Should the Music Industry Pay ISPs for Piracy?

In the wake of its “success” in pushing through Digital Economy Act, the British music industry is hoping to move on to the next stage: using it as a lever to get more money out of the system (even though the music industry is currently thriving).

The UK royalties collector PRS For Music has just published a rough blueprint [.pdf] for how this might be done, entitled: “Moving Digital Britain Forward, without leaving Creative Britain behind”. It's a fascinating document, and merits close reading.

As the title suggests, there are essentially just two players in this analysis: the music industry, and the ISPs (the public are obviously irrelevant here). The ISPs are no longer lowly bit-mules, mindlessly obeying Net neutrality by conveying digital files hither and thither without a thought as to their content, but are to be regarded as “Next Generation Broadcasters”:

operators of networks that connect supply with demand in a market for media.

That's important, of course, because it reframes the debate about file-sharing in terms of old technology: radio and TV. It permits the argument to be made that such “broadcasters” have to pay for the privilege of broadcasting all that content – just like the radio and TV broadcasters do.

The paper makes a very good point about the increased capacity networks that are being built:

One of the few studies to be published comes from MoneySupermarket, who found that more than a third of consumers surveyed believe the advent of high-speed, next-generation broadband services would encourage greater piracy and make it easier to illegally download content. The report concluded that: ‘Illegal downloading is already a big problem for the likes of the music and film industries ... with superfast broadband packages set to become commonplace, the problem seems likely to get worse.’

I think that's true, but the analysis dismisses too easily the main reason for this:

Perhaps, like iTunes, these legal venues could increase the range of content on offer, but this increase comes at a high cost when already at a significant disadvantage to “free”.

That's a vicious circle: music companies won't offer more content to compete with free, unauthorised sites because it would cost too much, which means that there won't be so much authorised content as unauthorised, which means that people will continue to be forced to opt for unauthorised downloads, which music companies aren't willing to compete with.

The report even mentions iTunes, which backs up this view: for once iTunes made available most of the content previously only found on unauthorised sites, it started raking the money in. And yet the report chooses to ignore this rare data point, and stick with its circularity – the reason being, it has a Cunning Plan. The ISPs – sorry, Next Generation Broadcasters – must pay:

If changes in the scale of unlicensed media can be measured, we can put a price on this spillover to bridge the value gap. Simply stated, at some date a price would be placed on the indexed measure of unlicensed media on ISP networks. If at a later date the measure of infringement increases, the value transferred (from ISP to rightsholders) would increase accordingly.

Conversely, were the measure of infringement to decrease, the amount transferred would decrease accordingly. The options for pricing such spillovers should be the subject of further research.

They should indeed: I think this is a splendid idea – if we could make just one tiny tweak.

For this to be fair, we must of course make sure that we capture all the effects of unauthorised file sharing so that its true economic effect is measured. That is, we shouldn't be measuring anything so crude and vague as the flow of allegedly unauthorised copyright materials across a network. After all, it's impossible to say whether some of that flow might be permissible uses, and then there's the question of whether people would have bought the equivalent content etc.

Instead, what needs to be ascertained is the knock-on economic effects of that file-sharing in the *real world*. And of course, one very important aspect that has to be included in that is the fact that those who share files buy more, not less, music. As Mike Masnick explains through a splendid series of links:

Study after study after study after study after study after study has shown the exact opposite -- noting that people who file share tend to be bigger music fans, and are more likely to spend on music.

So I think we should try out this report's suggestion that ISPs should pay for the consequences of their users' actions – provided the recorded industry pays the ISPs if it should turn out (as those six reports linked to by Masnick might suggest) that file sharing actually *increases* the sales of recorded music. What could be fairer than that?

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Why Patents are Like Black Holes

When a big enough star dies, it generally implodes, and forms a voracious black hole capable of swallowing anything that comes too close. When a big enough company dies, all that remains is a bunch of patents that can have a similarly negative effect on companies whose business models are too close.

He's Mike Masnick's commentary on the area:

It looks like just about all that's left of former telco equipment giant Nortel is a whole bunch of patents, that are now expected to sell for somewhere in the range of $1.1 billion. The big question, of course, is who ends up with those patents, and what they do with them. Generally speaking, you don't see companies spend $1.1 billion on a bunch of patents, unless they're planning something big. It's entirely possible someone will buy them for defensive purposes, but equally likely that they're used to sue lots of other companies (or, perhaps by the likes of Intellectual Ventures, to scare people into paying up to avoid the possibility of being sued).

And of course, in the field of open source, the really worrying dying star is Novell, as Matt Asay points out:

As reported, as many as 20 organizations have registered bids for Novell, most (or all) of them private equity firms. While an Oracle or a Cisco might acquire Novell for its maintenance streams and product portfolio, it's unclear that private equity firms will have the same motivation. For at least some of these, there will be serious pressure to sell Novell's assets to the highest bidder, regardless of the consequences to Novell's existing customers or to the wider industry.

This wouldn't be so bad if it weren't for the fact that Novell has a treasure trove of patents, with at least 450 patents related to networking, office productivity applications, identity management, and more.

Worth noting is that among those patents are some relating to Unix...

These cases show yet again why patents just don't do what they are supposed to - encourage innovation - but act as very serious threats to other companies that *are* innovating. As more and more of these software stars die, so the number of patent black holes will increase, and with them the unworkability of the patent system. Time to reboot that particular universe...

Follow me @glynmoody on Twitter or identi.ca.

Copyright Infringement: A Modest Proposal

The UK government's Canute-like efforts to stem the tide of online copyright infringement have plumbed new depths, it seems:

Proposals to suspend the internet connections of those who repeatedly share music and films online will leave consumers with a bill for £500 million, ministers have admitted.

The Digital Economy Bill would force internet service providers (ISPs) to send warning letters to anyone caught swapping copyright material illegally, and to suspend or slow the connections of those who refused to stop. ISPs say that such interference with their customers’ connections would add £25 a year to a broadband subscription.

As Mike Masnick points out:

Note, of course, that the music industry itself claims that £200 million worth of music is downloaded in the UK per year (and, of course, that's only "losses" if you use the ridiculous and obviously incorrect calculation that each download is a "lost sale").

So this absurd approach will actually cost far more than it will save, even accepting the grossly-inflated and self-serving figures from the music industry.

Against that background, I have a suggestion.

Given that the UK government seems happy for huge sums of money to be spent on this fool's errand, why not spend it more effectively, in a way that sustains businesses, rather than penalising them, and which actually encourages people not to download copyrighted material from unauthorised sources?

This can be done quite simply: by giving everyone who wants it a free Spotify Premium subscription. These normally cost £120 per year, but buying a national licence for the 10 million families or so who are online would presumably garner a generous discount - say, of 50% - bringing the total price of the scheme to around £600 million, pretty much the expected cost of the current plans.

As I can attest, once you get the Spotify Premium habit, you really don't want to bother with downloading files and managing them: having everything there, in the cloud, nicely organised, is just *so* convenient (well, provided you don't lose your connection). I'm sure that my scheme would lead to falls in the levels of file sharing that the government is looking for; and anyway, it could hardly be worse than the proposals in the Digital Economy bill.

Update: On Twitter, Barbara Cookson suggested a clever tweak to this idea: "absolution for ISPs who include #spotify as part of package". Nice.

Follow me @glynmoody on Twitter or identi.ca.

Why Most Newspapers are Dying

This is something that's struck me too:

as is oh-so-typical in these situations, Osnos does nothing at all to engage or respond to the comments that call out his mistakes. You want to know why newspapers are failing? It's not because of Google, it's because of this viewpoint that some journalists still hold that they're the masters of the truth, handing it out from on high, wanting nothing at all to do with the riff raff in the comments.

This is perhaps the biggest single clue that newspaper do not understand how the Internet has changed relationships between writers and readers. Indeed, one of my disappointments with the Guardian's Comment is Free site is that practically *never* do the writers deign to interact with their readers. Given that the Guardian is probably the most Web-savvy of the major newspapers, this does not augur well...

Why I Blog and Twitter

A question that often comes up is why people blog and twitter. I've given various answers over the years, but once again Mike Masnick says it best of all:

These discussions are like another graduate degree for me, because I constantly have to think, rethink, defend and truly understand the arguments I'm making. It's hard to overstate how incredibly valuable that's been. The fact that many journalists refuse to engage in that sort of conversation actually shows through in their work: they don't want to bother. They like to position themselves as experts, but many don't really understand what they're talking about. Engaging in the conversation may be a lot of work -- and, at times, it can be frustrating or seemingly pointless. But, the massive amount of value I've received from those discussions -- just like the student in the story above -- is almost impossible to quantify. People talk about the importance of ongoing education. That's exactly what these conversations are for me.

(Sigh): Another BBC Ad for Microsoft

I suppose I should expect this now:

In a surprise move, Microsoft has announced it will offer a free anti-virus and security solution from the second half of next year.

...


Amy Barzdukas, senior director of product management in the online services division at Microsoft, said: "This new, no-cost offering will give us the ability to protect an even greater number of consumers, especially in markets where the growth of new PC purchases is outpaced only by the growth of malware."

Ah, bless 'em.

Of course, this move couldn't possibly have anything to do with the fact that the security of Windows is so poor as to make the operating system unusable without this kind of anti-virus crutch. Well, that's certainly the impression you get from benign old Auntie.

As usual, Mike Masnick gets it in one. His headline? "Microsoft Realizes No One Wants To Pay Microsoft To Fix Its Own Security Flaws."

The Real Silicon Valley

Mike Masnick gets it again:

many folks look at Silicon Valley and try to replicate the outward manifestations (a good university, some venture capitalists) and miss the underlying details that create the real culture of Silicon Valley, because they almost seem counterintuitive. And the most basic element of this is enabling the free exchange of ideas (that engine for growth). Instead of doing that, most focus on protecting ideas and limiting that free exchange, falsely believing that hoarding information beats sharing information (even with competitors).

So, what happens is that other countries set up their own Silicon Valleys by focusing on protectionism (greater intellectual property rules, non-competes, hugely funded labs), and ignore the power of the cross pollination of ideas and people throughout Silicon Valley, which make it that much more difficult for any single company to abuse the trust of the people they serve. Should any company turn away from benevolence, that openness almost guarantees a more open competitor shows up in return (sometimes with the same employees from the older company). That openness drives innovation, but also keeps these benevolent dictators honest.

The BPI Makes the BBC Broadcast its Stupidity

When I read this riposte by British Phonographic Industry's chief executive, Geoff Taylor, to an eminently reasonable column by Bill Thompson, who had noted the futility and counterproductive nature of attempts to stop filesharing, one passage immediately struck me:

Let's look at the figures. More than six and a half million people in the UK illegally access and distribute music, and it is plain wrong to say that this is good for music.

Independent research has shown time after time that people who download illegally generally spend less on music than people that don't, which undermines investment in new music.

Hang on a minute, I says to mesself: isn't it exactly the opposite - that there are oodles of studies that show that people who download music actually spend *more*? Alas, I was feeling lazy, and I couldn't be bothered hunting out the verse and chapter to show that Mr Taylor was talking a load of nonsense.

But then, the wonder that is the blogospher kicked in. Techdirt's Mike Masnick picked up the rather insubstantial gauntlet flung down by Graham, and answered thusly:

The real kicker, though, is his claim that independent studies say that those who use file sharing spend less on music. That's simply untrue. Study after study after study after study after study after study has shown the exact opposite -- noting that people who file share tend to be bigger music fans, and are more likely to spend on music.

If that's not a refutation, I don't know what is.

But what's really pathetic about this is that somebody in a nominally responsible position - one capable of making the BBC print "his side of the story" - should so barefacedly misrepresent the facts in order to cast slurs on an journalist's reputation.

Wouldn't it be rather better to face up to reality, admit that things in the digital world have "moved on" in Tony Blair's oft-repeated phrase, and come up with a better business model? Not least because it's pretty damn obvious to even the spottiest teenager else what that might be.

Mighty Mike vs. Nugatory Nathan

As readers of this blog may have gathered, I am not the biggest fan of Nathan Myhrvold. I am, however, a big fan of Mike Masnick, especially when he writes posts like this:

And here Myhrvold is either outright lying or he's ignorant (he can let us know which one). First of all no one has ever said that patent litigation is threatening to stop all innovation. They've just said that it is slowing the pace of innovation. And there's plenty of evidence to support that, despite Myhrvold's claim that there's none. James Bessen and Michael Meurer just came out with a whole book detailing much of the evidence, and David Levine and Michele Boldrin also have a book with even more evidence. Did Myhrvold simply not know about these? Or is he lying to PC World?

Go on, Mike, tell us what you *really* think....

Intellectual (Monopoly) Ventures

Mike Masnick is a truly fantastic writer, because he begins a piece thus:

Malcolm Gladwell is a truly fantastic writer

...only to end up proving that Gladwell may be a great writer, but he doesn't actually understand the implications of what he's writing about. No, don't worry, I'm not going to draw the same conclusion for Masnick, since he *does* know what he's writing about, pace some trolling in the comments to the above piece.

Indeed, I think the posting in question is doubly fine: it not only calls into question the extremely odious business model of Nathan Myhrvold's "Intellectual Ventures", but it hammers home the "M"-word:

Gladwell uses this to talk up what Myhrvold is doing, suggesting that Intellectual Ventures is really about continuing that process, getting those ideas out there -- but he misses the much bigger point: if these ideas are the natural progression, almost guaranteed to be discovered by someone sooner or later, why do we give a monopoly on these ideas to a single discoverer? Myhrvold's whole business model is about monopolizing all of these ideas and charging others (who may have discovered them totally independently) to actually do something with them. Yet, if Gladwell's premise is correct (and there's plenty of evidence included in the article), then Myhrvold's efforts shouldn't be seen as a big deal. After all, if it wasn't Myhrvold and his friends doing it, others would very likely come up with the same thing sooner or later.

This is especially highlighted in one anecdote in the article, of Myhrvold holding a dinner with a bunch of smart people... and an attorney. The group spent dinner talking about a bunch of different random ideas, with no real goal or purpose -- just "chewing the rag" as one participant put it. But the next day the attorney approached them with a typewritten description of 36 different inventions that were potentially patentable out of the dinner. When a random "chewing the rag" conversation turns up 36 monopolies, something is wrong. Those aren't inventions that deserve a monopoly.

Quite. In a way, what should be renamed Intellectual Monopoly Ventures represents the quintessence and, I fervently hope, the apogee, of a patent system gone mad: a company set up with the express intention of coming up with *ideas* and patenting them so that it can hold companies that might actually create *inventions* based on them hostage. Perfectly parasitic and utterly pathetic.

The US Fashion Industry's Death-Wish

Another great post from Mike Masnic:

The fashion industry got jealous of the entertainment industry's ability to crack down on innovation with copyrights and pushed Congress to introduce new legislation that would add a copyright for fashion design. Recently such laws have been getting a big push from politicians who are pandering to the fashion industry. Of course, studies have shown that the very reason the industry has thrived was because the lack of IP protection. In fact, one bit of research showed that adding IP protections to fashion could kill the industry.

Free As in ...."Free Love"?

Techdirt's Mike Masnick pointed to yet another exploration of free as a business model. It's called "Free Love":

which is all about the ongoing rise of 'free stuff', and the brands already making the most it. Not to mention the millions of consumers who are happily getting into a free-for-all mindset. Yes, expectations are being set. Absorb and apply!

In fact, this is probably the best round-up to date of all the different kinds of free business models. It had all the ones I had come across, and many I hadn't.

Mike concludes his post with an excellent - and self-referential - point:

It's neat to see all of these different things come out at the same time -- once again highlighting the concept that ideas generally aren't formed in a vacuum. The trends that resulted in so many people recognizing the same thing at once are all around us. Yet, if we believed in the world where artificial scarcity rules, then we'd be focused on who "owned" this concept and who got the rights every time someone else mentioned it. That, of course, would be silly. By allowing so many different people to express these concepts, not only do we all get to see different perspectives on the same concept, but we get to learn from each other and build on these ideas.

Peace, man.

Why Intellectual Property Does Not Exist, Part 3502

A nice point from Mike Masnick:

Those who insist that copyright is the same as real property break their own rule by also insisting that they retain perpetual rights to the good, even after it's been sold. If copyright were like real property, after the creator sold it, the buyer could do whatever they want with it, including giving it out for free.

A hit, a very palpable hit.

Bank Julius Baer, Meet Barbra Streisand

One of the claims to fame of Techdirt's Mike Masnick is for coining the phrase "the Streisand effect":

The phenomenon takes its name from Barbra Streisand, who made her own ill-fated attempt at reining in the Web in 2003. That's when environmental activist Kenneth Adelman posted aerial photos of Streisand's Malibu beach house on his Web site as part of an environmental survey, and she responded by suing him for $50 million. Until the lawsuit, few people had spotted Streisand's house, Adelman says--but the lawsuit brought more than a million visitors to Adelman's Web site, he estimates. Streisand's case was dismissed, and Adelman's photo was picked up by the Associated Press and reprinted in newspapers around the world.

So attempts by the Bank Julius Baer to shut down the Wikileaks site are not only doomed, but doomed to make things much, much worse than if the bank had just put up with it. Fighting openness is just not a good idea.

Charlie's Not My Darling (Again)

Charlie McCreevy is a one-man disaster area: first he tries to bring in software patents for the European Union, now he wants to extend copyright for performers. I could rant about this but Mike Masnick has already said everything that needs to be said:

It's important to be entirely clear here: this is a total and complete bastardization of copyright law. Copyright law was intended to grant the creator of content a deal: you create new content and we will give you a limited time monopoly on the rights to that content before passing it on to the public domain, from which everyone can benefit. It was designed as an incentive system, providing a gov't backed monopoly in exchange for the creation of content. By creating content and accepting that deal, musicians clearly said that it was a reasonable deal. To later go back and change the terms for content already created and extend copyright makes no sense and is violating the contract made with the public. You can't newly incent someone to create content that they already created 50 years ago. Thus, the only reason to extend copyright is if you believe that it's really a welfare system for musicians. If that's the case, then we should be explicit about it, and present it that way, rather than calling it copyright.

That's not all that McCreevy has up his sleeve either. He's also apparently a huge fan of copyright levies that add taxes to any blank media for the sake of reimbursing musicians just in case you happen to use that blank media to record unauthorized material. It's effectively a you must be a criminal tax. So, basically, McCreevy's plan is to treat all consumers as criminals, forcing them to cough up extra money for musicians, while also setting up a welfare system for musicians hidden in the copyright system. Musicians must love him, but it's a bit ridiculous for him to claim these proposals make sense because "copyright protection for Europe's performers represents a moral right to control the use of their work and earn a living from their performances". Does Mr. McCreevy earn a living from something he did 50 years ago? Does Mr. McCreevy get a cut every time a consumer buys something just in case they commit a crime?

Superb stuff, Mike.

Free Music Goes Mainstream

What's interesting about this piece in the Guardian describing how the music industry is finally waking up to the virtues of free is that it brings together most of the arguments that I and others (notably Mike Masnick on Techdirt) have been banging on about for years. Looks like the industry has (almost) got it. We shall see.

DRM in the Analogue World

DRM is normally viewed as an issue in the world of digital content, which can be duplicated losslessly. But in this virtuosic post, Mike Masnick points out that it also exists in an analogue context in the form of noncompete agreements, which seek to prevent ideas being copied perfectly:

just think of noncompetes as the "DRM" of human capital. Just as DRM tries to restrict the spread of content, a noncompete seeks to restrict the spread of a human's ideas for a particular industry within the labor arena. Both concepts are based on the faulty assumption that doing so "protects" the original creator or company -- but in both cases this is incorrect. What it actually does is set up an artificial barrier, limiting the overall potential of a market. It may not be easy to see that from the position of the content creator or company management (or investors). It's natural to want to "protect," but it's actually quite damaging.

...


While it may seem easier to "protect" your ideas and your people, what you really end up doing is blocking off your own access to many of the ideas that you need to continue to innovate. You limit the vital mix of ideas to build not just decent products, but great products. Just as DRM has helped to destroy the record labels when competing against more nimble, more open technology -- noncompetes destroy businesses when competing against more nimble, more open technology clusters.

Brilliant.

Hardware is Like Software? - Ban Hardware Patents

I won't bother demolishing this sad little piece on why software patents are so delicious and yummy, because Mike Masnick has already done that with his customary flair.

But I would like to pick on something purports to be an argument in the former:

One needs to understand that there is fundamentally no difference between software and hardware; each is frequently expressed in terms of the other, interchangeably describing the same thing. For example, many microprocessors are conceptualized as software through the use of hardware description languages (HDL) such as Bluespec System Verilog and VHDL. The resulting HDL software code is downloaded to special microprocessors known as FPGAs (field programmable gate arrays), which can mimic a prospective chip's design and functions for testing. Eventually, the HDL code may be physically etched into silicon. Voilà! The software becomes hardware.

Well, that's jolly interesting, isn't it? Because it means that such hardware is in fact simply an instantiation of algorithms - hard-wired, to be sure, but no different from chiselling those algorithms in granite, say. And as even the most hardened patent fan concedes, pure knowledge such as mathematics is not patentable.

So the logical conclusion of this is not that software is patentable, but that such hardware *shouldn't* be. I'd go further: I suspect that anything formed by instantiating digial information in an analogue form - but which is not essentially analogue - should not be patentable. The only things that might be patentable are purely analogue objects - what most people would recognise as patentable things.

There is an added benefit to taking this approach, since it is also solves all those conundrums about whether virtual objects - in Second Life, for example - should be patentable. Clearly, they should not, because they are simply representations of digital entities. But if you wanted to make an analogue version - and not just a hard-wiring - you could reasonable seek a patent if it fulfilled the usual conditions.

Intellectual Monopolies Are No Privilege

We often call copyright a species of intellectual property, abbreviating it, “IP.” This brief paper suggests that we consider copyright as another sort of IP: an intellectual privilege.

When I first saw this idea, I thought it was wrong, but for the right reasons: "intellectual property" does not exist, but calling it "intellectual privilege" is not the way to flag that up. For the lay person, it makes it sound like it's a privilege to access it. Let's call them what they really are: intellectual monopolies - which nobody is going to mistake for something nice and cuddly.

Against this background, I was glad to see Mike Masnick, that bellwether of sound thinking on these issues, broadly in agreement with me:

I'd tend to side more with those who refer to it as an intellectual monopoly, as that's much more descriptive. Intellectual privilege, for all the niceness of retaining the "IP" designation, probably requires too much explanatory baggage.