Thursday, March 31, 2011

If I Had a Major Record Label, I'd Hammer in the Morning

Peter Kafka on All Things Digital asks the pertinent question, "Why are the major record labels so silent?" (See "An Open Letter to the Big Music Labels: Pipe Up, Please!")   It is a vey pertinent qestion.

We have been warning, and warning, and warning the record labels for years (as I have tried to document here in Chronicle of a Solution) that the cloud was coming and that they have a counterfeit problem that is going to get exponentially worse when the cloud arrives.  They talk to us ... but then they don't listen .. or they don't do anything.  Now, finally, their bus is parked in the proverbial blind alley and it will be even harder for them to steer out.

Here is the response I sent to Peter:

    I cannot speak for the labels, but as an entertainment lawyer that has represented platinum-selling artists, I’ll take the bait.

    Is Amazon any less aware than Limewire was (or indeed Napster was) that illegal downloads are going to be served to users by their servers? If not, then the same legal precedent is there that got Napster and Limewire shut down: contributory infringement.  They take your illegal music and  provide the player, they provide “management” (TOS), they provide Gracenote … and most of all they provide cloud-based access and mobile access, the best thing that’s ever been invented for music.  That is way more than Limewire ever did.  Limewire was “capable of non-infringing uses” as well.

    There are an estimated multi-billions of illegal songs still out there from activity of the last 15 years. Amazon has to know that 1/2 the stuff that is uploaded to its cloud is illegally downloaded, ripped from a CD the owner no longer owns (e.g sold back or returned to the library) stream-ripped, etc. It is one thing for illegal downloads to be stuck on hard-drives and not widely available for mobile except on iTunes clunky side-loading system. But when you unveil the state of the art mobile app and don't bother to distinguish between legal and illegal it is very bad.  If McDonalds announced tomorrow that it would accept counterfeit bills at all 10,000 of their stores in the US, what would that do to the value of US currency?

     If you look on Amazon for physical items, you will see that most music is under a dollar and the biggest payday on selling a CD is the $2.98 “shipping and handling”.  So Amazon, via the phenomenon of rip and ship specializes in driving down the price of music.  Taking a billion or more illegal downloads, or rip and ship downloads, or stream-ripped downloads and giving people state-of-the art access to them …  is guaranteed to drive the price of music down to zero.  Why buy a download? Why buy Spotify or anything else?

    Amazon, in the end, doesn’t care about the price of content.  As pointed out in a chart in the WSJ on Tuesday, they are hawking business services now more than ever.  This Cloud Player is a way of bringing more people under their sphere of influence in order to hawk other stuff.  Thus, it is a naked power grab at the expense of artists and content owners in general.
    The entire industry (record industry, cloud providers, publishers, apps, subscription services, etc.) needs to send this message loud and clear to users:

    "If you downloaded illegal music from 1996-2011, good on ya’.  But that doesn't mean you have the constitutional right to have that song be forward compatible w/ every new service that comes down the pipe."

Wednesday, March 30, 2011

In Media Rental Services We Trust

Why, in the age of Netflix, do any of us want to worry about buying thousands of little MP3 files individually, managing them in a directory structure, moving them from place to place, etc.? Could the folks at Spotify please hurry up and launch in the US so we can get out of this one-at-a-time, file-based model of music?
Read more:

I am not criticizing the above poster at all but it's interesting to me that on the one hand you have users complaining that they don't want to trust Amazon or any other cloud provider with their media files for privacy and a whole host of reasons so they want to store their music on their own hard drive and have no use for "the cloud" whatsoever  and then you have OTHER users like this poster saying that they will trust subscription services to always provide the full selection of media that they want at a reasonable subscription price forever until the end of their life.

Me, I'm going to hedge my bets. I want my stuff 97% in the cloud (there may be a few things so rare and precious that I will bother to store at home) but I want to own it.  As in Title. As in Property.  As in Po-SESS-ion.  That way, I am guaranteed always to have access to that song.  Even if my cloud provider goes belly up they will at least owe me my songs back in receivership.  A subscription service goes under it's by-bye songs.  Anybody having any luck getting their stuff back from MySpace?

And btw ... Who is Netflix that we trust them so much that we are willing to forego ownership?  I can buy Casablanca, which won 8 Academy Rewards, right now on Amazon for $1.79.  I can drop ship it to the Digital Content Exchange (my cloud provider) and watch it for free as many times as I want.  How much is Netflix going to charge me for it over the next 40 years?  Even after the film is OUT OF COPYRIGHT?  What if Netflix' license with the studio falls apart and it is deleted from offer? What if the film is banned for political reasons (I dunno "stereotypes"?  Too much smoking of cigarettes??).  For films that I am unsure about, yeah, maybe Netflix.  But for anything I might truly want to watch again, I'd rather buy it and if it sucks sell it back on Amazon or eBay for 80% of what I paid for it. Or 96% of what I paid for it if I sell it back through the DCE: on the DCE there is no deterioration of quality since it never leaves the user's digital locker and there is no packing or shipping.

Repeat after me: "Streaming and downloading are methods of delivery of digital content, not indications of ownership or rental"

You can have rental that is delivered by download.  You can have ownership that is delivered by streaming.  You can have subscription downloads.

Like Burger King, you can have it your way.  The key is: counterfeits shall not be given value.  

(And that is precisely what Amazon is doing).

Tuesday, March 29, 2011

The Amazon Challenge: The Music Industry at the Crossroads

According to this well-sourced report, the music industry is toying with the idea of allowing Amazon Cloud Drive & Player to accept illegal downloads for cloud access ... as long as they can extract a fee.
It is of the utmost importance that the industry not even for one minute countenance the idea that any of these new cloud services, which give people better ways to use their counterfeit songs, are OK.  If the record industry as the copyright holder (and fiduciary for the artists whose rights they hold), ever asserts, even implicitly by entering into negotiations, that it might be okay for someone to use ill-gotten songs, they have  thrown their whole argument of the last 10 years out the window and they will never get it back again.  What will then be wrong with a user stealing some new downloads?  What will be wrong with sharing Rhapsody or Spotify  passwords?  Or methods of copyright infringement to be invented in the future?  The user will always be able to rationalize, “Well, the record companies didn't like it for a while but eventually they went along with it.”  

Is Amazon any less aware than Limewire was (or indeed Napster was) that illegal downloads are being served by their servers?  There are an estimated multi-billions of illegal downloads still out there from activity of the last 15 years.  Right now, they are stuck on hard-drives and not widely available for mobile except on iTunes clunky side-loading system.  But, thanks to Amazon's nifty Cloud Player, these same illegal downloads are about to go "uptown".

Taking money from Amazon is like taking a bribe to look the other way.  It does not fix the problem.  How do we fix the problem?  As always, innovation.  Like everything else wonderful about the internet: you innovate.  Solve the problem!  Do not just cover it up.

But if no one bothers to even look at the problem, it will not get fixed.  If the users are greedy on one hand and just want free music by whatever means necessary and the record labels, on the other hand, just want up-front cash to help with the next quarterly earnings report, the problem will never get solved.

Innovation!  Such as that represented by the DCE.  The first steps of which are: 

  1. All parties (anyone who touches music) cooperate through an opt-in exchange*.  
  2. Agree to share user registration info and require that each user who wants access to a song be a Verified Accessor.**   
Immediately, users are happy because they have cloud access to all their stuff (video and books as well as music, physical as well as digital, and unlimited, not just 5 GB), and the value of counterfeit (illegal) downloads is reduced.  Music is valuable once again!  Mind you, the counterfeits are still out there, still on people's hard drives.  Just not quite so valuable.

A method like this has been used for decades successfully in the securities industry.   It’s reasonable to ask services like Amazon Cloud Player to require DCE-style verification before people enjoy their music in a newfangled way. Since verification is easy, they have no excuse.   But why aren't the labels insisting upon this?  Why aren't their artists insisting that they insist??


*An Exchange by definition allows competitors to compete fairly and creates efficiency.

**A Verified Accesor is an end user who has been verified to have access to a particular song by means of ownership, borrowing, or by such other rights as may be approved by the lawful copyright owner of the song.

Amazon: 'Look Ma, No Licenses'

It is a blood sport now.

You can now store over 5 GB of music and video for free, courtesy of Amazon Cloud Drive and Cloud Player.

According to multiple sources, Amazon has not secured a license from the record label for either.  And it is precisely the artist's lunch that is being eaten here.

This is because, despite the de rigeur user agreement, illegal downloads are given equal credence to legal ones in the Player (I just tested it for music).  No attempt at all was made to weed out illegal content (and yes, the technology is available).

What this instantly means is that:
a) over a billion illegal downloads currently in users' possession will be given even more value by being given this state-of-art, "anywhere" access.
b) if you are a user and you want to add a new song to your Amazon digital locker or your Google Android device, the choice will remain as before:  free vs. paid ... and free will win every time.

Another bonus for your illegal downloads is the services of the embedded Gracenote.  In fact, the only two approved purposes of the Player according to the terms of agreement are "management and playback of content".  So you can take all those illegal mp3s that came in from the wild and manage them into more usable shape (e.g. adding album art where there was none before), courtesy of Amazon.

What is to stop you from cramming the entire 5 GB with nothing but ill-gotten goods ? Practically, nothing.  Just a few measly words in a user agreement. The same words that were in the Napster, Kazaa and Limewire agreements.

The user agreement also states that the Player is only available in the U.S.  But watch out, World, this stuff is radioactive!

And in other news today, global music revenues fell 8.4% last year.