1st > February > 2004 Archive

Double Jeopardy for kids caught in Pepsi Apple promo

Four children bullied by the Recording Industry Association of America will re-enact their shame for tens of millions of TV viewers today, at the behest of two giant American corporations: Apple Computer and Pepsi Cola Inc. Instead of using actors to dramatize their shame, the RIAA, Apple and Pepsi have forced the children themselves to conform with the copyright regime, and to look suitably browbeaten as a series of captions reads: INCRIMINATED … ACCUSED … BUSTED … CHARGED. Is this a medieval costume drama? A low-budget dramatization of some era of America's dark and troubled past, as recorded by Hawthorne, when public humiliations were commonplace? Or is it some strange and sadistic imported Japanese game show - the kind where people assent to be filmed eating worms ? No, it's a home-grown artifact which will be broadcast at great expense across the nation during the annual US Superbowl sport event today. The advertisement features four victims of the RIAA's legal jihad wearing the Scarlet Letter of their own shame for the benefit of the TV cameras - and quite disgustingly, the RIAA insisted that the agency couldn't hire stand-in actors to replay the script, asking that the 'perpetrators' play themselves : a move which is likely to be remembered as one of the greatest public relations disasters in history. But let’s bear with it. This shameful advertisement - which apparently cost Pepsi (and not Apple, we're relieved to report) as much as $2 million, was entirely home grown, and has a very moral payload. The broadcast encourages children to buy as much teeth-rotting Pepsi soda as they can in the hope of finding a token that allows them to a free, DRM-infected piece of music. Lucky them! Ironies abound, as you might imagine. Where shall we start? Well Apple Computer isn't the only party that wants to exploit abused children, on this most of American of Sundays. MoveOn made a submission, also featuring children, but found itself rejected because it was deemed to represent a 'special interest group'. We're not sure what vacuum these arbiters of public taste live in. But with three of the four constituents of the entertainment industry - consumers, device manufacturers and artists - eager to discuss fairer compensation models, it's hard to see any other conclusion than that the RIAA is a very, very special interest group indeed. There's more. Suburban pub-rock 'punks' Green Day recorded a version of I Fought The Law And The Law Won for the occasion, to provide a soundtrack for the pigopolist lobby group. And how reputations crumble. Twenty years ago, let's not forget, Apple used a Superbowl TV intermission to introduce its iconographic Macintosh computer with the image of an athlete smashing Big Brother. The easy-to-use computer proved to be a liberating tool for personal creativity and with Adobe's Postscript and Aldus' software, created the desktop publishing industry. Now the same Apple is endeavoring to reduce personal freedoms by ushering in a regime where the recording industry enforces copyright with Big Brother's iron fist. The exercise will be lost on the children of Apple founder Steve Jobs, however. He wisely doesn't allow his kids to watch TV, or drink sickly sodas, advocating Odwalla's excellent fruit juices instead. Do as he does, not as he says, we suggest. For more coherent models - which make nonsense of such corporate child-abuse - we suggest you check out the mathematics here. ®
Andrew Orlowski, 01 Feb 2004

Free legal downloads for $6 a month. DRM free. The artists get paid. We explain how…

AnalysisAnalysis Imagine a world where music and movies could be freely exchanged online, where artists are recompensed and the labels don't lose a cent, and where 12-year old girls need not fear harboring an MP3 of their favorite TV show theme tune on their PC. All that could be yours for less than the price of a subscription to Napster: for less than $6 a month. Harvard University Professor Terry Fisher has completed the first comprehensive examination of various alternative models and the one we outline here offers such tantalizing social benefits, that even the most jaded sceptic ought to pay attention. Professor Fisher belongs to the school of forensic sceptics rather than the school of wide-eyed techno-utopians, and he's spent three years trying to make the sums add up. We think it's worth a look, and we think you ought to take a look too. (To make his task even more difficult, Fisher's license model also takes on the additional onerous task of compensating Hollywood, too). How does it work? Let's look at the sums: what level of compensation do the labels, studios and artists need to make it worthwhile? Fisher actually lays his philosophical armory down for us to inspect at a very early stage, and it's thus. Economies have had a lot of trouble with public goods that are 'nonrivalrous' - if you use it you're not depriving someone from access - and 'nonexcludable' - it's actually hard to make them exclusive. Examples of the latter include roads, defense, and culture. It's a real danger that if no one pays, then nothing gets done: the roads crumble, the country becomes vulnerable, and aspiring pop stars give up their dreams of one day snorting cocaine from an expensive prostitute's thighs. But our flippant illustration of the final example is not entirely accidental. Many artists forsake fame for fame's sake - but the beauty of alternative reward models is that there's no disincentive for them to become popular, either. To cite an example, when we've discussed flat fees before, someone usually writes in with some anguish to complain how this would only reward Michael Jackson for being popular. But what's wrong with that? There was a time when he was very popular, and deservedly so. So let's start at an accountant's year zero. Calculating lost revenue In the year 2000, the record labels earned $7 billion on retail sales of $13 billion. For the sake of argument, let's assume that in the first year 20 per cent of retail sales were lost to unlimited copying. That's $1.4 billion, although they'd save $210 million in manufacturing costs, and approximately $145 million in mechanical royalties. That brings the compensation to $1.045 billion for the recordings royalties and $138 million for songwriters, plus an amount for lost radio-related royalties. For the movie industry, calculating the potential loss is extremely difficult. Firstly it's hard to estimate how much the industry earns now from DVD and VCR sales and rentals, and cable and satellite deals. And it's even harder to gauge the loss from file swapping. Even with the advent of Bitorrent, downloads are slow, and few have the patience or resources to find value in them compared to the availability on offer at plentiful late night retail outlets. Fisher reckons five per cent, rather than twenty per cent for the music business, of a $10 billion industry, or $479 million. So combined, that's $1.677 billion to keep the RIAA and the MPAA happy. But of course that's not all it would cost: the model requires an organization to calculate and distribute the royalties, performing the duties of ASCAP or BMI today. ASCAP reported that its 1998 administrative overhead was 16 per cent, so Fisher generously estimates 20 per cent. (It's pretty generous, as we'll see, because the digital overheads may actually be much lower). This takes - and bear with us, because it also generously throws in a 10 per cent charge for inflation between 2000 and 2004 - the net result to $2.306 billion. So who pays? Raising the money If it was implemented as a regressive poll tax, with 87 million household filing IRS returns, each household would pay a mere $27 extra a year: a little over $2 a month, or 51 cents a week. That's half the price of a single iTunes Music Store song. That's the most efficient way, with the lowest overheads. However, any kind of income tax increase is obviously a hard sell, especially in God and Gubbment-fearing America. And there are many sound objections. Why should the poor subsidize the rich? Why, notes Fisher (who clearly must remember the culture wars of the early 1990s), should a proportion of the population which finds the entertainment products blasphemous be asked to subsidize their creators? And why should Net-free households want to subsidize the broadband users who are actually taking advantage of the system? Fisher then exhaustively discusses four other options: taxing the playback devices and/or burners, levies on the physical media, levies on the delivery service, such as Kazaa, or on the Internet access point (your ISP). The latter is by far the largest: spending on broadband in the US in 2004 is estimated to be $16.4 billion. By contrast, blank media sales generate $2 billion in revenue. In total, these four categories gross $20.248 billion. And so to get our $2.3 billion to compensate artists, studios and labels would require an 11 per cent hike. But what if it fell entirely on broadband users? Some might find the figure surprising: excluding all of the other penny taxes we've just mentioned, the cost will be $6 per broadband user per month. Um, is that all? Well, actually, yes it is. So what do consumers gain from suddenly being able to exchange music? It's perhaps the most delicious question that's ever been asked - and there are so many advantages to the free exchange of culture that we may have forgotten what they are. Fisher puts it thus: "Consumers would pay less for more entertainment. Artists would be fairly compensated. The set of artists who made their creations available to the world at large – and consequently the range of entertainment products available to consumers – would increase. Musicians would be less dependent on record companies, and film makers would be less dependent on studios, for the distribution of their creations. Both consumers and artists would enjoy greater freedom to modify and redistribute audio and video recordings. Although the prices of consumer electronic equipment and broadband access would increase somewhat, demand for them would rise, thus benefiting the suppliers of those goods and services. Finally, society at large would benefit from a sharp reduction in litigation and other transaction costs." Is that enough? Well, there are two other benefits Professor Fisher doesn’t list. The high street music chainstore would find itself in competition with informal music distribution points - such as concert venues, clubs or coffee shops. Given the availability of cheap wireless playback hardware (phones or Bluepods) every café or laundrette could become a 'record store'. The stores that survive would of necessity focus on their expertise and social relationships. It's hard to see what would draw customers into a Virgin chainstore, but it's easy to see an Aquarius Records (a feted specialist store in San Francisco's Mission district continuing to draw a loyal following). Social spaces could be transformed. Nor does Fisher attempt to calculate the demand for Internet infrastructure which might result, with potentially huge macroeconomic benefits. Divvying up the pot So what's the fairest way to divide the revenues? Professor Fisher points out that only a representative sample is required: the model need not involve Big Brother surveillance and aggregation of every song played. TV advertising buyers trust a system already: Neilsen's ratings are calculated from only a few thousand households. And in any case, it's doubtful any agency could afford the IT infrastructure required to aggregate such a vast data warehouse. However Fisher has a technical proposal which could simplify auditing enormously. He suggests that digital media carries embedded watermarks which would not restrict the playback of the song but would help auditors. Fisher says that the "ballot stuffing" is the biggest technical hurdle. "You can never eliminate but you can minimize the ballot stuffing problem," he tells us. "This most promising solution is an automated sampling system that counts the frequency members of the sample play a song all the way through. It's possible for artists to inflate the figure somewhat, to persuade family members to leave computers on 24x7, but that static is tolerable." The most significant disincentive to ballot stuffing is the model itself: most people would simply want the model to work. Unlike the current situation, where there's a monetary advantage to be gained by breaking the system. As for cross-border 'leakage' - Fisher says it is troubling from a fairness standpoint and this could limit its political appeal. "But it could work internationally especially when compared to a regime that leaks like crazy - the regime currently using illicit P2P." The simple idea is very powerful. Fisher identifies four constituencies necessary to accept the model: consumers, artists, device manufacturers and finally the intermediaries: the studios and labels. The model has huge advantages for three of the four. And what incentives, we asked, would the labels and studios have? After hearing his presentations, Fisher says industry is intrigued but hardly feels impelled to jump. The biggest 'carrot' is that it would see its revenues guaranteed at 2000 levels. If it believes its own rhetoric, that could be a very powerful incentive indeed. Aside from a fringe of partisans, consumers are likely to embrace it enthuasiastically. Several months into the infancy of DRM-locked music sales, the online stores are dwarfed by the quantity of peer to peer file swapping, which is again on the rise. Consumers will likely face two futures. In one, the music industry succeeds in locking music sales through DRM restrictions on MP3s, and equally restricted CDs. It's then at liberty to 'reinvent' itself, introducing such multi-sales opportunities we outlined here, and that Ross Anderson suggested in his TCPA FAQ: one-time plays, songs that only play on your birthday, graduated pricing models that charge a 'premium' for higher bit rates. Our favorite has already been suggested by the RIAA's Cary Sherman: a locked iPod full of all the music you'll ever need, which you can pay and unlock at your leisure. (It's deliciously illustrative of the lobby group, which has made the cynical, and not entirely false calculation that most of the people in the world have the same record collection. Or one that varies only by such sufficient degrees that it can apply the logic of the battery farm.) The other comes at a price, but a predictable and low price, and promises to see high street and the economy rejuvenated. That isn't a hard choice for consumers to make, but it will need to be fought against entrenched lobbyists. Our thanks to Professor Fisher for his exhaustive research in making our choices clear. ® Related Link Professor William W. Fisher
Andrew Orlowski, 01 Feb 2004

IT firms top UK software piracy roll of shame

IT firms are the UK's most prolific software piracy offenders. In 2003, tech sector firms were the subject of 24 per cent of 50 settlements made with the Business Software Alliance (BSA) in the UK. In other words, that makes a whopping 12 IT firms which got caught and which paide up. Cue much disapproving rhetoric from the BSA: the tech sector should understand software piracy issues better than anyone else, it says. And of course organisations within the IT sector should realise the "effect of piracy on software innovation and the development of the IT sector as a whole". Siobhan Carroll, regional manager Northern Europe of the BSA, said: "We are particularly unhappy to see the lack of diligence within the IT sector. We would like to see the IT sector as a guardian for our mission but this clearly isn't the case." Other regular software piracy offenders include the construction/engineering sector (17 per cent of settlements - umm, that would make eight and a half companies , Ed), architecture design sector (10 per cent) and educational organisations (8 per cent). The BSA aims to increase software compliance through various educational initiatives. For example, in an effort to help companies deploy successful software asset management strategies the BSA has set up a UK advice site, called justasksam.co.uk. ® Related Stories BSA piracy audit deadline looms for business SMEs slammed for unlicensed software use College students care more about beer than software
John Leyden, 01 Feb 2004

Small firms fighting Microsoft addiction

A fast-growing number of small and medium-sized firms are deeply concerned about being hooked on Microsoft technology and depending too heavily on the software giant's products and services. That's according to new research from the Yankee Group which finds that more than 40 per cent of companies with between two and 499 employees were conscious of the fact that they had all their software eggs in the Redmond basket. "While we expected some apprehension about over-dependence on Microsoft, we were surprised at the extent of this concern throughout the SMB (small and medium-sized business market)," said Michael Lauricella, program manager for the Yankee Group's Small and Medium Business Strategies advisory service. According to the analyst firm's SMB (Infrastructure Survey, almost three quarters of the same group of survey respondents said that they were considering going cold turkey by "actively seeking other vendors to diversify their portfolios". However, John Coulthard, head of small business at Microsoft UK, dismissed the poll, stating that smaller firms were the least likely candidates for diversification of technology portfolios. "We're not talking stocks and shares here with diversification of portfolios, but the ability of firms to manage their IT infrastructures," Coulthard told The Register . "Savvy small business owners really do not want to say that if they have five servers they want to diversify so that one is Microsoft, one is Apple, one is Unix and the others are something else." Coulthard denied that any companies are overly beholden to Microsoft, claiming that only a very small percentage of the overall cost of a typical business PC will swell Redmond's coffers. "In what terms are all these firms totally dependent on Microsoft? Their hardware may be from Dell or HP - that's 70 or 80 per cent of the cost. Microsoft will then provide the OS and the productivity suite. Maybe Symantec will provide the AV - that's as much cost as the operating system." According to Helen Chan, Yankee's small and medium business strategies senior analyst, Microsoft is banking on the SMB market being the "next big thing" for the company, worth an estimated cool $10 billion by 2010. But she notes that Microsoft is facing stiff competition in the sector as vendors such as SAP, Oracle, Siebel and IBM are moving down-market: "There's no question that Microsoft commands a strong presence in the SMB market, but this fear of Microsoft over-dependency will certainly open up opportunities for competitive vendors eager to sneak in." ®
Robert Jaques, 01 Feb 2004

DARPA-funded Linux security hub withers

Two years after its hopeful launch, a U.S.-backed research project aimed at drawing skilled eyeballs to the thankless task of open-source security auditing is prepared to throw in the towel. Initially funded by a research grant from the Pentagon's Defense Advanced Research Projects Agency (DARPA), the Sardonix project aspired to replace the loosely-structured Linux security review process with a public website that meticulously tracks which code has been audited for security holes, and by whom. As conceived by Oregon-based computer scientist Crispin Cowan, Sardonix was to attract volunteer auditors by automatically ranking them according to the amount of code they've examined, and the number of security holes they've found. Auditors would lose points if a subsequent audit by someone else turned up bugs they missed. Cowen hoped that the system would produce the same cocktail of goodwill and computer-judged competition that fuels other successful geeky endeavors, from the distributed computing effort that recognizes top producers in the search for new prime numbers, to the "karma" points awarded highly-rated posters on the news-for-nerds site Slashdot. In the end, though, nobody showed up. "I got a great deal of participation from people who had opinions on how the studliness ranking should work, and then squat from anybody actually reviewing code," says Cowan, chief research scientist at WireX Communications. The project's DARPA funding ran out nine months ago, and the website lingers as a mostly-abandoned husk. The only code audits on the site were performed by a handful of graduate students directed to the task by David Wagner, a computer science professor at U.C. Berkeley. Cowen believes Sardonix was a casualty of security community culture, which he says rewards researchers who find clever or splashy holes in a program, but not for making software more secure. "The Bugtraq model is: find a bug, win a prize -- a modest amount of fame," says Cowen. "Our model is: review a whole body of code, eventually finding no bugs, and receive a deeper level of appreciation from people who use the code. "It seems the Sardonix lesson is people don't want to play this game, they want to play the Bugtraq game." Copyright © 2004,
Kevin Poulsen, 01 Feb 2004