Wagons Circling: APM Marketplace Tech Report Rings Our Bell Twice This Week

In the past week, Marketplace Tech Report from American Public Media has been picking up on some themes that have been voiced on Chronicle of a Solution, and nowhere else.  First, on October 13, 2011,   Max Dawson, professor of radio, TV and film at Northwestern University, in critiquing Ultraviolet (the new digital rights authentication and cloud-based licensing system introduced by some major motion picture studios), said:

"Its success will largely depend on two factors. If this requires you to ditch your entire media collection you got through iTunes, the consumer will reject it. The other thing is compelling content; neither "Green Lantern" or "Horrible Bosses" falls into that category. As much as I'd like to see studios be able to achieve success, I'm not too sure this is the right solution."

These problems cited by Professor Dawson are problems we've highlighted here.  And of course are problems that only the DCE can fix.    


First, you do not have "to  ditch your entire media collection" with the DCE's patent-pending backward-compatibility method.   In fact, the DCE is somewhat counting on your not ditching your old media collection.  We want the vinyl records, VHS tapes, everything that was legally issued.  All of those past issues have some value.  We would not want those legacy media items to be off-exchange any more so than a stockbroker would want your grandmother to keep her old shares of IBM in a coffee can under the sink. *


Second, we have long said, going back to our US patent application, our original white paper and our Google book case Amicus brief,  that we are the only answer to the problem of selection.  We even solve the ultimate problem of lack of selection, the orphan works problem.  Videos which are registered at the request of the buyer and then immobilized in the cloud, become a modern  Alexandrine Library (with music and books included of course).  Next, our method of verification enables this library to be loaned digitally.  Finally, in contrast to the limited offerings for sale at Ultraviolet, the DCE creates a market of upwards of every movie ever commercially released, to the extent that there is at least one DCE user who is willing to part with a movie they own for the right price, (in the securities industry, this is called an offer).     


And then today, again on the radio, discussing "the Cloud":

Of course, "cloud" is a woefully inaccurate name for what's going on here. It's not up in the sky, floating, ethereal. We're talking about real computers owned by someone else, stored somewhere else ....  [Security expert Cristofer] Hoff says don't think of it like meteorology, "It's kind of like a bank. You give them stuff that matters to you, you expect that they'll take good care of it."

~Marketplace Tech Report from American Public Media, October 21, 2011

We at the Digital Content Exchange have been making this comparison for a long time.  The comparison is contained in the very header of this blog.  Our white papers and slide decks always make reference to banking or securities. And we have been a virtual Paul Revere on counterfeit media.     


The question for you if you are in the media or tech industry becomes this: "Now that you recognize that there is a banking-like quality to a cloud, are you so sure that your media executives/developers know everything there is to know about handling fungible bank-like commodities that have value?  Or do you want to bring in someone who has worked with these types of digital assets all his life?  Is there nothing you can learn from the securities industry, which is well-recognized as having learned how to handle and move fungible commodities and prevent forgeries?".  


*The backward compatibility feature of the DCE solves "the legacy problem".  Note that the legacy problem has been successfully overcome by the securities industry. Shares of stock were voluntarily turned in for registration and immobilized so that the shareholder could do more with them, more efficiently. Registration was preferred by users because the advantages of the new technology outweighed the old user preferences (including the illicit user preference of being able to use forgeries in place of authentic).  The addition of physical items to a board of exchange is no big deal . It has been done with physical shares of stock and is done at the bank every day when you turn in cash. The DCE grants access to people's music through cloud storage. Just like a bank or a stock brokerage gives its customers access to their accounts on the internet.

Worldwide multi-million dollar fencing operation for illegal music sets up shop today

iCloud launches today. The iCloud is an example of content owners (the big 4 music labels) encouraging people to illegally download material. (Yes, you read that sentence right).  This is because there is no verification of legal ownership in the iCloud.

As of today, we become the sole voice on the Internet for the proposition that the cloud should not be a massive fencing operation for illegally obtained stuff.

Why media streaming apps need to be licensing-free to survive

Recent analysis has it that Spotify is incurring "gargantuan" losses, $68 million in four years.  And this is even with paying artists bupkus.  And it is all being blamed on licenses with content providers which are crippling Spotify and, according to some prognosticators, bent on killing it.

This highlights another superiority of the digital content exchange. We don't need no stinking licenses! If you understand the Amazon cloud player, if you understand Google music beta, you understand the DCE. We put stuff that you own in the cloud and serve it back to you. (And let you sell it to other users and let you lend it to friends or strangers just like a library would do, i.e., on a one for one basis ... no copies!). 

But unlike Amazon and Google we make sure you really own it. So, whether it is a video, a book, or a piece of music, we are providing a basic service to a user, are doing it on an ethical basis, and doing it better than anyone else because we are the only ones that have the securities industry background (where they really know how to handle and move fungible commodities and prevent forgeries).

That being said ("we don't need your license"), we invite content owners to participate. It is very easy in this system to pay royalties to people that want to cooperate in helping us scale up and keep to scale long-term. Nonetheless, just like IBM cannot prevent IBM stockholders from trading their shares of IBM, no one can stop a user from doing what he or she paid for when he became an owner of a media item.

Once everything that you've ever bought in books music and video is placed on the exchange, immobilized in the cloud, it becomes the lingua franca of your media collection. Content owners can then come in and authorize as many units of new material as they want, and charge what they want and get nearly 100% of what you, the buyer, pay them.

Moral of the story: Spotify and its ilk have overpaid for licenses in an attempt to get to scale.  In helping Apple get to scale, the Big 4 have given a license which rewards anybody who grabs free music by "matching" the counterfeit in the cloud.  You, the user, will bring the DCE to scale, piece by piece by joining the DCE. The more the DCE acquires scale, the more it will thwart the usability of counterfeits and the more it will provide buyers who will, in turn, provide  struggling artists, authors and filmmakers (who get to keep nearly 100% of all buying and borrowing fees) with a steady income.

Pandora catalog vs. Spotify's: Small, Smaller, Smallest

Pandora has 800,000 songs available from 80,000 artists. How many artists do you know (and like!) that have only recorded 10 songs in their career to this point? That has to be a woefully incomplete catalogue.

I first noticed this about Pandora when it kept trying to serve me the same song from the newly-released Keep an Eye on the Sky … the Big Star box set. They would only play one track from the 120 or so on the set. I smelled a screwed-up major-label licensing restriction, and I think I'm right.


Spotify, oth, reports 15 million songs. A lot better, right? Still, I and other people have noticed huge holes in its catalog.  And that's a self-reported number, as opposed to Pandora's which is a public company and therefore has the SEC looking over its shoulder.

Upshot: Pandora as a radio station is doing basically the same thing FM radio did in the 80s: A&R'ing music for you based on what it thinks you'll like (plus what they can affordably license). Somebody else is still making unholy choices for you, just like the old days of FM. You're only getting the tip of the iceberg in this "algorithm".

http://en.wikipedia.org/wiki/Spotify
http://techcrunch.com/2011/02/11/pandora-files-to-go-public/

The Digital Media Ecosystem and the Restoration of the Viability of Individual Copyrights

Contra Lefsetz on Netflix

"They could go back to buying DVDs, but that's still a bad deal compared to Netflix."

 ~Bob Lefsetz

You go over to a buddy's house. he tells you, "Let's watch [X title]." Do you care if it's rented or "bought"? Of course not.  Does the fact that its rented give you a better "experience"?  Of course not. If you owned that video for 24 hours and sold it back to a completely fluid used market, would it make a difference to you?  Of course not. A long as that video was there when you wanted to watch it.  

Transfer of ownership via cloud immobilization is easy to do.  It's what they do in the financial world with stocks and digital banking. It just hasn't been tried.  Because influential critics like Lefsetz think "renting" and "streaming" are something magic.  The magic, instead, is in the way the Internet allows us to account for which users have rights to content, and which users don't.

Lefsetz is making a fundamental error. He is confusing modes of delivery with types of ownership.  A user doesn't care whether a video is owned or rented.  He just cares, "Am I watching this when I want it?".  When a record store was on every corner of every city block, did people care that it was "bought" rather than "rented"?  Of course not.  It was called "access".  You bought a loaf of bread.  You bought a Beatles record next door to the bakery.  You were listening to the music then and there, when it was hot.  That's all you cared about.

You can own a DVD and stream it and then sell it back to the pool if you think you'll never want to watch it again.  But if you want to watch it again, it's better to own it.  It's your choice.  But: do you think the Internet is not up to dealing with a market where everybody owns a DVD for a length of time determined by them and then resells it by a click of a button? Or lends it to a friend?  Or lends it to a stranger?   Have you not heard of "cloud computing"?   When you put stuff up in a cloud it is immobilized.  It's one-for-one.  There is no need to "rent".  Ownership changes hands within an instant.

Rental itself was born in a physical era.  Yes, we can accommodate rental on a digital exchange basis, but it is not a magical talisman.  In order to rent a copy to its customers, Netflix owns copies.  Netflix is simply a library, no different from the one in your neighborhood.  It buys stuff.  It lends it out.  Streaming is just one of several ways to distribute the content to the borrower.  The point is that we need to account for each copy and keep track of who is a Verified Accessor of that copy so that the person who is the Verified Accessor can have his or her access switched on when they go to the cloud to stream it.  When the Netflix movie is returned to Netflix then Netflix is the verified accessor until the next time it is rented out.

All of this is possible through an Exchange.  We have one patent-pending, and an embodiment in beta-test right now.  It's called the Digital Content Exchange. Once the Digital Content Exchange is up and running, it will have a log of everyone who can watch The Kings Speech, from the cloud, at that moment.  That "right to watch" could be by virtue of ownership (digital download or physically-verified DVD), renting (Netflix) or borrowing (New York Public Library).  If you own you can also download to as many devices as you like.  If you are renting or borrowing, you can only stream (the Library and Netflix don't want you making copies of stuff you borrow, and the DCE will abide that rule). It's that simple.

And now, Lefsetz:

For those who say people will never rent music, remember people rented videotapes, bought DVDs, rented DVDs and now stream movies. Don't tell me what the people want, they don't know. Furthermore, what made streaming so appealing was two breakthroughs, Netflix-compatibility in television hardware and the iPad. Yes, imagine if the music industry had enabled tech innovation instead of thwarting it, maybe it would have been prepared for the future.

In case you've been under a rock, yesterday Netflix split streaming from renting, instead of one low price you got a whopping increase if you still wanted both. People are complaining, but as stated above, what is their alternative? They could go back to buying DVDs, but that's still a bad deal compared to Netflix. As for renting, where you gonna do it? The video shop has evaporated and yes, we've got coin-operated rental machines, but inventory is limited and you've got to leave your house.

So I'm laughing. It's the cheapskates revolting.

But they've got an alternative, streaming.

 

Unfortunately, the movie business is leading.

The music business could have killed the CD, could have driven people to subscription, but afraid of the future and wedded to the past it refused to do so to its detriment. We'll see what happens now.

Carnegie's 19th century 'Cloud Storage System': a parable

Everybody knows Andrew Carnegie was a great philanthropist of libraries in the 19th century. But let us enter a fantasy world for a minute in which Carnegie sets up libraries which are made up almost entirely of books that were illegally copied.  

So now there are millions upon millions of counterfeit books stocking the shelves of newly-built libraries in towns large and small across America, Canada, Great Britain and Ireland ... and even in Belgrade. If this had really happened, is there any doubt that Andrew Carnegie would not be thought of today as a great philanthropist? Would there be any way to describe the Carnegie lbrary legacy as anything other than an unmitigated disaster for copyright and for authors?  Would it have made any difference in our estimation of Mr. Carnegie that he didn't actually create the unlawful copies himself nor was he sure that all 100% of the volumes in his library were counterfeit ?  

Why, then, is there hesitation to call Google Music Beta, Amazon cloud player and iCloud, as presently constituted without verification, an unmitigated disaster for copyright and for authors? Is this a “speaking truth to power issue”?

The dream of the buzz app with the adorable name saving copyright for all mankind (Subtitle: A long-term solution for a short-term thinking world)

"If your method is so great, why haven't I heard about you?".  

Answer:  I am not sure. Since the web is a new phenomenon, there is really nothing in history to compare it to.   What is the "way it's supposed to be done" when it comes to a problem this huge?  Tens of billions of counterfeit songs competing with paid.  Retailers like HMV at death's door.   This is unprecedented.  

Do you really think some "buzz app", with an adorable name, is going to come along and everybody's going to love it so much that they stop using their counterfeits and start paying for content all the sudden?

No.  We've got to exercise our brain muscles to find a solution.  Just like "The Revolution Will Not Be Televised",  "The Answer May Not Fit on a Bumper Sticker."

The investors in the web right now seem not to be focused on real solutions but rather on following the crowd of users.  FOMA is a big factor driving investment (Fear Of Missing Out).  (Query: Is there anything that Groupon does that somebody else cannot possibly do?)

The other problem is that the Digital Content Exchange is a new ecosystem for copyrights that helps everybody.  The stakeholders in digital media do not seem interested in doing something that helps *everybody*, they want to do something that helps only themselves.  

An exchange is defined as “a system that allows competitors to compete fairly and creates efficiency”.  Guess what?  If you are a giant stakeholder, and you have a competitive advantage, you don't want something that could potentially rearrange the competitive deck-chairs even if you are on the Titanic (like the record companies). 

And then there is short-term thinking.  As Lefsetz said this week in his column "They Should All Pay": "if you don’t think there’s short term thinking at America’s corporations read The Wall Street Journal, it’s all about quarterly profits.  Long term is almost irrelevant.  But it’s all that’s relevant if you’re a (musical) act."

So we are trying to sell a long-term solution to people for whom the long term is “almost irrelevant”. And the people for whom a long-term solution is all that's relevant by-and-large don't understand our solution because it's a smidgen on the technical side and .. after all ...  they're artists, not tech innovators.  So it is not really surprising that the Exchange is still in beta.

For the record, we've had high-level discussions with Google, the RIAA, the IFPI, the Federal IP Task Force, Apple (investment people only, not tech people).  Everyone who has bothered to understand our system has admitted, tacitly or expressly, that this ecosystem will work.  They just don't want to be the ones to bring it up to scale.  Fortunately, a lot less effort is needed now in order to bring it up to scale than a few years ago, because many of the key components that we have been recommending for the past 8 years have recently been put in place (e.g. registration, cloud storage and immobilization). 

 

A formidable DCE could be put together right now, simply with all the registration info, digital purchase info, and digital master files that already exist. If everybody who has possession of this info shared it with the Exchange.   

I'm telling you ... Users would LOVE it too.  It would be like they died and went to (cloud) heaven.  It would be the most user-centric media experience ever. But if we have to build an exchange, new user by new user, immobilized track by immobilized track  … it is going to take a while.  What can you do, from where you sit in the industry, to help get this idea out there so it can get to scale more quickly??  Or so that the idea can be just discussed?  Who in your circle needs to know about this??  Be a part of history ... Hit them up, now!

A new ecosystem for copyright-protected media

What the Digital Content Exchange (patent pending app. no. 10591416, priority date March 4, 2004) provides is a new ecosystem for copyrighted works.  Copyright cannot sustain life under the current ecosystem.   Apple's  "Scan & Match" iCloud and Amazon's Cloud Player are recent examples of attempts to "strip-mine" copyright resources and are very bad for the envronment that copyrighted works need to thrive.  (Unfortunately, the record companies, with their craving of up-front cash, are the boss of this strip-mine.)

An entirely new ecosystem is needed.  This goes beyond a business model, beyond just another new "app".  But it will work with all business models, with all apps.  A subscription service like Spotify needs a proper ecosystem just as much as a digital download service does, just as a radio station like Pandora does.

You can see an example of how this ecosystem works for music here.  But it also works for books and video, too.

If you are interested in giving this new ecosystem a chance to show what it can do, be part of the solution in any of the following ways:
a)  Explore!  Get in touch with us.  Ask questions.  We love questions. We love challenges!  And we need your input to make the ecosystem work better.
b)  if you personally are involved with music, books, or video, no matter where you are in the supply chain, cooperate with the DCE.  Share your registrations on a voluntary "opt-in" basis.  If you are the copyright  owner, share metadata about a work that you have created (among other reasons, so we can pay you!).
c)  If you are a cloud provider, please, do not allow counterfeit songs to be stored and accessed in your cloud.  Allow the DCE to verify a clean cloud for you.
d) invest in the future of the DCE ecosystem.  The sooner we can provide this new environment, the sooner artists can reassert that control over their works in digital space that is their moral right ... and things will start to look a lot brighter. 
e) become a beta tester at www.thedce.com
f) help us "scale up" by registering your library (i.e. your media collection) with the DCE.  And consider immobilizing it in the DCE "cloud" (which, until one of the big cloud companies start verifying, is the only clean cloud and therefore the only cloud that allows you to trade, sell, or lend your library.) 

And I would like to issue a challenge to anyone who is concerned about the copyright ecosystem:  The next time you are thinking about shipping a used CD or video using, e.g., Amazon or eBay ... don't!  The new owner may "rip it and ship it".  This just introduces new counterfeits into the environment.  Instead, ship it to the DCE and let your CD live in the DCE ecosystem.  Your CD will be verified, immobilized and registered in your name.  When you go to sell it to another user, the Exchange will assure a "one-for-one" exchange.  No "freebies"!!

Toward Copyright Sustainability: The DCE and the Digital Green Movement

A critic of the Digital Content Exchange recently told us “the urgency you mention will not be shared with any of the stakeholders you mention”. **

A critic probably once said the same thing to the environmental movement of the 1960s.  The DCE and Jim Yates are basically playing the same role as the Green Movement:

1. Preaching sustainability on behalf of the future.
2. Recommending a change in the way business is done which is a) difficult to implement, b) seems too costly,  and c) comes from people “outside the industry” who "don't understand how their business works" and who should, therefore, "mind their own business".
3. Saying that people have to clean up their messes (but offering a clean-up technology to do it).

It is 1968 all over again, and the “denial lobby”, aided and abetted by average people who want to continue to throw trash out the car window on the highway (people today who want free downloads), will rule for a while.  But we trust that people will eventually have their consciousness raised to the need for copyright sustainability.  Creativity itself, (nurtured by copyright ... or what else?), is at stake.

It took the green movement twenty years before anyone took them seriously when they said that "going green can actually be profitable".  And, like the green movement, we know that a digital content exchange will instantly make all the media industries more profitable, once the DCE is brought to scale.

But for right now, when Jim Yates is talking to the record industry, he might as well be Barry Commoner in 1967 talking to ExxonMobil!



**The stakeholders we most frequently mention here are the record labels, the music publishers, the artists, the tech giants (Google, Apple, Microsoft, HP), NetFlix, the MPAA, Blockbuster, the Universities under the Higher Education Opportunity Act, and public libraries.

Why I follow maverick internet inventor Jim Yates, and why you should too.

I follow Jim Yates, and here is why you should too:

1. He is an inventor who has already been very successful solving one digital age problem and is now gifting his time and energies into solving another problem that should concern all of us: that artists have lost any meaningful control of their creations because of digitization.
2. He has invented a method which monetizes a User’s valid media collection (music, video and books) and demonetizes illegal downloads by making them not forward compatible.
3. His method for dealing with illegal downloads is totally "opt in" and does no harm to either the user (who may continue to use his illegal files the same as he always has) or to any record company that may want to continue to allow access to free music for promotional or other purposes.
4. His invention works without the need for licensing ... from the record companies or anyone else.  (Though record companies can benefit greatly by becoming a User).
5. The method Jim Yates uses is exciting, and therefore fun to follow, because it has never been tried.  And all other methods that promised to “stop” illegal file sharing have been dismal failures.
6. When the peer-to-peer file sharing problem arose in the early 2000s, he began working on a solution and has both written a patent application and developed a web-based media cloud portal.
7. His background put him in a unique position to work on this problem.   In his last position, he solved the financial industry’s problem of counterfeit securities and was midwife to that industry’s complete conversion to digitization.  
8. He has twin degrees from Washington University, in both engineering and business.
9. His career has had a twin path: working in the securities industry with the New York Stock Exchange and in computer engineering.  
10. He is not from the record industry.  Or the home video industry.  Or book publishing.  If these industries had solutions from within, don't you think they would have found at least one by now? After all, they are the parties that supposedly have the financial incentive to fix the problem.
11. The earlier company he founded, Bridge Data, is now owned by Thomson Reuters.  Many of the features that are now taken for granted in financial information and securities trading were invented by him and implemented under his management of Bridge.
12. I have been using Jim’s  application in beta test for years and I am personally excited about it.  It really works!  I say that as a true record freak.  (If you have ooTunes, check out my DJ set, streamed right out of my immobilized and verified cloud on the DCE.  Simply do an ooTunes search for “Emmett”).

Don't Call Scan & Match an Amnesty: Call It Amnesty and Abolition

People have been saying that Apple's announced Scan & Match represents an amnesty to illegal downloaders  (see 1.6 million hits for scan & match amnesty)

Make no mistake:  it's not just an amnesty, it's an abolition.   It's not just what this does to past pirates.  That's a minor footnote.  It is the incentive it creates for tomorrow. 

It now behooves anyone who was buying music on June 6th to immediately STOP DOING SO, get it for free somewhere* then store it in Jobs' cloud and thereby get your music at a 99.993% discount (yes, i did the math).

The record industry is basically inviting you to do that.  Look at the statement from Frances Moore, president of the IFPI, the largest-in-the-world representative body of the four major labels:

IFPI’s chief executive, Frances Moore, told me via email that iTunes Match was “good news for music consumers and for the legitimate digital music business. It is the latest example of music companies embracing new technology, licensing new services that respect copyright and responding to the new ways consumers want to access and enjoy music.”

That's right.  She just said that a new service that even an Apple spokeswoman admits ignores copyright, respects copyright.  Brave new world.  And that "new way consumers want to access and enjoy music".  What can she mean other than getting it for free and paying a nominal amount to access it from a cloud?

In the end, what is a user to conclude but that if you pay your $24.99, your downloads are "all licensed up."?

* p2p, bit torrent, Google docs, email, rapidshare, intitle search, zip drive from a dorm-mate ... whatever ... Who knows?  Why not just develop a Limewire app for iPhone and cut to the chase?

6/21/2011 Update: Gracenote has disclosed how Apple's iTunes Match service will work when it launches alongside iCloud in the fall.  According to SAI:  "iTunes Match will not, as previously speculated, use any kind of customized new and more secure fingerprinting technology to determine what songs you have in your music library.  If you have a 128 kbps version of a song you pirated, iTunes Match will feed your Apple devices a 256 kbps version of the track.  One more thing to note: you'll be able to upload any music iTunes Match can't find to Apple server's for listening on your Apple devices."

Let's just say that (in honor of the opening of Wimbeldon) with this news it is no longer "advantage, Pirates" but pretty much "game, set, match".

Cui bono? Who gets the $150 million check that Steve Jobs wrote on Monday?

There are estimates that the record industry's take of the first year's Apple Scan & Match income will be $75-150 million.  Yet the advance that Apple paid is in the neighborhood of $100-150 million reportedly.


That sum was presumably paid on Monday at the latest.  (If you're Steve Jobs, you don't bring something to the annual developer's conference unless it is locked down.)  This is for something that won't even launch until Fall.  That is a very healthy advance.  That's at least a year, and maybe two years of advanced income.  Plus the four months of money use until Fall, plus assuming a 90-day accounting period, that's as much as 2 years and seven months of an advance on the last-dollar earned.    It also means a guarantee of one to two years of projected income, the risk of user uptake on this new product (which has two competitors whose names you may have heard of), being solely on Apple.


Conversely, this is why Google is out of the running: they wouldn't pay the advance: "The size of the advance payments have been a major hold-up for Google." (NY Post)

We have been saying here on this blog for over two months now: it is becoming all about the quarterly earnings report.  Long-term values, interests, commitments or principles, be damned.


So I guess if the money came on Monday at the latest, the artists should start seeing the "Scan & Match Income Share" line on their royalty statements in about 90 days, right?

I have requested, through private email to the IFPI's Frances Moore, who is doing the official crowing about this deal for the record labels, that the major labels explain how this money will be accounted to the artists. No word yet.  Unfortunately, no other entertainment lawyer is likely to ask, or request an actual audit, because it is unexplored terrain and his/her artist's share of the expected gain over audit and litigation would be reckoned to be less than the cost of the audit/litigation. So this is very tempting income for the record labels.  Income that they can pretty much account any old way they want.  Is it settlement income?  Miscellaneous services income for assisting with the scan and match capability?  Your guess is as good as mine.  It is not a royalty, we know that: otherwise the indie labels would be in on it.  Instead, as Hypebot eloquently puts it, the indie labels are getting "Zero.  Zip. Nothing" from Apple.

I wish I could say that Scan & Match was "The Record Industry on Drugs".  But alas, they know exactly what they are doing.  

iCloud and Piracy: Initial reaction from around the world.

What others are saying:

My Digital Life:  "iCloud probably will become the biggest pirated music hosting service."  

British rights lawyer Michael Speck, who ran the music industry's court case against file-sharing network Kazaa: "no better than the old p2p pirates" and
"If you can store all your pirate content you won't need to buy content will you?"

MSN Money:   "Apple's new music laundering service".

Australia-based lawyer for the Jimi Hendrix estate, Ken Philp said iTunes Match provided a means for people to "launder" pirated music.

Syfy: "pirate friendly".


David Pakman, a venture capitalist and former eMusic chief executive, speculating that the money will only come in at around $75 to $150 million for labels to split,  "Not small potatoes – they'll take it," he says, "but it doesn't change their business in a fundamental way."   [Ed. Note: The DCE does change their business, in a fundamental way.]

Sydney Morning Herald, "Apple iCloud 'legitimises' music pirates."

Nick O'Byrne, general manager of the Australian Independent Record Labels Association, "Why buy at 'full price' when you can pirate as many songs as you like and absolve yourself of guilt by paying $25 a year?"


[Ed:  Once again, the American entertainment industry (lawyers, managers, business managers, trade groups, publishers, "independent" labels, record stores, distributors) is to be found where they'll always be found: hiding in the tall grass.  (-: ]

Immobilized music in iCloud: The next logical step

If you bought a song, and it is immobilized in the iCloud, and Apple has the technology to make sure that all the music you properly own is synchronized to all your iDevices, then why are you not able to sell a digital download that you paid fair and square for, or lend it like a library?  Sell it ... "poof", it's not on your iDevice.  Lend it ...  and it's not on your iDevice for the length of the borrow period.

 

Jobs and Labels Reduce Price of Songs from 99 cents to 99-thousandths of a cent

Steve Jobs and the major-label record industry just reduced the price of music from 99 cents per song to 99 thousandths of a cent per song.
 

The new icloud service will take 25,000 of your songs that you pirated and store them in Apple’s new iCloud for $24.99 per year. What's the catch? Nothing, according to Tunecore’s Jeff Price. And you do not even have to upload them, it will simply match them for you.

... oh, and that includes a free upgrade from your low bit-rate mp3 to 256kbps.  And did I mention you won’t have to store it? Nor remember where you put it?  And have access to it all over the world?

No word on whether the record industry will be stepping up enforcement and prosecution against those who download illegally tomorrow, now that the "Fence Stolen Goods Here” sign has gone up on Apple’s shop window.  But if I were the defense lawyer of such person, my defense would be “entrapment!”. (Update: One Day after record industry approves of counterfeits for the iCloud, industry rep says it is "stepping back from 3-strike cutoffs".)

I am sorry. I am being a little bit deceptive here.  The price is 99 thousandths of a cent per year.  I know that might be a deal-breaker for you.

99 thousandths of a cent!  Just think of that, artists, next time you sit down to record another tune.  

Update 6/7/2011: Confirming the obvious, an Apple spokeswoman said the company would not know if a person's songs were pirated, only if they matched songs in iTunes.

How DCE-assisted Verification 'Cleans the Cloud'

Prediction: a One-for-One Cloud by the end of 2011

The Los Angeles Times is reporting that Apple has reached tentative agreements with all four major record labels that would allow users to listen to songs from the cloud. The last major to drop being Universal.

But Apple is not saying, nor is hardly anyone asking, what rights users will have once they purchase a song that goes straight into the Apple cloud?  Why could a user not transfer ownership of his song to another cloud user? Why could he not lend it to another user?  With cloud access, this is a simple matter. It is called a "One-for-one Cloud". If a user sells his song to another user, that song is removed from his account. If a user lends her song to another user, it is removed from her account for the loan period.

So why would not Apple make this possible? One reason is that the record labels have reportedly given Apple the go-ahead to accept illegal songs into the cloud as well as legal ones.  So if they allowed someone the right to sell or lend a song in the cloud, they would be allowing people to make money from illegal songs. 

Apple will have to tell its users, "Yeah we know you bought a song from us fair and square. But, we had to make room in our cloud for the thieves, you understand? So we cannot allow you the freedom to sell the record you paid for.  You will have to deal with having fewer rights than every record buyer since the invention of the phonograph: the right to sell your property, lend it to a friend, even the right to leave it to your spouse.  Even though the technology is easy for us, and we could do it without breaking a sweat, we won’t, just because we are Apple, and you are not.”

So if Apple is “like that”, why are you predicting a “One-for-one Cloud” by the end of 2011, Emmett?

Because users will clamor.  Because artists, who have been screwed by labels long enough and who can now register their moral rights in songs and can easily be paid a portion of the cloud transfer fee, will clamor.  And there is competition (thank heavens).  Amazon will move to a One-for-one Cloud. Then Google.  Apple will eventually have to throw in.  Voila, a One-for-one Cloud!  Or the beginnings of one anyway.  (Getting the illegal songs that were foolishly allowed in the cloud out of the cloud will take some time.  Verification of every lawful purchase, physical or digital, that a user wants placed in the One-for-one Cloud will take some time.)

The DCE is the trusted third party that can verify and clear a “One-for-one Cloud” for Amazon, Google as well as Apple. The DCE is the only third-party with the know-how (gained from decades in the securities industry) to fulfill this function. Just as the New York Stock Exchange and the American Stock Exchange both participated in the Depository Trust Company in the 1970s, Amazon, Google and Apple will one day all participate in the Digital Content Exchange.

Apple 'Scan & Match': A Record Industry Breach of Contract with Artists

Exclusive: Apple near cloud-music deals.

Apple now has the freedom to offer a range of features that rivals are prevented from rolling out because of the licensing restrictions, the sources said.

One example is that instead of requiring users to spend hours uploading their songs to the company's servers, as Google and Amazon do, Apple could just scan a user's hard drives to see what songs they own and then provide them almost-instant streaming access to master recordings. The process is sometimes referred to as  "scan and match".

(CNET, May 19, 2011)

 

ANALYSIS:

The record labels are breaking their contracts (and/or fiduciary duty) to their artists by approving anything less than a "clean cloud". Record companies will be feathering their own nests with "licensing" income from Apple that goes into an "ancillary income" category from which the artist's share is de minimis* and where accounting/auditing difficulties are legion.  Meanwhile, there are three other parties outside of the record label (the artist, the songwriter, and the publisher) who have reversionary rights (or residual rights) in the copyright that underlies. That reversionary interest is being diminished by the lack of verification in the cloud.  These parties, as early as 2013, will step into a copyright that is greatly diminished in value. 

The record labels either don’t know or don’t care to know about the DCE method of verification, registration and immobilization (a DRM-free method that keeps all pirated copies from 1996-present whenever created OUT of any cloud service).

* "at best".  This income cannot be effectively tracked back and will probably just go into a "pool".  How it gets paid out of the pool will be anyone's guess. 

[Update: The dirty deal is done, June 6, 2011] 
[ Update: Call it "Scan & Snatch", since the low-bit rate download is traded in for a high one, the users scanning of an illegal song confirms and bolsters his "snatch".]

What the Record Companies Should Say to Apple

The record industry needs to send this message loud and clear to Apple and all cloud services:

"We do not want every illegal download and rip from 1996-2011 made forward-compatible with every new service that comes down the pipe.  If you have not come up with a method to verify a clean cloud, it is because you have not been trying hard enough.  And the reason you have not been trying hard enough is that, ultimately, you don't care about content.   Heaven knows, you have invented everything else you needed to invent. 

"You see, content is simply a means to an end for you; but for us, it is our entire livelihood.  And some of you have been building empires based specifically on an 'opt-out' concept of content access.  Sitting back and waiting for takedown notices or counterfeit seller notices.  But we are the record companies and we are responsible for preserving the value of content.  So we will use every means of leverage at our disposal to get you to care about content.  On behalf of our artists.  On behalf of the long-term health of our industry.  And, no, we are not going to send takedown notices for every user that stashes unbought music in your cloud.  We will simply count on you to do the right thing."

Why We Don't 'Launch' and Why We Don't Need Money

All roads lead to the DCE.

After all the industries are done thrashing around with ideas that don't quite work because they are missing an ingredient ... they'll come to us to get that ingredient.

Therefore, we are not a "start-up" and we don't chase money.  Whether you realize it or not, you are expecting the next big breakthrough on the web to look and act like all those other "internet phenomena".   But The Digital Content Exchange is something totally different.

We have demonstrated how a DCE cloud and trading system would work at thedce.com (beta test, if you wish). We don't want money.  We don't need money.  We need understanding.  And we realize that understanding takes a frame of reference. Getting a frame of reference takes time.  Every day, the people whose jobs it is to monetize and make-safe the Internet for books, music, video, and search are gaining the frame of reference they need to understand the DCE.  Money or a "launch" would not help people gain that frame of reference.

It is not surprising that people do not have the frame of reference. The genius of the DCE comes from an entirely different industry: financial data and transactions.  For people (like me) that don't even know how to balance their own checkbooks, it is difficult.  I was personally introduced to the DCE in 2004 and it took me four years to get the proper frame of reference.  It took me four years to even understand what the problem really was (Hint: it's not piracy, it's counterfeiting. Second hint: it's not file sharing, it's non-verification. Third hint: it's not lack of DRM, it's lack of registration.). Since it took me, an entertainment lawyer, a copyright expert, four years in order to "get the hint", we are expecting for it to take quite a long time for people whose frame of reference is even less akin.

So, in the meantime, while we wait for people to gain that frame of reference, we are just going about the business of enjoying our lives.  (Which means making fun tweaks to theDCE.com and, for Jim, playing basketball and, for me, hanging out with my family, reading fiction classics and non-fiction anything, exercising and DJ'ing.)

Behind The Scenes: Record Label Demands Of Amazon

I asked the inventor, Jim Yates, for his comments on the reports of the very interesting but very confused negotiations going on behind the scenes between Amazon and the record labels.  Since Jim is the inventor, and the discussion is getting very technical, I have decided not to put my own gloss on it and just let Jim's reaction speak for itself:

Emmett,
As you probably know, the link (...) is for a Michael Robertson article detailing the Amazon talks with the labels.  I find no indication of any source for this information so I wonder how he came to know about it in such detail.  Also it needs to be known that he is on Google's payroll as well as being the owner of MP3Tunes (which is disclosed).  I note that the Warner Music (which is for sale you recall) position is the most interesting, "...What WMG would like to see happen is that a central locker authority would administer all locker assignments. ...".  Well, there is a good idea.  But then they go on to demand all sorts of payments, which Amazon and everyone else knows are not required or reasonable.  Btw, the use of the embedded sales information in the MP3 file is not much different than DRM and pretty useless without independent confirmation.  But if you get the independent confirmation from the source you did not need the embedded information except as a path to the source which could be obtained elsewhere.  The major use would be to track things like gifts which would require a test for uniqueness.  So the bottom line is that it can be helpful but it is not a complete solution.
We know the only complete solution.  These others are just wobbling along the trail to finding it.
Along that trail appears to be catchmedia.com.  We can discuss that at length elsewhere.
It should be noted that all this discussion is about playing media that is 'owned' in some way.  Nothing at all about transactions, proper one to one sharing. 
Also should be noted that, if Michael Robertson's information is correct then RIAA and IFPI are out of the loop or talking to different or the wrong people and/or do not have a clue as to what we have been talking to them about.  I think we should confront them with the article and our explanation of how we solve the reasonable issues (not the demands for media taxes).
Jim

I cannot resist adding one comment.  It is to Michael Robertson's final line:

With the record labels wide reaching demands it’s difficult to see how Amazon, or any company, could arrive at a workable license for personal cloud music.

Indeed, it is difficult to see.   And it won't happen until the labels and Amazon humble themselves to consider that the solution comes from outside of both their industries: it comes from financial-industry wisdom. 

Share Your Cloud Music Password? Share Your Online Banking Password??

One of the worries expressed by commentators concerning the Apple Cloud Player is that another form of illegal file sharing will be possible, wherein a user can share his username and password with someone else, who would then have access to all that user's songs, a la Napster.

This worry is easily solved by the Digital Content Exchange.  Because the DCE, in addition to being a cloud server, is also a board of exchange whereby your owned music is sold and loaned for a fee, a person would no more give someone his password to his cloud account than he would his bank account.

Amazon's Craig Pape agrees with us. Well, sort of.

A story published in the Irish Independent today quotes Craig Pape, director of music at Amazon, and the company’s point man for the Amazon Cloud Drive and Player:

"We’re trying to make purchased music more valuable. And we think that’s good for everybody.”

This is the first time I've seen in print the statement that has been a golden rule for us here at the DCE since the beginning (2003): that new apps and wonderful ways of accessing music digitally, like the new Cloud Player, add value to downloads.

The problem is of course that you are also adding value to illegal songs as well as legal ones. How do you determine which are which? That is where the digital content exchange comes in.

(As for why Craig Pape and his company probably don’t implement DCE verification, or call us back, see here.)

So it cannot be "good for everybody" to give counterfeit equal value to purchased.  If you do that, counterfeit will win every time...