DRM @ PTC

Remnants of DRM still remain in Apple’s DRM-free iTunes.

Apparently, the urge to embed private user information was just too great to overcome. Was this just a dirty trick to track songs? Surely they knew that it wouldn’t take long for a hacker to discover this. All kinds of privacy issues exist with embedding private information into music files. The same problems with figuring out exactly who shared what still exist. The only thing that can be proven is who bought the song.

This is very disappointing.

The DRM-free iTunes debuted today ..

“Our customers told us two things deterred them from buying digital,” Wragg said. “They weren’t 100 percent confident that the songs they’d purchase could play on their devices, and they wanted something closer to CD quality.”

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Last week Amazon.com announced the launch of a music service to compete with Apple’s iTunes Music Store. According to the announcement, Amazon will offer DRM free music from the EMI catalog that Apple will also sell from.

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Just got my Rolling Stone in the mail today (still got a little place left for “big music” in my heart). The subscription started from an anonymous benefactor in Christmas 2005. Thumbing through it I caught this on page 14. Check out the downloads counter (36,918 when I checked). They have a MySpace page with more band and tour information. Their tours are in the UK, so a concert is out. Their music is also a little too British whiny for me, but I bought the CD to give as a gift. Hey, infringement/DRM free music for people to enjoy. I wonder how many of the downloads will actually turn into sales …

Here is a review in the Wall Street Journal. Apparently, Warner dropped them last year because they “only” sold 35,000 albums. For some inexplicable reason, they are still interested in another major-label deal. These guys need some business classes …

Old regimes never die easily and revolution is never pretty.  These are axioms often forgotten in a purportedly kindler, gentler world.  Entrenched monarchs and pampered aristocracy were murdered and imprisoned as the Enlightenment swept through Europe courtesy of movable type.  Royalty just wasn’t able to adapt quickly enough to advances in the politics and technologies of control.  The more things change, the more they stay the same.

Indeed, in the battle between the RIAA and their customers, only emotional heads have been lost so far.  The inspiration for this post came from a Slashdot thread I came across.  After the usual bickering amongst Slashdotters for and against an array of file sharing issues, I came to an astonishing sub thread that delved into how best to live “under the radar” if the RIAA managed to win a substantial judgment against someone with no ability to satisfy it.

First up was a large plot of land and a used shipping container adapted for living space.  One could support oneself in limited fashion by selling secondhand items on Craigslist and Ebay and by selling plasma (once per week, if you keep healthy!).  If a shipping container is too pricey, a hay bale home or geodesic dome could work as alternatives.  A homeless man jumped in with a much cheaper alternative, living on the street with an initial investment of $400.  His main problem with being homeless is the boredom.  He considered the limited commerce offered by selling plasma and other things as a “hustle” beneath him, yet he “only asks other people for food” after X number of days without it.

The natural progression in the discussion, from RIAA issues to homelessness, reminded me of the callous disregard that aristocracies have for their subjects.  I suppose that homelessness would cut back your illegal downloading quite a bit as priorities shift to finding potable water and a place to sleep.  I have not heard of a case of homelessness brought about by RIAA antics, but how long will Americans sit idly by while lives are being destroyed by the love of music?

A different axiom is applicable.  Just as there are no completely new ideas, there are no completely new human conditions.  The staggering excess of the music industry is fueled by the same aristocratic bent that kept propping up the Ancien Regime just prior to the French Revolution.  The masses are expected to keep funding the trough this insatiable aristocracy feeds from.  They squeal when the trough runs low, callous to the cries from the masses that enough is enough.  This is revolution in progress, and no, it isn’t pretty.

History repeating.    

For Assignment 2, my essay was about promoting music via live performances in Second Life. I also argued that the issues surrounding music sharing would eventually self correct as generations that come of age never knowing a non-Internet world choose alternatives like Creative Commons. In response, Elizabeth and Steve wrote that they would like to see more detail on the business model. Now that our blog is up and running, I have a little time to explore a possible alternative using the open source model.

In open source software, much of the code is available as a free download. It is literally given away, so the money is not made in software sales. Companies have built their business models around hardware appliances, maintenance, and services that they can charge for. A good example is a firewall appliance or DNS server that uses embedded Linux, Apache, Bind or IPTables, that can be plugged in to a network and easily configured with a web front-end that the company builds. The company can sell the appliance and charge an annual fee to keep it patched and updated as needed.

In this vein, a company could design an MP3 player that will hold a number of songs. The company could research independent bands and labels that allow the artist to retain their rights to the songs that they compose and record. For commercial use, a licensing scheme must be negotiated.

For the math:

Say the MP3 player with a custom logo wholesales for $20 in bulk. At a negotiated royalty payment of $.25 per song, per player, 50,000 units sold would look like this:

MP3 Player 512mb $20
100 Songs @ .25 $25

Total Unit Cost $45

50000 Units Sold @ $59.99 $2 999,500
Cost of Goods Sold $2 250,000
Gross Profit $ 749,500

This player could also be offered in conjunction with a subscription service that refreshed the songs on the player for an additional monthly fee. You would have to move the current songs to another hard drive first. The gross profit of the unit will get eaten up by R&D and promotional costs, but the payout to musicians is still $1.2 million, or $12,500 per song (bands that go through Magnatune must split 50/50). A major label band that gets $.10 per song must sell 125,000 songs to make the same amount of money AFTER they are square with the label.

Marketing for this product could be done via Second Life. The bands could perform live at “festivals” or individually in SL venues. Objects linking to a web page for ordering could be widely distributed at the SL Magnatune location and around towns. Other avenues for promotion would be the artist’s web sites, college radio stations, etc. Cheaper models with a selection of fewer, royalty-free songs could be given away at real-life concerts as promotional items. Promotional versions could have a browser interface to provide more information on the full version and links to the bands’ web sites.

Would people buy it? That would take more market research than I can do in the allotted time, but marketed to the right audience, it might arouse interest in DRM-free, independent music. The value added is in a service that makes it easy to supply the consumer with “podsafe” songs that they can use without fear of lawsuits. By most standards, $.25 per song is a bargain, but the music buying public is quite fickle. The key to success for this type of product would lie in the sexiness of the player and the selection of music. In other words, to get this really cool MP3 player, you have to buy the music. That type of customization may drive the price past the point what the market would bear, but the “loss leader” business model works well for devices like printers and cell phones, where there is an ongoing cost for supplies or maintenance. Ultimately, the device may have to sell for the price of the songs.

The 1866 plot of Fyodor Dostoevsky’s novel, Crime and Punishment, that focuses on the mental anguish and moral dilemma of the impoverished student Romanovich Raskolnikov who kills a pawnbroker with a “noble” intention of ridding the world of evil while benefiting financially, may parallel well with many of the modern-day consumers who seek to circumvent copyright protection in the products they consume. I suspect that many who seek to copy a dvd and post it on the internet or share the music these days do so in order to express their dismay over what they would consider attrocious prices or some other aspect they disagree about. Given the current situation of significantly increased awareness of copyrights and a world where the RIAA sued many “innocent offenders”, many individuals are plagued with the feelings of guilt, remorse and a moral dilemma. To share or not to share — that is the question.

But then there are no easy answers to such dilemmas. An internet society where politics rule the technology to gain control of the riches, what are simple humans to do? Abide by the law — a law that serves the interests of the haves over the have-nots? Rebel against the disparity — “music is the gift of god and it should not be denied”? Share the happiness and joy with friends by sharing the songs? May be? Or NOT!

Good prevails in the society over the evil, so they say. So when a law is broken, punishment is not the only remedy, and those who punish may not have the last laugh. Those who recognize this come to terms that there is a delicate balance in a society, where the majority, it is believed, want to be good. Then, wouldn’t it make sense to have norms enforce the protection? Wouldn’t it be nice if a happy fan sent in that check to the musician? Would it not be great if the “benevolence” of the industry spurs the interests of the crowd? Ultimately, doesn’t the age-old wisdom say, “there is more satisfaction in pardon that punishment?”

As internet evolved, the need to create rich media websites increased exponentially. Websites began to be created increasingly with rich graphics, movies and sounds. A true enabler of this phenomenon was Adobe Systems — the company that brought products such as Photoshop, Acrobat (that made the pdf file format famous) and After Effects. However, as Adobe introduced these products to the market, the cost was way too high for the majority of the users — ranging from $400 and upwards. Given this huge difference in the price that companies such as Adobe charged from the price the customers were willing to pay for those products, an illegal market sprung up on the internet. This market was based on a very simple mechanism – break the only protection that these products carried – License keys/numbers.

Until a few years ago, license numbers for a vast variety of products were based on simple number generations schemes. Clever hackers could easily figure out the co-relation between these license keys and the products. Special software tools were written that could easily tackle more complex key generation schemes that included product types, owner names, version numbers, credit card digits, etc. Once someone could get their hands on a copy of the software, they could generate a new key. Thus, it became a easy source for many to make quick bucks by selling the software (albeit illegally) and packaging it with a new key. Websites such as Ebay and Amazon.com that created the concept of marketplace became the points from which such software got sold. During the initial years of Ebay and Amazon, many illegal copies were sold advertantly and inadvertantly to buyers. Needless to say, the software industry reacted quite sternly against Ebay and Amazon who promptly instituted a probe into such sellers. Some rogue sellers were apprehended while others wound-up their operations and disappeared.

Over the years, the proliferation of open source softwares prompted the realization within the software industry that customers would not be willing to pay abnormal prices for getting their hands on products that would help them with rich media. Photo editing, home movie making and website creation has become such common place that rich media creating software was essentially commoditized. Also, most of the industry leading software companies started creating more common consumer oriented software products at a substantially lower price point. For e.g., Adobe created Photoshop Elements, Premier Elements, etc giving the most commonly used functions from its industry leading Photoshop, Premier, etc. and Alias released its personal edition of Maya for free. This is the kind of position that industry and consumers like a lot.

In fact, when consumers get a product that holds a reasonable price tag, they are willing to pay for it rather than find ways to circumvent the copyrights in order to get their most desired products. This has been proven for a fact — for almost every item that can be copied such as software, music or movies — that consumers are ready to abide and play by the rules for the right price. Ultimately, its a win-win for all when the most appropriate price can be determined for any product.

I have been very careful to point out the difference between anti-DRM and illegal file sharing. Not so surprisingly, the RIAA sees it differently. Apparently, the DMCA just doesn’t quite go far enough.
The Intellectual Property Protection Act of 2007 would “stiffen penalties for violating anti-circumvention provisions of the Digital Millennium Copyright Act, and other copyright crimes”. This bill also introduces two completely new federal crimes, “attempted copyright infringement” and “distribution” of copyrighted materials. I suppose next up is “trafficking” and “paraphernalia”, making it a federal crime to have more than one 50-pack of CD-Rs at a time. We could sign for them like Sudafed.

Since books, charts, and maps were protected under the first federal copyright law enacted in the U.S. in 1709 copyright owners have sought to protect their assets through legal means. Throughout the nearly three hundred years that these law have been in effect the overall concept of copyright law has been to strike a balance between protecting the rights of authors, artists, and copyright owners and, according to the Constitution, to “promote the Progress of Science and useful Arts.” That balance had largely been maintained until the arrival of digital technology, which, unlike the analog technology that preceded it, could make copies in large quantity, in faster-than-real-time, and with no degradation in quality. The response to these features of digital technology was to create a system of digital rights management and other technological deterrents where content owners could exert control over media usage and then to create and enact the Digital Millennium Copyright Act, which, among other restrictions, criminalizes DRM circumvention and creates safe harbor provisions for limiting OSP liability. It is the goal of this paper to present a balanced argument in support of copyright law exclusive of the DMCA and to demonstrate some of the ways that the DMCA and other attempts to amend copyright law can be viewed as anti-competitive, anti-consumer, and undermining of the doctrine of “fair use.”

CONTINUE READING MY FINAL PROJECT