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A Public Format

Jessicasimpson Sony BMG has discovered the MP3 format, a mere seven years after MP3.com and Napster helped make it the de facto standard for downloadable music. Today, the conglomerate released its first MP3: a bizarre customizable single from Jessica Simpson. For a mere $1.99 - more than twice the price of the typical download, not that Sony BMG hasn’t been trying to make those tracks more expensive, too -- you can download a version of Simpson's "A Public Affair" that name-checks your first name in the chorus. Well, the background singers do, at least. Smashing! It's not all that bad a song, actually, but then, I love the antecedent: Holiday (Immaculate Collection Album Version). And because it's in a DRM-free format, it will work on every MP3 player on the market, including the only one that matters these days. You can't say that for any other track Sony BMG sells online, particularly not those at Sony's online store. To limit copying and guard against piracy, the rest of Sony BMG's catalog is wrapped in DRM, whether it be Apple's, Microsoft's, Real's or Sony's. It's just sad that the company would be so fearful of MP3 that it would use The People's Format only on customized songs (which narrow the sharing possibilities, except for equally self-centered namesakes) sold at premium prices.

Still, I hope the song sells like gangbusters. And I hope all the major labels test the waters, too -- not at $1.99, but at 99 cents. My guess is that the demand will jump, generating more revenue and (with luck) obviating the fears of piracy. After all, CDs are nothing but glorified MP3 delivery systems these days. Why should downloads be any different? And why should indie labels be the only ones who capitalize on the phenomenon?

Slow Burn

Movielink_logo Hollywood has moved with surprising speed to embrace some aspects of the Internet and digital distribution. For example, witness how quickly Apple’s iTunes Music Store went from five shows last fall to more than 150. But when it comes to downloadable flicks, the studios have moved at a glacial pace. What’s particularly galling is the refusal to let people buy permanent copies of movies that can be burned onto discs that can work in a conventional DVD player.

The announcement today by Movielink and Sonic Solutions shone a spotlight on that issue. For about a year and a half, Sonic has been demonstrating its ability to burn DVDs with the same copy-protection technology as packaged DVDs use – a type of encryption called Content Scramble System, or CSS. But the group of studios, tech companies and consumer-electronics manufacturers that control the rights to CSS has yet to permit it to be used on homemade DVDs. The group hasn’t disclosed why, exactly, although participants talk vaguely about a clash over the studios’ desire for additional protections against piracy in exchange for granting consumers more flexibility. More recently, Sonic has developed DVD-burning software that supports a variety of anti-copying technologies, from CSS to a variation on the cloaking technique used in copy-protected CDs. Movielink announced today that it will incorporate this Sonic software into its store. That's as far as it can go, though, because it doesn't have the studios' permission yet to use Sonic's solution on any of the films it sells. In the meantime, it will continue to sell movies that cannot be played in a DVD player.

What’s remarkable here is the pointlessness of the studios’ efforts. In essence, they’re trying to stop bootlegging by people who buy movies. That might stop people from burning copies for their friends (or not – programs to circumvent CSS illegally are widely available online), but it won’t make a dent in online piracy. That’s because bootlegged versions of a DVD start popping up weeks, if not months, before the film becomes available for downloading. In other words, the horse will be out of the barn, over the hill and across the river by the time Hollywood brings the lock.

A much better approach is to do what the EZTakes movie store does. Don’t bother with CSS. Use DRM to deter file-sharing and limit copying, and insert a unique digital watermark that will transfer onto any DVDs burned. That way, if anyone is foolish enough to rip the DVD and share it online, the studio can trace the copies back to the source. Somehow I suspect that the folks who want to buy downloadable movies aren't the ones the studios have to worry about.

Broadcast Flag Burning

Is Sen. Daniel Inouye (D-Hawaii) trying to sabotage the broadcast flag?

Inouye is the top Democrat on the Senate Commerce Committee, which recently approved a telecommunications bill that would restore the FCC's ill-fated broadcast-flag rules. But a provision inserted at Inouye's behest could block the use of the technologies that TV manufacturers have already put into millions of products to comply with the FCC's requirements.

The flag regulations would require two things of any device that could tune in or decode a local digital TV station: the device would have to detect whether a program was flagged for protection, and if so, it would have to use an FCC-approved scrambling technique to stop the program from being shared online. The rules would impose new requirements on digital TV receivers, set-top boxes and computer peripherals, as well as changing the way devices talked to one another in a home entertainment network.

Many consumer-electronics and tech firms have acquiesced to the rules, despite some obvious shortcomings, because the FCC gave them sufficient flexibility to design their own technological solutions. A cluster of tech and consumer-electronics powerhouses, including Intel, Sony and Matsushita (which owns the Panasonic brand), had already developed technologies (including those know by the acronyms HDCP and DTCP) that could be used to enforce the broadcast flag regime. In fact, the only digital connectors used to link digital TV receivers to high-definition monitors and recorders today rely on HDCP and DTCP. Thus, any manufacturer wanting to build an HDTV monitor that can interoperate with other companies' products has to license the technologies, at least until a new type of connector or wireless link comes along with a different type of scrambling.

The Inouye provision, which is backed mainly by Philips, would bar the FCC from approving any scrambling technology that relies on the kind of license used for HDCP and DTCP. The rationale is that the licensing scheme deters some patent holders from obtaining royalties, and so is hostile to property rights. The effect would be to remove HDCP and DTCP from the FCC's list of approved technologies. Because so many devices already rely on HDCP and DTCP, the provision would prevent the broadcast flag from having any meaningful effect on consumers for years. The idea of crippling the broadcast flag for the forseeable future is appealing, but the notion of lawmakers meddling in tech firms' licensing choices is not.

Technologies Better Left Unused

Ps3_1The “first sale” doctrine hasn’t been kind to the entertainment industry. Written into federal copyright law in 1976, the longstanding principle holds that a copyright holder’s exclusive right to distribute a work ends as soon as someone buys it. That means consumers are free to redistribute that work – selling, donating or renting it – without compensating the copyright holder, provided they’re not making new copies. Without the first-sale doctrine, there wouldn’t be vibrant, legal markets for used albums, movies and video games.

Now, some video-game industry analysts are wondering if Sony will try to defeat the first-sale doctrine technologically. Several years ago, Sony Corp. patented a technique for designing consoles and video game discs that would effectively eliminate gamers’ ability to rent, sell or share the titles they buy. My colleague Dawn Chmielewski provides an outline of the technology here. The company hasn’t implemented the technique yet, and there’s no indication whether it would do so in the forthcoming PlayStation 3. Still, it’s a logical extension of the strategy that the entertainment industry has been following for a decade: using encryption and other digital-rights-management techniques mainly to stop people from using products in ways the industry doesn’t like, rather than employing those tools to enable compelling new uses.

That strategy has produced such bizarre and counterproductive results as the Sony BMG rootkit fiasco, which led the company to recall millions of dollars worth of copy-protected CDs, and the DRM format war that’s curbing the growth of online music subscription services. If the video game industry were like the cellphone business, with free consoles and cheap games, a move to cut off used or rented games might be tolerable. Against a backdrop of $400 consoles and games that sell for $50 to $60, however, such a change would simply push more fans away from the PlayStation 3 and onto Microsoft’s Xbox 360 or Nintendo’s Wii. Good thing they have a choice….

Ill Communication

Gfc_kitty_backpack_sm I used to think the labels were losing the battle against campus piracy because they weren’t doing enough to put legitimate services into colleges and universities. But this story in the Wall Street Journal suggests that the situation is a bit more, umm, complicated. Even though they’re virtually free, the services aren’t attracting many student subscribers. And the students who do sign up keep their wallets in their jeans, rarely buying any permanent (99-cent) downloads.

Critics of Napster, Rhapsody and other subscription services say they’re not surprised – even an 18-year-old can tell a bad deal when he/she sees one. In this view, these services are a waste of money because all the tracks you’ve downloaded evaporate as soon as you stop paying a monthly fee. In addition, any permanent tracks you buy for 99 cents are polluted with a flavor of DRM that doesn’t work with iPods.

Gee, what a ripoff! It’s as if you paid $70 a month for TV, then lost all those great shows as soon as you cancelled your subscription! Oh, wait – nearly 80% of the people who watch TV do just that. And by saving those 99-cent downloads onto CDs (because everyone backs up their online purchases, right?), they can be converted easily to WAV, Apple Lossless or 320 Kbps MP3s with no discernable loss in fidelity.

Yes, the iPod compatibility problem is annoying. But here’s my indefensible position: on a campus where you have ubiquitous broadband and everyone totes a laptop, there’s no reason to download anything. Stream it all. (Microsoft may make this even easier by offering a portable player with WiFi. Granted, it's not likely to be an instant icon of cool.)

So why are the services lagging? My guess is that it’s a combination of factors. At the top of the list is the ubiquitous iPod. For students who have one – and who will admit to not having one? – the top priority is filling it. The legal services can’t help on that front. Instead, they’re a substitute, and folks with working iPods aren’t in the market for a substitute.

Second, the services aren’t nearly as deep as they should be. They’re good on new releases from the major labels and large independents, but sketchy elsewhere. (Kissing the Pink, anybody?) So students may sour on them as soon as they come up empty when searching for Led Zeppelin or Garth Brooks.

Finally, and most fundamentally, students may miss the point of these services because no one is doing even a marginally good job of explaining them. They’re not about acquiring tunes, they’re about being entertained by them. It’s just like cable TV, only cheaper and better. Besides, the $0 to $3 a month that students pay won’t buy them much from any legal outlet. Instead of thinking “Gee, I’ll be left with nothing when I graduate,” they should think, “Dang, I'll save a ton of money on music for four years.”

Of course, when students feel they’re entitled to music and shouldn’t have to pay for it, there’s no way to sell them a service that heaps restrictions onto files in exchange for cutting the price.

Maybe I’m atypical because I have a voracious appetite for music and don't think I should be it for free, but I like the subscription services. And with time and more product development (suggested feature: letting people play DJ remotely for their friends), maybe more of the tastemakers on campus will come to appreciate the services as I do. Of course, that won’t happen unless they also accept this basic premise of copyright law: labels and songwriters have a right to demand something in return for their work.

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Times editorial writer Jon Healey pens opinion pieces about a variety of business issues, and blogs about technologies that are changing the entertainment industry's business model.

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