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Browsing posts in: File-sharing

Music labels infringing musician’s copyrights, provide convenient list

Music labels (and copyright maximists) often claim they need copyright to benefit the musicians, but their actions more often contradict that. Unlike the U.S., Canada replaced its compulsory license system (where anyone can pay a set amount to use a song) with a permissions based system meaning the copyright holder has to give permission for each use of their music.  Record labels have reportedly been releasing musicians’ music, such as on compilation discs, without permission nor paying any royalties tracing back to the late 1980s.  The labels have even kept a “pending list” of all the musicians they have not paid.  The list includes more than 300,000 songs from major names like Bruce Springsteen and Beyonce.  Jazz musician Chet Baker is leading a lawsuit against the labels claiming at least $50 million is owed to him.

The labels could face liability of $6 billion using the same infringement fines the label seeks from file-sharers ($20,000 per infringement multiplied by 300,000 songs).

David Basskin, the President and CEO of the Canadian Musical Reproduction Rights Agency Ltd., said in an affidavit that “the record labels have devoted insufficient resources to identifying and paying the owners of musical works on the Pending Lists” adding it would be “an unproductive use of their time.”

There are several other examples of record labels and collection agencies collecting money that never makes it to musicians from creative book-keeping, multiplatinum albums make no money, violating contracts to release music without permission, or just holding onto money because they can.

The reason record labels are so desperate to save CD sales is because that’s their main source of income – and the revenue only works when record labels have full control over distribution. When they have full control, they can charge whatever they want, like $20 for 12 songs,  and treat musicians as they always have – badly. Technology has dropped the cost of making and distribution music so cheap that musicians can control their own destinies – they don’t need labels anymore. Labels served a valuable purpose when there was no alternative. They provided the expensive recording, distribution, and marketing required to make a band successful.

With a computer and a website, almost anyone can make a go at being a musician. This means more music – more people making money from their music (whether through merchandise, live performances, or other inventive business models) and more music to listen to and enjoy.  The labels have lost control over the marketplace and this is a good thing as it will allow the marketplace to grow. Don’t believe me? Look at the U.K.

Evidence mounting that file-sharing and movies can live happily together

…but movie companies certainly don’t see that. Paramount Pictures released its study of the five million IP addresses it tracked who downloaded camcorded copies of Star Trek.  Writing to the FCC, Paramount says:

Just five years ago, one had to be computer literate and exceedingly patient to pirate movies. Today, literally anyone with an internet connection can do it. Clunky websites are being replaced by legitimate looking and legitimate feeling pirate movie websites, a perception enhanced by the presence of premium advertisers and subscription fees processed by major financial institutions.

So after years of suing and spending millions in lobbying, spying, and prevention, Paramount agrees it is easier than ever to download movies. Downloading movies “has advanced from geek to sleek” they say.

I interpret this as a sign that the movie companies’ campaign against piracy has not worked. It is easier than ever to download any movie, song, or game you want and it will only get faster and easier. More people are doing it and aren’t embarrassed by it. For all the propaganda (see last Sunday’s 60 minutes), file-sharing is what the market wants.

Paramount, of course, sees the opposite.  The spreading of file-sharing means movie companies need more laws to stop file-sharing, while never showing how these laws, assuming they worked (which they won’t), would encourage customers to go back to their former purchasing practices.

That’s why Big Champagne, a company that tracks online piracy, is urging movie companies to rethink their piracy strategies, claiming their own practices are encouraging file-sharing, especially in European countries where they might wait weeks or months for a TV show or movie to air. CEO Eric Garland tells CNET:

In the digital world, we don’t want to wait three months, six months. We’re just not accepting that anymore…we want it all, we want it right now and even Mom and Pa Kettle are getting to the point where they say if it’s not on, let’s just fire up the computer and watch it. If they want me to wait six months, I’ve got other options. And people don’t really have a conscious [sic] or qualms about that.

So we know waiting hurts (why wait when you don’t have to). But instead of searching for alternatives, movie companies want more windows, or at least maintain the ones they have. This goes against what customers are demanding. Instead of offering customers a compelling product, movie companies just want the government to pass laws supporting their obsolete business models.

For all the increases in file-sharing, movie production and revenue has risen (ignore the blatant lies in the aformentioned 60 Minutes segment), from 567 movies released in 2004 to 1177 movies scheduled for release this year.  Total revenue rose by about $300 million from 2004-2008 (this year hasn’t ended, and for reference 1037 movies came out in 2008).  So more movies, more money. I wish file-sharing would hurt my industry the same way.

Researchers verify you can’t stop file-sharing

A paper from New York University researchers analyzes the methods used by the content industry to annoy and stop file-sharing on BitTorrent networks.  They found the practices of MediaDefender and other organizations presented no more than a nuisance to downloaders despite costing the content industry millions of dollars.

Prithula Dhungel, Di Wub and Keith Ross reviewed two specific methods use to slow down BitTorrent downloads. The first called “piece attack” involves trying to upload as many failed connections or hash fails as possible. Second, there is the “connection attack” where TCP connections are blocked preventing downloaders from accessing the actual content.  The researchers found these methods did slow download speeds, but not enough to deter downloading. Additionally, blocklists which can be easily found online increased speeds by 30-35 percent.  BitTorrent client uTorrent only encountered hostile connections 2 percent of the time while Azureus had only 18 percent.

Emails from a few years ago estimate that music companies pay up to $4,000 for each month of MediaDefender protecting one album.  As many already suspected, this money is likely being flushed down the digital drain.  Downloaders are not being deterred and certainly not being encouraged to buy content in another way.  The content industry is spending massive sums of money to fight against consumers preferred method of distribution. The ethics of file-sharing are not the point – basic economics, as always, is. Consumers by the millions are using file-sharing networks to find the content they want and share that content with other people. This is a good thing that should be embraced, not fought.  As we’ve seen, embracing new technology increases the size of your market and the money you can make, not decreases.

MediaDefender uses P2P for porn promotion

You read that headline right. TorrentFreak reveals MediaDefender, the infamous anti-piracy firm working on behalf of Big Content, has been moonlighting as a porn pusher.

To disrupt online P2P networks, MediaDefender often floods searches with false files, many of which redirect users to these porn sites.  The redirects have been extremely effective, converting 1 in 2000 LimeWire users.  MediaDefender’s Ben Grodsky wrote in an email:

One of the theories I’ve had about why the LimeWire redirects sell so many porn subscriptions is because one basically can’t get porn on old versions of LimeWire because our popups and spoofs overwhelm the user.

MediaDefender makes $4,000 to protect an album, $2,000 for a single song, and almost a million dollars for a movie. Basically, MediaDefender is paid by these media companies to promote its other efforts.  That’s a pretty healthy business model, as long as morals aren’t an issue.

Seriously, MediaDefender is doing more to show P2P is a viable business model, something Big Content isn’t looking to admit.  Their tactics are mostly spam and obviously frustrate users, but work. Just think if a caring, responsible company used P2P for promotion, helping users find the content they were looking for or selling related scarce goods for the content users do find.

International viewers love TV too

Prison Break attracted more than six million TV viewers for its season premiere. Another two million downloaded the episode over the next week even though the episode was available for free on Fox.com.

Fox believes most of those downloads came from Europe where Prison Break isn’t available on TV or online.  TorrentFreak found only 4 percent of downloads came from the U.S.

TorrentFreak concludes availability is a key factor when people download from BitTorrent.  Price is not the only consideration.  Joss Whedon’s recent Dr. Horrible web series was streamed free on the web but became a top seller on iTunes for a price because people wanted a convenient, downloadable version to watch when and where they wanted.

This is why media companies should view file-sharing networks as competitors feeding a market need.  Other countries want to watch popular TV shows, but networks delay them for weeks if not months. Even websites Fox.com and Hulu only allow North American viewers, sending millions of international users to file-sharing networks.

The market wants easily available, convenient TV shows, movies, and music.  They keep showing this with their time and dollars. Media companies should pay attention to what the market wants.

Universities become propaganda machines for content industry

Congress has passed the Higher Education Act with special provisions requiring universities to push the content industry’s agenda on its students.  In order to get funding for students, universities will have to advertise commercial downloading services to students and educate them on a one-sided view of file-sharing and piracy.

The controversial provisions were added partly on the basis of the MPAA’s admittedly flawed research that claimed 44 percent of piracy occurred on college campuses – the number the MPAA later admitted was 15 percent.

So why are universities suddenly mouthpieces for a specific industry?  Even with flawed research, what makes universities responsible for the content industry’s obsolete business models.  The fact that these companies can’t track all the file-sharing makes me wonder how universities are expected to do better? Some artists want their content shared, others don’t, so leaving filtering up to a third parties will lead to overzealous blocking and can also affect educational uses for file-sharing tools.

Universities and consumer groups were able to block this bill last year when the MPAA included requiring filtering technology in its wishlist. William Patry points out that the content industry likely postponed filtering technology – doing it all at once caused too much backlash.

What concerns me is the silence among academic, from administrations and students.  College campus are the front line in the content industry’s Save Our Obsolete Business Model campaign simply because it’s easy to pick on students. There’s a reason the RIAA avoids suing students at Harvard.  Unfortunately, most universities are letting a lone industry and the government turn places of education into propaganda mouthpieces with a rare few standing up for their student’s rights.  Regardless of your position on file-sharing, universities should not be responsible for doing what the content industry already can’t do itself.

And universities need to stand up for themselves and student’s rights. What better way to educate than to lead by example.

All the world’s problems are solved – only piracy remains

The upcoming G8 summit has many important issues to discuss – climate change, world poverty, and file-sharing. That’s about it. Everything else is fixed.

On topic for the G8 is the secret (yes, secret) Anti-Counterfeiting Trade Agreement (ACTA) that only became public knowledge after details were posted on WikiLeaks.  The ACTA is a new treaty being written completely in secret for the purpose of restricting international piracy, allegedly allowing border security to check your iPod for illegal downloads, bring criminal charges against file-sharers, and require ISPs to police their networks.  While the public and consumer groups have not been privy to the treaty negotiations, a RIAA got a chance to submit its wishlist.

Aside from the improprieties of privately writing legislation, why is the G8 taking the time to prop up one industry’s unwillingness to adapt to the internet.  As I’ve written before, the entertainment industry does not have a right to revenue.  It’s their job to find business models that work, not the government’s.

The entertainment industry has pushed many copyright requirements into trade agreements with other countries (often falsely referred to as free trade).  The argument is these laws are needed to encourage innovation and content creation when in reality, these laws only help current copyright holders, hampering development in other countries who now have to spend money policing their citizens.

While several countries around the world waste time spoon feeding copyright holders, I’d have hoped the G8 wanted to at least pretend it cared about helping solve the world’s important crisis, of which their are many. It’s even listed first on the official website, “protection of intellectual property rights.” Piracy is not a world issue, even if the revenue losses the entertainment industry makes up were true.  That’s because it’s not the government’s job make you money – that’s your job through innovation and competition.  The G8 should try dealing with the food crisis, climate control, oil prices, genocide, poverty, human rights, and terrorism to name a few.  Of course, the U.S. attorney general says piracy funds terrorism.  Yeah, that’s convincing.

[Via CustomPC]

Treating customers like criminals the way to save PC gaming

For the doomsaying that PC gaming is in it last throes, game publishers keep releasing games. Several publishers including Infinity Ward and Crytek blame piracy for low sales of their PC games, Call of Duty 4 and Crysis respectively. Thus publishers are packing their games with more and more restrictive and complex DRM, a surefire sales pitch to increase sales.

mass_effect_headshot Electronic Arts released a PC-port of Mass Effect last month and users are already complaining they are being locked out of the game. The company restricts the game to only be installed three times and uninstalling it doesn’t reinstate an install. This is a step up from the proposed DRM which would have rechecked the game’s serial number every 10 days, requiring an internet connection to play a game that doesn’t require an internet connection. After the internet backlash, EA dropped the 10-day check, but made sure Mass Effect was still to difficult to be worth purchasing.

The upcoming game Spore is likely to have similar DRM.

The challenge for PC game publishers is not piracy, because pirates will pirate games. Fighting these pirates becomes an arms war of technology that the pirates constantly win. Publishers waste their time and money fighting them, and alienating paying customers at the same time.

Stardock takes a different approach. Their games contain no DRM and don’t require keeping the CD in the drive to play. Users with valid serial numbers get regular updates with rich lists of new features. Obviously pirates get their hands on Stardock’s games, but the publisher makes a significant profit with a loyal fan base and, shockingly, not spending so much money.

Brad Wardell, founder of Stardock writes:

Anyone who keeps track of how many PCs the “Gamer PC” vendors sell each year could tell you that it’s insane to develop a game explicitly for hard core gamers. Insane. I think people would be shocked to find out how few hard core gamers there really are out there. This data is available. So why are companies making games that require them to sell to 15% of a given market to be profitable? If you need to sell 500,000 of your game to break even and your game requires Pixel Shader 3 to not look like crap or play like crap, do you you really think that there are 50 MILLION PC users with Pixel Shader 3 capable machines who a) play games and b) will actually buy your game if a pirated version is available?

He goes on to explain why Stardock is successful without copy-protection.

When you develop for a market, you don’t go by the user base. You go by the potential customer base. That’s what most software companies do. They base what they want to create on the size of the market they’re developing for. But not PC game developers.

PC game developers seem to focus more on the “cool” factor. What game can they make that will get them glory with the game magazines and gaming websites and hard core gamers? These days, it seems like game developers want to be like rock stars more than businessmen. I’ve never considered myself a real game developer. I’m a gamer who happens to know how to code and also happens to be reasonably good at business.

Stardock games, like “Galactic Civilizations II sold 300,000 copies making 8 digits in revenue on a budget of less than $1 million” according to Wardell. Sins of a Solar Empire was the best-selling PC game of February, ahead of Call of Duty 4 and a World of Warcraft expansion.

Stardock is not praying for people to actually buy their games. They cater to a large enough market, spend an appropriate amount to make the game, and provide an on-going service to encourage people to pay for the game rather than pirate it. People pirate Stardock games, just like they’re pirating EA’s DRM-filled Mass Effect. But Stardock is making huge profits and not pissing off its paying customers. Revolutionary.

Piracy versus business: How both can win

Media and software companies release reports that piracy costs them billions of dollars, destroying their business, funding terrorism, or hurting poor farmers. These companies lobby governments to pass laws, sue fans in court, or ask people to spy on others in order to prop up business models that are becoming obsolete. Companies should stop fighting piracy and treat it like any competitor – by competing and out innovating file-sharing services to provide a better value allowing everyone to make more money.

Matt Mason promotes this in his book, The Pirate’s Dilemma, calling piracy a sign of innovation as pirates experiment to make processes more efficient.

Some of America’s greatest innovators were thought of as pirates. When Thomas Edison invented the phonographic record player, musicians branded him a pirate out to steal their work and destroy the live music business, until a system was established so everyone could be paid royalties. Edison, in turn, went on to invent filmmaking, and demanded a licensing fee from those making movies with his technology. This caused a band of filmmaking pirates, including a man named William, to flee New York for the then still wild West, where they thrived, unlicensed, until Edison’s patents expired. These pirates continue to operate there, albeit legally now, in the town they founded: Hollywood. William’s last name? Fox.

New technology has repeatedly challenged media companies, from Edison’s phonograph to television to cassette tapes. After lawsuits attempted to quash the innovation, media companies embraced the new technology and found new revenue streams, making more money as a result. The home video market Hollywood so desperately defends now would never have existed had Universal and Disney’s lawsuit against Betamax succeeded. Instead of suing file-sharing networks, media companies need to embrace the new technology as a new way to make money.

The current state of media and software is quite good. Media companies are making more money every year. Even the music industry is making more music while more people are listening to music. The recording industry is plummeting at a rate so fast piracy cannot be the sole factor, as studies have shown.

But piracy has become an obsession for media and software companies, hurting themselves and their paying customers with DRM and restrictive policies that limit the value of their products. Microsoft, Google, and Major League Baseball have all discontinued DRM serviced, meaning people who legally paid for goods no longer get to use them while pirates continue to download DRM-free goods for nothing.

Piracy offers a compelling alternative. Piracy offers unlimited free downloads of an almost complete collection of every movie, song, TV show, book, or game ever made using a variety of easy to use programs. Pirated content has no DRM, meaning you can put your music and movies on every computer and portable device you own. On the down side, pirated content is has unreliable quality and inconsistent download speeds, but since its free, these are minor negatives.

Why should someone pay for a service with less services?

Media and software companies need to recognize piracy is not going away – it’s a competitor. No matter how many lawsuits the RIAA, MPAA, and BSA file, piracy grows. These lawsuits increase publicity for many sites and services, working against the lawsuit’s purpose – Pirate Bay, the leading BitTorrent tracker, is now one of the 100 most trafficked websites thanks to publicity from these lawsuits. And for every file-sharing service closed down, dozens more pop up. File-sharing is too useful and thus valuable.

To compete, media and software companies will need radical changes to their business models. Techdirt’s Mike Masnick constantly refers to leveraging infinite goods to sell scarce goods.

In a competitive market, the price of a good is always going to get pushed towards its marginal cost. That actually makes a lot of sense. As competition continues, it puts pressure on profits, but producers aren’t willing (or can’t for very long) keep selling goods at a direct loss. Sunk (or fixed) costs don’t matter, because they’ve already been paid — so everything gets pushed to marginal cost.

Movies, music, and software have high upfront costs but negligible reproduction costs – it’s as simple as copy and pasting a file.

This means leveraging infinite goods to sell scarce goods, like concert tickets, collectable merchandise, or advertising (people’s time and attention is very limited). $20 for DVDs and CDs worked under the old, obsolete business model. The new media economy requires new business models that offer more value to consumers. Plastic discs don’t offer $20 of value anymore, meaning new price models and revenue expectations need to be developed. Just because the recording industry used to be making $10 billion a year doesn’t mean is deserves to always $10 billion. As Masnick points out, should the automobile industry be blamed for putting horse-drawn carriages out of business? The industry has to innovate and adapt to market forces to continue making that money. That’s how capitalism works.

Several progressive artists and developers are experimenting with new business models. Radiohead’s pay-your-own price for their new album was a good start. Trent Reznor of Nine Inch Nails earned $1.6 million in one week selling special editions of his new CD, a CD that you could also download for free. Indie record label Fueled by Ramen used viral marketing to build valuable brands around its bands rather than relying on disc sales. The potential for rewarding business models exists, but will require risk and experimentation and an understanding of the evolving marketplace. Media and software companies need to recognize what their customers want and give it to them. Suing isn’t the answer. Embracing is. And that’s how both piracy and business can win.

Marvel Comics learning the lessons of digital media

LITG pointed me to a program that allows you to download comic books from Marvel’s digital comic service.  Almost every streaming service on the web from YouTube to Last.Fm have been hacked to allow users to easily download media in convenient and portable formats.  LITG says after they contacted Marvel about the software, Marvel DCU was changed to render the software useless.  The downloader was quickly updated and works again.

Marvel’s digital comics, as I wrote about last year, are a good start providing a small but unlimited amount of comics for a monthly fee.  Aside from the sparse selection, Marvel failed to include a download option to let users put comics on their hard drives or portable devices, which is one of the major attractions of pirated comics.

Marvel continues to learn hard lessons about file-sharing, from suing torrent websites to now fighting a ripping tool.  Just as fast as Marvel updates their website, the developer updates his software.  If Marvel updates its site again, it’ll start am arms race that costs them time and resources, but just gives this developer more publicity.  The developer is giving out his software for free; he can stop anytime. 

As Sony, Apple, and every software company can attest, fighting pirates is a full-time job.  For some bizarre reason, these companies are willing to waste resources just to fight these developers rather than embrace them.  Marvel could license this downloader for a fraction of the cost is would have taken to develop themselves, maybe throw an ad on it, and give it out so people can get more value for Marvel’s digital service.  It would inspire more people to join.  As long as Marvel regularly updates the digital collection, subscribers will have a reason to keep paying the fees. 

Marvel shouldn’t worry about downloaders sharing comics they download: people already scan every new comic on the day of release in higher quality than Marvel provides.  So Marvel already has competition that still wins with every feature: greater selection, better quality, and free.  Making an unstable service with small selection and DRM isn’t going to convert anyone.