A Nail in Public Libraries’ Coffins May 20, 2012
Posted by Bill Rosenblatt in Publishing, Services, United States.1 comment so far
There it was, on the entire back page of the A section of the New York Times a few days ago, at a likely cost of over US $100,000: a full-page ad from Amazon touting free “lending” of all of the Harry Potter e-books for members of Amazon’s $79/year Amazon Prime program who own Kindle e-readers, starting next month.
I wrote last December about the challenges that public libraries face as e-reading becomes popular and major trade book publishers increase restrictions on public library e-lending of their titles. Copyright law allows publishers to set license terms for digital content, so instead of giving e-book buyers the standard “copyright bundle” of rights, publishers can dictate whatever terms they want — including refusal to license content at all. Currently five of the Big 6 trade publishers restrict library e-book lending in some way, including two of them that don’t allow it at all. Libraries have little leverage against publishers to change this state of affairs.
I also discussed Amazon’s Kindle Owners’ Lending Library (KOLL), which is one of the benefits of Amazon Prime membership (along with free shipping and access to streaming video content), as a step toward the private sector invading the turf of public libraries. In case anyone doesn’t see this, Amazon makes it quite clear in its press release:
“With the Kindle Owners’ Lending Library, there are no due dates, books can be borrowed as frequently as once a month, and there are no limits on how many people can simultaneously borrow the same title—so readers never have to wait in line for the book they want.”
In other words, Amazon has implemented a model of ”one e-book per user at a time, not more than one per month.” It can configure any such model on its servers and enforce it through its DRM.
KOLL’s selection had been limited to a few thousand titles from smaller publishers. Recently Amazon has been moving aggressively to increase the KOLL catalog, despite lack of permission from some publishers and authors; it now claims a catalog of over 145,000 titles. Amazon did make a deal with Pottermore, the organization that distributes J.K. Rowling’s Harry Potter titles in digital form, to include those titles in KOLL. Pottermore admits that Amazon paid it “a large amount of money” to do so. Taken together, these steps take KOLL to the next level.
Of course, there are several reasons why the Harry Potter case is exceptional. The only way to purchase Harry Potter e-books is on the Pottermore site, and Amazon wanted to find some way of luring Potter fans back to its own site; Harry Potter is a series of seven books, and Pottermore believes that allowing users to borrow one title per month will lead to increased sales of other titles; The Amazon Prime and public library demographics may not overlap much.
But still, this deal is an example of Amazon using content to make its devices and services more valuable. The company is subsidizing a bestselling author’s work to induce people to buy Kindles and Amazon Prime memberships. This kind of arrangement is likely to become more commonplace as authors, publishers, and retailers all get more information about the value of private-sector e-lending and learn how to make such deals strategically.
This is nice for already-famous authors, but it doesn’t benefit the multitude of authors who haven’t made it to J.K. Rowling’s rarified level. It’s not something that libraries are able to replicate — neither the subsidies nor the full-page ads in the New York Times.
Roots of the Online Upheaval of SOPA/PIPA May 13, 2012
Posted by Bill Rosenblatt in DRM, Law, United States.add a comment
I’m in the middle of reading a new book called Hollywood’s Copyright Wars: From Edison to the Internet, by University of Pennsylvania professor Peter DeCherney. I’ll report back on this book later; today I want to talk about a PhD dissertation that appears in a footnote in this book.
Bill Herman’s dissertation at Penn’s Annenberg School of Communication is called The Battle over Digital Rights Management: A Multi-Method Study of the Politics of Copyright Management Technologies. It was written in 2009, and it presciently anticipates the online movement that led to the downfall of SOPA and PIPA two years later.
Herman — now a professor of film and media at Hunter College in NYC — looked at four legislative developments in U.S. digital copyright policy and measured how they were influenced by three types of communication: direct communications with legislators (e.g., lobbying), the press, and online. The four developments were the Audio Home Recording Act (1992), the anticircumvention provision of the Digital Millennium Copyright Act (1998), efforts to revise the DMCA (2003-2005), and the FCC Broadcast Flag regulation (2006).
Herman’s research analyzes communications in those three arenas and grades them according to whether they tilt “strong copyright” or “strong fair use.” He finds that communications with congress, which tilted strongly “strong copyright,” predominated in the earlier years; press reporting (in the Washington Post and New York Times) was roughly balanced, with a slight “strong fair use” tilt; then online communication took over the debate with a forty-to-one “strong fair use” slant and influenced the repeal of the FCC Broadcast Flag regulation in 2007. Although Herman is unabashedly on the “strong fair use” side, his methodologies for identifying and characterizing these various communications are rigorous and do not show bias.
In his introduction, Herman writes: “While the time period under study does not include their ultimate triumph at the bargaining table — as of this writing, what I describe as the strong fair use coalition still has not won a major legislative victory — it does include the beginning of their time as a genuine force at that table.” As a prediction of the online and copyleft communities killing SOPA and PIPA, this is pretty impressive.
Herman’s thesis goes into great detail about the ways in which the “strong fair use” axis posted lots of material online to feed the debate, while the other side didn’t. It’s a trove of factual evidence about how to shape policy debate in the Internet age (and how not to). It also, in effect, shoots holes in the theory held by some strong-copyright people that a Google-led cabal caused the defeat of SOPA and PIPA.
I admit not to having read the entire 400-plus pages of the dissertation, though it contains a much more manageable 27-page introduction that summarizes the methodology and results. With that caveat in mind, I can identify one shortcoming in Herman’s methodology that, if he had corrected it, might have changed the nature of his conclusions.
Herman tracked press stories that specifically covered the four legislative developments mentioned above. But he didn’t track stories that covered the real-world marketplace of the technologies being regulated – articles by the likes of David Pogue in the Times and Walter Mossberg in the Wall Street Journal. (Nor did he track online content about the same, from the likes of TechCrunch, CNet, etc., not to mention Internet ideologues like Cory Doctorow and thousands or millions of blogs.)
If he had done this, he would have found a much more anti-DRM tilt in the press during the early-mid 2000s than he did. Articles from this period (and thereafter) took a populist, pro-consumer viewpoint: after all, people read Pogue, Mossberg, and CNet to help them choose the best digital content services and devices. The job of these writers isn’t to defend the interests of copyright owners or content creators; it’s to help sell newspapers and drive traffic to websites.
These sources routinely praise digital content services and devices that offer as many rights to as much content for as little money as possible. DRM can be used to enable new content distribution models, but it can also be used to force consumers to pay, limit interoperability, and restrict uses of content that are allowed under copyright law. Thus it makes sense that these writers would paint DRM in a negative light.
One has to wonder how much the pro-consumer point of view in this press coverage influenced legislation. The journalists who covered legislative developments during the period Herman studied did not overlap much with those who covered products and services. For example, Jenna Wortham, Jonathan Weisman, and Brian Stelter provided the bulk of legislative coverage at the Times, while over at CNet, Declan McCullagh wrote about policy and legislation while Greg Sandoval did (and does) most of the marketplace coverage.
Herman attributes the “strong fair use” coalition’s increased legislative influence to its greater effectiveness than the “strong copyright” community in putting its message out online. But I would suggest that they had a lot of help from both professional and amateur writers about consumer media technologies, who led people to wonder why technologies like DRM exist and then what role government plays in them.
It might not be as easy to gauge that influence, but it was — and is — surely significant; and that means that the press could well influence digital copyright legislation more strongly than Herman surmises. Herman seems eager to glorify the power of the Internet by itself. While there’s no doubt that Internet forces killed SOPA and PIPA, what Herman calls the “strong fair use” movement has roots outside of the copyleft academia and advocacy groups that he credits (he was an intern at Public Knowledge and considers Larry Lessig a hero).
Regardless, the defeat of SOPA and PIPA has made it clear that the online community now has a lot of power over policy debate. Gary Shapiro of the Consumer Electronics Association wrote a letter to the editor in the Times admitting that “back rooms do not exist on the Internet.” I would suggest that if the RIAAs and MPAAs of the world want to understand how to engage the online public in order to shape future legislation, Herman’s thesis ought to be required reading for them.
As a postscript, there is now a bit of overlap in coverage of digital content products and services and legislative policy, now that people are digging through the post-SOPA/PIPA wreckage and considering what to do next. David Pogue, for example, got around to actually reading the legislation back in January as it was failing. He made two badly-needed observations: that many of the objectors to SOPA and PIPA didn’t like it simply because it could cut off their supply of free content, and that such people generally didn’t have a clue about the actual legislation and acted on misinformation about it. Let’s hope that now that Pogue has connected the dots, more people will follow that train of thought to some reasonable policy developments.
Public Knowledge’s “Blueprint” February 28, 2012
Posted by Bill Rosenblatt in Law, United States.1 comment so far
My recent review of William Patry’s book on copyright reform segues neatly into Tuesday’s announcement of the Internet Blueprint campaign by the copyleft advocacy group Public Knowledge (PK). Apparently PK has taken some grief for its vociferous objections to the SOPA and PIPA legislation, and the ACTA agreement, without coming up with alternative ideas of its own.
As PK would have everyone believe, the Internet Blueprint is intended to remedy that situation. It’s a set of ideas for copyright reform, which come complete (in true lobbyist style) with draft legislation; and it’s open to ideas for expansion.
It also has nothing whatsoever to do with the objectives of SOPA and PIPA, which — in case anyone has forgotten — were to reduce copyright infringement.
Here is a quick summary of most of the ideas in Public Knowledge’s Internet Blueprint:
- Reduce abuse of the notice and takedown system in Section 512 of the Digital Millennium Copyright Act (DMCA) by imposing additional requirements on takedown notices and fines on bogus ones, as well as expanding the “safe harbor” granted to internet service providers under this law.
- Impose regulations on the US Trade Representative that would forbid negotiating intellectual property terms in secret (as was done in the ACTA process).
- Relax section 1201 of the DMCA by making it legal to hack DRMs for lawful uses of copyrighted material protected by them.
- Shorten copyright terms from life of the creator plus 70 years to life plus 50 years.
- Empower the Federal Trade Commission (FTC) to require labeling of DRM on digital content that uses it.
- Prohibit various types of abuses of copyright law, such as deceptive warning notices and frivolous lawsuits.
- Expand Fair Use.
Nope, nothing in here about reducing infringement. Even Consumer Electronics Association CEO Gary Shapiro, while being harshly critical of the music industry and its push for SOPA and PIPA, referred to “the very real problem of Internet piracy” and called for the RIAA to work with him on solutions that are more “reasonable” than those pieces of legislation. PK’s Internet Blueprint is not about working with anyone to reduce piracy.
Furthermore, for an organization that professes to be against larding the Internet with excessive regulations, this is a very interesting list of additional regulations. For example, instead of adding qualifying conditions to DMCA 1201, why not just call for its repeal?
Public Knowledge’s home page says: “In the weeks since SOPA and PIPA, many people have been wondering ‘what now?’ Policymakers here in DC ask us a similar question — ‘[I]f you don’t like SOPA and PIPA, where are your ideas?’” Some people may have asked PK that question, but the Internet Blueprint doesn’t answer it. I think a more accurate statement is probably something like, “After the success of the SOPA and PIPA protests, we would like to see what other items on our agenda we can get the public excited about.” Connecting the Internet Blueprint with SOPA and PIPA is just disingenuous.
Of the actual ideas in the Blueprint, the abuse-curbing regulations seem sensible, and the proposed legislation on DRM labeling is unworkable — as the FTC probably knows, having looked into this issue in depth back in 2009. Otherwise, for the record, I’m not expressing opinions on PK’s ideas, except to say that in general I am not a fan of regulating technology, and I believe that the United States copyright law is already too complicated. (I am particularly not a fan of DMCA 1201, though not for the typical set of reasons — but that’s a different discussion.)
It’s a good thing to try to rally the public around actionable ideas rather than feel-good slogans. But in this case, PK is guilty of excessive opportunism — or what politicians like to call “overplaying their hand.” Just as one shouldn’t bother asking vegetarians for better steak recipes, one shouldn’t bother asking Public Knowledge for ideas on reducing copyright infringement.
Who’s Subsidizin’ Who? February 9, 2012
Posted by Bill Rosenblatt in Business models, Music, Publishing, Services, Uncategorized, United States.add a comment
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!
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.
Mixed Verdict for EMI against MP3tunes.com August 23, 2011
Posted by Bill Rosenblatt in Law, Music, Services, United States.4 comments
A federal district court judge in New York this Monday delivered a mixed-bag opinion in long-running copyright litigation between a number of record companies led by EMI and MP3tunes.com, led by that veteran of music industry litigation, Michael Robertson.
The summary judgment decision affirmed yet again the principle that online content providers have no obligation to proactively “police” their sites or services for their users’ copyright infringements — which has been established in such recent cases as Viacom v. Google (YouTube) and Universal Music Group v. Veoh, at least at the district court level. As long as service providers respond “expeditiously” to takedown notices under the Digital Millennium Copyright Act (17 U.S.C. § 512) and terminate the accounts of egregious repeat offenders, they aren’t liable for their users’ infringements.
MP3tunes provides what has come to be known as a locker service: users can upload their music to the service and access it from any Internet-connected device. That aspect of MP3tunes.com got a clean bill of legal health from Judge William Pauley.
Another feature didn’t, though: the “sideload” feature. MP3tunes operates a separate website called sideload.com, which lets users search third-party sites that contain free music files (whether legal or not). Users can search all of those sites with a single search command, select files from them, and copy the files into their MP3tunes lockers. Sideload.com currently claims access to over 160,000 tracks. MP3tunes responds to takedown notices on such files by removing its links to them from sideload.com search results, but not removing copies of the actual files from users’ lockers. Judge Pauley didn’t buy MP3tunes’ argument that doing the latter would violate its users’ privacy and personal property; instead he found MP3tunes liable.
Michael Robertson is a wealthy man, having sold his previous music venture, MP3.com, to Universal Music Group for over US $370 Million back in 2001. Now it seems that he spends his time and effort designing technology products and services that provocatively test the boundaries of both copyright law and copyright owners’ patience. Robertson started MP3tunes.com in 2005, and in doing so, he invented the idea of “cloud sync” locker services, which are now virtually mandatory checklist items for online music services. Other vehicles for Robertson’s copyright nose-thumbing include AnywhereCD (buy a CD, get the MP3 for free) and Linspire (Linux-based operating system that runs Windows programs), both now defunct.
As Judge Pauley’s order reveals, MP3tunes.com looks like a site that was designed by Robertson in consultation with copyright law experts with the objective of figuring out just how much they can get away with without record company licenses. As an example of this, consider a feature in some locker services known as scan and match. With scan and match, a locker service need not upload a user’s actual files. Instead, the service scans each file and identifies the music through various means such as examining ID3 tags (metadata in MP3 file headers) and acoustic fingerprinting. If it has that music in its online catalog already, it skips the upload step and gives the user access to the copy of the file that the service already has.
Scan and match has two big advantages over uploading. First, uploading could take hours, days, or even weeks depending on the size of the user’s collection. Second, scan and match eliminates the need for the service to store many files of the same music; it only needs to store a single copy.
Scan and match is a controversial feature; record companies claim that it requires a license from them to cover the “master” files that the service provider hosts. Apple has a license to implement scan and match for its forthcoming iTunes Match service. Catch Media has a license for this as well. Google and Amazon do not.
MP3tunes finesses this issue by actually uploading users’ files but only storing a single copy. It claims to be able to restore the copy that a user actually uploaded when she wants it — possibly by storing some information about how the uploaded file differs from the file that MP3tunes stores and then using that information to reconstruct the user’s original file on demand. In other words, MP3tunes has it both ways: it presumably avoids the need for record company licenses (by doing actual uploads instead of scanning and matching) while also avoiding both the storage overhead and the copyright liability of storing multiple copies of the same music on its servers (because each copy is a separate possible infringement, and each infringement carries high financial penalties). MP3 tunes thus does not actually source its music from record companies; it sources the files from its users. Another service that operates this way is Grooveshark, which has also found itself in legal hot water.
The point is that MP3tunes’ implementation has nothing to do with the user experience and everything to do with treading on the knife-edge of the law.
Similarly, sideload.com is based on the legal principle that because users don’t know whether the music on the third-party sites to which it links is unauthorized or not, the company should not be liable for contributory infringement for those files. The judge concurred with this.
Robertson’s comments (e.g. on CNet) on the heels of Judge Pauley’s decision reinforce the impression that he is doing this as a professional goad to the music industry: he seems to be much more interested in the decision’s impact on Google and Amazon than on his own site and its 300,000 users. This decision doesn’t seem to help Google and Amazon much, though: at bottom, it merely reiterates findings from the Veoh and YouTube cases at the district court level. We won’t know much more about the legal boundaries of online storage services at least until an appeals court renders a decision in one of these cases.
How High Will Spotify’s Paid Subscribership Go? August 10, 2011
Posted by Bill Rosenblatt in Business models, Europe, Music, Services, United States.1 comment so far
More on the direct consumer revenue trend: the first set of results of Spotify’s US launch are in, courtesy of the Wall Street Journal’s All Things D. As of earlier this week, only a month into the service’s US presence, Spotify has signed up 1.4 million subscribers, of which 175,000 are paying. At 12.5%, that’s a bit lower than the 15-16% paid subscribership Spotify is enjoying in Europe, but it doesn’t change Spotify’s overall paid-subscriber rate very much.
All Things D’s Peter Kafka points out that the US conversion rate from free to paid is likely to be lower because US subscribers get more free music during the first six months of the US launch than European free subscribers do. But I would also argue that the conversion rate is lower because Spotify is new in the US, and people are just trying it out — many of whom may already subscribe to a competing service such as Rhapsody.
Given that the addressable market for Spotify increased by 150% when it launched in the US (about 150 million Internet users in the seven European countries in which Spotify operates vs. about 220 million in the US), Spotify’s total subscribership could end up in the multiple tens of millions fairly quickly. But to me, the more important question is: given the steep growth in its percentage of paid subscribers, where does that growth stop?
Here’s a poll:
Do Paid Music Subscriptions Indicate a Tipping Point? July 20, 2011
Posted by Bill Rosenblatt in Business models, Music, Services, United States.3 comments
Maybe it’s reflective of consumers’ generally increased willingness to pay for content, now that more paid models are out there. Maybe it’s the launch of legal content services that are really easy to use and represent what users, as opposed to record labels or online retailers, want. Maybe it’s both factors and more. But whatever the reasons, consumer sentiment towards respecting copyright and paying for legitimate content seems to be moving in a positive direction — at least for music.
Let’s get one thing out of the way quickly: yes, digital copyright infringement is still massively rampant, and it’s not going away. And the changes I’m observing are small in magnitude. But they indicate trends that could become larger.
I’m seeing comments to stories on mainstream tech sites such as CNet News.com and TechCrunch that are more balanced than they have been about the need to respect copyright and ensure that content creators can get paid. As I mentioned last week, the reaction to the recent Copyright Alert System announcement from major ISPs and content owners was more measured than I would have expected. There were even anodyne statements such as “Educating users about copyright is a worthy endeavor” and “…important educational vehicle that will help reduce online copyright infringement” from EFF and Public Knowledge respectively. Could this be a sign that extremism in the “copyright wars” is mellowing?
The biggest quantitative sign of a tipping point is that the music industry has reversed its long slide and reported an increase in revenue for the first time since 2004. The overall increase is only 1%, but digital sales are back on the rebound too, at double-digit increases.
Yet there’s a more telling statistic that no one seems to be talking about: the dramatic uptake in paid subscription music services over the past year. This chart from Spotify data, culminating in 1.6 million paid subscribers on the eve of its recent US launch, tells the story best:
Rhapsody’s subscriber numbers are up, too, reversing a decline that bottomed out in early 2010 before it spun out from RealNetworks as an independent company:
Pandora’s revenues from paid subscriptions also rose dramatically in the last year. The company’s recent IPO filing documents indicate an increase in revenues from subscribers to its Pandora One paid service (no ads, better sound quality, unlimited skips) from 6% to 9% to 14% over 2008-2010.
Pandora’s percentage of paid subscribers (as opposed to revenue) is much lower than that of Spotify; it’s only about a third of a percent. But it is also growing much faster than overall subscribership. And interestingly enough, that’s exactly the same as the New York Times’ percentage of paying online subscribers, when expressed as a ratio of paying subscribers to unique monthly website visitors. (The Times figure was released in April 2011, only a month after the paid service went live.)
The difference between subscription music services on the one hand and the Times and Pandora on the other is easily explained as a matter of consumer expectations. Newspapers and “radio” are services that consumers expect to get for free. Getting them to pay was always going to be a tough proposition. But subscription music services have no such legacy in the pre-digital world; they represent a new value proposition.
Rhapsody only operates in the US; until now, Spotify only operated outside the US. Now they’re direct competitors. Before its US launch, Spotify had paid subscribership that amounted to about 1.1% of the Internet-connected populations in the seven countries in which it operated. Rhapsody’s subscribership in the US is 0.36% of the net-connected population. Of course, Rhapsody has more direct competitors in the US, including Napster, Rdio, and MOG, though their subscription numbers are smaller.
The burgeoning Rhapsody-vs.-Spotify rivalry is generating a healthy buzz about subscription music services that should buoy all of the players. You can see the nature of the competition in blogs and support forums. Rhapsody has more features and a steadfastly loyal subscriber base. But Spotify has a cleaner design and, more importantly, a far better mobile experience than any of the US-based competition. Music has been enjoyed on portable devices ever since the advent of the transistor radio over half a century ago. The use of PCs and Macs for playing music will soon be viewed as a detour from its natural evolution.
It will be interesting to see how high paid subscription service subscriber numbers climb. It’s the first born-digital business model for music that actually makes money. It may even become a keystone in the re-stabilization of the music business. I’ll report back after Spotify has been in operation in the US market for a year.
The Copyright Alert System: A Cautious Experiment July 10, 2011
Posted by Bill Rosenblatt in Law, Services, United States.2 comments
Last Thursday, a coalition of content owners and ISPs announced the creation of a Center for Copyright Information (CCI) and a framework for “Copyright Alerts.” Briefly, the Copyright Alert system identifies a six-level system of interventions that ISPs should take with subscribers if they receive evidence of suspected copyright infringement. They start with simple “educational” messages, move to messages that require user acknowledgement, and culminate in “Mitigation Measures” that could include bandwidth reduction (throttling) or account termination. The CCI analogizes the Copyright Alert system to credit card fraud alerts. It positions the framework as a starting point towards a set of best practices for how ISPs should deal with online infringement.
Perhaps the most encouraging sign about this development is that several organizations representing indie content creators have either signed onto the initiative or issued statements endorsing it, including the Independent Film & Television Alliance, American Association of Independent Music, and Future of Music Coalition. In other words, this is not just the MPAA and/or RIAA. Another good sign for the future is that the announcement has received relatively tepid reactions from entities that one would expect to sound alarms. I can summarize the substantive concerns that have been raised by putting them in a few buckets:
- This initiative may sound inoffensive, but it’s really a foot in the door; future versions of the Copyright Alert system will become more draconian.
- All the language on the Center for Copyright Information website that says “This is not ‘Three Strikes’” is disingenuous: ISPs do have the option to terminate users’ accounts if they are still accused of copyright infringement after a suitable number of warnings.
- The system is based on accusations from copyright owners, not from any sort of objective source, thereby laying the system open to false positives and other abuses.
- There is an issue with presumption of innocence: you can appeal your accusation of infringement to the CCI, but it could cost you $35 to do so; there does not seem to be any redress mechanism for entities that file egregious complaints.
As is often the case, I think Nate Anderson of Ars Technica got it right: the Copyright Alert system does seem sensible, though it would have been easier to swallow if it had been introduced several years ago, instead of after several years of more drastic actions such as lawsuits against individuals and attempts at blunt-instrument legislation (and blunter-instrument levy schemes).
Fear of worse things to come based on worse things that already came explains #1 and #2 above. ISPs have always reserved the right to terminate a subscriber for breach of their Terms of Service anyway.
As for #3, what are the alternatives? ISPs can’t be relied on to self-police. Copyright owners have to produce their own evidence of infringement. The only other possibility would be the government, perhaps through the FBI or some newly created entity.
First of all, this is not supposed to be about law enforcement and criminal charges. Secondly, a fundamental premise of this type of arrangement between industries is to avoid governmental intrusion — and it was most likely created in the first place because the White House and then-New York Attorney General (now Governor) Andrew Cuomo threatened government intervention if the two factions couldn’t reach agreement by themselves. Finally, involvement of some government entity would raise concerns about taxpayer funding, which would be tantamount to the deeply misguided antipiracy levy that was proposed in the UK in early 2009.
I have to admit some sympathy for #4, though, once again, this is not law enforcement. The reason for charging the $35 fee is supposedly to discourage people from abusing the system (i.e. overworking the Copyright Information Center) by bombarding it with cycles of illegal upload, appeal, illegal upload, appeal, etc. If the point is to prevent scalable abuse, then a Captcha system on the appeal form ought to suffice. But if the real reason is to foist the cost of this mechanism onto consumers, then once again, that’s wrong — and this is a particularly poor way to do it, given that at least some of the users who appeal will be innocent.
Yet otherwise, this ought to count as yet another of the many instances in modern life where you have to put up with inconvenience and cost to shake off a false accusation. Anyone who has had a credit card charge refused because of the card company’s hair-trigger fraud detection mechanism, was issued a bogus parking ticket, or found mysterious long-duration calls to Eritrea on their phone bill, will understand — not sympathize, perhaps, but understand. (Yes, all of those things have happened to me.)
What the Copyright Alert system is not is an opportunity for providers of technology to detect infringement on networks, such as content identification (watermarking and fingerprinting) or traffic monitoring, to sell more of their services. Content owners will most likely continue to use the infringement detection services that they currently use. The Copyright Alert system gives them a mechanism through ISPs to inform subscribers about allegedly infringing activities and potentially some actions to take against repeat offenders.
As to the question of whether five or six strikes can ever get you out — i.e., get your Internet access terminated — I suspect the answer is no for the foreseeable future. The Electronic Frontier Foundation has described what’s likely to happen here. ISPs will naturally object to cutting customers off from the products they’ve paid for. The EFF suggests that content owners will believe that they have leverage against ISPs under the DMCA: they will argue that ISPs that refuse to cut off infringers should not enjoy the benefits of DMCA safe harbor (i.e. not being held secondarily liable for users’ infringement). The issue may well end up in court.
In that case, there will be litigation over the meaning of the DMCA — not unlike the current long-running litigation between Viacom and YouTube — that would be destined for high level appeals courts. In other words, a definitive answer to the question of “can ISPs get away with not terminating repeat infringers’ accounts?” will (barring any preliminary injunctions) be several years away, and until that day, the answer will be yes.
The Copyright Alert system is, at bottom, a cautious and reasonable experiment — one that, as many have argued, could have been launched ten years ago to better effect. Many details have yet to be determined, as does the system’s effect on ISP subscribers and on copyright infringement. It’s best thought of as a “watch this space” initiative, to put people on notice. Any conclusions drawn about it are premature, and that’s how it should be.
iCloud Cuckoo Land June 7, 2011
Posted by Bill Rosenblatt in Music, Services, United States.6 comments
As part of Apple’s iCloud announcement this week, Steve Jobs announced a “cloud sync” feature similar to those launched by Amazon and Google in recent weeks. This service had been heavily rumored and even partially pre-announced for weeks. The announcement answers most questions about how iCloud differs from the Amazon and Google offerings, and what Apple is able to offer now that it has licenses from the major recording companies while the others don’t… yet one tantalizing point remains unexplained.
iCloud automatically stores users’ iTunes music tracks online. It automatically downloads newly purchased tracks to all of a user’s connected iTunes devices, which include iOS devices (iPhones, iPod Touches, iPads) and Windows PCs (Vista or higher; XP isn’t supported) and Macs with iTunes software. Users can choose which of their previously-purchased iTunes tracks are copied to all of their devices. It’s all free to iTunes users, but you have to use an Apple device or Apple iTunes software to use this feature of iCloud.
Apple doesn’t make any mention of streaming content from iCloud to Internet-connected devices, whether Apple or otherwise. It all seems to be file copies and downloads.
This leads one to wonder: just why did Apple pay $80 Million for the streaming infrastructure of Lala.com in December 2009?
Apple is ambiguous (at best) on this point.
The iTunes Match feature adds to the mystery. iTunes Match, which will launch this fall, lets users store their non-iTunes tracks in iCloud, regardless of their origin and as long as they are in a standard DRM-free format.
iTunes Match incorporates a feature that has come to be known as “scan and match”: it identifies music on the user’s device, using techniques such as examining ID3 metadata tags in MP3 files and acoustic fingerprinting. If it finds a match and the track exists in the iTunes catalog, then it need not be uploaded to the Cloud; Apple will simply make a copy available for that user. If iTunes doesn’t have the track, then it’s uploaded to online storage.
Apple charges users $24.95 per year for this feature, a chunk of which will go to record labels as royalties. Given that most “non-iTunes” tracks are likely to be of dubious origin (downloaded from file-sharing sites, ripped from friends’ CDs, etc.), this amounts to a “piracy amnesty” fee. It’s also worth noting that Apple didn’t originate this technique. Apart from Michael Robertson’s MP3tunes.com, which had to drop that feature under legal pressure from the record labels, CatchMedia offers this feature today in the UK, in partnership with Carphone Warehouse. It has record company licenses and charges consumers a fee that amounts to double Apple’s price.
The scan-and-match technique has two advantages over the Google and Amazon schemes, which require every track to be uploaded. First, uploading takes time. Depending on the number of tracks in a user’s collection and the Internet connection speed, uploading could take hours, days, or even weeks. Scan-and-match takes seconds per track as long as it finds a match. The other advantage is that for matched tracks, the user gets iTunes’s high-quality (256kbps AAC) version of the track regardless of the quality of the track on the user’s device.
The question is, how does the user get this track? Is it downloaded to the user’s device(s) or streamed? If it’s downloaded, does the user’s original file stay or disappear? Again, Apple does not say. The web page uses language that sounds intentionally ambiguous: “the music iTunes matches plays back at 256-Kbps … quality.” The press release says “replaces your music,” which is a bit more suggestive of downloads; yet it also says “it makes the matched music available in minutes (instead of weeks to upload your entire music library)”, which implies that “replacing” does not involve downloads that could be as time-consuming as uploads. Furthermore, Apple’s acquisition of Lala tips the balance back towards streaming.
Even knowledgeable commentators have mixed views; some (like CNet and the New York Times) say download, while others (like the Associated Press via Eric Garland of online media measurement firm BigChampagne) say stream. Others such as Music Ally and Digital Music News are hedging their bets.
The difference is certainly important. So why isn’t Apple forthright about this aspect of iTunes Match? Leaving aside Apple’s penchant for secrecy before launch — which Apple otherwise didn’t exercise this time — there are a few possible explanations. The options, as I see it, are these:
- Apple intends to let users stream their tracks to any Internet-connected device, not just iOS or iTunes devices, using a web interface. Google and Amazon offer this.
- Apple intends to let users stream their tracks, but only to iOS devices or PCs/Macs running iTunes, using some type of proprietary secure streaming protocol that excludes non-Apple devices.
- Apple will download copies of iTunes Match tracks to users’ iTunes devices.
The first of these strikes me as unlikely, given that everything else about iCloud and iTunes Match seems designed to recapture the platform lock-in that Apple enjoyed when it used DRM. Now it’s lock-in through the convenience of seamless, automated cloud sync. Yes, you can copy your tracks to non-Apple devices, because they are DRM-free, but it’s a hassle compared to the automated ease of iCloud.
Furthermore, because Amazon and Google offer streaming, wouldn’t Apple want to publicize it heavily instead of using ambiguous language? Apple is not shy in using a competitive matrix to claim its superiority over the others.
The second is a distinct possibility. It would also explain Apple’s ambiguous language: it’s the type of “feature” that critics would pounce on, given that it’s clearly less open than Amazon and Google, and includes what could be called DRM. If this is what Apple intends to offer, it’s not surprising that Apple would be reticent or evasive about it now.
The last option is also a possibility. It is consistent with platform lock-in; moreover, it increases the possibility that users will use iTunes and iOS devices as their only music players. It could be a feature of the financial deal that Apple struck with the record companies.
But there are two problems with this option. First, it would cost Apple much more money, as royalties on downloaded copies would be much higher than on streams. Second, this option “elevates” non-iTunes tracks to the same status as tracks purchased from iTunes. It sends a message that users need not purchase tracks from iTunes, yet those tracks can become full-fledged iTunes tracks anyway. That’s the status quo for tracks stored locally, but it’s inconsistent with Apple’s opportunity to re-establish lock-in through the Cloud.
What do you think? Here’s a poll:
In any case, what Apple is definitely not offering with iCloud is the ability to stream any of the music from its vast library on demand, as is the case with services like Spotify, Rhapsody, Napster, Rdio, and MOG. Instead, Apple is sticking with the paid-download model. It boggles my mind why journalists and analysts aren’t focusing on this distinction, which to me seems far more important than “cloud sync.”
I have said that cloud sync is now a “checklist item” for online music services. I’ll go further and state that it may turn out not to be a particularly valuable feature. For those who use streaming subscription services, it’s irrelevant. And for those who hoard thousands of MP3s on their hard drives — a crowd that overlaps considerably with the crowd that actually uses more than one or two music devices actively — cloud sync could become a nuisance once their 8GB or 16GB portable devices fill up with tracks that the almighty Cloud puts there automatically (for that scenario, Apple needs to invent iCache).
Furthermore, if you have multiple music devices, the odds are that you listen to different types of music on each device anyway. My PC is used mostly for background music in the office; my Android handset is for active listening while commuting; my iPad is for home with the kids. I have a moderate-size digital music collection (a few thousand tracks) and use Rhapsody and Pandora as well as file-based music players. Occasionally I want to copy music files from my PC to another device; a cable or Bluetooth works just fine. Cloud sync doesn’t help me.
Bill Rosenblatt
Azita Arvani
Bill Jones
Niels Thorwirth
