Knowledge Ecology International, a group that seeks to reduce the control wielded by patent and copyright holders, recently posted a list of suggestions that the RIAA purportedly sent to the U.S. Trade Representative for what to include in the proposed Anti-Counterfeiting Trade Agreement. Ars Technica's Nate Anderson took up the issue today, accusing the record companies of trying to disembowel the safe harbor provisions of the DMCA. I checked the legitimacy of the Knowledge Ecology post with Neil Turkewitz, the RIAA's point man on such things, and he said it looked accurate. Not surprisingly, however, he offered a somewhat different take than Ars. Yet he acknowledged that some aspects of the RIAA's proposal for ACTA go beyond U.S. law on the enforcement of copyrights online.
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A little more than a year ago, the creators of Azureus -- a file-sharing program based on the BitTorrent protocol -- launched Vuze, a version that ignored bootlegs in favor of authorized copies of TV shows, movies, games and other programming. The idea was to create a file-sharing environment that content owners would want to participate in, and that would present less risky revenue streams. By focusing the software only on authorized files, Vuze could charge fees for files or sell advertising around them without fear of being sued for profiting from piracy. It soon attracted content from dozens of producers around the globe, including the BBC, PBS and TOKYOPOP, although the major Hollywood studios largely kept their distance.
This month, Vuze did an about-face. Unleashing the software's search engine, it enabled users to find and retrieve content indexed by some of the world's most popular BitTorrent search engines. These include Mininova, an index site in the Netherlands now under legal assault from Dutch anti-piracy authorities. As a result, users don't have to fire up a second file-sharing program to find free, pirated versions of the titles Vuze offers on a pay-per-view basis. They can do it through Vuze's search engine.
CEO Gilles BianRosa acknowledged that the move didn't meet with universal acclaim from the companies providing content on Vuze. Yet he said that the change merely acknowledges the reality of the marketplace, and argued that it would help content owners compete better with online bootleggers.
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It's a needle-in-a-haystack world for new TV shows, particularly when they're on cable. That's why so many networks put pilot episodes online well in advance of the series premiere. Still, the Viacom-owned cable network Spike seems to be going one important step beyond its peers in its efforts to build an audience. Not only is it making the first episode of the new series "Factory" available in advance on its website and through downloadable video stores, it's also trying to spread it through Limewire and other file-sharing networks. Without DRM, or seemingly any form of copy protection.
Spike is working with Jun Group, a firm that specializes in promoting media through p2p networks. Mitchell Reichgut, a principal in Jun Group, acknowledged that other TV programmers had used p2p technology to distribute shows (witness the broad support for Joost, or NBC's work with Pando Networks). But those distributions "have taken place in
enclosed, rights-protected `fish bowls,'" Richgut said in an e-mail, while "Spike is swimming in the `ocean' - open
P2P networks - where Spike's viewers regularly seek out the latest and greatest
new content." In other words, Spike isn't using p2p technology to cut its distribution costs. It's doing it to chase viewers.
Todd Ames, a marketing vice president at Spike, said in an interview that putting the show on file-sharing networks was an acknowledgment of "what people are really doing, and the way consumers are really looking for content." Using DRM, he said, would be self-defeating. "I don’t think there’s a marketer out there who hasn’t been
told, `Get me that viral thing.' And `get me that viral thing' when it’s handcuffed
and ball-and-chained is pretty difficult."
It's not something he'd do for just any show, but it made sense for "Factory," a semi-scripted comedy about four working-class buddies (it aspires to be a blue collar version of "The Office" or "Entourage."). "There is no better marketing tool for the show than the show
itself, but you’ve got to be seen," he said. "I’m dealing with something that has no real celebrity, and
has never been seen before.... We’re trying for a bit of a ubiquity here, to go
where the people are."
Still, those file-sharing networks are hotbeds of TV piracy, so Spike's approach is more of a toe-dip than a cannonball. You won't see any TV commercials on Spike touting the availability of "Factory" on Limewire. (All the same, Richgut expects more than 1 million downloads of the pilot. Jun Group's secret sauce is its ability to use metadata and other techniques to help the files it promotes bubble to the surface in p2p searches.) Nor does Spike plan to make later episodes available through file-sharing networks, although it expects bootleg versions to wind up there anyway. "My goal is not website traffic," Ames said. "It's really about driving tune-in for the television network."
Of course, if Spike could guarantee an additional million views of "Factory" through p2p, it might make sense to distribute the whole series that way -- with commercials, that is. But Ames said the medium still has to prove its ability to deliver individual shows to the kinds of mass audiences they can reach on cable. The Spike network is available in 96 million cable and satellite homes, after all. The online video business isn't there yet.
"Factory," which has been available online since Tuesday, premieres June 29. Here's a taste of the show, courtesy of the Spike website:
An astute reader of my earlier post regarding a possible new, earlier window for movies at home pointed out something significant that I'd missed. Rather than being an isolated initiative, the earlier window fits into a continuum of efforts to create a secure, copy-protected pathway into and around the home for high-def programming. Those efforts could eventually give Hollywood inordinate influence over the technologies used in home networks and device-to-device communications.
To recap: the MPAA has asked the Federal Communications Commission to let it use a copy protection technique called "selectable output control" on high-def movies made available through cable and satellite TV operators before the titles were available on DVD. SOC enables studios to turn off the analog and unencrypted digital outputs from cable boxes and satellite receivers to prevent unauthorized copying. The FCC had banned the technique for existing services, such as pay per view, but left the door open to it being used in connection with an innovative new offering.
The MPAA's petition says that titles would be affected only during the period prior to their release on DVD. Once the movie is in Blockbuster, the people who'd been shut out by SOC -- those whose TV sets relied on analog or unencrypted digital inputs -- would have no trouble viewing it. But a pair of footnotes that I'd overlooked in the petition point out that next-generation home-video formats may also include SOC. These include downloadable movies and Blu-ray discs. So if Hollywood restricts high-def releases of movies to the new early-release window, Blu-ray discs and downloadable files, it could make SOC the rule, not the exception -- at least until the films reach HBO and broadcast TV.
That's not to begrudge Hollywood's desire for more protection on high-def titles. The problem here, IMHO, is the potential for the studios to control which protection technologies devices use. Under the FCC's broadcast flag rules (which a federal court struck down in 2005), the commission, not copyright holders, had the power to decide which anti-piracy techniques were acceptable. One example of why this matters: the commission approved the anti-piracy scheme for TiVo's TiVo To Go feature over the objections of the MPAA and the NFL. But with SOC, the FCC has no say over what's an acceptable level of protection. That leaves Hollywood with a great deal of sway over which anti-piracy technologies get deployed. Of course, the studios want their movies to be seen, too. If consumers rally behind home entertainment and networking equipment that's not compatible with the studios' favored protection techniques, the studios will have to adapt to that reality. That's one of the reasons the major record companies finally embraced unprotected MP3 files -- they proved to be the best way to reach the largest audience.
The MPAA has offered a deal to the Federal Communications Commission that could bring movies to cable and satellite viewers more quickly after their original release. The trade-off, though, is that the movies couldn't be viewed by some high-definition TVs, nor could they be recorded by stand-alone TiVos. The FCC moved quickly to invite public comments on the MPAA's petition, meaning that it could decide the issue later this summer.
Ars Technica reported this story over the weekend, emphasizing the restrictions on recording and the unusual alacrity of the FCC's response. To me, however, the more intriguing element is the studios' interest in creating a new release window for home viewing of high-def movies. Today, studios release the DVD version of a film about four months after it hit the multiplexes (bombs often are released sooner, and hits sometimes take longer). Cable pay-per-view and VOD services have to wait another 30 to 45 days for the movie, although Warner Bros. has started experimenting with simultaneous DVD and VOD release. These delays are designed to preserve box-office and DVD sales, but they also concede the market to bootleggers. There's no legitimate way to watch "Kung Fu Panda" at home today, but there's no shortage of illegitimate ones.
In its petition, the MPAA says each of the major Hollywood studios wants to explore deals with cable and satellite operators that would make high definition versions of their movies available prior to their release on DVD. No details about the price or timing were included, but one would expect the movies to carry a premium. To a family of four, paying $30 to see a (relatively) new movie in high def at home might seem like a reasonable offer, compared to paying $50 for tickets and popcorn at the multiplex. Of course, the reasonableness of the premium would depend on how soon the movie became available.
Now here's the tradeoff.
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Numerous speakers at this week's Advertising 2.0 conference in New York commented on the gap between the amount of video people watch on the Web and the money advertisers spend on online video. The gap represents a huge opportunity to some, with billions of dollars shifting from traditional media outlets to the Web. But the five venture capitalists and investors who spoke Thursday suggested that the short-term outlook wasn't so rosy. As Roger Lee, a general partner at Battery Ventures, put it, the online video field is "dramatically overfunded." Lee said that there are more than 200 companies in the online video market and more than 200 in social media. "Probably 90% of them will disappear in the coming year," he predicted. Other panelists saw overfunding among online ad networks and mobile content plays, too.
One reason for the spending gap, said Dennis Miller, a general partner at Spark Capital, is that "advertisers are lazy." He added, "They talk a big game about getting involved in the brave new world.... [but] they've spent the last 50 years buying [advertising time on] three TV networks and playing golf." They're reluctant to buy time on sites featuring user-generated content for fear of running ads next to something inappropriate, Miller said, yet they don't hesitate to run commercials during the Jerry Springer Show or the Ultimate Fighting Championship. "We're in the very early days, it's very challenging still, but a lot of the onus is on the advertising community to step up, take some chances and stop with the double standard." (Spark's investments include EQAL and Veoh.)
James Slavet, a partner at Greylock Partners, said much of the viewership online has been for videos produced by professionals and semi-professionals (think broadcast TV for the former, lonelygirl15 for the latter). This content is "relatively easy for advertisers to embrace, compared to viral, user-generated stuff," so it's likely to drive a lot of growth in online advertising, Slavet said. But advertisers also have to adapt to content getting chopped into smaller pieces and redistributed unpredictably by viewers. So, too, do content companies -- Slavet said Viacom's lawsuit against YouTube "makes no sense at all," and that the company needs to "embrace users as a distribution channel." (Graylock's investments include Facebook, LinkedIn and Digg.)
EQAL, the digital entertainment start-up behind the lonelygirl15 phenomenon, announced a deal today with M.A.D. Entertainment of Milan to develop a version of the serial online drama for Italian Internet users. It's the first foreign-language version of the show, now it its third season online. EQAL will co-produce the show (due out late this year) but will rely on M.A.D. Entertainment to line up Italian distribution and advertising partners. The announcement comes less than a month after EQAL landed a partnership with CBS to build interactive experiences online to complement selected TV shows.
The new version of lonelygirl will have different characters and plots, but will follow the same strategic path as the original, founders Miles Beckett and Greg Goodfried said in an interview Wednesday in New York. The goal remains to make the short video episodes the heart of a social network where fans interact with the shows -- not in a "choose your own adventure" sense, Beckett said, but in chat rooms and other settings that blur the line between the characters and real viewers.
EQAL's first two serials (lonelygirl15 and KateModern) have built audiences large enough to attract advertisers, whose products have been integrated into the story lines. Product placement has its detractors, but Beckett said there are practical reasons for EQAL to go that route. Long pre-rolls are unpopular, those shown after a video have very little value, and EQAL's videos are too short to support interstitials, he said. The company also found that the tactic supported the illusion it was trying to create of real people communicating through videos. After all, Goodfried said, real people are more likely to be holding a Pepsi than a can of generic soda.
lonelygirl15 photo courtesy of the lg15 website.
Glenn Britt, head of Time Warner Cable (soon to be a pure-play cable operator), recently engaged in a revealing Q&A with the Wall Street Journal's Vishesh Kumar that highlights yet another impediment to TV networks putting their shows online. Britt warns that cable operators such as Time Warner won't be willing to pay a network as much for the rights to its programming if the same content is available online for free. As he put it:
If all of the programming goes to the Internet, and
it's free, then there is a whole source of revenue that the
entertainment business is not going to have anymore.
I think we will have to have a new formula for
financing television programming, or else we just aren't going to get
the same quality and quantity that we are used to today. That's just
pure economics. People should think things through before they just go
willy-nilly putting things on the Internet.
His argument makes sense if you believe the Net induces TV viewers to abandon the prime-time version of their favorite programs faster than, say, TiVo does. But it's hard to believe that many people skip watching "Gray's Anatomy" on their living room sets because they can tune it in later on their computers. Today, at least, programs transmitted online are viewed on computers, which suggests that the audience is separate from the TV-watching audience. It's time- and place-shifters, or college students who don't have TVs in their dorm rooms.
Britt may have a valid point about the long-term impact of ad-supported online programming. TV sets will eventually become smart enough to tune in ABC.com and Hulu as easily as they do over-the-air and cable broadcasts. But by discouraging programmers from making shows available online, Britt's conceding the Internet to content providers who represent a bigger threat to the entertainment-industry economics, including independent producers, user-generated sites and video bootleggers. Cable operators can try to stand in the way of online content reaching the TV -- after all, they're the ones whose set-top boxes have high-speed modems but no browsers -- or they can try to capitalize on it. Oddly enough, Britt himself said last week that his company planned to help consumers get more Web content to their TV sets (although his comments left some key questions unanswered). Go figure.
The Center for Democracy and Technology weighed in today on the delicate subject of privacy and digital watermarks, recommending a series of best practices for protecting consumers against the unauthorized use of personal information. It's a tricky issue because watermarks -- unique digital identifiers that can't be detected with the naked eye -- are emerging as an anti-piracy tool, in which case the whole point is to identify the source of an infringing file. Nevertheless, as the 17-page report (download here) notes, even watermarks used for such purposes are subject to abuses that could invade innocent consumers' privacy or, worse, expose them to lawsuits for infringements they did not commit. And as the use of watermarks in online and digital media spreads, the threats proliferate. As the report puts it:
Perhaps the most frequently raised privacy concern is the idea that watermarks could enable increased monitoring, recording, or disclosure of an individualâs media purchases or usage. The fear, in other words, is that watermarking could compromise an individualâs ability to use and enjoy lawfully acquired media on a private, anonymous basis. Particular media usage choices could be sensitive if exposed, or could contribute to the creation of profiles of individualsâ overall media purchase and consumption habits, which might be used in ways that the individuals do not expect or understand. Other possible privacy concerns include the risk that watermarks could contain personal information that could be exposed to third parties, and the risk that errors in or manipulation of watermark data could paint a false picture of an individualâs behavior and perhaps lead to adverse consequences, including potential legal liability.
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After a couple of years playing hard to get, Sony got into bed with the cable industry Tuesday and embraced CableLabs' tru2way standard for interactive-cable-ready devices. That makes at least
six four major consumer electronics manufacturers who have signed onto the CableLabs standard for two-way plug-and-play (and, more important, the license agreement that so many CE executives deplored), the others being Panasonic, Samsung and LG.
This subject is more than a little esoteric, but there's a couple of real-world effects that are easy to identify. One is that Sony's move strikes another blow against the cursed cable converter box and its monthly rental fees. The box's functions should have been built into TV sets years ago, but cable operators and set makers were unable to agree on a standard approach to interactivity that would work on any system across the country. With Sony's acquiescence, tru2way (formerly known as OCAP) is now effectively that standard. The second real-world impact is that Sony's capitulation means there's little chance we'll see a cable-ready digital TV that fully integrates cable networks and services with complementary and competing programming from the Internet. The deals signed with CableLabs consign Internet content and other non-cable services to a program guide separate from the cable guide. The stricture rules out a guide that, for example, mixes on-demand movies from Netflix or Hulu with those from HBO.
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