Central Planning Didn't Work In Russia And It Doesn't Work On Your Set-Top Box

from the competition dept

Here's a roundup of movie-download services -- Apple TV, Vudu, Movielink, Unbox -- all of which have underperformed expectations. This won't come as a surprise to Techdirt readers, as we've panned these products before. And the reasons they've flopped are frankly pretty obvious: high prices, restrictive DRM, and no easy way to move videos to the device of your choice. I won't re-hash those arguments, but I think it's interesting to compare the anemic development of the digital video marketplace with the rapid development of digital audio a decade ago. The fundamental difference is that Hollywood kept a tight grip on the digital video market, while the DMCA didn't come along soon enough to give the music industry control over digital music. They tried to outlaw the MP3 player, but because there was no DRM involved, they lost in court, and the result was the flowering of innovation that led to the iPod and other MP3-based devices.

There's still something of a mystery here, though: most video download services are not just bad but spectacularly bad. For example, Hollywood sunk $100 million into Movielink before giving up and selling the whole mess to BlockBuster for $20 million. Even assuming that Hollywood wants to limit how its content is used, it's obviously not in their interests to make things this crippled. So what's going on? I think a key insight is offered by an excellent paper that Columbia law professor Tim Wu wrote a couple of years ago called "Intellectual Property, Innovation, and Decentralized Decisions." Wu's basic insight is that too much centralization of control over any one part of the economy can lead to poor decision-making. In an extreme case, such as Soviet Russia, a government can try to run a whole economy by central planning. But the same principle applies on smaller scales. The modern cell phone industry, with half a dozen competitors, is evolving a lot more rapidly than the old Ma Bell monopoly used to. And on the other hand, there's a lot more innovation going on in the open Internet than locked-down networks of cell phone companies. (Apple doesn't seem about to change the walled garden wireless model.)

The same principle applies to the digital video marketplace. Right now, Hollywood has veto power over innovations in the video space. They've made some dumb mistakes, like charging too much and mandating the use of DRM. Unfortunately, thanks to the DMCA, competition hasn't had a chance to kick in. People can't route around Hollywood by using DVD-ripping software the way they routed around the record labels in the 1990s using CD rippers. So if somebody has a great idea for a digital video product, they have to go begging to Hollywood before they can implement it. But Hollywood isn't run by technologists, so they make bad decisions. And because nobody else is allowed to enter the market without their permission, the whole world suffers for it.

Filed Under: central planning, drm, movie downloads

Windows Vista Copy Protection Cracked

from the yeah-we're-shocked-too dept

More than a year after Windows Vista was introduced, hackers have finally developed a clean crack of Windows Vista. There have been a variety of workarounds for Vista's copy protection before now, but this is the first time someone has figured out a way to install a cracked version that would pass all of Microsoft's various anti-piracy checks. It seems that certain OEMs found the activation process too burdensome and persuaded Microsoft to provide them with a way to bypass it in order to save their own customers the hassle. Hackers figured out how to activate this special "no activation" mode on cracked copies of Vista. I think this is one of the biggest reasons copy protection schemes fail: they almost always creates serious inconveniences for customers, and irritating customers hurts the bottom line. Companies may talk a tough line about fighting piracy, but when push comes to shove, they're not willing to cut off their own nose to spite their face by insisting on enforcing a copy protection scheme that would put their product at a disadvantage in the marketplace.

Of course, the obvious question is why companies implement copy protection schemes in the first place if they invariably wind up compromising them. The reason, I think, is that these trade-offs are almost never made explicit to corporate decision makers ahead of time. When the copy protection plan is being pitched to management, its developers only talk about how great it will work. Only later, once it's actually being implemented, do people start noticing that it will also cause a lot of problems. But by that time, the copy protection system is too far along the development process to be canned, so instead exceptions are added. These exceptions prevent the copy protection system from crippling the product, but they also undermine its effectiveness as an anti-piracy measure. So customers have to deal with annoying restrictions and the product still gets pirated.

Update: Uh oh! As some readers are pointing out, it looks like this story is actually from March 4, 2007. Somebody submitted the story to Slashdot, and I foolishly linked to it without double-checking the date. My apologies for the oversight. In retrospect, I should have been more suspicious, because if Vista really went more than a year without a crack, that would probably have set some kind of record.

Filed Under: drm, windows vista

DRM-Free Doesn't Mean Copyright-Free

from the everybody's-doing-it dept

The death of audio DRM continues apace, as major book publishers begin following the lead of record labels and phasing out copy protection on audio versions of their books. It seems they're learning what we (and a lot of other folks) have been saying for years: DRM doesn't prevent piracy. All it does is annoy customers and limit the value of your products. One thing the New York Times gets wrong in the above story is the idea that these publishers are "abandoning copyright protections." The Guardian made a similar error, saying that Penguin's audiobooks would be "copyright-free." But of course, DRM isn't the same as copyright. Infringing copyright is just as illegal with DRM-free audio files as it is with copy protected files. This point may actually become a major headache for content companies. They've spent the last decade trying to conflate DRM with copyright. This was always misleading, but a lot of people bought it. Now that they're changing their minds and abandoning DRM, they're going to have to spend a lot of time explaining that DRM-free music is still copyrighted, and pirating it is still illegal.

The other interesting question is when content producers in other content industries will start paying attention to the no-DRM trend in the audio market and move towards phasing out DRM for themselves too. We're rapidly approaching the point where almost every major audio firm offers their content in downloadable, DRM-free formats. (Of course, they've always sold content in the DRM-free CD format) But at the same time, the Kindle was launched just last year with DRM restrictions, and Hollywood has stubbornly clung to DRM for its high-definition video products, despite the fact that that hasn't worked either. How bad do things have to get before these guys start paying attention?

Filed Under: audiobooks, copyright, drm

DRM Prevents AppleTV From Working On Some Hardware

from the thank-you,-DRM dept

Kevin Stapp writes "The infinite wisdom of the entertainment industry has decided to place DRM on AppleTV downloads that can make the content incompatible with many hardware configurations. If your hardware doesn't support HDCP you can't watch content you legitimately rented via AppleTV. Now that's a great way to treat a PAYING customer." This seems to happen all too frequently these days. DRM isn't being used to prevent copying, but it sure does make life a lot more difficult for users. Whatever happened to Steve Jobs being against DRM? Oh, right, that was only for music, not video.

Filed Under: apple tv, drm
Companies: apple

Why Is Adobe Trying To Add DRM To Flash?

from the anti-competitive-reasons dept

The EFF's Deeplinks blog has an excellent discussion about Adobe's plans to add DRM to Flash. Flash has become something of a defacto standard online, and it's partly the lack of included DRM that allowed this to happen, encouraging creative uses, such as mashups. However, with the latest version of Flash, apparently Adobe wants to include DRM. As the EFF notes, this clearly is not to stop copyright infringements -- as no DRM has ever stopped copyright infringement. However, thanks to the DMCA's anti-circumvention clause, it will make it possible for Adobe to block out competitors from making tools and players to work on Flash, by failing to license that DRM to them as well. This was not the purpose of the DMCA at all.

Filed Under: competition, drm, flash
Companies: adobe

Yahoo Finally Dumps The Music Service It Never Really Liked

from the why-do-it-in-the-first-place dept

A few years back when Yahoo launched its music service, it was pretty clearly designed to fail. Yet, Yahoo kept it going for a while, despite the fact that the executives who ran the program clearly were not fans of the company's own offerings. Thus, it should come as no surprise that Yahoo has simply moved all of its subscribers over to RealNetworks' Rhapsody service, which is having its own problems adjusting to a changing music market place. One could hope that Yahoo's ditching of the music service is a sign that it's actually going to do something more interesting, but given this little merger the company may be involved in, it may be difficult to do very much that's unique or innovative.

Filed Under: drm, music, subscriptions
Companies: realnetworks, yahoo

Yet Another Report Of Free Label Music That Isn't

from the details,-details dept

Last week, we noted that the press couldn't stop talking about Last.fm's supposed effort to offer "free" music, when the details showed it was a lot less than the press made it out to be. You'd think that maybe they would be more careful the next time around. However, when you combine the words "free" and "music" it appears that some folks in the press just can't help themselves. Thus, when a company named Qtrax announced "free" file sharing, with the backing of all four major labels, plus iPod compatibility, the press ran with it. The Associated Press and Reuters both ran with it... though, at least the Associated Press has quickly started backtracking after the various record labels all started denying any kind of deal with Qtrax. They admit they're talking, but no deals have been signed -- meaning that Qtrax jumped the gun, as did the reporters who ran with the announcement. Even if the labels do come around on this one, it's a plan that will go nowhere fast. It involves crippling DRM and annoying advertising that won't even be close to effective. This is a non-story turned into a story by the use of two words: "free" and "music."

Filed Under: drm, free, free music, ipods, record labels
Companies: qtrax

How Many Separate Video Players Do I Really Need?

from the ask-Mr.-Owl dept

Downloading TV shows and movies is clearly becoming a competitive market as Netflix and Apple (as well as many others) start offering video on demand services. But with each new offering, it seems like viewers need a separate and proprietary piece of video playing software which is obviously aimed at enhancing the viewing experience for the audience. The DRM and the crazy number of different time limitations for how long you can watch you downloaded shows are really just bonus features. Imagine the glorious future of watching a la carte videos where every distribution channel has its own player and set of rules for how you can consume the content. Future DVRs will incorporate access control systems that would rival the most complex enterprise content management systems of today. I can't wait to click through dozens of end-user agreements just to watch my favorite time-shifted shows! Progress is great.

While my vision of the future for watching videos in the US will hopefully be averted due to competition with BitTorrent, the EU is facing a tangled web of content regulation right now. Each of the 27 members of the European Union currently has its own right to agree to content distribution deals with video vendors, creating a patchwork of regulatory requirements that will likely hinder the development of pan-European media services. The New York Times notes that this situation will likely benefit the IP lawyers in Europe over the next few years, as service providers and content owners battle over each country's legal requirements. While the European Commission is trying to create a more consumer-friendly set of regulations that every nation in the EU can agree to, it seems somewhat unlikely to happen in a timely fashion. The irony is that many of these video on demand services are aimed at giving consumers a legal alternative to piracy, but the red tape and legal disputes will be likely to point consumers to pirating until the dust has settled.

Filed Under: downloads, drm, eu, time-shifting, video
Companies: apple, hbo, netflix, xbox

The Next Generation Of Anti-Piracy Legislation Goes To School

from the beware-the-precedents-you-set dept

As discussed a few months ago by Tom Lee, misguided anti-piracy requirements for universities found their way into the College Opportunity and Affordability Act of 2007. Mostly, the nearly 800-page bill rehashes existing legislation regarding federal financial aid. However, a section titled "Campus-based Digital Theft Prevention" provides an unfortunate glimpse at what could be the new wave of legislation related to network filtering of copyrighted material inside and outside the academic domain, that’s waiting in the wings.

The bill, in its current form, outlines that eligible institutions "develop a plan for offering alternatives to illegal downloading or peer-to-peer distribution of intellectual property as well as a plan to explore technology-based deterrents to prevent such illegal activity." While advocates emphasize that the only requirement is to plan, the wording leaves the door to state mandated copyright protections in exchange for federal funding wide open... a truly backwards and illogical arrangement. In this case, congressional requirements will most likely take the form of industry-sanctioned DRM initiatives, in addition to network detection/filtering techniques laden with privacy risks and prone to the inevitable backlash of technological countermeasures.

The link between failing to draft plans and eligibility for at least some student financial aid programs is most troubling because it does not address the inherently complex nature of piracy and copyright infringement in the 21^st century. Instead it seeks to place the onus on university administrators, who are already in the midst of coming to grips with effective digital threat prevention. Introducing this type of government intervention does nothing to stimulate the desperately needed innovative solutions for the issues at hand. Also, from a policy perspective, the networks on campuses across the country differ mainly in scale from those governed by the likes of the Verizon and Comcast, meaning that a disconcerting and inappropriate model for anti-piracy legislative action is being shaped.

In the same way that universities provide an environment where some of the leading minds of the tomorrow’s society are shaped, specious legislative action that effects their rights as downloaders will impact their expectations of how privacy and civil liberties should be transposed to an increasingly digital world. It shouldn’t be left for the conspiracy theorists to suggest that this will begin the prying open of a Pandora’s Box of well-meaning public policy that falls short due to short-sighted intentions and narrow perspectives on the matters at hand.

Yet, in spite of these frightening possibilities combined with the fact that electronic piracy is fast on its way to becoming a hot-button issue, Congress doesn't appear to have any clue about the inappropriateness of these measures. That means, unfortunately, that it is unlikely they will support any sustained effort to remove the aberrant mandate. There are options that don't resemble placing economic sanctions on institutions of higher learning -- but it doesn't appear Congress is interested in pursuing them any time soon.

Filed Under: anti-piracy, drm, unintended consequences, univerisities

Digital Watermarks Are Not The Answer

from the the-next-rabbit-hole dept

It was quite predictable that as the recording industry finally realized that DRM was a bad idea that it would move on to digital watermarking. The idea sounds appealing. It doesn't have the feature that people hate about DRM: preventing you from doing what you want with the music you've purchased -- but it does have a number of other downsides. First, it tends to degrade the quality of the audio. Second, it's often relatively easy to remove the watermark, making it effectively useless. Third, if watermarks are used to link a specific file to a specific user (which the industry insists it isn't doing... yet), it suddenly becomes a huge liability just to have those music files. Imagine if you lose your iPod full of watermarked tracks, and all of those tracks find their way onto file sharing sites? Even more importantly, the whole concept of watermarking is counterproductive to what music files should be about. If the industry were smart and understood the basic economics of what was happening, they'd want people to be sharing music. They should want people to be their biggest (free!) promoters of music. They should want people to be spreading the music of their musicians as a way to get the word out. The whole concept of watermarking goes against that very idea. It's more backwards thinking from an industry that is more focused on protecting an old way of doing business, rather than recognizing the opportunities of a new way of doing business.

Filed Under: copy protection, drm, recording industry, riaa, tracking, watermarks
Companies: riaa