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.
Music Forecast: Even Cloudier May 11, 2011
Posted by Bill Rosenblatt in Law, Music, Services, United States.add a comment
Earlier this week, Google announced Music Beta by Google, its long-awaited music service. It’s currently an invitation-only beta, and it has gotten mixed reviews including negative press from the New York Times, Wired, and elsewhere. Like Amazon’s Cloud Player/Cloud Drive, it is not licensed by any of the record companies.
Google evidently decided to release an incomplete product after licensing talks with the major record companies broke down. This decision could be a negotiating tactic, a “just try and stop us” gambit to get the record companies to improve their terms. It could also be a rushed-to-market response to Amazon’s recent launch as well as a way of beating Apple to market with a music streaming service.
Whatever the reason, Music Beta by Google hardly bears comparison to full-featured music services like iTunes, Spotify, Rhapsody, etc. It is essentially as much functionality as Google believes it can offer without music licenses. It’s little more than a subset of Amazon’s offerings, with more free storage.
Its functionality is quite similar to that of Amazon Cloud Player/Cloud Drive: it lets users upload and store music they already own onto an Internet file storage service and stream it to any web-connected device with a music player. It also (again, like Amazon) incorporates an app for Android devices that has various additional functions. Of these, the most interesting for our purposes is the ability to store music on Android devices for listening without a network connection (“offline listening”).
Google’s service keeps a limited amount of most-recently-played music on the handset for offline listening. It also allows users to specify which tracks or albums they would like to store on their Android devices for offline listening. As I have mentioned previously, other services such as Spotify, MOG, and Rhapsody offer similar functionality, but they have music licenses. (This means, among other things, that the locally-stored copies must be protected with some form of DRM, even though the services aren’t using that term.)
The record companies must now decide whether to let Amazon and Google continue operating their services without licenses or to put legal pressure on these two tech giants. Their decisions will be based on several interrelated technical, legal, and business issues.
To understand these issues, first we should be more specific about what features these services are and are not offering. Essentially they let users do three things:
- Upload and store copies of their music files online.
- Stream those files onto virtually any network-connected device with a music player.
- Store some files on a user’s Android device for offline listening.
- Google does not actually supply music. In other words, it does not provide a way for users to get music they don’t already have; it doesn’t even recommend or point to new music. (Amazon has an MP3 download store for that purpose.)
- Both use Flash for their player apps and thus won’t run on iOS devices (iPhones, iPads, iPod Touches).
Now’s let’s turn to the business issues. As I mentioned last month, a number of startups have been offering similar sets of services with licenses from the record companies. So-called “cloud sync” services like DoubleTwist and Catch Media enable file distribution across multiple types of devices, not just Android devices. But Catch Media in particular charges users for this service and pays royalties to music companies, whereas Amazon and Google offer it largely for free and do not pay royalties. This must cause the Catch Medias of the world much pain and resentment. The same goes for paid subscription services like Spotify, Rhapsody, and MOG, which supply music in addition to offering Internet streaming and cloud sync features.
The record companies are going to have to decide whether to press Google and Amazon for licenses or risk the wrath of existing licensees, which are presumably paying for the right to offer certain features including those that Google and Amazon are offering without licenses.
So what exactly are those features that require licenses? Both Google and Amazon claim that they are simply offering personal online file storage capabilities, similar to those available from “online backup” services like Norton Online Backup and Trend Micro SafeSync — or even general file-sharing services like RapidShare and DropBox. These services simply enable users to exercise Fair Use rights, and none of them have licenses from copyright owners, so why should we need them? …goes their argument.
This brings us to the technical and legal issues, which are intertwined. The fact is that all of the services mentioned in the previous paragraph offer more than just online storage of a user’s files. For example:
- Google, Amazon, and RapidShare (paid premium accounts) offer streaming of music files.
- RapidShare, DropBox, and SafeSync offer ways for users to give other users (friends, colleagues) access to their online files.
- RapidShare, Norton Online Backup, and SafeSync let users publish links (URLs) to their online files.
- RapidShare and DropBox let users download files onto any computer where they log in with their user IDs.
- Google and Amazon will download certain files onto users’ Android devices.
The right to store copies of one’s existing files on a network server is not really settled law in the United States. The recent Cablevision decision in the Second Circuit, which determined that server-based PVR (personal video recording) services are legal, is somewhat but not exactly relevant. Nevertheless, none of these services have been sued just for enabling personal online file storage. The ambiguities — and therefore the potential legal battlegrounds — lie in the other features.
Here we get into the meanings of words like “copy” and “cache.” A “copy” is something that is presumably covered under copyright law. A “cache” can imply something known as an “incidental copy,” which has a certain meaning under copyright law and is often assumed not to require licensing. (For example, streaming buffer data kept in RAM usually falls under the “incidental copy” rubric.) Google, in its description of Music Beta, circumlocutes these terms by using phrases like “will automatically be available offline.” Amazon uses the more straightforward phrase “download to your device” while still avoiding words like “copy” and “cache” in its description of Cloud Player/Cloud Drive features.
The Cablevision appeals court decision of 2008 established some precedents for determining “when is a copy not really a copy,” but it did not cover the use cases here, which are of uploading a user’s own copies of copyrighted content to a network file storage service for later retrieval and downloading them onto a user’s device for offline playback. Arguments would need to be made in litigation over whether features such as those mentioned above qualify as fair use exceptions to copyright infringement or require licenses from copyright owners. If the music industry decides to sue Amazon or Google, then both sides will have work to do to get courts to see things their way.
Amazon To Enter Library Lending Market April 20, 2011
Posted by Bill Rosenblatt in Devices, DRM, Publishing, Services, United States.1 comment so far
Amazon announced today that it is launching Kindle Library Lending, working with OverDrive to support Kindles and Kindle apps on other platforms on OverDrive’s digital lending platform for public libraries. The timing of the announcement was unclear, given that the service won’t be available until “later this year.”
OverDrive is apparently adding server-side support for Amazon’s Kindle DRM technology, so that it can distribute e-books that are readable on all Kindle devices and apps. This will make OverDrive the first third-party service provider to support the Kindle DRM
This announcement throws an interesting twist into the recent controversy over lending of e-books from public libraries. One of the complaints that library and user advocates have made about digital lending is that DRM has prevented e-books from being readable on and portable across different reading devices and software. The distinction between the two is important, so let’s examine them.
Currently, patrons of libraries that use the OverDrive service can borrow e-books and read them on just about any popular device except Amazon Kindles. OverDrive uses the Adobe Content Server/Digital Editions platform, which runs on just about every e-reader devices except Kindles, as well as on software apps for Windows, Mac, Linux, Android, iOS (iPhone, iPad, etc.), and BlackBerry. When Kindle Library Lending launches, that limitation will be removed.
Instead, library patrons will most likely have to choose which e-book format they want based on what device they have. This will, ironically, lead to overlap: you will be able to choose either format if you have a PC, Mac, Android device, or Apple iOS device. If you have a Nook, Sony Reader, Kobo Reader, or IREX, you’ll choose the Adobe format; if you have a Kindle, you’ll choose the Kindle format. As far as portability is concerned, e-books will be readable across these two highly overlapping subsets of devices. Amazon’s Whispersync feature will even preserve margin notes you write on borrowed e-books without revealing them to other borrowers.
You still won’t be able to “re-lend” your e-book to a friend or family member unless they use your reading device or your user account, and you still won’t be able to move your e-book from a device in one of the ecosystems to one in the other ecosystem — for example, from a Nook to a Kindle or vice versa. But that’s a pretty low number of restrictions, given that this is library lending we’re talking about, not purchase and ownership.
Given the recent price drops, it looks like the Kindle is on its way to being a loss-leader product for Amazon — which will make up the revenue through its margins on e-book sales. So why would Amazon want to support library lending? Apparently because library e-book borrowing is popular, and the Kindle’s lack of support for it gives Amazon’s competitors a differentiating feature that consumers consider to be important. As Amazon’s press release suggests, the Kindles’ ability to read library e-books is up there with their display quality, battery life, and other features in the ultra-competitive e-book reader race.
Google Book Settlement Rejection: A Missed Opportunity March 30, 2011
Posted by Bill Rosenblatt in Law, Publishing, Rights Licensing, United States.3 comments
U.S. federal judge Denny Chin last week rejected the latest iteration of the settlement agreement between book authors and publishers and Google over Google’s massive-scale scanning and indexing of books. Judge Chin rejected the proposed settlement after having heard from hundreds of parties that objected to it, including members of the author plaintiff class who did not agree with it, academic and public-policy amici curiae, and a coalition of the U.S. Justice Department and Google competitors (Microsoft, Amazon) organized by the prominent antitrust attorney Gary Reback.
The objections to which Judge Chin responded in his opinion focused on areas like Google’s de facto monopoly over the online availability of certain types of works, particularly so-called orphan works whose copyright owners are not in evidence, and the “blessing” that settlement approval would confer on steps that Google took without permission, such as scanning books and making snippets of their texts available online. But the broadest objection that Judge Chin seized on was that the settlement’s structure has such fundamental impact on copyright that it should not be the product of litigation among private parties; it is more properly the domain of Congress.
Large commercial entities such as (in the case of copyright law) major book publishers, record labels, and film studios often bring lawsuits like this one in the first place as a second-best alternative to pushing for legislation. It’s generally more expensive, time-consuming, and risky to litigate than to lobby Congress, but if Congress isn’t paying attention, then the legislative route is not viable.
A prominent example of this is the Supreme Court’s 2005 Grokster decision on file-sharing, which was the result of litigation that music companies instigated when it became clear that Congress wouldn’t enact a bill called the INDUCE Act of 2004. The outcome of Grokster ended up being similar to the INDUCE Act: it established a new class of secondary copyright infringement liability for someone who “induces” people to infringe copyright, in the same manner that someone can induce people to infringe a patent by marketing and profiting from some technology that makes it easy to do so. (The inducement principle for patents is long-established law.)
More recently, Viacom’s huge litigation against Google over YouTube is an attempt to increase network operators’ responsibility to act as “copyright police” over their own services beyond the notice-and-takedown requirements in the current law (17 USC 512). That case is currently making its way through the appeals process. Viacom would also most likely have preferred legislation over this protracted, expensive, and distracting lawsuit to achieve its ends.
Most of the talk over the rejection of the Google book settlement has focused on the issues that Judge Chin emphasized in his opinion: orphaned works, antitrust, and condoning unauthorized copying after the fact. But disappointingly scant attention has been paid to a feature of the settlement that had the potential to improve the global copyright scene for the digital age in a major way: the establishment of a global Book Rights Registry, which Google would have paid over US $30 Million to build.
Many of the problems in managing digital rights to content could be solved if there were complete, consistent, up-to-date, and easily accessible sources of information about content and rights holders. Private companies have made various attempts to solve this problem over the years; none have succeeded, owing to unrealistic profitability requirements, overly narrow scope, lack of cooperation from rights holders, and other factors.
Governments have been understandably reluctant to try to establish such databases — especially in an age where even registering copyrights is not considered mandatory. But the need is there, and it’s sorely felt. Notwithstanding its source, legality, or ethics, the Book Rights Registry could have been a real solution to this problem — moreover, one that would be paid for, not by taxpayers or even rights holders but by a company for whom the price would amount to a rounding error on its balance sheet.
Furthermore, the Book Rights Registry — now in the public view for at least two years — has become a source of inspiration for similar activity in other sectors of the media industry, such as the Global Repertory Database for music currently being contemplated in Europe. Many highly qualified managers and potential implementers have been lining up to build and run the BRR, thus helping to ensure good design and operations.
Now, with Judge Chin’s rejection of the settlement, the BRR looks like a lost cause. Judge Chin’s opinion suggests that a revised settlement could be approved if it works on the “opt in” instead of “opt out” principle, i.e., it should include only those works whose copyright owners proactively agree to let be included. This may pass various legal sniff tests. But any resulting Book Rights Registry under an opt-in regime would be of highly dubious value to the industry in general; in fact, it would scarcely differ from repositories of licensable material available today, such as Overdrive’s Content Reserve.
The parties to the proposed settlement are now in a daze over what to do next. Sentiment seems to be toward Google lobbying Congress to pass legislation that would make orphan works available to the public. Such legislation has been in the works for at least five years. But Congress’s attention nowadays is taken up with issues such as unemployment, wars, the deficit, and other issues which (let’s face it) are more important to U.S. society. Yet orphan works legislation has always sounded like a no-brainer.
Now that Google has an estimable lobbying presence in Washington, we may find ourselves in a world with orphaned works becoming available to the public and a Book Rights Registry that includes them as well as works with claimed ownership on an opt-in basis. That’s well short of the “castle in the air” rights information database that some of us have been dreaming of… but I suppose it’s better than nothing.
E-Book Lending: The Serpent in the Garden of Eden March 3, 2011
Posted by Bill Rosenblatt in Business models, DRM, Law, Publishing, Services, United States.22 comments
I wrote my previous article about e-books and libraries in response to an article by my colleague Thad McIlroy on his Future of Publishing site. The news that HarperCollins had put restrictions into its e-book licenses for lending library services so that each “acquired” title could only be loaned out 26 times was fresh and appeared as a side note in my article. HarperCollins (a division of Rupert Murdoch’s News Corp) is one of the world’s largest trade book publishers. So, what about this major development?
First, let’s quickly review the technical and legal backdrop to what HarperCollins is doing. Libraries normally buy (acquire) books to lend to library patrons. This is made possible through the copyright law, specifically section 109, which is known as First Sale. Section 109 says that anyone who legitimately obtains a copy of a copyrighted work (e.g., a book) can do whatever she wants with it, including resell it, lend it, or give it away. Eventually physical books in lending libraries become worn and damaged; libraries may repair them or dispose of them. Libraries control lending abuses by collecting fines from patrons who return books late or not at all.
In the world of e-books, libraries don’t buy titles; they license e-books in order to license them to patrons. A license is a contract, the terms of which are ultimately up to the publisher. Copyright law allows libraries to lend digital works to their members, but DRM-packaged e-books are governed by licenses, and thus contract law, not copyright law.
Of course, it takes no effort to make a copy of an e-book. That’s why library services use DRM to ensure that e-books are loaned only to properly credentialed users (i.e. members of the library) and that those users can’t make copies for their million best friends. Service providers like Overdrive and NetLibrary have arisen to make it possible for libraries to “lend” e-books in a way that is very similar to the way they lend hardcopy books: you get access to the e-book for the library’s lending period (perhaps a couple of weeks, or for a reference work, a few hours), and then it “disappears” from your device and becomes available to another library member. Libraries can license multiple copies of popular works so that more than one patron at a time can borrow them.
The noted library technologist Eric Hellman calls this the “Pretend It’s Print” model — a characterization I don’t quite agree with, but leave that aside for the moment. Hellman characterizes “Pretend It’s Print” as a reasonable model, at least for the time being. But HarperCollins appears to be taking “Pretend It’s Print” quite literally: they seem to be trying to emulate physical wear and tear on a book that leads some libraries to discard books after a while. Still, Hellman’s blog post on the subject drips with contempt for HarperCollins.
I also believe that HarperCollins has done the wrong thing, but for a different set of reasons. Let me preface my reasons with a couple of caveats: I have no access to statistics on the expected lifespans of library books, though I found a couple of data points that expect between 20 and 35 loans until a book must be either discarded or repaired at a cost that may exceed its value — thus making HarperCollins’s 26 seem like an appropriate number (or did they find the same two articles I did?). I also have no insight into a library book’s promotional value to a publisher, but I suspect it’s not very high.
HarperCollins’s 26- loan limit is just a bad decision. It is bound to please absolutely no one. It is a lose-lose-lose proposition. The library community is up in arms on Twitter and elsewhere about the decision. Many are calling for libraries to boycott HarperCollins material in hardcopy as well as e-book format.
Yet at the same time, two other major publishers, Macmillan and Simon & Schuster, never licensed e-books for library lending in the first place. Librarians complain about this, but not very much.
As I said previously, I had heretofore considered e-book lending to be one of the real success stories of DRM. Libraries get to lend e-books, publishers get paid for those e-books, and library patrons can read them on a wide range of devices (pretty much anything but a Kindle) without leaving their homes or offices. Everybody wins.
Furthermore, let me be clear that some form of content protection is absolutely necessary for library e-book lending. To allow library patrons to make additional copies of “borrowed” digital materials with even relative impunity is just plain unfair to publishers and authors. (Yes, DRMs can be hacked; people can make digital scans of hardcopy books too.)
Yet HarperCollins is making two serious mistakes in DRM implementation. One is to try – too literally – to use DRM emulate a physical product in the digital domain. This has never worked, because a digital emulation will always contain one or more shortcomings with respect to the original physical model that will not meet user expectations. ”Pretend It’s Print” may be a convenient point of reference for consumers, but it is more effective to focus on the content access model rather than the physical product in designing digital content services. (As far as I know, record labels aren’t experimenting with DRMs that gradually introduce clicks, pops, and skips into digital music files.)
In this case, the HarperCollins model will fail to meet “user expectations” by angering librarians, who don’t like DRM in principle. Either the e-book will suddenly become unlendable without warning or the DRM system will warn librarians that they will soon have to pay for another license to keep lending the e-book. How many libraries will re-up? Not many, I suspect.
Furthermore, this move defies logic regarding publishers’ strategies for their backlists (catalogs of older content). Publishers believe that their backlist titles have less value than frontlist titles, and they constantly seek ways to invigorate sales of their backlists. By making it unlikely that e-books will be available for library lending after a year or so, HarperCollins is both cutting off access to products that it presumably does not value highly in the first place and hurting its ability to invigorate its backlist. This makes no sense at all.
The other mistake that HarperCollins has made is to introduce complexity into a DRM implementation in a way that adds no value for users. Many early digital music services failed to gain user acceptance because they were too complex for users to understand. Some, for example, had Byzantine pricing plans – X permanent downloads, Y timed downloads, and Z streams per month – that resembled the bad old days of confusing cell phone plans. iTunes won because it kept things simple. Nowadays, as music services take on more and more new features in their attempts to unseat the iTunes juggernaut, they risk similar user confusion and alienation (most egregious current example: the feature-overloaded MOG).
If HarperCollins wanted to try something different with licensing terms, it should have done something that offered value or choice. It could, for example, have offered a choice of limited-loan titles for less money or unlimited-loan for full price. (Eric Hellman tried polling this question; the responses he got prove little more than how emotional everyone is over this issue — which is exactly my point.)
If HarperCollins does not get value from e-book lending, then why not just pull its catalog entirely and join Simon & Schuster and Macmillan as library holdouts? If they do that instead, librarians need not bother boycotting HarperCollins’s e-books; and any threats to boycott the publisher’s hardcopy releases will surely ring hollow.
The end result of a move like this can only be the slow and painful death of library e-book lending. HarperCollins may hope that other publishers will follow its model – though not so closely as to invite antitrust scrutiny. This will only lead to further confusion for librarians and users alike: HarperCollins allows 26 loans, Random House allows 35, Penguin allows 20, etc. There is no way that a model like this can lead to the growth in library e-book lending that libraries need to survive as e-reading grows in popularity. `
Libraries are highly unlikely to reverse the tide in the market alone. Boycotts may be emotionally satisfying but will have no practical impact. Instead, the library community’s best hopes lie in the legal system.
The most likely route would be to try to get the Copyright Office, at its next DMCA rulemaking in 2013, to approve an exemption that would allow libraries to circumvent (hack) DRMs in order to lend e-books as long as they re-package them for the library patron with the same type or strength of DRM. This would be a more elaborate exception than any that the Copyright Office has granted in its four DMCA rulemakings to date. It also has various disadvantages: it could only last three years under the DMCA rulemaking rules (every exception only lasts until the next triennial rulemaking); it could cost libraries more money to support than they pay Overdrive or NetLibrary, which benefit from scale economies; and it could induce publishers to demand (and perhaps even pay for!) DRM that is more difficult to hack.
But perhaps it’s worth a try. Unlike the Section 108 Study Group — a body that recommends changes to the part of copyright law that covers libraries, which ironically has little bearing on the issue at hand — it is possible for anyone to submit a request for a DMCA exemption to the Copyright Office without first having to run a gauntlet of copyright industry lobbyists.
If the Copyright Office were to grant such an exemption, it would mean that a library could be free to purchase any e-book — not just those that the publisher decides to license — and lend it to its members on its own terms while respecting copyright. The result would be a better version of “Pretend It’s Print” — in the business model sense, where it counts.
Bill Rosenblatt
Azita Arvani
Bill Jones
Niels Thorwirth
