A Copyfighter’s Musings

This week I got a veritable hit parade from my rant on Sony’s DRM and format lock-in.  There, I considered the lock-in in terms of whether it was good or bad for Sony; I’ve similarly examined Apple’s FairPlay DRM as well as whether the lock-in is good for the music industry.  These considerations are important, but, to really understand lock-in’s impact, we must put it in a broader normative perspective.  One can rather loosely do so under the label of “consumer perspective,” including harm to innovation and competition.  Drawing these and other considerations together, we can think more generally in terms of welfare economics.  After reading Ernest’s post on DRM last week, I wanted to bring this up for further discussion.

In iTunes: How Copyright, Contract, and Technology Shape the Business of Digital Media, the Berkman Center’s Digital Media Project considered the relation between iTunes, FairPlay, the iPod, and the DMCA in terms of social welfare as well as from Apple’s business perspective (see p. 33-47, 44-45 in particular).  As to the latter, the tying of the Music Store to the portable player may be wise. As to the former, our account is not favorable.  The fragmentation and barriers to entry caused by DRM will inhibit competition and innovation in the music store and portable player markets primarily as well as the market for compression standards (please forgive the typo “DRM compression standards” – copying to PDF missed a strike-thru; will update in next draft).  Compatibility would generate substantial network effects – “[j]ust like having different standards of incompatible fax machines would reduce the value of all fax machines, having incompatible portable players and DRM is likely to affect the value of the players.”

This analysis is relevant independent of the DMCA.  That is, had the market simply evolved this way without a DMCA, these harms could still raise some concerns.  However, it is doubtful that the market would have done so. The DMCA provides the necessary impediment to legitimate reverse engineering for interoperability.  The impact of fragmentation and DRM lock-in would be minimized as people could create products that play all formats.  Moreover, without the DMCA, the incentive to create these barriers in the first place would be greatly diminished, because compatible products would have a much easier time of getting to market.

The iTunes-iPod tie is just one example of the DMCA’s effect, of course.  Among many articles on the subject, Professor Dan Burk’s Anti-circumvention Misuse excellently covers how the DMCA’s enables copyright holders (and whoever else controls the DRM) to control secondary markets, inhibit competitors, and dictate innovation.  Rather than innovation flourishing in an environment of limited control, where all technologists can compete to bring the best products to market, the DMCA gives certain parties tight control over digital media use.  As Burk points out (and Ernest noted), this control can be particularly dangerous in the hands of powerful incumbents, who will reap enormous benefits from the technologies they choose to allow while not suffering the consequences of technologies that undermine their business model.

The best part of Burk’s article is how he sets this against legal background in patent and copyright.  We typically have a rather nuanced approach for this subject, including consideration of anti-trust (e.g., tying) as well as rules like misuse which take into account basic public policy considerations.  In misuse cases, a critical component is whether the actions of the IP holder allow them to appropriate rights beyond the scope of the IP grant.  Traditionally, we would allow the sort of interop that FairPlay and other DRM prevents.

In steps the DMCA, a blunt instrument, unchecked by any of the balances we have built into copyright. In Burk’s terms, it provides a “paracopyright” far beyond the scope of copyright’s intended bounds or even the DMCA’s stated purposes.  As Cory said, the copyright holder has gotten control of the record but never the record player; and the copyright holder’s control over the record has never given Apple or Sony and all the other involved vendors the right to dictate compatible technologies.  All this done in a law whose purpose was to stop piracy.  

This all leads to a final key point.  One can certainly point to ways in which reverse engineering and interop could in certain circumstances lead to some social harm (for instance, by reducing some incentive to innovate of those who would have had control).  But to justify the DMCA on these grounds is myopic.  I accept that standard setting and this control over secondary markets is a complex issue that could have differing consequences in different situations; however, the DMCA ignores those many complexities that we have traditionally examined when treating this issue, particularly in the IP context.  Also, it is oversimplified and misleading to call, for instance, the current digital music standards situation “the market at work.”  Indeed, given how the DMCA steps into the market to limit competition, this is hardly just the market functioning “normally”.  It is a market born out of a particular legal framework that rejects the careful balancing we would typically employ, and the balance we had struck to allow reverse engineering and decryption for interop.

Filed by Derek Slater at 4:14 am under General news
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Frank’s been taking great notes at iLaw.  This section from Professor Fisher’s and Nesson’s presentation stood out:

“Another stick: a ‘first in line auto-competition’ system
The objective is to protect new releases that have immediate commercial value. Preservation incentive for novelty.

At T0, the file exists only at the artist’s. Someone gets a copy, and puts it into the P2P net. As soon as that happens, it is now visible – until then, it’s invisible. So, we set up a system that searches the net, and finds the first release of the file on the network, and then – here’s the big deal – (1) the program starts hogging access to that single file excluding others and (2) notifying the poster that s/he’s been identified as the source of the infringing copy.

This technology has been developed and is being tried out. Stats for three weeks of protecting a file on KaZaA and Gnutella. 20 seeds (initial drops into the net); total sharers: 500 – others. What we see is that, on a day by day basis, there’s a big bounce when radio plays start up. And the program seems to be effective at getting people to take the file down. Only a few evaders.

So, this is a proof of concept – it is possible to inject something into the technology so that you can get ahead of the rate of “seeding” the network; downloads may behave exponentially, but uploading does not – so it can be attacked. Stopping the seeder seems to have meaningful effects – so the trick is to monitor all networks (and thus, a problem, IMHO)”

Very interesting.  Again, this is a key component of the speed bumps argument.  What I hadn’t seen before is any actual stats on interdiction – I’d love to see more.  Putting aside methodological problems, getting such stats is difficult because no one really admits on record that they’re using interdiction.

Filed by Derek Slater at 5:49 pm under General news
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Jason makes an excellent point (via Donna) about what it means to preserve the music industry.  We don’t need to preserve the record labels; however, just because most artists don’t make money off of CD sales doesn’t mean the record labels and CD sales do not benefit artists.  The record labels have served an important role in the production, distribution, and marketing of music, most of which is paid for by CD sales.  Live performances, for instance, may remain a viable revenue stream in a post-Napster world, but losing the current structures of music production will impact those other streams.  The point is not that we need to preserve the current structures, but, if we lose them, we may need new ones.

The obvious rejoinder, made quite well by Professor Raymond Ku, is that we have replacements for all three major record label functions.  The Internet makes distribution virtually costless.  Digital technology is making the home studio, and even the studio on a laptop, much cheaper.  All that’s left is marketing, which is aided by efficient distribution schemes, recommendation engines, and other new methods of discovering music online.  And, to the extent that there’s less marketing, that’s a good thing, Ku says; marketing can be distortative, giving disproportionate attention to wealthy artists and enhancing the “winner-take-all” nature of creative good markets. (See also this Netanel article.)

Now, I’m not really convinced by Ku that it’s as simple as letting the record labels die and we all live happily ever after.  I’ve expressed my uncertainty about alternative business models that do not rely on selling copies. There are many complexities that are overlooked by people who discount the importance of the current industry structures.

It’s also worth considering Ku’s argument if transplanted to movies (something he purposely and explicitly avoids).  Distribution costs are just as low, but production costs have not been reduced by nearly the same amount.

Filed by Derek Slater at 5:13 pm under General news
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Made it through three great articles recently:

1.  As noted before, I read Lemley and Reese’s UDRP for P2P infringement cases.  It’s a worthwhile read no matter what you think should be done about P2P infringement.  If you think that the lawsuits should continue, then it’s a more efficient and possibly more humane method.  They suggest lower penalties in a less costly legal system for both copyright holder and P2P user.  More lawsuits with lesser penalties would help counter the critique that the lawsuits are unfair, leveling enormous penalties on a few of many million infringers (see Lemley and Reese in other paper as well as Lichtman).  The authors also explicitly discuss how this streamlined enforcement process would work for the EFF’s VCL.  After all, you would still need some threat of enforcement against “stragglers.”  It makes more sense to do so in a cheaper, streamlined fashion than through the costly civil infringement process with huge penalties.

2.  Sonia Katyal’s The New Surveillance provides a fascinating framework to understand numerous privately-enforced ways of policing consumers.  These ways include section 512 (including notice-and-takedown and the expedited subpoena provision), DRM and section 1201, “bots” that search for copyrighted materials, and interference (primarily interdiction).  This policing matters in terms of the threat to privacy but also in how it ties into controlling and chilling legitimate use of copyrighted materials.  It is particularly problematic because it is extrajudicial in nature; enabled by certain laws, but determined mostly by private actors, namely copyright holders.  Katyal discusses the resulting panopticism and the effects on speech, privacy, and autonomy.  I’m not quite sure yet if it makes sense to lump so many technologies and actions together, but it is a helpful lens.

3.  Tim Wu’s Copyright’s Communications Policy provides another amazing framework, this time in the ways copyright resembles other communications policy, governing distributors of information.  Like in telecom policy, copyright involves choosing a “stewardship” or “competetive and open” model for distributors; whether assigning a strong property right to incumbents or removing barriers to market entry for new innovators will lead to the best result. Wu takes on a trip through copyright’s history as well as telecom’s to show similarities.  He also addresses the Sony doctrine in the P2P age as a communications issue.  One really interesting, somewhat unusual point he makes is that, contra Litman, a less complicated copyright statute wouldn’t necessarily be better when looking at it from this communications policy viewpoint. A “future proof” copyright law that could work no matter what technology comes along would not necessarily have the vagueness and uncertainty that allows those new technologies to come along.  Uncertainty in the law can be bad for copyright owners and technology creators, but it can also enable new entry because incumbents do not have by definition have control.  While this uncertainty leads both sides to spend large sums trying to get government on its side, that process can lead to better, compromise solutions.  Ambiguity is thus a feature, not a bug – sound familiar?

Filed by Derek Slater at 4:31 pm under General news
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Frank points to this story, which gives us a hint of what Napster charges the universities.  For reasons I’ve made clear before, I’m glad that Ohio is planning to make it voluntary, regardless of price.

Filed by Derek Slater at 4:21 pm under General news
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The public interest advocates made great arguments at yesterday’s DMCRA hearing, but, having read their testimony, I feel that one was underemphasized.  Why didn’t anyone really go after the assumption that the DMCA actually reduces infringement?  We know DRM benefits copyright holders in ways aside from reducing piracy, but that’s not what the Congress critters care about.  They care about “theft.”

Maybe making the argument in this forum would have been too difficult.  It might have been better to just make the Robert Moore argument that tech and entertainment companies can work together privately to make workable DRM, and most consumers are honest anyway.  But can’t someone submit to the committee the Darknet paper at least?  How come Valenti cited Felten but the other side didn’t?

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Have a look at Scott Matthews’ DRUMS.  Can’t really say I’m capable of judging the idea technically, but making referencing, finding, and possibly licensing works very efficient sounds cool to me.  As I’ve expressed to Scott, I don’t really get how it’s a new file-sharing “rhetoric”; it could help P2P in numerous ways, too, so it’s not like this is just a tool for improving the legit services.  But that’s even better – it’s a neutral tech that might enhance the way we experience digital media in many contexts.  Maybe you want to identify shareable content, maybe you want a reference that you can use when moving between various media tools, maybe you want to identify the author and relevant copyright holders to license samples – all might be helped by something like DRUMS.

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I have never known (in brief conversations and reading numerous interviews) Fred von Lohmann to be overly or consistently optimistic.  Not pessimistic, certainly, but not someone who I’d label an optimist.  For that reason, his final line from his DMCRA hearing report gives me great hope:

“Today was a good day for fair use, for consumers, and for our nation’s tradition of balance in copyright law.”

Did the hearing go THAT well?  I only saw the end of Panel 3, and it seemed like plenty of Congressmen had already decided that the DMCRA was evil.  On the other hand, Robert Moore was really strong, concretizing everything the academics had said; he managed to play the part of ordinary average citizen while making excellent, clear arguments.  And some people seemed sympathetic, but not all.

Fred’s satisfaction came not just from the hearing, but from something that happened during the lunch session:

“It was there that Rep. Joe Barton, Chairman of the full House Energy and Commerce Committee and a co-sponsor of H.R. 107, announced that he intends to see the bill marked up (a prerequisite to approval), passed by the subcommittee, passed by the full committee, passed by the full House of Representatives, and ultimately signed into law by the President.

This year.

Needless to say, Rep. Barton’s support isn’t enough to guarantee all of these results — but because he is committee chairman, his support means a great deal.”

Very, very interesting.  Fred also made three related posts.  See also reports from SethF, Ed Felten, and Matt Morse (I knew you’d be back!).

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Joe Gratz gives a nice update on Sony’s stupidity, including its new Sony Connect music service and iPod-like device.  Apparently, Sony’s hard drive player cannot play MP3s, WMA and (of course) Apple FairPlay-locked AAC.  It only plays Sony’s proprietary ATRAC3 format; if it’s like Sony’s MiniDisc players, forcing consumers to convert to ATRAC3 also forces them to accept certain DRM restrictions. In related news, the Washington Post and New York Times both deemed Connect embarassing, noting its poor interface, proprietary DRM format and codec, copying restrictions … too many to count.  I’ve been over this before (see earlier rant on Sony Connect) in some detail.  How could Sony not have learned from the numerous music services that have come before it?

Filed by Derek Slater at 7:36 pm under General news
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Audible Magic is up to its old tricks, this time with a firm called Palisade Systems. It’s a system designed for ISPs to monitor all your traffic, P2P, email or otherwise. As if that wasn’t enough, read on:

“Jacobson said the identification process would not work on an encrypted network, such as is used in several newer file-swapping programs. However, the Palisade software could act to block those applications from using the network altogether, instead of blocking individual song transfers, he said. “

Hurray for the technological arms race.

Filed by Derek Slater at 9:13 pm under General news
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UPDATE: Apple has denied these rumors.

Frank points to an article that says Apple will be raising its singles prices.  Before I believe it, I’ll need some other confirimation, because Steve Jobs has denied these changes so many times and the $.99 has been a central part of their marketing campaign and value.

I do believe, of course, that the record labels are pushing for such changes.  Probably, if they’re going to get them anywhere, they’ll have to start with iTunes, the market leader; otherwise, all the other services would only help iTunes grow even more.

But why would they want this?  Sure, the temporal price discrimination has a logic, particularly given the exponential decay in sales that most records go through after release.  But will consumers stand for it?  It’s not just a matter of price points, but one of principle.  After many consumers saw the record industry finally trying to produce a reasonable alternative to P2P, it seems they’re backtracking.  That seeming unreasonableness of this playing with prices will turn many people off.

Filed by Derek Slater at 3:00 pm under General news
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Ernest explains how DRM’s control may be useful to the content industries even if it doesn’t stop piracy.  I agree entirely with his analysis, though I know some people within the industries certainly believe that it will also stop piracy.

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I generally agree with sentiments expressed by many others (for example, Ernest) about Janus.  I’m uncertain how much consumers really want to rent their music such that it dies when their subscription lapses; the DRM/copyright/contract behemoth (as noted by Ernest) also has some frightening implications.

At the same time, I do think Janus certainly is important to the growth of the online music stores, if they are to succeed in their current form.  There must be some interest in the subscription market, otherwise Rhapsody and Napster 2.0 wouldn’t have any subscribers. The all-you-can-listen model certainly has appeal from a pricing standpoint on the business side, because you have lower credit card costs; from the consumer side, each listen feels like it has a marginal cost of zero and, in that way, perhaps the subscription format may feel more like P2P.  One of the major barriers has been that, unlike in the pay-per-download stores, you have to pay extra to move to a portable player.  Janus removes that barrier and should provide a boost to these services.  Of course, much also depends on how the record labels choose to license such copying.

Certainly, Janus doesn’t solve all the problems facing the online music stores.  But as far as short term growth, it will help. 

Filed by Derek Slater at 2:40 pm under General news
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The paper I was working on before my travels apparently did end up in the Speed Bumps Conference docs and on the Web, so I might as well link to it.  It explores what I call the Digital Media Store, the evolving means of selling music and movies through services like iTunes, Napster 2.0, and Movielink.  I explore the theory and practice of these systems, considering important variables for their success and failure, along with the effects of a Speed Bumps or Technological Lockdown Scenarios.  I would appreciate any and all comments; it is only a draft, very much a work in progress (btw, apologies for some of the typos, particularly in that first line, which should say “alternative models” – a couple of words got jumbled in transit to the speed bumps page).  Also, I should point out that this is merely one section of what will be a larger paper on digital media biz models – stay tuned.

Also, do check out all the resources listed at the Speed Bumps page, including the overview from Prof Nesson and Sarah Hsia

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Prof Felten had a series of great posts post-Speed Bumps Conference.  The first dichotomized speedbumps into two definitions; following that, Ernest suggested a slightly different separation. Let me explain and expand on Ernest’s suggestion, which is the way I have thought of speed bumps.

The larger category is actions and tools that, as Felten puts it, “[try] to make illegal acquisition of content (via P2P, say) less convenient than the legitimate alternative.”  To me, that’s just a general statement about “competing with free” – you make buying legit cheaper in terms of monetary and non-monetary costs.

As Ernest suggests, the speed bump approach is kind of a subset of that broad strategy. The speed bump approach is not about stopping all leakage onto P2P for a period of time.  Rather, it is about making illegal acquisition significantly less convenient and more costly for the initial release period.  It’s not that all people will be prevented from downloading over P2P; it’s that, to do so, they will have to wade through substantial obstructions for that period.  The speed bump scenario, as I conceive it, imagines that the obstructions’ substantiality and the period make a meaningful difference for the affected industries. (One can also imagine this scenario in both terms, as Nesson and Hsia do here.  I tend to think of only the latter as the scenario, because the former is really an extension of the status quo – using spoofing and DRM in an attempt to reduce P2P – rather than a new scenario).

Felten points out that DRM doesn’t seem a particularly good fit here.  Once the file gets onto P2P, the DRM has no effect.  But consider two other technologies typically associated with the speed bumps approach: spoofing and interdiction.

Spoofing’s effects can persist after the initial release period, as the spoof files still hang around the P2P directory.  However, in the initial release period, before legit files have spread far and wide over P2P, the spoof files are more likely to outnumber the legit ones.  Also, counterattacks are less likely to have been implemented effectively.  People are less likely to have identified spoof files and either manually removed them from shared folders or designated them as spoof via a peer-rating system.

By slowing the spread and availability of legit files, interdiction can create an inconvenience during the initial release period.  Interdiction’s impact can persist after the creation of one unencrypted copy, though it certainly degrades over time as legit copies spread and it becomes more costly to interdict more users.

When viewed with these technologies, DRM has a possible, but still uncertain, role.  By limiting the initial number of uploaders, it increases the ratio of spoof to legit files and decreases the costs of interdiction by reducing the number of users who must be interdicted.  Given the ease at which one can evade (through CD burning and reripping or the analog hole) or circumvent DRM, DRM may still have no impact.

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