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ACTA fully leaked; USTR now wants to release it

A few weeks ago, the entire draft of the ACTA leaked with some scary proposals that would severely limit individual privacy, consumer rights, and online freedom.

The U.S. Trade Representative, who has been pushing for the ACTA’s secrecy all this time, has promised that the trade agreement will do nothing to change U.S. law. But this is a blatant lie. Trade agreements like WIPO and TRIPPS were used in the past to bypass public debate since the receive less attention that actual legislation. Once these trade agreements are passed, lobbyists claim each country must change its laws in order to comply with their international obligations. ACTA is even more creative by calling it an executive agreement. And now that the entire draft has been leaked, the USTR says its willing to release it.

I’ve gone over a bit of the ACTA, but now the full document verifies many of the fears I and others have had about the agreement.  The draft includes proposals for borders searches of iPods (without probable cause), secondary liability for infringement without safe harbors or exceptions, making Google and eBay pretty much illegal and even forcing your ISP to be liability for anything its users do online. The ACTA even allows for injunctions to prevent “imminent infringement”. Yes, Minority Report style pre-crime prevention is coming to intellectual property first. Also, there would be no more due process for online anonymity and intellectual property cases get special priority within the court system while also evolving intellectual property crimes from a civil issue to a criminal offence. This means rather than being sued by the effected party, the government becomes a free police service for corporations. The U.S. doesn’t need the ACTA for this. Thanks to the PRO-IP law, our Department of Justice already prioritizes copyright infringement over less important crimes like identity fraud.

Slowly, public officials are noticing the lack of transparency and dangerous provisions in the trade agreement.  The E.U. Parliament voted 663-13 against the ACTA, but this hasn’t stopped the negotiations from continuing. President Obama, unfortunately, remains a strong supporter of the ACTA.

Don’t worry entertainment industry: United Kingdom here to save you

With almost no debate and minor opposition, the United Kingdom passed the Digital Economy Bill which is pretty much a wish list from the entertainment industry looking to trample over individual’s rights in order to prop up their obsolete business models.

The Digital Economy Bill includes a “three-strikes” type provision to ban copyright infringers from the internet, based on accusations from copyright holders, not the courts. This will also make open wireless networks impossible as the law holds the owner of the signal responsible for any infringement.  Let’s ignore the research that shows the costs of forcing ISPs to police their uses costs more than the already inflated lost revenue from the entertainment industry.

The law was pushed though the UK Parliament using a system called wash-up that avoided most of the debate and scrutiny a law would normally receive. Of course, let’s not forget Lord Peter Mandelson personally helped orchestra this law after having a ritzy dinner with the head of the MPAA (that hasn’t stopped Mandelson from infringing on others’ copyrights).

So ISPs are now legally forced to basically subsided entertainment companies who are unwilling to recognize changes in the marketplace.  Nothing in this bill reveals why people will suddenly start paying for content.  Rather, these laws only push file-sharing and piracy into more fragmented and underground areas making them even harder to track.

Newspaper paywall broken down by single digit subscribers

Looks like Newsday can boast about its 35 paying subscribers. After three months, Johnston Press is ending its £5/quarter paywall after less then 10 people signed up. This news comes as Rupert Murdoch just put two of his U.K. papers behind an even more expensive pay wall – £1 per day and £2 for a week.

So newspaper executives can claim people will pay for newspaper content, but the real-world case studies show newspapers are vastly over estimating the number of subscribers they’ll sign while also giving up tons of traffic and publicity to websites willing to give content for free and find better ways to monetize their traffic.

Changing our cultural mindset to understand abundance

Clay Shirky gave a fascinating speech at the NFAIS Annual Conference where he showed how society has difficulty understanding abundance. Our entire economic theory is based around allotting scarce resources – money, natural resources, tangible property.  Shirky says: “Abundance breaks more things than scarcity does. Society knows how to react to scarcity.” As a society, we are used to only having a few books, CDs, and DVDs, but now it is possible and even feasible to have tens of thousands of each.

As Michael Masnick adds, abundances has not been an issue for most of history. Now technology is introducing abundance and infinite goods into society and we’re struggling to make sense of it. As Masnick says, “It’s a ‘divide by zero’ sort of problem.”

This is why we’re seeing so many companies trying to force scarcity in order to hide abundance. DRM serves that exact function – to make an infinitely reproducible digital file scarce. mp3 and eBook retailers are simply taking brick-and-mortar mentalities of selling single items into a digital space.  Shirky explains how this radical change requires completely new ways of thinking, not just the old system on a new platform.

It’s easy to say “preserve the best of the old and combine it with the best of the new,” but in revolution, the best of the new is incompatible with the best of the old. It’s about doing things a whole new way.

Business models disrupted by abundance (recording industry, newspapers, software and game developers, etc.) need to scrape their old way of thinking. Paywalls for newspapers and more release windows for movies are examples of old businesses trying to force scarcity onto abundance.  These systems do not make sense when anyone can easily copy, share, and view every newspaper article or movie with the few clicks of a mouse.

Of course, when more abundance (well, less scarcity) is introduced, businesses eventually find they can make more money because they have more stuff to sell and more people willing pay for it. Shirky had a great example last year showing how the printing press, and small innovations on printing methods, led to more books which, in turn, made literacy more valuable and thus created more readers. Books were then cheaper to make, but with more readers, publishers could make even more money.  VHS and home video, a great example of the movie industry trying to stop abundance, rather helped to expand the movie market and make it billions more dollars.

Shirky ably frames one of the major problems facing the next generation – changing our understanding of abundance. What once was scarce is now infinite and that requires a whole new approach to business.

Apple admits defeat: sues competing mobile phone company

One of my favorite sayings is “Those who can’t innovate, litigate.” Many patent defends claim the patent system protects small inventors, but it more often seems as a way for large businesses to stifle competition. Look at recent lawsuit announcements and it’s a who’s who of no longer relevant companies who ceded their market leads by failing to continue innovating with market.

Apple has seemed like a company more focused on innovation. Even as Jobs proudly announced more than 200 patents related to the iPhone, Apple appeared to want to seriously compete in the mobile space by offering a more compelling product.  Those 200 patents did little to stop the many patent lawsuits lodged by marketplace losers against Apple including most recently Nokia (think, what was the last good Nokia phone).

Now Apple, rather than continuing to fund and innovate on the iPhone, has sued HTC, the maker of many Google Android phones, over several patents.  HTC and Google Android have been stealing much of Apple’s thunder in the mobile space and are both growing very rapidly (thanks, in part, to Google’s free and open-sourced operating system allowing HTC and other phone manufacturers to innovate and create compelling phones). Apple apparently thinks its worth spending millions of dollars on lawyers to sue HTC rather than spend that time and money making an even better iPhone.

Apple suing HTC, and by association Google, is a thinly veiled way of saying they’re scared of competition. Yes, Apple has a legal right to sue over patent infringement (even though most patent lawsuits are not over willful infringement but because two companies came up with the same idea but one patented it first), but what is gained from these lawsuits, aside from making lawyers richer. Rather than out-innovate and compete in the marketplace, as is object of capitalism, Apple would rather sue to keep quality products out of consumers hands. Enjoy that AT&T 3G. We might get stuck with it.

Startup visa bill aims to create jobs

For years, the U.S. has turned away smart, in-demand immigrants because of the limited number of H-1B visas it grants. Most regrettable is these highly trained and highly paid workers are also high in demand and often create more jobs than they fill. Instead, these workers attended U.S. universities only to return to their home countries to build companies, technology, and jobs.

Last year, Brad Feld started a movement to add a startup or founder’s visa to any immigrant who starts a company in the U.S. The Senate is now considering just such a bill called the Startup Visa Act (full text PDF here) that will encourage immigrants to stay and build companies here in the U.S. creating new jobs and new opportunities.

Certainly not every startup will succeed (no guarantees for U.S. citizen startups either), but as any venture capitalist knows, you only need one or two to take off to shake up an entire industry: see Google or Apple, Microsoft, and IBM of yesteryear. Our goal should be to make sure the next generation of Googles and Apples are founded in the U.S. as that ensures more jobs and more prosperity for the next generation.

Video games making athletes better athletes

maddenfootball Hand eye coordination and faster reaction times often get credited as benefits to playing video games, but how about strategic thinking or even the way athletes play their games?  Chris Suellentrop from Wired explains on how the current generation of athletes, now college graduates who grew up playing sport video games, are changing the way sports, especially football, are changing.

Similar to the computer opponents in chess and online poker players, video games simulations of football, like the popular Madden series, have become so detailed and accurate, that athletes and their coaches are using these games to train for games and research possible plays and outcomes. Madden has even been used to correctly predict the winners of five of the last six Super Bowls and the AFC and NFC Championship winners within 3 points.

With years of basically computer training, athletes moving up from high school to college and then professional have a better understanding of the game – they can read the other team better and make faster decisions, requiring less apprenticeships. Wired goes into detail:

At the Pop Warner Super Bowl in 2006, the winning team had 30 offensive plays, which it had learned through Madden. (”I programmed our offense into Madden to help me memorize our plays,” one 11-year-old told Sports Illustrated. “It was easier than homework.”) Dezmon Briscoe, an all-conference wide receiver for the University of Kansas, credited Madden 2009 with teaching him how to read when defenses “roll their coverages” — move their defensive backs to disguise their strategy. Chuck Kyle, a high school coach who has won 10 state championships in football-mad Ohio, has programmed his team USA playbook into Madden and uses it to teach players their assignments. So have coaches at Colorado State, Penn State, and the University of Missouri, among other schools. An offensive lineman for the Tampa Bay Buccaneers used the videogame as a preparation tool for an entire season, scouting his opponents digitally. While even-more-sophisticated software is available for virtual sports training, coaches and players at all levels of football say that Madden’s off-the-shelf simulation is good enough.

It’s likely much of the next decade will have a lot of “now that the gaming generation” type stories (hell, I’ve done two is as many weeks) as we start seeing the next generation of gamer movie makers, marketers, and other areas we can’t even predict. And so far, these gaming influences were far from intended but open up exciting possibilities for what can games, and technology, do next.

Music streaming: Warner Music Group sees what customers want and says they can’t have it

Record labels continue to flounder in the face of basic economics and 10 years of failed strategies. As part of their latest flip off to customers, Warner Music Group announced they will stop free streaming of music. While they haven’t clarified whether this means removing all current streaming deals, the idea is likely meant to remove a large portion of music from popular streaming sites like Spotify and Last.FM.

Warner Music claims there isn’t enough money being made from streaming, but once again, Warner Music is ignoring basic economics here and worse, ignoring a large market of customers who they can make money on selling true scarce goods.

First, if customers can’t find your music, then they’ll find someone else who’s willing to stream, share, and use all the marketing tools at their disposal. And for those who want Warner music, well, there are more than enough unauthorized sources that offer no direct revenue back to the labels. So Warner Music’s artists get less exposure and file-sharing still runs rampant. How is this suppose to increase revenue?

Warner Music could use streaming as a marketing tool to increase the value of scarce goods (not music files) like concert tickets, merchandise, or the many other new music business models we’ve seen.  And if they were really smart, they’d stop strangling music streaming services with onerous service charges that make it impossible to innovate and run a business.

Book publishers push Amazon to sell fewer eBooks

Amazon has been selling eBooks at a loss in order to increase sales of the Kindle.  Amazon would buy the eBooks whole from publishers at about $12 and then sell the eBooks for $9.99.  But book publishers, who have been used to more than a decade of high profit hard covers, view these eBooks as a threat to their business rather than an opportunity (seeing a pattern here recording industry?).

Macmillan demanded Amazon change its pricing, focusing on more expensive $12.99-$14.99 charges for new books. Because of Macmillan’s demands, Amazon removed all digital and hard copy versions of Macmillan’s books.  The books and digital versions have since returned with the Amazon agreeing to taking a 30 percent commission from eBook sales rather than buying them wholesale. The result means Amazon will actually make money now on eBook sales and ironically, book publishers make less (30 percent of $15 is still less than the old wholesale price of $12.99-$14.99).

You have to wonder whether Macmillian and book publishers have paid any attention to the past 10 years, watching the recording industry shrivel up as it fought tooth and law brief against digital media (and still hasn’t given up on its road to irrelevance).  First, my belief is that book publishers know increasing eBook prices will hurt sales. This is made apparent by several publishers’ urging to delay eBook releases for weeks after the hard cover. Much like movie companies delaying Netflix rentals a month after the DVD is released, book publishers don’t want to siphon readers away from their high margin hard cover books.

Of course, this only annoys customers. If customers want the eBook but one is not available, there are more than enough unauthorized versions on file-sharing networks on the day of release. You can’t compete with free by staying home and sulking.

But then book publishers want to charge higher prices. Well, let’s see how well that done for the recording industry on iTunes. iTunes allowed higher and lower prices on music beginning last year and the results have shown such a large drop in unit sales that overall revenue is down.  Growth in digital sales slowed from 20 percent in 2008 to 8 percent in 2009. While yes there was still growth, that is a massive drop in a still infant industry. The price elasticity of digital goods is extremely sensitive to increases in prices (and seems even more sensitive to drops, as video game download service Steam has successfully proven with its sales).

As I and others will say over and over again, digital goods are infinite goods. Basic economics says their price should be zero. And there are several examples of free eBooks actually increasing the sales of the actual book. But economics and real-life examples don’t matter when you have a former monopoly on distribution to protect. But business evolves and like the recording industry, book publishers may be in for a difficult decade.

Prodigeek was recently hacked

I believe I caught this issue early. All the pages on Prodigeek were forwarding to different sales sites. It does not seem like malicious code was downloaded to anyone’s computer, but of course, any bad code is not good. I’m bumping up some more security plug-ins so hopefully this will not happen again.