Amazon To Enter Library Lending Market April 20, 2011
Posted by Bill Rosenblatt in Devices, DRM, Publishing, Services, United States.2 comments
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.
Are Libraries Locked Out of the E-book World? February 27, 2011
Posted by Bill Rosenblatt in DRM, Law, Publishing, Uncategorized, United States.8 comments
Publishing guru Thad McIlroy was kind enough to link to one of my stories on the e-book DRM scene in an article on his excellent Future of Publishing site. (I have had the pleasure of working with Thad on various projects over the years. Especially when it comes to production and output issues for publishers, he is The Man.) So it’s incumbent on me to return the favor.
In his piece, Thad accuses book publishers and Amazon of effectively colluding to shut out libraries from access to e-books. You can borrow e-books from many public libraries in the United States, but the process is clunky – because it entails using a system provided by a third party, Overdrive – and you can’t read them on a Kindle device or any of the Kindle apps.
On the one hand, de facto (if not necessarily explicit) collusions of this type are far from uncommon; in fact the history of copyright law is littered with such arrangements (read Jessica Litman’s Digital Copyright
First of all, Amazon is not the only company with a popular e-book platform. Adobe’s e-book platform works on just about every e-reader except the Kindles (including the Barnes & Noble Nooks and Sony Readers) as well as on PCs, Macs, Android, and so on. The Adobe platform supports library lending and in fact is at the heart of Overdrive’s public library e-book lending service. Moreover, a very recent study indicates that the Kindle’s market share among the e-book reading public has dropped below 50%, mainly thanks to the Apple iPad… and regarding iOS devices’ compatibility with the Adobe e-book platform, yes, there’s an app for that. So, if you want to borrow e-books from your public library, just don’t use a Kindle; you have plenty of other choices.
In addition, there is a legal as well as technological or market-based angle to the problem of libraries in the era of digital content that’s worth discussing. Section 108 of the U.S. copyright law grants libraries and archives rights to content that exceed those granted to people under normal conditions. Among other things, it allows libraries to make copies of copyrighted works for noncommercial lending, as long as those copies are limited in number and afforded adequate protections against infringement.
There are various subtleties to Section 108 and its interplay with other areas of copyright law, not to mention moving-target implications of digital technologies. Accordingl, the law requires a group of interested parties to revisit Section 108 every five years and recommend any changes they deem necessary. The Section 108 Study Group is an analog to the better-known rulemaking on Section 1201, which the U.S. Copyright Office conducts every three years. Section 1201 — enacted as part of the Digital Millennium Copyright Act — is the law against circumventing (hacking) DRM on copyrighted works.
The Section 108 Study Group (in its 2008 incarnation, at least) has 19 members, which are well balanced between copyright-owner and library/archive interests: nine from each side and a neutral “legal advisor” from Columbia Law School.
Section 108 allows a library to make a copy of an e-book and lend it out to the library’s members. Under this law, a library could presumably buy an e-book and lend it out. But if the e-book is packaged with DRM, there are two problems. First, the library is not actually buying a copyrighted work, it is licensing the work; see below. Second, Section 108 doesn’t allow the library to hack the DRM in order to make the copy – not even if the library agrees to re-package the copy in a DRM scheme that lets a specific library patron read the e-book. Such hacking would have to be allowed as an exception to Section 1201, which is the province of the Section 1201 rulemaking, and thus of the Copyright Office, not the Section 108 Study Group. (See, I told you this stuff is subtle and complex.)
Because major publishers require DRM on their e-book releases, this means that libraries aren’t able to exercise rights under Section 108 just as a matter of law. This has given rise to services like Overdrive, which facilitate the licensing of e-books from publishers for library lending purposes.
A license is a contract. The licensing of digital content exists in a legal realm that is separate from copyright law – at least for the moment. The upshot is that publishers are free to choose whether to license their material in e-book form for library lending and to dictate some of the terms of those uses, such as the number of devices on which a given user can read the material, period of lending, or number of times an e-book can be loaned. For example, Simon & Schuster doesn’t license for e-book lending at all, and HarperCollins just introduced a policy to limit the number of loans per licensed e-book to 26, in an apparent move to mimic the lifespan of a physical book in library circulation.
Because libraries and publishers will perpetually disagree on these terms, it helps to have a third party like Overdrive or NetLibrary to act as a buffer or intermediary. Some publishers may also agree to license their content through these services because of the risk that their refusal to do so will cause the Section 108 Study Group to recommend changes in the copyright law that give libraries more latitude in lending digital works. As it is now, the copyright-owner contingent in the Study Group can point to services like Overdrive and NetLibrary as evidence that the market is providing solutions so no changes in the law are necessary.
The last Section 108 Study Group Report (for which I consulted to the Study Group) came out in 2008, which means that the activity in preparation for the next one will take place next year. The next Copyright Office 1201 rulemaking also takes place in 2013. If the members of the 108 Study Group who are on the “library side” want greater flexibility for libraries to lend digital works, they may want to try to get exemptions to the 1201 anti-hacking law for library lending proposed and approved.
If that happens, then Amazon and book publishers definitely will no longer have the “library lock-out” that Thad McIlroy described in his article.
Cricket Wireless Sings the Same Old Song December 21, 2010
Posted by Bill Rosenblatt in Business models, DRM, Mobile, Music, United States.1 comment so far
Cricket Wireless, a small wireless carrier that spun out of Qualcomm in 1998, announced the imminent launch of a new music service called MuveMusic. The service will launch at CES next month in the Las Vegas area, with other markets to be added later. Unfortunately, the Wall Street Journal’s All Things Digital blog (piece written by Ina Fried of CNet, who ought to know better), Engadget, and other media outlets have fallen for the deceptive hype that this service has created for itself.
MuveMusic calls itself “the first wireless plan with unlimited music included.” It offers a library of millions of tracks from all of the major music companies. This description is misleading. MuveMusic is actually similar to services offered in Europe and elsewhere, such as from Vodafone and other carriers through Omnifone’s white-label MusicStation service. It’s really a paid monthly subscription music service where the US $10/month fee happens to be tacked onto your mobile phone bill instead of paid separately, as with Rhapsody, Napster, MOG, Rdio, etc.
The only “first” about the business model is that it is the first such price-bundling deal to launch in the United States. (Look carefully at the quotes from the music execs in Cricket’s press release and you’ll see that they agree.) And the network offering it is a small one by US standards, with about 5 million subscribers, compared to over 90 million each for AT&T Mobility and Verizon Wireless.
As for the technology, Cricket also claims that the service offers “DRM-free files,” the truth of which — to be charitable — depends on your definition of “DRM.” The files themselves are not encrypted, though they are surely sent over the air to the handset (about which more shortly) using an encrypted protocol. But the files are stored in a secure partition of a special SD card from Sandisk. The files can only play on the user’s handset; capacity is limited to 3000 songs (or about 300 albums); there is no streaming. It’s unclear whether a user can take her SD card to another MuveMusic-licensed handset and play the music there (thereby “lending” the music). Unlike Vodafone’s service and similar ones, the music files cannot be played on users’ PCs.
In any case, this is not new either, but rather reminiscent of Datz Music Lounge, which launched in the UK back in 2008 and has since folded. Datz Music Lounge offered unlimited downloads for £99/year but required users to insert a dongle-like secure USB device into their PCs in order to download music to them.
In fact, MuveMusic files can only be played on a single handset model, the $199 Samsung Suede SCH-r710. Unlike the Omnifone services (or device maker-based bundled services like Nokia’s Ovi Music Unlimited), MuveMusic files can’t be played on users’ PCs at all.
The “DRM-free” claim that so many new content services make is rich in irony for those of us who have been in the field for a while. In the early days of DRM (mid-late 1990s), the term DRM was meant to cover a wide range of technologies for managing rights in a digital environment, only some of which happened to involve encrypting files and controlling their use. Subsequently the press co-opted the term so that it only referred to the narrower, more restrictive technology. Supporters of rights management cried foul.
Now this interpretation has been turned on its head: content services that put limits on content uses can be called “DRM-free” as long as they don’t meet the narrow definition of DRM or don’t use a “brand-name” DRM technology such as PlayReady or Marlin or OMA DRM or Flash Access or Widevine.
Subscription services like MuveMusic need some form of usage restrictions, otherwise they are too easily abused. MuveMusic is no exception; otherwise the majors would not have licensed it. As I’ve said before, the term “DRM” has turned into a pejorative, so subscription services are using the idea of DRM while avoiding (or, in Cricket’s case, outright denying) the term.
No, Cricket Wireless’s MuveMusic is not a “game changer for everyone,” as Ben Bajarin of Creative Strategies amusingly puts it in the press hype. With newer mobile music services offering such features as cloud-based sync among all of a user’s devices, higher-fidelity files, and streaming, all Cricket is really offering is a billing convenience. In all other respects, it’s just singing the same old song.
The End of Two File-Sharing Services: LimeWire and Choruss October 27, 2010
Posted by Bill Rosenblatt in Law, Music, Services, Uncategorized, United States.13 comments
Yesterday a federal judge issued an injunction against the file-sharing network LimeWire, causing it to stop distributing and supporting its software. Meanwhile, the Choruss initiative to implement “flat tax” file-sharing on college campuses appears to have died, despite the effort that Warner Music Group and longtime flat-tax ideologue Jim Griffin put into it.
Judge Kimba Wood’s injunction against LimeWire, which follows her summary judgment against the company back in May, is a milestone in the company’s four-year legal battle with the music industry, and by all accounts, it’s the end of the war. It’s also the first time that the Supreme Court’s 2005 Grokster decision, which created a new category of liability for “inducing copyright infringement,” has manifested itself in a major court action.
LimeWire CEO Mark Gorton claims that he intends to figure out a way to turn LimeWire into a legal paid service. Good luck with that strategy, Mark; it worked so well for Pirate Bay, iMesh, and Kazaa, just to name three.
Gorton’s attempts at emulating Michael Robertson in the music-industry-nose-thumbing business have failed; neither his blatantly disingenuous legal strategy nor his PR charm offensive have worked. And whereas Robertson made tens of millions selling his original MP3.com to Universal Music Group, Gorton may find himself personally liable for that much in fines.
The failure of Choruss is a different story, but there are common elements to both. Choruss was an attempt by Warner Music Group CEO Edgar Bronfman to experiment with a music licensing model that the copyleft has been advocating for years: a flat monthly fee per user in return for unlimited rights to use content on a network. Bronfman had hired Jim Griffin, a respected digital music pioneer as well as a vociferous advocate of what I call the flat tax approach, to lead the effort.
Griffin quickly found that the industry was not going to adopt a US-wide flat tax model voluntarily; it would require getting Congress to enact a statutory license. That wasn’t going to happen in any reasonable timeframe (if ever), so he turned his attention to college campuses.
College campuses had several advantages in terms of openness to the flat tax model: legal, technical, and economic. The legal advantage was that college administrations could have been held liable for the copyright infringements of their students — which are typically massive — so they had incentive to adopt a legal music service of some sort. The technical advantage was that colleges control their campus networks and are capable of filtering them (at least to some extent) so that file-sharing can be done freely inside the firewall but not through it to the outside world.
The economic advantage was that college administrations could easily charge students a monthly fee for use of content on the campus network. Such a fee could be added to existing student activity or IT fees without too many people noticing or caring, especially alongside the five-figure tuitions many colleges charge. Subscription services like Napster had been offering this arrangement to colleges. But unfettered file-sharing with access to a large, DRM-free music library would be better for users, all else (such as price and music selection) being equal.
In other words, Choruss was offering a value proposition to colleges that was actually superior. Unfortunately, Choruss failed because it couldn’t get the licenses to music from at least one of the major music companies and several publishers. (See my article from earlier this week for a possible reason why.)
Choruss had intended to partner with a file-sharing service called Audiogalaxy, which would have provided the infrastructure and user interface. Here’s where the commonality with LimeWire comes in. Audiogalaxy was a file-sharing service that operated during the original Napster era. Like LimeWire, Audiogalaxy used patently ineffectual technology to block sharing of copyrighted works, and like LimeWire, it was shut down in music industry litigation. (Yet in some ways, Audiogalaxy was ahead of its time: it was the first file-sharing service to incorporate what we now call “social” features in its user interface.)
Now that Choruss has failed, Audiogalaxy is relaunching as a service that lets users sync their own music files across their devices and stream it from a server — in other words, it now looks a lot like other current services such as Catch Media and DoubleTwist. In a post last week, Digital Music News’s Paul Resnikoff noted — as I did for Catch Media — that most of the files that would be “synced” with such a tool are most likely not legally obtained. In calling this “ironic,” given Audiogalaxy’s history and Jim Griffin’s intentions with Choruss, Resnikoff was right on the mark.
The National Academies’ Workshop on Copyright in the Digital Age October 17, 2010
Posted by Bill Rosenblatt in Economics, Law, United States.3 comments
The National Academies held a workshop last Friday at its headquarters in Washington as part of its efforts to launch a research program into copyright policy in the digital age. A total of 17 invited presenters gave 10-minute talks followed by Q&A. There were a few revelations and surprises among these.
The committee overseeing the research program sought input on what issues they should be addressing in their research. My own presentation (audio available) identified two areas: the lack of understanding of costs and benefits of rights technologies, and the ambiguity inherent in US copyright law that makes it difficult for technology to decide whether uses of content are legal or not.
The biggest surprise among the presentations came from Cary Sherman, President of the RIAA, representing the music recording industry. He called for the US to revert to a copyright system that requires registration in order to get the benefit of copyright protection. The current system makes registration automatic and only requires it as a precondition to infringement litigation. Automatic registration is a feature of the Berne Convention, an international copyright agreement that dates back to 1986 and which the US adopted in 1989.
Sherman’s call for “opt-in” copyright registration was a shocker, especially considering that Larry Lessig and other copyleft icons have been advocating this position for years. Lessig’s rationale is that intellectual property protection should only be necessary for those who actually care enough to register their copyrights.
Other media industry representatives were at odds with Sherman’s newfound opt-in religion. (Among other things, making this change in copyright law would put the US at odds with international copyright laws.) Even the MPAA (represented by Fritz Attaway), whose movie-studio members routinely register their copyrights, was against this idea.
Why would the major record companies be interested in reverting to opt-in copyright registration? Essentially for the same reason that Lessig is, but viewed from a slightly different angle: to make copyright the exclusive province of those who want it; to keep out the riff-raff, if you will.
The RIAA’s rationale is that the world is flooded with user-generated and indie content that overwhelmingly outnumbers the recording industry’s output; the vast majority of such content comes from people who aren’t interested in protecting copyrights or aware of the benefits of doing so. If registration is made mandatory, then the likely outcome is that a much higher proportion of copyrighted music will come from major labels.
Frankly, I don’t see the point. The only practical advantage of having a copyright in music in the digital age is to be able to sue for infringement. There would be other advantages if there were an online database of copyrighted music works, analogous to the database for books that Google intends to fund as part of its settlement with publishers and authors. With such a database, it would be possible, say, for a digital music service to restrict sharing of music tracks that have copyrights while allowing unlimited sharing of those not in the database. But — as several presenters at the workshop noted — such a database does not exist.
Another surprise at the National Academies workshop was the antagonistic stances of scholarly publishers and academic researchers. Presenters representing the American Chemical Society (John Ochs) and the Professional and Scholarly Publishers division of AAP (Bill Cook) made impassioned speeches about the need for stronger copyright protection, the devastating effect of piracy, the important roles their businesses play in disseminating scholarship, and the unfairness of open-access policies. These hard-line presentations were like throwbacks to Jack Valenti speeches from a decade ago, while today’s MPAA and RIAA (see above) have moved on to more nuanced dialog and engagement with the technology community.
Meanwhile, Columbia University statistics professor Victoria Stodden bemoaned the restrictions that copyright laws place on free sharing of research data. One of the research committee members hammered away at the scholarly publishers for being beneficiaries of the academic tenure system who don’t pay their authors. The exchanges did not put the scholarly publishing community in a very positive light.
The National Academies project committee was mainly interested in finding sources of data that they could draw on for their research — either existing data or places from which to mine fresh data. Their goals are extremely worthy, but some of the data they would like to get may be hard to come by. For example, one of the common threads of the discussion was the “amateurization” of content creation and its effect on culture. Do professionals create “better” content than nonprofessionals? How do you measure quality — or should that be judged at all?
One of the law-professor types noted that any differentiation of treatment of content based on some notion of quality runs counter to the First Amendment. But that wasn’t the point. The point was whether it’s possible to measure the effect of the explosion of user-generated content on culture by assessing quality of the works that are available. No one was able to identify a reliable measure. In the end, the argument put forth by Derek Slater of Google that “one man’s trash is another man’s treasure” — which more or less defines the success of YouTube — was hard to refute.
Nevertheless, the research that the National Academies proposes to do should be very worthwhile. In the prospectus for the research program, they state that one of the motivations for the research is to offer facts and economic principles to frame the debate on digital copyright, rather than the philosophical and emotional arguments that have largely framed it thus far. I could not agree more.
My Remarks at the National Academies October 17, 2010
Posted by Bill Rosenblatt in Economics, Events, Law, Technologies, United States.add a comment
Remarks made at the National Academies’ workshop on the Impact of Copyright Policy on Innovation in the Digital Era, October 15, 2010, Washington, DC.
Good morning. First I would like to thank the committee for the opportunity of being invited here today. It’s an honor to be here. The issues being discussed here are ones that I have studied and cared deeply about for years. I’m thrilled to see the potential for research to solve some of the pressing issues around copyright policy in the digital age.
My name is Bill Rosenblatt. I’m president of GiantSteps Media Technology Strategies, a consulting firm based in New York. I consult on rights technologies, among other things. I’m the author of a book on DRM, which is ancient history by now, I suppose. I’ve worked with clients from across the spectrum of these issues for many years.
As a consultant, I try not to take sides in this debate. My only personal bias is that I was raised by professional musicians, so I am in favor of content creators being able to make a living. I’m a computer scientist by training, but also an author and editor, and someone who has worked in the content as well as technology industries.
The prospectus for this Workshop notes that debates over digital copyright have been philosophical and emotional rather than economic or fact-based. I was happy to see this acknowledged, because it’s absolutely what I see too.
I would like to draw attention to two particular issues that I have focused on, and that I believe are particularly in need of objective research.
- The economic imbalance that I perceive between demands for rights technologies and the costs of implementing them.
- Something I call the trap door between laws and technologies.
For each of these, I’d like to describe the problems that I believe can be addressed by appropriate research.
Regarding the first one, the economic imbalance: copyright owners demand that downstream entities in the content value chain, such as distributors, retailers, and consumer electronics makers, implement digital rights technologies in order to get licenses to use content. But in general, the downstream entities pay for those technologies; the content owners don’t. This has led to two common outcomes, both of which are not optimal: first, downstream entities implement the cheapest and simplest rights technologies that they can get away with, or second, in many cases, they implement technologies that benefit them at least as much as they benefit content owners.
One example of the first outcome is the CSS protection for DVDs, which was, in my view, designed primarily to be cheap to implement rather than to actually protect content well. It was hacked in a matter of weeks after its release, the hack was applicable to all protected DVDs worldwide, and it was easy to use. An example of the second outcome is Apple’s FairPlay DRM technology for iTunes, which was designed to promote platform lock-in as well as content protection. I don’t mean to pick on these particular technologies; they are just examples, and there are others.
No one really knows how to fix this problem, because no one actually understands the value of these technologies – to content owners, to retailers, device makers, or to consumers. Various studies have been done on related subjects, such as losses to content industries from copyright infringement, the effect of DRM on content pricing to consumers, the effect of file-sharing on music piracy, contributions that Fair Use has made to the Gross Domestic Product, and so on.
How helpful are these studies? Well, the Government Accountability Office released a report this past April that not only cast doubt on their validity but expressed skepticism that the economic impact of IP infringement can be measured at all with any kind of accuracy. I had seen some of the studies mentioned in the GAO report and also felt that their methodologies and objectivities left much to be desired.
I’m not the only one who sees this imbalance. A couple of years ago, Professor Jonathan Zittrain of Harvard Law School said at a conference that the key issue in Viacom’s copyright litigation against YouTube was the cost and responsibility of implementing copyright filtering technology. Litigations such as that one and similar ones like Universal Music Group v. Veoh are really attempts to obtain or rebuff technological mandates, so that the government decides (or doesn’t decide) who has to pay for what technology. There may well be legal and philosophical principles that guide such decisions, but there are economic ones as well, and these go largely unexplored.
Despite the GAO report’s pessimism, I believe that if the questions are posed carefully and the research is done well and objectively, we can get some answers to questions like these:
- How much better is a content protection system that costs more to implement, in terms of both content security and the consumer experience?
- What are the differences in cost-effectiveness and user experience between proactive and reactive solutions to infringement? (DRM is an example of a proactive technology. Forensic watermarking is an example of a reactive one.)
- What is the appropriate economic consideration or incentive in requiring network operators to be accountable for their users’ copyright infringements through means such as filtering technologies and “progressive response” laws?
- And many others that I could think of.
The second issue that I’d like to mention today is what I call the trap door between laws and technologies.
It’s the digital age; everything about digital content is automated and instantaneous: copying, distribution, storage, searching, browsing, playback, etc. Everything, that is, except decisions about copyright infringement. You can do whatever you want with content, but in a large and growing number of cases, you have to call lawyers in to decide questions of legality. Or as Larry Lessig once said, “Fair Use is the right to hire a lawyer.”
I prefer to say that Fair Use is a trap door into the legal system. Whenever you get to a copyright gray area, you fall through the trap door, and you have to stop doing what you’re doing.
The problem is not just that people have to hire lawyers and embark on potentially long legal proceedings. It’s also that consumers and especially entrepreneurs tend to shy away from activity that may or may not be legal, because of the fear of going through a legal process to get the question decided.
My view is that the trap door is itself a chill on expression and innovation. It’s as if you’re driving; speed limits aren’t posted, and you have to guess how fast you can drive based on the width of the road, type of road surface, presence of pedestrians, and so on – and if you aren’t sure, you could pay a traffic lawyer to go spend a year figuring it out for you — all so that you can drive to the mall one afternoon or, as Google apparently just did, invent a new type of self-driving car.
Wouldn’t it be easier if we had a copyright legal system that enabled at least some degree of automation of decisions on fair use and other issues? Apparently not, according to most lawyers. When I raised this possibility on a panel at my last conference, the attorneys on the panel – who represented a broad range of copyright interests – reacted with a mixture of bemusement and annoyance.
But my view is that this step is unavoidable given the realities of the digital age. And in fact, like it or not, our legal system does introduce rule-based judgments about appropriate use. For example, the Copyright Office’s triennial rulemaking on DMCA 1201 produces a list of legally permitted uses. But of course these are severely constrained and don’t have much practical impact.
The problem, once again, is that arguments are being made on philosophical or emotional rather than fact-based grounds. People say that Fair Use shouldn’t be made more automatable because business models and technologies change too rapidly, and it’s the flexibility that gives the law its staying power. That may be true, but to me it’s a cop-out.
The issue has just not been explored properly. It may well be that our principle-based Fair Use system is better, in some sense, than, say, the European system or some other type of copyright regime. But we don’t really know one way or another. And by the way, what I’ve said applies not only to Fair Use but to Section 109 and other parts of the copyright law.
A nonprofit organization called the Digital Media Project tried to solve this problem several years ago. The DMP was created by Leonardo Chiariglione, the founder of the MPEG standards body. They tried to do something that could have been great, if only they had finished the job.
The DMP created an open standard DRM technology. One of its design goals was that this technology should support what they called Traditional Rights and Usages (TRUs), which vary from one country to another according to copyright laws. From what I can tell from reading their documents, the DMP made some progress on mapping TRUs to digitally expressible and automatable constructs, but it essentially abandoned the effort three years ago. They did create a long list of TRUs but only came up with a few examples of the mapping.
Someone ought to try to continue the work that the DMP started — though with a different goal: not to try to shoehorn existing copyright constructs into a DRM system, but just to see how far it could reasonably go. Right now — the Copyright Office’s DMCA rulemaking notwithstanding — rules about appropriate use arise primarily from a very ad hoc combination of settled case law precedents (such as parody or criticism being fair use) and industry convention (such as for music sampling). Research could be done to explore both the boundaries of how current copyright law can be made more amenable to technological implementation and the pros and cons of changing copyright law so as to make the trap door smaller.
Those are the two sets of issues in digital copyright that I believe would benefit from the research that the committee contemplating. Thanks for your attention, and thanks again to the committee for inviting me today.
In PogueWorld, Apple TV Is the Future October 7, 2010
Posted by Bill Rosenblatt in Business models, Services, United States, Video.2 comments
David Pogue’s review in today’s New York Times of new internet TV gadgets from Apple and Roku was right about one thing: it’s early days for Internet TV. Otherwise, this was a particularly egregious example of PogueWorld.
In PogueWorld, closed proprietary systems are evil, unless they are Apple’s. Movie studios are evil because (among other reasons) they don’t give Apple everything it wants in negotiations, they have things like release windows, and they insist on “stupid” rules such as time limits within which to watch rented content. No one but Apple is capable of producing a well-designed piece of consumer electronics.
Enough is enough already. Yes, Apple makes beautiful products that are well-designed and easy to use. But “$1 on-demand TV” is not “a brilliant idea in search of studio executives with a clue.” On the contrary, it’s a dumb idea that has found technology executives with no clue. That’s why TV networks other than ABC — which marches in lock-step with Apple owing to its common control by Steve Jobs — and Fox are shunning it. TV networks (other than ABC) also happen not to want to risk giving Apple the same degree of control over content economics as it has achieved in the music industry.
Why is Apple even doing this? That’s the question inquiring minds like Pogue’s should really be asking. Here’s my view: the first edition of the Apple TV was a bust (mine functions very well as a decorative paperweight); Apple now knows very well that people aren’t interested in owning TV shows. But Apple doesn’t have the infrastructure (including flexible rights management technology, among other things) to provide something that would interest consumers more. So as a transitional move, they have introduced a lower-priced box that does rentals. It strikes me as a stopgap effort by a smart company that ought to have a better longer-term vision.
Educating consumers on new content business models is expensive and difficult. Someone from Apple told me that the company spent half a billion dollars in educating consumers on buying individual tracks instead of albums. Yet even that’s an exaggeration: single-buying is not a new behavior, as anyone old enough to have bought 45s will know.
In contrast, there is no precedent whatsoever for paying piecemeal for TV shows, whether to rent or to buy. Some might buy entire seasons of important TV series (mostly non-broadcast, such as The Sopranos (HBO) and Mad Men (AMC)) on DVD, but that’s about it. Otherwise, this idea flies in the face of every precedent. Consumers rebelled against per-call charges for their telephones, and more recently, their mobile phones. Cable TV sells packages of programming.
Moreover, a recent article in the Financial Times suggests that the dollar-per-song business model is coming to an end as well: MP3 music sales are now flat compared to last year, suggesting that the market is saturated. Various business models that offer “access” to content on a subscription basis instead of “ownership” — such as Spotify and Catch Media for music — are touted as the future.
If you want an analog to these “access” models for video, it’s Hulu, not Apple TV. We watch Hulu on our Sony HDTV at home through a PC via VGA and audio cable connections. It requires a little finagling, and the resolution is not exactly HD, but it works tolerably. Hulu is to TV as Spotify is to music… except that the $10/month Hulu Plus is not ad-free… but then again, broadcast network television is generally not ad-free either.
Roku is working on a Hulu-capable version of its Internet TV device. Pogue reviewed Roku’s latest devices (“uglier” than the Apple TV) but did not mention this. Apple TV’s buck-a-show model will not, as Pogue claims, induce people to give up their cable service. But if Hulu offered more content and made it available through a $60 Roku box, we’d buy it in a heartbeat and dump Time Warner Cable in the next heartbeat. We’d pay the $10 per month. We’d pay double, or even triple, for no ads. That would be a bargain. So much for PogueWorld.
Ninth Circuit Overturns Vernor v. Autodesk Decision September 14, 2010
Posted by Bill Rosenblatt in Law, United States.7 comments
Last week, the US Ninth Circuit appeals court overturned a district court decision in a case that could have broad ramifications for the rights that consumers get when they purchase digital content.
The lower court had decided, in Vernor v. Autodesk, that the sale of used software on CD-ROMs ought to be treated as the sale of any other used copyrighted work, such as a book or videotape, with respect to consumers’ rights to redistribute the content after the original sale. The decision cited the “economic reality” of the transaction, which the court found was similar to that of physical analog media. The plaintiff in the case, Timothy Vernor, had asked the court for a declaratory judgment against computer aided design software maker Autodesk to allow him to sell used copies of the vendor’s AutoCAD software on eBay.
The question of whether sale of digital content ought to be covered under First Sale (section 109 of the Copyright Act) has not been settled law. First Sale (known as “exhaustion” outside of the US) states that the publisher of a work has no further control over it after it’s sold — which means, for example, that libraries can buy books and lend them to the public, or a music store can sell used CDs or vinyl LPs.
In 2001, the US Copyright Office was asked to provide an opinion on digital First Sale; it stated in a report that digital First Sale may be possible to enforce via mandated technological measures (i.e., DRM), but that it was not reasonable to introduce such a mandate because the technology was too impractical to implement.
Libraries and advocacy groups have been hoping for a result along the lines of the lower court ruling in Vernor, which is sometimes known as the “duck test“: the “looks like a duck, swims like a duck, and quacks like a duck, therefore it must be a duck” theory. In other words, if the sale of a digital content product resembles the sale of an analog physical content product, then it ought to be subject to First Sale.
The lower court opinion didn’t quite affirm the duck test for digital First Sale, but it went in that direction. Yet in overturning the lower court, the Ninth Circuit didn’t quite do the opposite. It offered a test for end-user license agreements (EULAs, a/k/a clickwrap agreements) that cover digital content: if the content is covered by a EULA, and the EULA contains usage conditions that are more restrictive than those granted under a normal sale of a copyrighted work, then it’s a license, not a sale, and therefore it’s not subject to First Sale.
For you logicians out there, the Ninth Circuit’s decision was the contrapositive of the duck test: ”if it doesn’t walk like a duck, swim like a duck, or quack like a duck, then it can’t be a duck.”
In one sense, all the Ninth Circuit decided was that EULA terms are enforceable, which is fairly settled law — despite frequent attempts to characterize EULAs as “contracts of adhesion” that are legally unenforceable.
But on the other hand, this decision could lead to EULAs on all sorts of digital content imposed by copyright owners and retailers that might now have the guts to impose restrictions that relate to redistribution of content. In fact, Ars Technica’s Nate Anderson points out that Amazon.com’s paid MP3 download service (just as one example) already imposes such restrictions. Yet Anderson does not distinguish license restrictions on redistribution from restrictions on personal use. For example, the Amazon.com EULA includes “modify, adapt, edit” as prohibited actions on MP3s sold on the site; these are personal usage restrictions that may relate to Fair Use but not First Sale. The Vernor opinion does not affect any duck-quacking theories about Fair Use.
Otherwise, Anderson echoes the loud alarm bells sounded by the American Library Association and others about the Ninth Circuit’s decision, saying that it could well give content owners the encouragement they need to impose all sorts of distribution restrictions on unprotected content. To put it another way: if you don’t like technology-based DRM, you’re gonna really hate what can only be called verbal DRM.
As Anderson points out, this court decision might embolden copyright owners and service providers to write distribution restrictions into their EULAs that could theoretically lead to the end of used music or video stores.
But let’s look at this realistically: if you think that DRM doesn’t do much to prevent copyright infringement, how are mere words in a clickwrap agreement going to do any better? They aren’t, of course. No one reads EULAs, and not much is generally done to enforce their terms. The software industry knows this very well; otherwise they would not use elaborate “product activation” and other antipiracy technologies — as Autodesk certainly does.
It’s really more about consumer expectations — as it always has been. Consumers are comfortable in their expectations about what they can do with unprotected content. In some cases (such as pay TV, music subscription services, and library e-book lending) they also have largely made peace with technological restrictions on usage.
Consumer expectations arise out of actual functionality, not legalese — as anyone of the millions of people who drive above the speed limit will attest. As a consumer, given the choice between verbal and technological DRM that impose similar restrictions — and all else being equal — I’d pick the latter any day. I’d rather bump up against technologically imposed usage restrictions than have to slog through a pile of legal language or just hope I don’t do something wrong with the content I purchased — oops, I mean licensed. (Ideally I’d rather have the technological restrictions and a clear, accurate, non-legalese explanation of those restrictions.)
So while I can see why the ALA and its fellow amici are concerned about the Ninth Circuit’s decision in Vernor, I don’t see much immediate practical impact. But in the longer term, I am concerned about what I have called the trap door into the legal system, where lawyers and courts take time and expense to decide issues that could be decided immediately and automatically by technology.
Autodesk claims that its usage and distribution restrictions are necessary to enable it to offer different products for different markets, including free software for students. It relies on technological means to differentiate those products, which sell for thousands of dollars. Autodesk is hardly likely to take this court decision so much to heart that it jettisons its product activation scheme in favor of a series of EULAs, even though doing so would save development and support costs. Nor are the producers of audiovisual content likely to do the same.
My hope is that this court decision does not end up encouraging copyright owners to rely on “verbal DRM,” because it just won’t work.
Bill Rosenblatt
Azita Arvani
Bill Jones
Niels Thorwirth
