Then comes the working group meetings, like the BPDG. The BPDG was nominally set up to set up the rules for the Broadcast Flag. Under the Flag, manufacturers would be required to limit their "outputs and recording methods" to a set of "approved technologies." Naturally, every manufacturer in the room showed up with a technology to add to the list of approved technologies -- and the sneakier ones showed up with reasons why their competitors' technologies shouldn't be approved. If the Broadcast Flag became law, a spot on the "approved technologies" list would be a license to print money: everyone who built a next-gen digital TV would be required, by law, to buy only approved technologies for their gear.
The CPTWG determined that there would be three "chairmen" of the meetings: a representative from the broadcasters, a representative from the studios, and a representative from the IT industry (note that no "consumer rights" chair was contemplated -- we proposed one and got laughed off the agenda). The IT chair was filled by an Intel representative, who seemed pleased that the MPAA chair, Fox Studios's Andy Setos, began the process by proposing that the approved technologies should include only two technologies, both of which Intel partially owned.
Intel's presence on the committee was both reassurance and threat: reassurance because Intel signaled the fundamental reasonableness of the MPAA's requirements -- why would a company with a bigger turnover than the whole movie industry show up if the negotiations weren't worth having? Threat because Intel was poised to gain an advantage that might be denied to its competitors.
We settled in for a long negotiation. The discussions were drawn out and heated. At regular intervals, the MPAA reps told us that we were wasting time -- if we didn't hurry things along, the world would move on and consumers would grow accustomed to un-crippled digital TVs. Moreover, Rep Billy Tauzin, the lawmaker who'd evidently promised to enact the Broadcast Flag into law, was growing impatient. The warnings were delivered in quackspeak, urgent and crackling, whenever the discussions dragged, like the crack of the commissars' pistols, urging us forward.
You'd think that a "technology working group" would concern itself with technology, but there was precious little discussion of bits and bytes, ciphers and keys. Instead, we focused on what amounted to contractual terms: if your technology got approved as a DTV "output," what obligations would you have to assume? If a TiVo could serve as an "output" for a receiver, what outputs would the TiVo be allowed to have?
The longer we sat there, the more snarled these contractual terms became: winning a coveted spot on the "approved technology" list would be quite a burden! Once you were in the club, there were all sorts of rules about whom you could associate with, how you had to comport yourself and so on.
One of these rules of conduct was "robustness." As a condition of approval, manufacturers would have to harden their technologies so that their customers wouldn't be able to modify, improve upon, or even understand their workings. As you might imagine, the people who made open source TV tuners were not thrilled about this, as "open source" and "non-user-modifiable" are polar opposites.
Another was "renewability:" the ability of the studios to revoke outputs that had been compromised in the field. The studios expected the manufacturers to make products with remote "kill switches" that could be used to shut down part or all of their device if someone, somewhere had figured out how to do something naughty with it. They promised that we'd establish criteria for renewability later, and that it would all be "fair."
But we soldiered on. The MPAA had a gift for resolving the worst snarls: when shouting failed, they'd lead any recalcitrant player out of the room and negotiate in secret with them, leaving the rest of us to cool our heels. Once, they took the Microsoft team out of the room for six hours, then came back and announced that digital video would be allowed to output on non-DRM monitors at a greatly reduced resolution (this "feature" appears in Vista as "fuzzing").
The further we went, the more nervous everyone became. We were headed for the real meat of the negotiations: the criteria by which approved technology would be evaluated: how many bits of crypto would you need? Which ciphers would be permissible? Which features would and wouldn't be allowed?
Then the MPAA dropped the other shoe: the sole criteria for inclusion on the list would be the approval of one of its member-companies, or a quorum of broadcasters. In other words, the Broadcast Flag wouldn't be an "objective standard," describing the technical means by which video would be locked away -- it would be purely subjective, up to the whim of the studios. You could have the best product in the world, and they wouldn't approve it if your business-development guys hadn't bought enough drinks for their business-development guys at a CES party.
To add insult to injury, the only technologies that the MPAA were willing to consider for initial inclusion as "approved" were the two that Intel was involved with. The Intel co-chairman had a hard time hiding his grin. He'd acted as Judas goat, luring in Apple, Microsoft, and the rest, to legitimize a process that would force them to license Intel's patents for every TV technology they shipped until the end of time.
Why did the MPAA give Intel such a sweetheart deal? At the time, I figured that this was just straight quid pro quo, like Hannibal said to Clarice. But over the years, I started to see a larger pattern: Hollywood likes DRM consortia, and they hate individual DRM vendors. (I've written an entire article about this, but here's the gist: a single vendor who succeeds can name their price and terms -- think of Apple or Macrovision -- while a consortium is a more easily divided rabble, susceptible to co-option in order to produce ever-worsening technologies -- think of Blu-Ray and HD-DVD). Intel's technologies were held through two consortia, the 5C and 4C groups.
The single-vendor manufacturers were livid at being locked out of the digital TV market. The final report of the consortium reflected this -- a few sheets written by the chairmen describing the "consensus" and hundreds of pages of angry invective from manufacturers and consumer groups decrying it as a sham.
Tauzin washed his hands of the process: a canny, sleazy Hill operator, he had the political instincts to get his name off any proposal that could be shown to be a plot to break voters' televisions (Tauzin found a better industry to shill for, the pharmaceutical firms, who rewarded him with a $2,000,000/year job as chief of PHARMA, the pharmaceutical lobby).
Even Representative Ernest "Fritz" Hollings ("The Senator from Disney," who once proposed a bill requiring entertainment industry oversight of all technologies capable of copying) backed away from proposing a bill that would turn the Broadcast Flag into law. Instead, Hollings sent a memo to Michael Powell, then-head of the FCC, telling him that the FCC already had jurisdiction to enact a Broadcast Flag regulation, without Congressional oversight.
Powell's staff put Hollings's letter online, as they are required to do by federal sunshine laws. The memo arrived as a Microsoft Word file -- which EFF then downloaded and analyzed. Word stashes the identity of a document's author in the file metadata, which is how EFF discovered that the document had been written by a staffer at the MPAA.
This was truly remarkable. Hollings was a powerful committee chairman, one who had taken immense sums of money from the industries he was supposed to be regulating. It's easy to be cynical about this kind of thing, but it's genuinely unforgivable: politicians draw a public salary to sit in public office and work for the public good. They're supposed to be working for us, not their donors.
But we all know that this isn't true. Politicians are happy to give special favors to their pals in industry. However, the Hollings memo was beyond the pale. Staffers for the MPAA were writing Hollings's memos, memos that Hollings then signed and mailed off to the heads of major governmental agencies.
The best part was that the legal eagles at the MPAA were wrong. The FCC took "Hollings's" advice and enacted a Broadcast Flag regulation that was almost identical to the proposal from the BPDG, turning themselves into America's "device czars," able to burden any digital technology with "robustness," "compliance" and "revocation rules." The rule lasted just long enough for the DC Circuit Court of Appeals to strike it down and slap the FCC for grabbing unprecedented jurisdiction over the devices in our living rooms.
So ended the saga of the Broadcast Flag. More or less. In the years since the Flag was proposed, there have been several attempts to reintroduce it through legislation, all failed. And as more and more innovative, open devices like the Neuros OSD enter the market, it gets harder and harder to imagine that Americans will accept a mandate that takes away all that functionality.
But the spirit of the Broadcast Flag lives on. DRM consortia are all the rage now -- outfits like AACS LA, the folks who control the DRM in Blu-Ray and HD-DVD, are thriving and making headlines by issuing fatwas against people who publish their secret integers. In Europe, a DRM consortium working under the auspices of the Digital Video Broadcasters Forum (DVB) has just shipped a proposed standard for digital TV DRM that makes the Broadcast Flag look like the work of patchouli-scented infohippies. The DVB proposal would give DRM consortium the ability to define what is and isn't a valid "household" for the purposes of sharing your video within your "household's devices." It limits how long you're allowed to pause a video for, and allows for restrictions to be put in place for hundreds of years, longer than any copyright system in the world would protect any work for.
If all this stuff seems a little sneaky, underhanded and even illegal to you, you're not alone. When representatives of nearly all the world's entertainment, technology, broadcast, satellite and cable companies gather in a room to collude to cripple their offerings, limit their innovation, and restrict the market, regulators take notice.
That's why the EU is taking a hard look at HD-DVD and Blu-Ray. These systems aren't designed: they're governed, and the governors are shadowy group of offshore giants who answer to no one -- not even their own members! I once called the DVD-Copy Control Association (DVD-CCA) on behalf of a Time-Warner magazine, Popular Science, for a comment about their DRM. Not only wouldn't they allow me to speak to a spokesman, the person who denied my request also refused to be identified.
The sausage factory grinds away, but today, more activists than ever are finding ways to participate in the negotiations, slowing them up, making them account for themselves to the public. And so long as you, the technology-buying public, pay attention to what's going on, the activists will continue to hold back the tide.
Happy Meal Toys versus Copyright: How America chose Hollywood and Wal-Mart, and why it's doomed us, and how we might survive anyway
(Originally published as "How Hollywood, Congress, And DRM Are Beating Up The American Economy," InformationWeek, June 11, 2007)
Back in 1985, the Senate was ready to clobber the music industry for exposing America's impressionable youngsters to sex, drugs and rock-and-roll. Today, the the Attorney General is proposing to give the RIAA legal tools to attack people who attempt infringement.
Through most of America's history, the US government has been at odds with the entertainment giants, treating them as purveyors of filth. But not anymore: today, the US Trade Rep using America's political clout to force Russia to institute police inspections of its CD presses (savor the irony: post-Soviet Russia forgoes its hard-won freedom of the press to protect Disney and Universal!).
How did entertainment go from trenchcoat pervert to top trade priority? I blame the "Information Economy."
No one really knows what "Information Economy" means, but by the early 90s, we knew it was coming. America deployed her least reliable strategic resource to puzzle out what an "information economy" was and to figure out how to ensure America stayed atop the "new economy" -- America sent in the futurists.
We make the future in much the same way as we make the past. We don't remember everything that happened to us, just selective details. We weave our memories together on demand, filling in any empty spaces with the present, which is lying around in great abundance. In Stumbling on Happiness, Harvard psych prof Daniel Gilbert describes an experiment in which people with delicious lunches in front of them are asked to remember their breakfast: overwhelmingly, the people with good lunches have more positive memories of breakfast than those who have bad lunches. We don't remember breakfast -- we look at lunch and superimpose it on breakfast.
We make the future in the same way: we extrapolate as much as we can, and whenever we run out of imagination, we just shovel the present into the holes. That's why our pictures of the future always seem to resemble the present, only moreso.
So the futurists told us about the Information Economy: they took all the "information-based" businesses (music, movies and microcode, in the neat coinage of Neal Stephenson's 1992 novel Snow Crash) and projected a future in which these would grow to dominate the world's economies.
There was only one fly in the ointment: most of the world's economies consist of poor people who have more time than money, and if there's any lesson to learn from American college kids, it's that people with more time than money would rather copy information than pay for it.
Of course they would! Why, when America was a-borning, she was a pirate nation, cheerfully copying the inventions of European authors and inventors. Why not? The fledgling revolutionary republic could copy without paying, keep the money on her shores, and enrich herself with the products and ideas of imperial Europe. Of course, once the US became a global hitter in the creative industries, out came the international copyright agreements: the US signed agreements to protect British authors in exchange for reciprocal agreements from the Brits to protect American authors.
It's hard to see why a developing country would opt to export its GDP to a rich country when it could get the same benefit by mere copying. The US would have to sweeten the pot.
The pot-sweetener is the elimination of international trade-barriers. Historically, the US has used tariffs to limit the import of manufactured goods from abroad, and to encourage the import of raw materials from abroad. Generally speaking, rich countries import poor countries' raw materials, process them into manufactured goods, and export them again. Globally speaking, if your country imports sugar and exports sugar cane, chances are you're poor. If your country imports wood and sells paper, chances are you're rich.
In 1995, the US signed onto the World Trade Organization and its associated copyright and patent agreement, the TRIPS Agreement, and the American economy was transformed.
Any fellow signatory to the WTO/TRIPS can export manufactured goods to the USA without any tariffs. If it costs you $5 to manufacture and ship a plastic bucket from your factory in Shenjin Province to the USA, you can sell it for $6 and turn a $1 profit. And if it costs an American manufacturer $10 to make the same bucket, the American manufacturer is out of luck.
The kicker is this: if you want to export your finished goods to America, you have to sign up to protect American copyrights in your own country. Quid pro quo.
The practical upshot, 12 years later, is that most American manufacturing has gone belly up, Wal-Mart is filled with Happy Meal toys and other cheaply manufactured plastic goods, and the whole world has signed onto US copyright laws.
But signing onto those laws doesn't mean you'll enforce them. Sure, where a country is really over a barrel (cough, Russia, cough), they'll take the occasional pro forma step to enforce US copyrights, no matter how ridiculous and totalitarian it makes them appear. But with the monthly Russian per-capita GDP hovering at $200, it's just not plausible that Russians are going to start paying $15 for a CD, nor is it likely that they'll stop listening to music until their economy picks up.
But the real action is in China, where pressing bootleg media is a national sport. China keeps promising that it will do something about this, but it's not like the US has any recourse if China drags its heels. Trade courts may find against China, but China holds all the cards. The US can't afford to abandon Chinese manufacturing (and no one will vote for the politician who hextuples the cost of WiFi cards, brassieres, iPods, staplers, yoga mats, and spatulas by cutting off trade with China). The Chinese can just sit tight.
The futurists were just plain wrong. An "information economy" can't be based on selling information. Information technology makes copying information easier and easier. The more IT you have, the less control you have over the bits you send out into the world. It will never, ever, EVER get any harder to copy information from here on in. The information economy is about selling everything except information.
The US traded its manufacturing sector's health for its entertainment industry, hoping that Police Academy sequels could take the place of the rustbelt. The US bet wrong.
But like a losing gambler who keeps on doubling down, the US doesn't know when to quit. It keeps meeting with its entertainment giants, asking how US foreign and domestic policy can preserve its business-model. Criminalize 70 million American file-sharers? Check. Turn the world's copyright laws upside down? Check. Cream the IT industry by criminalizing attempted infringement? Check.
It'll never work. It can never work. There will always be an entertainment industry, but not one based on excluding access to published digital works. Once it's in the world, it'll be copied. This is why I give away digital copies of my books and make money on the printed editions: I'm not going to stop people from copying the electronic editions, so I might as well treat them as an enticement to buy the printed objects.
But there is an information economy. You don't even need a computer to participate. My barber, an avowed technophobe who rebuilds antique motorcycles and doesn't own a PC, benefited from the information economy when I found him by googling for barbershops in my neighborhood.
Teachers benefit from the information economy when they share lesson plans with their colleagues around the world by email. Doctors benefit from the information economy when they move their patient files to efficient digital formats. Insurance companies benefit from the information economy through better access to fresh data used in the preparation of actuarial tables. Marinas benefit from the information economy when office-slaves look up the weekend's weather online and decide to skip out on Friday for a weekend's sailing. Families of migrant workers benefit from the information economy when their sons and daughters wire cash home from a convenience store Western Union terminal.
This stuff generates wealth for those who practice it. It enriches the country and improves our lives.
And it can peacefully co-exist with movies, music and microcode, but not if Hollywood gets to call the shots. Where IT managers are expected to police their networks and systems for unauthorized copying -- no matter what that does to productivity -- they cannot co-exist. Where our operating systems are rendered inoperable by "copy protection," they cannot co-exist. Where our educational institutions are turned into conscript enforcers for the record industry, they cannot co-exist.
The information economy is all around us. The countries that embrace it will emerge as global economic superpowers. The countries that stubbornly hold to the simplistic idea that the information economy is about selling information will end up at the bottom of the pile.
What country do you want to live in?
Why Is Hollywood Making A Sequel To The Napster Wars?
(Originally published in InformationWeek, August 14, 2007)
Hollywood loves sequels -- they're generally a safe bet, provided that you're continuing an already successful franchise. But you'd have to be nuts to shoot a sequel to a disastrous flop -- say, The Adventures of Pluto Nash or Town and Country.
As disastrous as Pluto Nash was, it was practically painless when compared to the Napster debacle. That shipwreck took place six years ago, when the record industry succeeded in shutting down the pioneering file-sharing service, and they show no signs of recovery.
*The disastrous thing about Napster wasn't that it it existed, but rather that the record industry managed to kill it.
Napster had an industry-friendly business-model: raise venture capital, start charging for access to the service, and then pay billions of dollars to the record companies in exchange for licenses to their works. Yes, they kicked this plan off without getting permission from the record companies, but that's not so unusual. The record companies followed the same business plan a hundred years ago, when they started recording sheet music without permission, raising capital and garnering profits, and then working out a deal to pay the composers for the works they'd built their fortunes on.
Napster's plan was plausible. They had the fastest-adopted technology in the history of the world, garnering 52,000,000 users in 18 months -- more than had voted for either candidate in the preceding US election! -- and discovering, via surveys, that a sizable portion would happily pay between $10 and $15 a month for the service. What's more, Napster's architecture included a gatekeeper that could be used to lock-out non-paying users.
The record industry refused to deal. Instead, they sued, bringing Napster to its knees. Bertelsmann bought Napster out of the ensuing bankruptcy, a pattern that was followed by other music giants, like Universal, who slayed MP3.com in the courts, then brought home the corpse on the cheap, running it as an internal project.
After that, the record companies had a field day: practically every venture-funded P2P company went down, and millions of dollars were funneled from the tech venture capital firms to Sand Hill Road to the RIAA's members, using P2P companies and the courts as conduits.
But the record companies weren't ready to replace these services with equally compelling alternatives. Instead, they fielded inferior replacements like PressPlay, with limited catalog, high prices, and anti-copying technology (digital rights management, or DRM) that alienated users by the millions by treating them like crooks instead of customers. These half-baked ventures did untold damage to the record companies and their parent firms.
Just look at Sony: they should have been at the top of the heap. They produce some of the world's finest, best-designed electronics. They own one of the largest record labels in the world. The synergy should have been incredible. Electronics would design the walkmen, music would take care of catalog, and marketing would sell it all.
You know the joke about European hell? The English do the cooking, the Germans are the lovers, the Italians are the police and the French run the government. With Sony, it seemed like music was designing the walkmen, marketing was doing the catalog, and electronic was in charge of selling. Sony's portable players -- the MusicClip and others -- were so crippled by anti-copying technology that they couldn't even play MP3s, and the music selection at Sony services like PressPlay was anemic, expensive, and equally hobbled. Sony isn't even a name in the portable audio market anymore -- today's walkman is an iPod.