than one patron at a time, and Google can withhold up to 15% of its scanned titles at its discretion.
The Google book settlement is still unresolved, but the terms in it show that publishers may be willing to grant libraries some limited e-book lending rights. Libraries have complained about the “table crumbs” offered to them in the Google book settlement. But unless they take action similar to what I’ve described here, those rights may be the best that public libraries can hope for as the e-book market expands.
C&T 2011 Conference: Registration Now Open September 28, 2011Posted by Bill Rosenblatt in Uncategorized.
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I am also pleased to announced that the law firm of Frankfurt Kurnit Klein & Selz has become our latest sponsor.
We invite law firms with practices in the digital copyright area — like Frankfurt Kurnit — to sponsor the conference as well. We have an exciting lineup of panels in our legal track. We will attract a high-caliber audience of professionals from media and technology industries who are coming to grips with issues of intellectual property in the digital age. If you are interested in sponsorship materials, please contact me as well.
On to a different subject: after Facebook’s announcement of integration with several subscription music services, Spotify announced that it is now requiring new subscribers to have Facebook IDs. This has caused a lot of sturm und drang, but it’s yet more evidence that Facebook IDs are becoming the de facto universal ID standard for the Internet.
If you read my article on the music services’ Facebook integration a few days ago, you can see why Spotify might want to do this. What do you think? Here’s a poll:
The Next Battlefield: 3D Printing May 9, 2011Posted by Bill Rosenblatt in Technologies, Uncategorized.
A couple of months ago, the advocacy organization Public Knowledge started posting pieces on its website about 3D printing technology and how it could become the next venue for overreach by intellectual property owners. I initially dismissed this as scare-mongering by an organization that, like all others of its type, is constantly on the lookout for causes around which to rally fundraising efforts.
But then PK issued a white paper on 3D printing and its implications for IP law which was well-researched, thought-provoking, and surprisingly balanced — more reminiscent of the output of a Center for Democracy and Technology or a Future of Music Coalition than of the polemics of an Electronic Frontier Foundation or of a… Public Knowledge.
And last month Ars Technica dished up an equally stimulating article on the same subject; I don’t know whether one inspired the other or vice versa. Anyway, my eyes and ears started to perk up.
What really did it for me was hearing Jaron Lanier’s keynote address last Thursday at the Festival of Ideas for the New City conference here in New York. He mentioned 3D printing as becoming huge once the technology gets down to the consumer range of price and complexity. Being the fan of Lanier’s writings that I am, I became convinced: 3D printing is worth much attention in the world of intellectual property and technology.
So what is 3D printing? It’s a manufacturing technique whereby a machine makes a physical object by “printing” it in many very thin layers. It’s typically referred to as a disruptive technology, but like all such things, it grows out of existing technologies and only becomes “disruptive” once it reaches a certain threshold of price, size, scale, complexity, or more than one of these.
Plenty of steps have been taken towards the scalable and economical automation of manufacturing. I’ve had experience with two of them. About thirty years ago, I wrote user-interface software for a computer-controlled lathe, an example of what we now know as CAD/CAM. With this software (which ran on a mainframe), you could draw the outline of a part you wanted to make, insert the raw stock (wood or metal) into the lathe, press a button, and have it make the part. More recently, I worked with a leading maker of printers and copiers which had a device for printing images on garments, such as T-shirts.
I’ll leave it to other sources, such as the Public Knowledge white paper, Ars Technica article, and Wikipedia to give better background on the emergence and potential of 3D printing than I can. But what strikes me the most about this technology from our perspective here is that it has the capacity to profoundly affect all areas of intellectual property.
If an everyday person can spend, say, US $1000 for a device that lets her make any plastic or polymer object up to a cubic foot in size for the cost of raw materials, and if that device can accept AutoCAD, Sketchup, or similar CAD/CAM files specifying what is to be made, then IP owners have a problem on their hands. With such a device, you could make something that infringes copyrights, trademarks, patents, or all of the above at once.
These three branches of IP evolved separately; see Adrian Johns’ Piracy for a very good summary of how they were originally distinguished from one another and then went their separate ways. Occasionally some law is made that borrows a concept from one branch of IP law and applies it to another; the most prominent recent example of this is the Supreme Court’s 2007 Grokster decision, which borrowed the concept of “inducement” from patent law and applied it to copyrights.
Applying all of the different strands of IP law to a single technology is a recipe for a mess — particularly when it comes to the legal concept of secondary liability, i.e. “helping someone infringe.” The maker of a 3D printing device would be held to different standards regarding patent, copyright, and trademark infringement.
IP owners will naturally begin to think about technical measures they can take (or attempt to require) to guard against infringement. With predecessor technologies to 3D printing, life was relatively simple — relatively. For example: In the project I did with the printer maker, the company wanted to sell the garment printers to small retailers so that they could produce garments with licensed images on them, on demand. The printers had a price tag in the low five figures (USD).
Think about applications such as sports venues (second-string player shoots a sixty-footer at the last second; everyone wants a T-shirt to commemorate the occasion but the kiosk doesn’t have any), party stores (My Little Pony on the front, Happy 5th Birthday Juliette on the back), or museums (I want a T-shirt of that Vermeer painting on the second floor, on a light blue background, in Extra Large). My involvement with the printer maker was to help design a service that could provide licensed images to the devices over the Internet while ensuring that the local merchant wouldn’t abuse them.
But 3D printing takes such concerns to a much more complex level. It’s easy to recognize trademarks and trademarked imagery. We know something about how to recognize and thwart copyright infringement. But what does “DRM for patents” even look like, and is such a concept even worth pursuing?
I certainly don’t have the answers. But I promise you that I will follow this fascinating area with interest as it unfolds.