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Kaleidescape escapes

Kaleidescape_logo Score one for common sense. A California Superior Court judge ruled this week that Kaleidescape Inc. did not breach its contract with the DVD Copy Control Association when it manufactured and sold a high-tech system that let consumers copy the DVDs they owned onto a home video jukebox.

I'm not a lawyer, and I'm not going to do my usual legalistic pantomime on this one. As a principle, I accept that contracts are binding when properly done. On the other hand, you have to wonder whose interests were served by this litigation. Kaleidescape sells extremely high-end gear -- at the time of the lawsuit, the entry-level system cost $27,000. Its systems are closed networks with military-grade security, so even if a Kaleidescape owner should rip a copy of a movie he/she rented from Netflix (because, having spent $27,000 on a state-of-the-art video jukebox, the person isn't likely to drop $15 for a copy of "Little Miss Sunshine"?!?), those bits will never leave the building. By contrast, a pirate equipped with a $900 Dell can easily transform an encrypted DVD into an unencrypted file, then burn multiple copies of the movie for friends and offer it online to downloaders around the globe.

So clearly, this case wasn't about protecting Hollywood against bootleggers. Instead, it seemed to be about stopping Kaleidescape from doing something nifty and compelling that other consumer-electronics companies were either too timid or not clever enough to do. Unlike more conventional jukeboxes that rely on a multi-DVD changer, Kaleidescape hard-drive-based system enables better ways to search through movie collections, put bookmarks in films, create customized playlists and video mixes, and view films in multiple rooms. So while its products are hardly mainstream, Kaleidescape's approach is as logical an application of the technology as an iPod or Picasa.

The DVD CCA is likely to appeal the ruling, but a better response would be to clear the way for people to copy DVDs legally onto home servers. That's something the DVD CCA has been discussion for more than a year, but approval has been delayed by a fight over whether new DVD players should include technology to detect and block bootlegged films. Perhaps those talks will have a new sense of urgency now.

The logo pictured above is Kaleidescape's.

The MPAA clamps down on torture

The Motion Picture Assn. of America came down hard today on the distributor of the torture-infused horror film "Captivity" -- not because the trade group has anything against sadistic popcorn flicks, but because it draws the line at sadistic marketing campaigns. The original promo for "Captivity" was a set of pictures showing the movie's female starlet being menaced by a gloved hand; bloodied; tortured in some weird, emergency-room kind of way; and then left for dead. The tableau was extreme, even by today's standards, and when distributor After Dark Films submitted it for approval, the MPAA rejected it. Nevertheless, according to the Hollywood Reporter, the pictures wound up on 30 billboards in Los Angeles and 1,400 taxis in New York City earlier this month. The head of the studio told the Reporter that it was an accident, but the MPAA was unmoved -- in part because it took days for After Dark to have the offending promos taken down. The penalty: After Dark has to obtain the MPAA's approval not just for the content of any ads for the film, but also for their location (a first). And the ratings board won't consider the film until May 1 at the earliest, putting the film's May 18 release date in jeopardy. Ouch. If the board doesn't like what it sees, After Dark may not have time to make the cuts needed to avoid an NC-17 rating (a mark of box-office death, historically). Nor is releasing an unrated horror film a viable option, given how few theaters will carry such films.

This is a dramatic (pardon the pun) illustration of industry self-regulation. Some free-market purists might complain that it amounts to the major studios, who control the MPAA, trying to hamper an independent competitor. To me, though, it reflects the sensitivity of a Washington-based organization to the hot buttons on Capitol Hill. Lawmakers may wring their hands about how violent and graphic movies have become, but what really puts them in a regulatory mood is when adult-themed content spills into the world of Impressionable Children. The studios and broadcasters are particularly nervous these days about an impending report by the Federal Communications Commission that is expected to prod Congress to regulate violent TV programming, ostensibly because kids can't help but see and be damaged by it. You can argue -- as the Times' editorial board has done -- that the best defense against that kind of programming is for parents to keep their kids away from it, but that's a much harder argument to make when outdoor advertising near malls and thoroughfares is involved. That's why the MPAA requires filmmakers who want their movie to be rated -- which virtually all of them do, mainly because most multiplexes demand it -- to submit their advertising to the trade group and maintain a patina of decency. Outside the darkened theater, that is.

Incidentally, the star of "Captivity" is Elisha Cuthbert, who rose to fame on Fox's "24," the most torture-happy show on television. That's quite a streak -- "24," "House of Wax," "The Quiet," "Captivity".... Good thing she's on board to do a cartoon about animals, it'll help balance her clip reel.

MOG for the masses

YouTube's vast user base has turned it into an encyclopedic electronic library of music videos, ranging from glossy MTV fare to grainy live clips shot with a cellphone camera. And now, the music-blogging site MOG is stepping into the role of YouTube's librarian.

Today, nine-month-old MOG comes out of beta with a new and vastly improved version of its site. One of these enhancements is something called MOG TV, a personalizable channel of music videos culled from YouTube. Users can tell MOG TV to show it videos from artists within their own and/or their friends' collections, or have the programming reflect other MOG users' tastes. The software then plucks videos from YouTube that comply with the user's preferences.

YouTube makes this possible by allowing its inventory to be embedded into other folks' websites. The risk for Google, YouTube's parent, is that companies like MOG will create a better way to navigate that inventory, siphoning off users and the advertising revenue that chases them. That could be happening here; MOG TV promises a better lean-back experience than YouTube, although the latter makes it easier to surf through a single artist's repetoire. Whether any of this works for artists and copyright holders is a whole 'nother question, and the answer to that one depends in part on the religious issue of whether free music videos are promotional or cannibalistic. Such major record companies as Warner and Universal have made their peace with YouTube, but it's not clear what happens to those arrangements when YouTube's videos -- and not the surrounding advertisements -- get imported by sites like MOG.

My overall impression of MOG, though, is that it is promotional. It's been a playground for music geeks, enabling people with huge sonic appetites to indulge themselves in other people's enthusiasms. The new version makes MOG much more friendly to the average listener, someone who's more likely to read a concert review than write one. The changes, which include much better ways to sort through users' posts, music samples and videos, make MOG a more inviting place to discover music and people who love it.

Such tools, to me, are a critical ingredient in the future digital-music landscape. As music transforms from a product into a service and the industry sells access to catalogs instead of copies of songs, one of the main challenges for consumers will be sorting through giant stacks of content to find the things they like. It's as if the produce stand on the corner were to be replaced by a supermarket that carried almost every food in creation. MOG's software uses a fairly common technique, called collaborative filtering, to steer people to bands and songs they might like. In essence, it compares your music-consuming behavior against other users' collections, finds those with overlapping tastes, then recommends back to you things that aren't in your collection but other members of the group have. What makes MOG a powerful tool, at least in theory, is that it can look at the music you've collected on your computer and what you've been playing, both on your PC and your iPod. That's a better approach than, say, a site that bases recommendations on what you've bought or searched for.

Whether MOG emerges as a great music-discovery vehicle depends on how well its software performs and how many people become MOGgers. There's a powerful network effect here, just as with YouTube. My guess is that it's still missing one piece -- enabling users to hear the songs and artists that get recommended to them. The site allows users to add MP3s to their blog posts, which readers can stream (not download). But it asks people to upload songs only if they have the right to do so, and they seem to be complying. As a result, users' profile pages and MOG's recommendations are populated mainly with 30-second samples. On the other hand, MOG probably can't make a vast quantity of music available on demand without charging something, given the royalties involved. And 30-second samples, combined with the occasional full-length song or video and blog post, may be enough to prod someone to obtain a single or album elsewhere -- ideally, where they can pay for it.

Verizon's new TV channel

Thursday, Verizon plans to unveil its first stab at TV programming -- well, the first since Tele-TV, an ill-fated TV programming and delivery venture that two of Verizon's predecessors, Bell Atlantic and NYNEX, launched in the mid-1990s. This time the product is a channel that Verizon plans to offer through FiOS TV, its fiber-optic alternative to cable, to customers in the Washington, D.C. area. It will be devoted to local topics, including news, sports, traffic and high-definition videos shot by "citizen video journalists" (dubbed VJ's -- how original). The sports programming alone (which includes some Georgetown and George Mason University games and Major League Baseball but not, apparently, the Redskins) could generate a substantial audience for the channel, depending on which games Verizon can obtain the rights to carry. Not many details are available yet, but it sounds as if Verizon is falling into the trap of using advanced technology to deliver something based on yesterday's programming model. Instead of a linear channel, a la local broadcasters, why not make the material available on demand? Let users put up windows showing news, traffic and weather simultaneously, and let them pick which segments to watch in the order they want to watch them. FiOS doesn't have to be just an alternative to cable; it can create a whole new value proposition for viewers. And the easiest place for Verizon to start is with programming it owns.

Have ringtones jumped the shark?

BMI, one of the three major performing rights organizations in the U.S., announced today that consumers appear to have regained their senses about ringtones. The group estimated that U.S. ringtone revenue will drop to $550 million in 2007, down $50 million from 2006. "The ringtone market matured in 2006.... The novelty phase has ended," BMI new-media exec Richard Conlon said. In addition to the novelty wearing off, a growing number of phones and software programs are letting users create and load their own tones.

Happily for songwriters and music publishers (more than 300,000 of whom BMI represents), as well as record companies, the fading ringtone fad could be offset by irrational exuberance over ringback tones -- music that callers hear in lieu of a ringer when they dial your cellphone. BMI estimated that $65 million worth of ringback tones will be sold this year. But how long is that fad going to last? As BMI's Conlon suggested, the next big growth area for mobile music probably lies in streaming media.

Filtering user-generated content

Advestigo_logo A Bear Sterns analyst's report on Google caused a stir early this month by estimating that its YouTube subsidiary made $15 million in all of 2006. One reason for the comparatively paltry sales was YouTube's reluctance to sell ads next to videos with uncertain provenance -- the company had to be sure the clip wasn't violating copyrights before it was monetized. Meanwhile, the entertainment industry was pressing YouTube, other user-generated content sites and file-sharing networks to police themselves, rather than forcing copyright holders to identify and complain about specific files.

These overlapping needs have created a powerful demand for software that recognizes files as they're uploaded onto user-generated sites or swapped on file-sharing networks. Not surprisingly, the tech industry has responded. The Motion Picture Association -- the global version of the MPAA -- is in the final stages of studying video-recognition technologies supplied by 11 firms and a university. Here's the list: MPA content recognition participants. Included are a couple of usual suspects -- Audible Magic, whose customers include the iMesh file-sharing network, and Gracenote -- as well as such globally flavored upstarts as Advestigo, which was founded by a pair of French researchers, and Vobile, whose founders are Chinese engineers. The basic approach is to assemble a database of unique identifiers for movies, TV shows, music videos and other forms of content, then compare files against this database as they're transmitted online. Within a couple of weeks, the MPA is expected to give several of those technologies an informal seal of approval.

At that point, look for more user-generated sites and file-sharing networks (e.g., StreamCast's Morpheus) to plug in content-recognition technologies and start experimenting with a variety of ways to sell advertising. According to executives at Advestigo and inside Hollywood, the rationale for identifying files has changed dramatically in the past year or so. The major studios used to view video "fingerprinting" techniques as a way to block copyrighted materially from being shared online. Now they see them as the key to building advertiser-supported business models -- they enable content owners to find out who their online audience is, as well as monitoring how ads flow to those viewers. Much work remains to be done to complete the infrastructure -- for example, studios and content-recognition firms have to build their databases of unique identifiers. But when the MPA's report comes out, it could be the online equivalent of a gun going off in the race to port TV's business model to the Web.

The Wall Street Journal on Apple TV

Apple_tv Today's dog-bites-man news: the Journal's Walt Mossberg got an exclusive pre-release look at the latest Apple device, and he loved it. The box in question is the Apple TV, which is designed to bridge the gap between your PC (or Mac) and your television set. Mossberg focused on the sort of questions that someone new to digital media would focus on. Is it easy to set up? (Yes.) Is it easy to use? (Yes.) Is the picture quality good? (Yes.)

To me, though, there's no reason to buy a "media extender," particularly not one as expensive as the Apple TV, unless it can do one thing: enable me to watch on my TV (and hear on my stereo) things that I can get only on my PC today, and that I'd rather experience in my living room. Those things include photos; home movies; downloaded songs and videos; and music, video clips and TV shows streamed from Web sites. Mossberg and co-writer Katherine Boehret didn't answer this question directly, but provided some clues. They note that the Apple TV can handle some of the digital photos scattered around your home network (although it's not clear whether you can plug a digital camera or memory card into the thing and show off your latest pics). They didn't address the home-movie issue, but Apple's website says the box is limited to particular flavors of MPEG-4 and H.264, which means most people would have to convert their videos to these formats to make them work. They gave the Apple TV high marks for the way it handled music and video stored on a home computer (with an important caveat, which I'll address later). But they conceded that the box cannot display content from YouTube, MySpace, NBC.com, Comedy Central's Motherload or any other Web site with audio or video streams, although they speculated that the software will eventually be updated to accomplish this feat.

The inability to handle streamed content makes the Apple TV a non-starter in my book, particularly at that price. Besides, I don't have digital TV. But there's another issue that Mossberg and Boehret mentioned in passing that is a real problem for the device, as well as seemingly every other one of its ilk. The content that is most clearly trapped on the PC is the stuff protected by electronic locks, a.k.a. digital rights management (DRM) technology. Some of it is Hollywood movies, for which there is an easy substitute at the local movie rental store. But some of it is content rented through Web-based audio or video subscription services, such as Vongo or Rhapsody. Just about every subscription service on the Net today (along with most of the legal download sites) uses Microsoft's DRM, which the Apple TV cannot handle. That's not because Microsoft won't make it available, but because Apple uses only its own DRM, which powers the market-leading iTunes Store. As a result, people who buy an Apple TV can't use it for content rented online or bought at any store other than Apple's. One ugly result is that someone who wants to watch, say, a missed episode of "24" can't use the Apple TV to watch it for free through MySpace. Instead, if they want to use their shiny new device to watch it in their living room, they'll have to plunk down $1.99 to buy it from the iTunes Store.

IMHO, the ultimate solution here is a media adapter that a) can handle material streamed from the Net; b) recognizes every digital media format in wide use by consumer-electronics and computer makers; and c) uses standard scrambling technology that the studios and music companies embrace, such as DTCP over IP. That way, the DRM used on downloaded content shouldn't matter, as long as the computer storing the content could connect securely to the media adapter. Yes, it would be a better world without DRM, but then we wouldn't have subscription services, downloadable movies, etc. etc. If Apple took this approach, its engineering and design skills would probably still trump anyone else in the market. Instead, it seems intent on promoting iTunes and the iTunes Store as the software platform for digital music and movies.

One other question that Mossberg and Boehret didn't answer, and I've never been able to persuade Apple to answer, either: will Hollywood movies and other high-definition content bought from the iTunes Store be viewable in HD on older HDTVs, or will the high-def output be limited to the HDMI connection? A geeky question, I know, but one that matters to millions of potential buyers whose HDTVs have only component video inputs.

How I spent my spring break

Sxsw I saw all or part of 43 bands at South by Southwest last week, but the most intriguing part of the trip might have been a Q&A by Pete Townshend, the only original member of the Who currently standing. In addition to dispensing career advice and telling anecdotes, Townshend announced something he called The Method. Details were sketchy, but what it boils down to is Web-based software that creates highly personalized songs -- the program generates music by processing the data people provide about themselves. There's likely to be a fee associated with it (the flyer on our seats talked about the service being available to "subscribers"). On the plus side, Townshend said that the individuals who "sit" for the Method software will hold 1/3 of the copyright to the ensuing music. Townshend has been thinking about doing this since the "Lifehouse" days -- the rock opera that was largely shelved in favor of "Who's Next." The whole thing is scheduled to launch with a press conference and webcast April 25, but there's a MySpace site on this topic already.

As for the music, my week was typified by what happened late Friday night. I was amid a giant sea of humanity at Stubbs for The Good, the Bad and the Queen, arguably the biggest act playing that evening, and I wasn't exactly transported into groove heaven. So after four or five turgid tracks I ran down the street to join a sparse crowd of 20 or so fans at Parish II, where Tullycraft was about halfway through its set of head-bobbing twee-pop gold. The Tullys delivered on the promise of live music (albeit in a no-animals-harmed-in-the-making-of-this-indie-pop-record kind of way) much better than TGTB&TQ did -- more than just raising the volume, they breathed life into the songs on their records. With that in mind, I'd say my other favorite shows were by, in no particular order: Peter, Bjorn and John (who rocked surprisingly hard); hypnotic +/-; the ever-reliable Sloan (who always rock like it's 1975); the astounding Kid Koala; Fujiya & Miyagi; The Cinematics; Sparklehorse; The Broken West; Amy Winehouse; The Rapture; Youth Group; Thomas Dolby (playing a number of hits, but sadly nothing from "The Flat Earth"); Dallas Crane; Great Northern and The Blakes. My main regrets: watching Razorlight made me miss half of the WinterKids' set, and going to see a disappointing Parisian two-piece instead of trying to get into Field Music, a not-so-obscure British three-piece. Then again, I wound up rawking out to the Blakes, so the story ended well.

For the Rashomon effect, check out blog posts from my two companions on the trip: Dan Hontz and Bill Goodykoontz. The did a much better job keeping track of our food and beer intake. And yes, that movie is a bit older than we are. But the next time I go to SxSW, I'm taking my AARP card.

A few Slacker thoughts

Slacker_logo2_2 Maybe I'm beating a dead horse, but I wrote another piece about how digital rights management technology can be used to give consumers more, not less, than they had before. It's today's Opinion Daily column at latimes.com, and you can read it here. The example I cite is a company called Slacker, which re-imagines radio for the always-on generation. I haven't had the chance to play with Slacker's service yet -- I spent the last week at South by Southwest, seeing more bands in four days than I'd seen in the previous decade (read three versions of the highlights: here, courtesy of my pal Bill Goodykoontz; here, from my pal Dan Hontz; or here, from me) -- but the demos that CEO Dennis Mudd provided at the festival were pretty compelling. At any rate, the main thing that interested me was how the company used DRM to create a new value proposition, not the product itself.

The Slacker team includes alumni from several pioneering digital-music companies, including MusicMatch (Mudd's last company, which made one of the first jukebox programs for PCs) Rio (the first MP3 player) and XM satellite radio. And as an aside, Slacker's launch could have two impacts on XM. First, it shows how much technology has changed the radio market since the FCC set the rules for satellite radio in 1997, giving regulators another reason to approve the proposed XM and Sirius merger. Contrary to what critics say, the combination hardly creates a monopoly; as Slacker's emergence shows, the radio market is getting more competitive every day. Second, the license deals that Slacker negotiated include the ability to offer a portable player that lets users save tracks they hear on Slacker's radio stations. Those tracks can be then be played on-demand and mixed with the user's personal MP3s, but not moved off the device. That's just what XM does with its Inno, a player so loathed by the major record companies that they sued over it. That case is still pending. So why is Slacker's player acceptable to the majors (two of the four have announced deals with Slacker, and the others are expected to follow) and the Inno isn't? My guess is that it was easier for Slacker, as a start-up with no users, to carve out a new royalty niche -- somewhere between the rate for basic webcasting and the one for a fully on-demand, portable service such as Napster-to-go -- than it has been for XM, which has millions of users. The fact that Slacker (and Sirius) were able to strike deals, though, suggests that XM will ultimately be able to do the same and make the labels' lawsuit go away.

Viacom sues YouTube and Google

Viacom_logo From Mark Cuban's lips to Sumner Redstone's ears.... Upping the ante at the negotiating table, Viacom sued YouTube and Google today for upwards of $1 billion in damages. Although you may remember Viacom's outside counsel -- Donald Verrilli Jr. of Jenner & Block -- from MGM v Grokster, this case raises several really interesting issues not found in the peer-to-peer cases, in addition to one that came up in the original Napster case.

YouTube's approach to copyrighted material has been the same as Google's -- if (and only if) a copyright owner complains that one of his/her clips was posted without permission, YouTube will remove that specific clip. That's what the Digital Millennium Copyright Act of 1998 requires Web hosting companies to do in order to be shielded from lawsuits. It's also consistent with the 9th Circuit Court of Appeals' first ruling in the Napster case, which said it was the record companies' job, not Napster's, to look for and identify  infringements on the network. Viacom sued YouTube in a different circuit -- it was filed in New York, in the 2nd Circuit -- and argued that several YouTube features make it impossible for copyright holders to detect all the infringements enabled by the site. Viacom demanded that YouTube use technology to prevent or remove infringing posts, effectively making YouTube police itself on behalf of copyright owners.

Youtube_logo2 More important, Viacom argues that YouTube doesn't qualify for the DMCA's "safe harbor" for Web hosting companies. YouTube duplicates and displays works on a site it controls and monetizes, the lawsuit contends, while a Web hosting firm leaves such activities and control to its customers. If Viacom prevails in court on this point, that's bad news for every user-generated content site -- particularly the ones that syndicate their content elsewhere online. Paging Dr. MySpace....

Intriguingly, some of the things Viacom complains about are the kinds of features that legitimate users demand from a site like YouTube. For example, YouTube lets people post videos that can be seen only by the users ("friends") they select. That's a great approach for letting far-flung relatives watch home videos, but it's also a fine way to keep Viacom's lawyers from spotting "Mission: Impossible" clips. Similarly, the embedding function helps filmmakers tap the viral energy of the Web to gain exposure for their short works and promotional pieces. But it also helps spread an infringing work far and wide.

The ideal outcome here is for Viacom to strike a licensing deal with YouTube that turns the former's clips into incremental revenue. I suspect that Viacom feels the same way; the problem is figuring out how to define the clips' worth. By serving as a virtual VCR for "The Daily Show," "South Park" and other Viacom titles, does YouTube reduce the amount of revenue those shows generate? There's some evidence that the effect is just the opposite -- that online exposure increases viewership on TV. How about YouTube's effect on Viacom's websites and their advertising revenue? Does it draw eyeballs away from comedycentral.com, et al, or does it expose Viacom clips to a complementary -- and much larger -- collection of viewers?

Hey, if questions like these were easy to answer, we'd be seeing more licensing deals and fewer lawsuits.

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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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