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The future of electronic publishing and reading

Last Wednesday, I had the opportunity to sit on a panel for an event put on by the Society of Internet Professionals: The Future of E-Publishing and E-Reading. The following is a rough approximation of my presentation.

Digital technology has a disruptive effect on traditional content industries in many ways, but this is especially true when it comes to copyright and the law. We’re at the beginning of a struggle between traditional and new media in the space of electronic publishing, and much like the past decade has been for the record industry and newspapers, the transition from analog to digital isn’t going to be easy.

Patents

First, there’s an unfortunately predictable area of legal conflict for any emerging technology: patents. Winners innovate, losers litigate. We see it again and again, with the most heated battles taking place right now in the mobile computing space between companies like Apple, Nokia and HTC. To mention just a couple of patent lawsuits related to e-books:

  • In March 2009, Apple was sued by a Swiss communications company, MONEC, for distributing digital book reading applications through the iPhone App Store. MONEC believes that Apple violated a 2002 patent, which describes a “light-weight” electronic device with a “touch-screen” LCD-display having the “dimensions such that […] approximately one page of a book can be illustrated at normal size, this display being integrated in a flat, frame-like housing.”
  • That same month, the Discovery Channel sued Amazon claiming that the Kindle violated a patent held by its CEO for technology that “provides for secure distribution of electronic text and graphics to subscribers and secure storage.” When asked whether Discovery would build an e-book reader, the company’s spokeswoman said, “we are only focused on the Kindle at this time.” So, they aren’t interested in making anything, just in suing people who make things.

Even though these broad reaching patents are patently obvious to anyone who understands technology, the lawsuits happen time and time again because they’re profitable. As more companies get involved in the e-reader market, expect more patent lawsuits, just as Apple, Nokia, and HTC have started suing each other over smartphone patents. Because of problems in the patent system, this is the price that innovative technology companies pay to step through a patent thicket and get involved in the market.

Copyright

Copyright law, however, has many more implications for all parties involved when it comes to electronic publishing. The issue is fundamentally about freedom, and the economics of digital goods, as copyright law gets used and abused as a crutch and a hammer.download full movie Bad Moms

Economics of Abundance

The problem stems from a misunderstanding of scarcity. As we move from atoms to bits, we also move from scarcity to abundance. Traditional business models are built on scarcity—selling copies, for example. Windowing systems are used to milk money from hardcovers before the paperbacks are released. Basic economics tells us that, in a competitive market, price gets set at the marginal cost of reproduction, at the cost of producing one more copy. When books become digital, the marginal cost of reproduction is essentially zero. And there are no hardcover and softcover e-books. Publishers are terrified by what Napster did to the record industry, worried that consumers won’t want to pay for books, so they’re trying to keep content locked down and with high prices, to keep the audience passive and consuming—and copyright law is often the tool for the job.

Anti-features

How many people are familiar with the Amazon Kindle Big Brother mishap? In its best impersonation of big brother and the most ironic tech event of 2009, Amazon deleted all of the copies of 1984 and Animal Farm from every single Kindle last July because the publisher changed its mind about offering an electronic edition. Just like that, people who legitimately purchased (well, more like “rented”), those books lost them in an instant.

Amazon backtracked on the deletion, restored the books and promised it would never happen again, but why do devices like the Kindle have such a kill switch to begin with? As Andrew Moshirnia from the Citizen Law and Media Project later explained,

Amazon used its power to delete entire volumes, a tactic with all the subtlety of carpet bombing. But this technology could be used like a sniper rifle, replacing small portions of an offending work and leaving the reader none the wiser.

When you buy a physical book, the retailer or publishing doesn’t have the right to enter your home and confiscate it, or rip out a page. Yet, that’s the functionality that’s being built right in to these e-readers.

This is an example of an anti-feature—a “feature” that no user would ever request or desire.

The reason these digital locks are appearing is that many publishers and authors don’t feel that they can protect their copyright interests without them. And, the technology companies often don’t mind the monopoly they wind up with when consumers can’t easily move their content from their device to a competitor’s, as they become the new gatekeepers (e.g. Apple and iTunes), but at other times they’re under intense pressure from publishers and authors to limit the functionality of their devices.

For example, in February 2009, Paul Aitken, as executive director of the Authors’ Guild, made an extraordinary statement when he discovered that the Kindle had an experimental text-to-speech feature. He insisted that it was illegal, claiming,

They don’t have the right to read a book out loud. That’s an audio right, which is derivative under copyright law.

Notice that no one, at least no one I’m aware of, would claim that, if you purchase a dead-tree book, you need the publisher’s permission to read it out loud. I don’t believe the Author’s Guild is knocking down on people’s doors for reading to their kid at night. But, the second that process is automated as part of electronic reader, they claim it’s a violation of copyright. Amazon caved, and allowed rights holders the ability to disable the text-to-speech feature, something that would have been useful to many, and even essential for some (such as the blind).

The real concern is audiobook sales. If text-to-speech technology can read a book for you, why would you need an audiobook? This is an instance where authors threatened to use copyright law to shut down a new technology, the sort of feature that would help to transform the book and create it anew in electronic form. The new potential was stifled because it might affect the old sales model.

Mike Masnick of Floor64 describes it as being “like the ‘horseless carriage’ or ‘talking pictures,’ rather than focusing on what the new technology allows, the focus is on bringing the old offerings onto a new platform and assuming it’ll be just like the old…

Here’s an example of a copyright license for an eBook on the Secrets of Digital Photography (admittedly from 6 years ago, but the same fear is present today). It’s presentation in a FAQ format:

Q: Can I sell it?

A: Yes you can, as long as you do four things (five if you sell it in a public forum such as eBay) then you can sell the eBook original with its package intact when you have outgrown it or no longer need it. Here is the list of things you MUST do, otherwise you have not lived up to the law:

  1. (Only if selling it on a public sales site such as, but not limited to, eBay.) Inform the publisher that the sale will be appearing on days x through y. That will alert them of your legal sale and prevent you from looking like a software pirate. You’ll get no hassle from them if you simply let them know what’s going on.

    eBay has had a policy for years of not allowing CDR materials to be sold through their site unless the seller is the original copyright holder. Both eBay and we know that software pirates are plentiful and eBay knows that they cannot legally be a willing party to software piracy. Now eBay allows resale of original material if the seller has permission from the copyright holder to do so.

    Permission costs nothing. Ask first.

  2. Remove every shred of eBook software and files from all of your computers. All of them.
  3. Destroy every hard copy print-out you have made from any and all of the files.
  4. Trash all of your iNovaFX Photoshop actions.
  5. Destroy all traces of the original serial number that you may have kept as a record for upgrades and sidegrade purchases at a discount, and inform the recipient that upgrade privileges do NOT transfer with the transaction. Upgrade and sidegrade privileges only are granted to the original first recipient of each eBook.

And my favourite part was the post-amble:

Copyright in the digital age is evolving. Perhaps some future system can be developed without onerous conditions that would allow you to sell it and not have to live up to today’s conditions.

But for now, our eBooks are the legal equivalent of an object. You can buy a book, then sell it when you’re finished with it. But if you were to run off a copy of it–just for reference, mind–then you could NOT sell the original without destroying your copy. Nor could you sell that copy to a friend.

We endeavor to only expect the same equivalent procedures from buyers of our eBooks. We want you to buy it and enjoy it and learn from it and use its included software and example files to your great benefit.

But we are merciless with people who steal it.

Of course, that isn’t you, so this whole discussion is academic.

There is a fear of the potential for digital books that causes rights holders to treat them like physical objects, to use copyright to impose these restrictions, to impose artificial scarcity. It’s an all stick no carrot approach, and copyright law is the stick.

Anti-circumvention

And rights holders have been pushing for more and more draconian copyright laws. The Digital Millenium Copyright Act, a 1998 update to copyright law in the States, contains many troubling expansions to the law, but one of the most troubling has to do with anti-circumvention provisions. The DMCA makes it illegal to circumvent a digital lock, even if what you are doing would otherwise not be considered copyright infringement.

For example, to watch a DVD that you’ve lawfully purchased is not copyright infringement. But, it would be copyright infringement for me to use my laptop to watch a DVD in the US, because DVDs contain digital locks, and with the GNU/Linux operating system I use, my DVD software has to break those digital locks in order to show me my movie. Watching a DVD you own would not normally be copyright infringement, but if you have to break a digital lock to see it, it becomes infringement.

These troubling anti-circumvention provisions essentially allow rights holders to rewrite copyright law with a digital lock. It’s this sort of thing that caused law professor Lawrence Lessig to proclaim that “code is law.” With electronic books that have digital locks, things that might normally be considered fair use—like copying and pasting a couple paragraphs, or transferring an electronic book from one device to another—can become infringement if the action requires breaking a digital lock.

There are no anti-circumvention provisions in Canadian copyright law, but anti-circumvention has been an issue in the last two (failed) copyright bills, and in the copyright consultation conducted by the government last summer. Anti-circumvention provisions are required in order to ratify the WIPO treaties, but there’s flexibility—anti-circumvention could be linked to copyright infringement, so that circumventing a digital lock for something that would be considered fair dealing would not be considered infringement.

The government expects to table a new copyright bill this Spring, and anti-circumvention will certainly be one of the contentious issues. Whether or not it allows rights holders to invent new rights, with a broad ban on circumvention, or whether it protects fair dealing will remain to be seen.

Fair dealing

Fair dealing is another contentious issue. Uses that are considered fair dealing under the copyright act do not require permission from the rights holder. Canadian currently has a limited fair dealing provision that only applies to research, private study, criticism, review, and news reporting. A recent proposal to expand that into a more flexible concept was met with criticism from the Writers’ Union of Canada, which claimed that more flexible fair dealing would “legalize theft.” These debates have been a heated part of Canadian copyright reform.

The Potential for Electronic Reading—When is the future coming?

When faced with a fear that old sources of income will disappear with new technology, people are understandably concerned, but they too often turn to copyright law to prop up old business models and avoid the necessity of exploring new ones. The real tragedy is that the potential of electronic readers is not being met. Consumers are confronted with anti-features—readers that can’t copy/paste, that allow books to be deleted against their will, that prevent an easy transfer from device to device—and rights holders focus on trying to replicate the physical world in the digital.

I don’t think we’ll see the future of electronic publishing anytime soon. So far, we’ve only seen attempts to recreate the scarcity and limitations of the physical word—and then some. With physical books, you can buy them, keep them, mash them up, share, photocopy, as opposed to device-specific rentals, bogged down by digital locks and people who think you need their permission to read a book out loud.

The really exciting things about electronic books are the things you can’t do with paper books. Like, having a text-to-speech feature. Or sharing things you’re reading with others. Or commenting on it. Is there an electronic reader out there yet that can host a conversation thread inside of a book? Because of copyright-related fears, the focus has been on using readers as a sort of broadcast, consumption medium. They’re called “readers.” I personally don’t have any desire for a dedicated electronic device, just for reading a particular kind of text. I read Plato and Aristotle, and Aquinas and JPII, but I also read blogs and news articles and other forms of content online. Why would I want a single device for “books?”

Content comes out of its container when it goes digital, but efforts so far have centred on using copyright law to try and build containers, through locks and legislation. To let text come out of its container would unlock the real opportunities that the technology allows. A paper copy of Brittanica has to be linear; Wikipedia isn’t—it’s hyperlinked. Blog posts are as much about the conversation as they are about the initial “content,” but how many electronic books are being designed with conversation in mind?

Until we get beyond this tendency to impose artificial scarcity and digital locks on electronic books and media, we won’t see the full potential of electronic publishing.

Last Wednesday, I had the opportunity to sit on a panel for an event put on by the Society of Internet Professionals: The Future of E-Publishing and E-Reading. The following…

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I’ve Pad Enough — It’s 1984 for Apple

Defective by Design -- Apple Restriction Zone

Just hours before the iPad announcement yesterday, I wrote the following:

When we think of mobile computers as merely “phones,” we tolerate restrictions that we would otherwise reject on our computers. How many iPhone users would come to Apple’s defence if they instituted the same strict policies and arbitrary limitations on third-party applications for a Macbook as they do on their mobile computer?

The iPad is a general purpose computer with precisely those restrictions.

Today, Apple launched a computer that will never belong to its owner… By making a computer where every application is under total, centralized control, Apple is endangering freedom to increase profits… Their record of App Store rejections and removals gives us no reason to trust them. The iPad’s unprecedented use of DRM to control all capabilities of a general purpose computer is a dangerous step backward for computing and for media distribution.

Talk about lockdown. I’m still waiting for them to ban third-party apps on Macbooks that haven’t been approved through the app store. The Vista bodyguard may be annoying, but with new Apple products, there’s simply no “allow” button. Apple has become what it sought to destroy.

It’s worth quoting the rest of that paragraph from yesterday’s blog post:

Recognizing that these devices are really mobile computers is an essential step to gaining control over our mobile computing. Carriers and handset makers control our phones. We should control our own computers.

The same goes for tablets (and for “TVs” for that matter). Say no to computers that can’t be ours.

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The ‘Creative’ Technology Behind The AP’s News Registry

This post originally appeared on Techdirt.

The Associated Press’ attempt to DRM the news is a bad idea for a variety of reasons, but its claims for the news registry’s capabilities seem pretty misguided, once you examine the technology behind it (the “magic DRM beans”). Ed Felten dug into the details of the registry’s microformat, hNews, which the AP announced a few weeks earlier, and here’s where it gets really interesting: the hNews rights field is based on the Creative Commons Rights Expression Language (ccREL).

If the AP thinks it’ll be able to build its “digital permissions framework” with Creative Commons technology, it’s in for a letdown.

I’m not sure if I’m “allowed” to quote the press release, but this is how it describes the news registry:

[It] will tag and track all AP content online to assure compliance with terms of use. The system will register key identifying information about each piece of content that AP distributes as well as the terms of use of that content, and employ a built-in beacon to notify AP about how the content is used[…]

The registry will employ a microformat… [that] will essentially encapsulate AP and member content in an informational “wrapper” that includes a digital permissions framework that lets publishers specify how their content is to be used online and which also supplies the critical information needed to track and monitor its usage.

The registry also will enable content owners and publishers to more effectively manage and control digital use of their content, by providing detailed metrics on content consumption, payment services and enforcement support. It will support a variety of payment models, including pay walls.

Microformats provide a syntax for expressing machine-readable licensing metadata in the HTML of a web page. ccREL was intentionally developed so that others could innovate freely on top of it, but the AP is trying to use it for something it’s simply not designed to do — “protect” and control. The Creative Commons has responded, explaining that ccREL is a tool for rights expression, not rights enforcement. (That doesn’t mean the AP isn’t allowed to try this, but it’s not going to work very well… it’s like trying to lock a door with posters.) Felten described the AP’s claims for the microformat as much ado about nothing, saying “the hNews spec bears little resemblance to AP’s claims about it,” and the Creative Commons clarification echoed the point:

Microformats and other web-based structured data, including ccREL, cannot track, monitor, or generally enforce anything. They’re labels, i.e. Post-It notes attached to a document, not locked boxes blocking access to the content.

There’s no “encapsulating” or “wrappers” — it’s just annotation.

This ecosystem of technology is about rights expression, not enforcement, and it’s more about telling people what you can do than what you can’t. There are tools built on top of Creative Commons technology, like FairShare, that “track and monitor” usage of content across the web, but these are search engine tools (similar to Google Alerts) rather than any sort of “built-in beacon.” Other tools, like Tynt’s Tracer (which Creative Commons blog uses), use javascript to append attribution and licensing information when you copy/paste, but that’s hardly a “wrapper.” These tools are based on the idea of granting permission, not requesting it. Participation is not enforced; anyone can remove or adjust metadata before reposting HTML, Tracer’s attribution is just plain text that can be changed (as I did when quoting the blog here), and FairShare can’t actually stop anyone from posting your content. These tools are based on a decentralized, permissive view of the web; they aren’t designed to create centralized registries and exert control.

If you re-read the AP’s description of the technology, it sounds a lot less scary, but a lot more hopeless. The tools are designed to convey further rights to users beyond what copyright allows, not further restrictions that limit user rights already granted by copyright law (e.g. fair use). This is a great way of tagging news articles, but it’s next to useless as a digital lock. They would be smart to employ this technology to make their content more usable and more valuable, but hoping it’s going to help them lock it down will only lead to disappointment.

Read the comments on Techdirt.

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Why free culture?

The other day, I wrote a (ridiculously long) post announcing my commitment to free culture, and more specifically, to free music. I didn’t expect anyone to read the entire thing, but my friend, John, not only read it but also responded to it on Facebook. I’m not sure what his privacy settings are like on that note, so as I reply I will quote him often.

John, I really appreciate your response. I didn’t interpret as “pompous” in any way, and I hope the same will be true for my response. 😉 I really appreciate the opportunity to hammer out these points in more detail, the opportunity to have a real discussion and debate about them. It’s nice to be able to address these questions in a conversation rather than just on my own.

(0) Statement of Intent

My original post was largely addressed to people already familiar with the free software movement. Long as it was, I assumed for the most part that readers would already accept the idea of free software and argued for extending those freedoms to cultural works. I’ll try to reply to John’s concerns now, along with a few other commons concerns, without assuming such prerequisite knowledge.

Still, this is part of an on-going conversation and is not intended to be complete. I hope to develop a more complete and concise summary on my wiki over time.

Index

(NOTE: these links might not work on Facebook)

  1. Freedom — the ethical argument
    1. The Four Freedoms
    2. A Moral Imperative
  2. Economics
    1. Definitions
    2. Approaching zero
    3. The Economics of Abundance
    4. Let’s talk about music
      1. Selling music recordings
      2. Live Performances
      3. Session Work
      4. Other Merchandise
      5. Kevin Fox – an example
  3. Other
    1. Communism
    2. Exploitation
      1. The T-Shirt Example
    3. Nine Inch Nails — Ghosts
    4. Making a direct profit from your product
    5. Digital Audio Players
    6. Shakespeare
  4. Conclusion

(1) Freedom — the ethical argument

(1.i) The Four Freedoms

The Definition of Free Cultural Works describes the four freedoms as follows:

  • the freedom to use the work and enjoy the benefits of using it [freedom 0]
  • the freedom to study the work and to apply knowledge acquired from it [freedom 1]
  • the freedom to make and redistribute copies, in whole or in part, of the information or expression [freedom 2]
  • the freedom to make changes and improvements, and to distribute derivative works [freedom 3]

This is generalized from the free software definition.

(1.i.0) Freedom 0: the freedom to use

This is the most fundamental freedom, to use a work that you posses. For software, this means “the freedom to run the program for any purpose.” For music, this means the freedom to listen to that music.

Digital Restrictions Management (DRM) is a huge attack on this freedom. With music, for example, you are unable to listen to music as you please if DRM dictates which devices or which software is permitted to playback your files, or even how many times or how often you can listen to them. Even though all DRM is circumventable, some countries (like the United States) legally forbid you to do so. Anti-circumvention measures mean that no one has any fair use rights, because DRM technology is law.

John hasn’t directly expressed any troubles with this freedom. This, I think, is the easiest one to accept. However, simple as it is, it’s often not respected. DRM is a technical measure that attacks this freedom, and legal barriers exist in the gray areas such as making multiple copies of a copyrighted item for personal use (e.g. backup, use on multiple devices, etc.). Fair dealing provisions in copyright law may be able to protect this freedom, but most large proponents of copyright law are also large opponents of fair use (e.g. RIAA/CRIA).

(1.i.1) Freedom 1: the freedom to study

For software, this is extremely relevant, described as “the freedom to study how the program works, and adapt it to your needs” (from the Free Software Definition). This includes access to the source code. In the Definition of Free Cultural Works, “the license may not, for example, restrict ‘reverse engineering’.” This is the freedom to open the hood of your car and make modifications.

For cultural works, the part of this freedom which may be more relevant is the freedom to “apply knowledge” acquired from studying the work. I’m not quite sure exactly what this means yet, but it seems reasonable. If there are objections, we can research and discuss further.

(( I do plan to release the “source” for my music (ie. multi-tracks), I think, even though it’s not required by the CC BY-SA license. The Barenaked Ladies did this for a few of their tracks when they were encouraging fan remixes. I think it’s a cool idea. ))

(1.i.2) Freedom 2: the freedom to make and redistribute copies

First, and perhaps this is the root of many of the rest of my questions, I continue to take issue with the freedom to redistribute software, music or any other such item at no cost. Thus I take issue with Myers’ point that he takes as self-evident [about] freedom of distribution[.] I believe that this promotes a kind of Randian piracy of creative effort. [- John]

This is fundamental. If you consider physical goods, there are no limitations on redistribution. If you buy something, it’s yours and you are free to do with it what you please, which includes sharing it with a friend, reselling it or giving it away. We don’t have this freedom with digital goods, such as software or music. The reason, I would argue, is that with digital goods, one needs not relinquish their own copy to share it with a friend. It’s actually copying, not transferring ownership.

But, what’s wrong with that?

I think digital technology is a blessing and not a curse. This is an advantage of digital technology. Sure, it will shake up business models that are based on scarcity if goods are no longer scarce, but businesses come and go with technology. We shouldn’t limit the usefulness of technology in order to protect out-dated business models. That sort of protectionism prohibits progress and does not have the best interests of society in mind. We don’t need to prop up the buggy-makers just because automobiles are making them obsolete.

It’s a strange idea for things to be owned by their creators rather than their owners. Imagine what implications that would have on all your possessions, none of which would actually be yours anymore.

John, correct me if I’m wrong, but I think your problem here is with the economic implications of such a freedom. I would argue that the economic considerations are secondary to the ethical ones, and that there are economic models that work.

Let’s look at the ethical side. Benjamin Mako Hill quotes Eben Moglen when addressing the issue:

The great moral question of the twenty-first century is: If all knowledge, all culture, all art, all useful information, can be costlessly given to everyone at the same price that it is given to anyone — if everyone can have everything, everywhere, all the time, why is it ever moral to exclude anyone from anything?

If you could make lamb chops in endless numbers by the mere pressing of a button, there would be no moral argument for hunger ever, anywhere.

I see no system of moral philosophy generated by the economy of the past that could evolve a principle to explain the moral legitimacy of denial in the presence of infinite profusion.

Mako Hill continues,

With all its warts, copyright was a system that filled an important role at a particular time and in the context of particular technological and social systems around the production and and consumption of a particular intellectual good: eighteenth century printed books.

The only reason freedom two was ever restricted was that, in a certain specific context, it made some sense to do so. In that context, the average person couldn’t practically redistribute works anyways; few people owned a printing press. Now that anyone can be a distributor, the freedom is much more important and the trade-off of restricting it as an economic incentive for creation is no longer a fair one.

What about before copyright? How would works of Aristotle had been preserved if scribes needed to worry about licensing copies? How would such ideas spread and give rise to academic and intellectual debate? The advantage of the natural and free flow of ideas vastly outweighs any perceived advantages of giving creators an artificial monopoly over their works. The freedom to share something with your neighbour is more important than the creators ability to become rich. Plus, with the proper economic perspective, allowing the exercise of this freedom can help you make money.

I’m going to leave this as rather abstract and philosophical for now, but we can get into specific practical examples of the exercise of this freedom as the conversation continues.

As an auxiliary argument, there is absolutely no way that people will stop making use of technology that is so useful. The RIAA will never stamp out Napster spin-offs. DRM will never work, it is defective by design and unbelievably flawed in such basic technical ways. To believe that something infinite (a digital good) and in demand can be made truly scarce is foolish.

(1.i.3) Freedom 3: derivatives

If you accept freedom two, I think freedom three follows fairly easily. If permitted to distribute verbatim copies, why not permit the propagation of improvements or spin-offs as well? I addressed many of the main concerns in my original post. In short, derivatives can include modifications (a musical remixes, changes to the software code) or other uses as well (e.g. syncing music and video, like the way my high school Student Council used music in our videos). The derivatives are one of the most important parts of free culture, since it’s only natural for us to reuse and build on existing ideas.

I won’t go into depth here.

(1.ii) A Moral Imperative

I think a system in which the creator of something we legimately call a “tool” such as software, as it is explicitly called by many proponents of free software, should be able to directly monetize this tool but not be forced to offer it for free with no personal gain on the basis of some social moral. [- John]

But Rob Myers writes,

Free Culture is an ethical matter. As with Free Software, economic concerns are secondary… the economic harm [free culture] may cause for current business models is both acceptable as a moral consequence and can be offset by business models that are already being proven.

If you accept the ethical arguments, but hold economic concerns above them, that is a straightforward — and, I believe, misguided — example of the ends justifying the means. The ability to make a profit from one’s work is a good ends, as is encouraging the production of cultural works, but if the means involves violating people’s freedom, it’s unethical. Furthermore, it’s based on misguided thinking because cultural works can and will be produced, and profit can and will be made, without implementing a means that disrespects freedom. (That’s demonstrated by history, by current examples and by the economic arguments.)

To limit any of the above freedoms is unwise, unnecessary and unethical.

(2) Economics

(2.i) Definitions

Price
the amount of money needed to purchase something; a product’s monetary value.
Value
The property or aggregate properties of a thing by which it is rendered useful or desirable, or the degree of such property or sum of properties; worth; excellence; utility; importance. [1913 Webster]

(2.ii) Approaching zero

I read Techdirt a lot, which you can tell if you ever click through my links. Mike Masnick from Techdirt writes extensively about the economics of abundance.

We usually think of the economics of scarcity — the allocation of scarce resources based on supply and demand. Economic models based on scarcity break down when the supply is abundant. There is an inverse relationship between price and supply; as supply increases, price decreases (assuming constant demand). Thus, as supply approaches infinity, price approaches zero. Digital goods are infinitely abundant, therefore it’s natural and inevitable that their price will approach zero in a competitive market.

Note that value and price are two separate things. Value, as defined above, is much more than price; price is merely a subset of value — monetary value.

Mike Masnick writes,

[Price and value] are not the same. Value drives demand — but price is set by the intersection of demand and supply. If supply is abundant, it’s not going to matter how valuable your product is, price will get pushed towards zero.

We can see the price of digital audio files approach zero, the price of news articles approaching zero, etc. Free (as in price) music does not conflict with the free (as in freedom) market, basic economics still applies to infinite goods.

(2.iii) The Economics of Abundance

Many people think that economic models break down when a zero enters the equation. (“You can’t compete with free [as in price]” or “giving your content away isn’t rational”, etc.) The economics of abundance teach us how to make more economic sense of zero. Business models based on the economics of abundance recognize abundant goods and use them to add value (especially monetary value) to scarce goods. Basic supply and demand still applies to scarce goods, but abundant goods can be leveraged to increase that demand.

Kevin Kelly writes about eight “generatives” (things which can’t be copied) that are “better than free [as in price]:” immediacy, personalization, interpretation, authenticity, accessibility, embodiment, patronage, findability. You can find examples by clicking through the links or reading some of my posts on generatives. His suggestions aren’t exhaustive, but they’re a good starting point. (And yes, the word “generative” is silly.)

The economics of abundance is about monetizing the complements, or, more specifically, monetizing the scarce complements. In recognizing abundance when you posses it, you can capitalize on it, for example, as a promotional tool for your scarce goods.

The alternative is artificial scarcity, to pretend that your abundant goods are scarce and attempt to artificially inhibit supply. DRM is an example of this. This usually tramples on people’s freedoms and neglects much of the value of the goods you posses (i.e. their digital value). Also, it usually fails. How has DRM worked for the music industry?

(2.iv) Let’s talk about music

The language is very ambiguous here, so I’m going to be careful with my terms.

Music — an ordering of sounds, possibly words — has immense intrinsic value. Music is valued in and of itself. Music in this sense (e.g. a song, a composition) is also scarce. In order to get a new song, someone must write it. Though, a composition is not scarce in the same sense that physical goods are scarce because it is an idea and ideas are naturally free-flowing; when someone hears a tune, they might possess it without taking it away from someone else. From an economic perspective, however, a composition is scarce.

Digital audio files — a format of musical recordings — are infinite because they are digital. Whenever I say “music is an infinite good,” the “good” I am referring to is that digital musical recording, not the composition (i.e. the idea) itself.

Also, digital audio files are infinite, but CDs are scarce insofar as they’re physical. Thus, “music” can refer to either the composition (e.g. a song), a digital recording (e.g. an OGG file) or an embodied recording (e.g. CD). I’ll try to be clear.

Music is extremely valuable, though copies of digital audio files are easily made and therefore not as valuable, especially in a monetary sense (i.e. price). As an infinite good, it is natural and inevitable that the price of musical recordings will approach zero. This does not mean that artists can’t sell music recordings. This does mean that artists will want to sell other things alongside their recordings.

(2.iv.a) Selling music recordings

As an independent BY-SA artist, I still expect to make a significant amount of money from selling my music recordings (whenever I have something to sell). Recent examples have shown that people will still buy music they like when it’s available at no cost. People still paid for Radiohead’s In Rainbows despite the fact they could get it at no cost and people still paid for Nine Inch Nail’s Ghosts despite the fact that it was available on file sharing networks at no cost. People will still support the artists they like with their wallets (in generative-speak, this is patronage).

In both cases, artists added value to their offerings to encourage fans to pay. Radiohead offered the deluxe box set (generative-speak: embodiment), and Nine Inch Nails offered several packages which included added value (high quality audio files, artwork, CDs, DVDs, signed packages, etc.).

A CD is also a physical good and is therefore scarce. Most artists make money from selling CDs at concerts, especially independent artists. The more popular an artist becomes, the higher the demand for their CDs. In Rainbows has been selling on disc despite the fact that it is widely available online.

(2.iv.b) Live performances

For me, live performances have been my main source of (musical) income over the past year. This “product” is the least copyable of all. Even if all your music, all your artwork and t-shirt designs are released under free (as in freedom) licenses, no one can reuse your person in a live performance. Concert tickets are an important complement to music.

Songwriters who aren’t performers obviously wouldn’t be able to take advantage of this though.

(2.iv.c) Session work

Most of my musical activity in the last year has been on violin, partially because my band is dead (that’s another story), partially because I’m in demand as a violinist. There aren’t many violinists who are also folk/rock/songwriter savvy and I’ve been trying to leverage my skills recently by playing with other artists. This overlaps with live performances, but I can (and hope to) also offer my services on violin for work in a recording studio.

(2.iv.d) Other Merchandise

Bands make a surprising amount of money from other merchandise, such as t-shirts and posters. I don’t think it’s an epicycle (which John had mentioned) because a) it’s already an important part of life as an independent artist, and b) it’s in addition to (not in place of) selling music.

The point here is more of a “make sure you sell the other stuff too” if you’re music is widely available at no cost. This certainly applies to free culture artists, but also to musicians in general since all popular music tends to be available at no cost online.

(2.iv.e) Kevin Fox – an example

Kevin Fox is one of my musical heroes. He’s a singer/songwriter, guitarist and cellist. As a cellist in the music business, he’s in high demand. He’s played on some of Robyn’s recordings (as session work) and I spotted him in a recent Jann Arden music video. I’ve seem him play in the Andy Kim band (“Sugar, Sugar”) and he’s been the musical director for Shaye. His main product is himself.

For me, I hope to have a similar component to my music career as a violinist and multi-instrumentalist.

Also, as a side note, he makes money from making music, not from music that he’s already made. In what other careers does one make money from work they’ve done in the past? Usually, people make money from working. I don’t think it’s a tragedy if musicians do the same thing.

(3) Other

(3.i) Communism

John often brings up communism when talking about free software/culture, though often with some disclaimers about it being a bit of a tangent, but I thought I’d take a second to address the issue.

I don’t understand how free software or free culture is at all communist.

The systems of copyright and patents impose government sanctioned and enforced monopolies on ideas. Free software and free culture involves less government control, more free market, more personal freedom and allows for more freedom of expression.

Moreover, free software benefits many corporations. Companies like Google and Facebook wouldn’t exist without free software, they wouldn’t have had the ability to rapidly scale their software without licensing fees (freedom two) or adapt it to their particular needs (freedom one).

Just because free software/culture encourages collaboration and a sense of community doesn’t mean that it’s communist.

(3.ii) Exploitation

John’s uneasiness about freedom two seems to be largely based on a concern that creators will be exploited if they don’t have copyright laws to protect them. I believe this is a common myth that ought to be debunked.

First of all, copyright doesn’t prevent exploitation. I would argue that, in its current state, it encourages in many ways. How many musicians actually own the rights to their music (example), authors to their books? Copyright laws don’t necessarily protect the “rights” of creators if those rights are assigned to corporations. How many times have you heard about musicians in dispute with their labels? There are authors who can’t sell or distribute their own novels anymore because of publishing deals, even if the publisher refuses to print and sell more copies after they cease to become available. I’ve met musicians who aren’t allowed to sell me their own CDs because of their record deals. Copyright laws encourage the exploitation of artists by corporations.

Secondly, the purpose of copyright was not to prevent exploitation. The purpose of copyright was to promote the progress of science and useful arts (in the words used in the American Constitution, for example). Copyright doesn’t grant creators artificial monopolies to “protect their rights” or because they “deserve” such monopolies, but only because such monopolies were believed to be potentially useful, in so far as they promoted the creation of more works by offering a financial incentive.

Society traded away its rights in exchange for more cultural works. The deal may have been fair a few centuries ago, when the average person would hardly be able to exercise freedom two, but copyright laws are ill-suited for the digital age when we exercise such a freedom constantly.

(3.ii.a) The T-Shirt Example

Let’s say I decide to sell t-shirts (humour me, I’m not exactly that far yet, lol).

Take your example of monetizing music through t-shirts or other paraphenalia. Under the fullest extent of such a free licensing system, is not the artwork on the t-shirts also free for commercialization, and if not, why is it exempt. [- John]

I would release any artwork under a CC BY-SA license as well.

If it is free for commercialization, isn’t the person to benefit the most from the production of the t-shirts going to be the company that can produce and distribute them in the cheapest way, which could be, for example, the GAP rather than Blaise’s private records. [- John]

First of all, that’s a very narrow view of benefit. It only considers short-term financial benefit. Sure, there could be a lot of potential for short-term benefit for other companies, but the long-term benefit of all the advertising and publicity that sort of thing would generate can’t be neglected. If people are buying and wearing my t-shirts faster than I can make them, if the demand is strong enough that some big company wants to start selling and distributing them, by all means. They are entitled to make a profit from their work, and yes, it would compete with one of my side products, but it would serve to supplement and support my main product — me, the musician. T-shirts and other such merchandise may be a great source of supplementary income, but that merchandise has indirect value insofar as it acts as a promotional tool for other scarce goods, such as concert tickets or CDs.

That’s just focusing on freedom two. What if the GAP exercised freedom three? What if they took my shirt and modified it to make it “better” and started selling the modified version? That’s why I use copyleft licenses — the GNU GPL for software and now a CC BY-SA License for cultural works. Any derivatives or redistributed copies are required to maintain the same freedoms. If someone improved on my design, I would be free to sell the improved design on my own as well.

Also, there are ways to be competitive. Even though there’s value to others selling my shirts, I’d make more money if I sold them myself. Other people can’t create autographed shirts, for example. If the shirts are so popular that some major corporation is distributing them, that would presumably make an autographed copy that much more valuable. In generative-speak, that’s authenticity.

Many people buy band merchandise at concerts. If I’m selling my own “Blaise’s private records” t-shirts at my concerts, that’s an advantage I have over third-party competition. In generative-speak, that’s immediacy.

Patronage is also important. Kevin Kelly writes,

It is my belief that audiences WANT to pay creators. Fans like to reward artists, musicians, authors and the like with the tokens of their appreciation, because it allows them to connect. But they will only pay if it is very easy to do, a reasonable amount, and they feel certain the money will directly benefit the creators.

Radiohead is the high-profile recent example here. But, as this relates to my t-shirts example, if I make my t-shirts available at a reasonable cost, easy to buy and I make it clear that the money will be directly benefiting my work, I would feel confident that I could compete with third parties.

And, again, insofar as third parties are successful, they are successful at promoting me.

What about examining this in a more positive light? Releasing t-shirt art under a free license allows for fan sharing. Fans could make their own t-shirts as well, without having to break the law. The positive effects that type of thing brings about with respect to building a community (in this case, a fan base) serves to counter any immediate economic setbacks from third party competition. There are benefits as well.

Increased competition may be a side effect of a free license, but the above examples show how this side effect is manageable and I believe any negative effects (e.g. increased competition) are outweighed by the positive effects (e.g. fan sharing, improvements on the design) and the ethical considerations (respecting freedom and the positive effects that can have on a community).

(3.iii) Nine Inch Nails — Ghosts

I found Reznor’s experiment interesting – giving away 9 of the 36 tracks and charging a nominal fee for the rest. In fact I think it’s brilliant, including the seeding of torrents. But I think it doesn’t work well as an example of progress towards free music because it must be conceded that a sizable (though unmeasurable) portion of the 1.6 million dollars made was made from people wanting the other 27 tracks that were not freely published. One can argue that the people paying $5 are just donating because they could easily have gotten the same thing from some file sharing site online but I don’t think that’s entirely true. I don’t think I’m the only person that still feels that file-shared music is unethical and does not consider that a legitimate means of obtaining a work. [- John]

John, you missed a key point about the release. It’s legally impossible for people to steal his music; it’s released under a Creative Commons License. Although it’s a non-free license (BY-NC-SA — doesn’t allow commercial use), music file sharing is explicitly permitted in the license, as are derivative works.

That brings up another common misconception about free software/culture though, that you have to give everything away. Reznor made the first nine tracks available at no cost on his site and spread them on bit torrent himself. He leveraged that popularity as a promotion tool, and then requested a bit of money for the remaining tracks if you wanted them through the official channel (another example of patronage).

Even more importantly, Ghosts II-IV (the tracks he charged for) have only contributed to a portion of his success. His 2500 limited edited ultra-deluxe packages sold out in under two days and, costing $300 each, those alone grossed $750,000 USD. People weren’t buying that because they just wanted Ghosts II-IV, they were buying it because they wanted “all the high quality downloads, two CDs, a data DVD, a Blu-ray high def DVD and assorted extras, all in a nice package signed by Reznor.” It wasn’t just the less-available tracks that were causing people to reach into their wallets. True fans wanted the extras and Trent delivered, using the infinite goods as a promotional tool for the more expensive scarce goods (in generative-speak, capitalizing on patronage, embodiment and authenticity).

(3.iv) Making a direct profit from your product

I think a system in which the creator of something we legimately call a “tool” such as software, as it is explicitly called by many proponents of free software, should be able to directly monetize this tool but not be forced to offer it for free with no personal gain on the basis of some social moral. [- John]

They can: they can sell their software. No developer is forced to give anything away at no cost. However, once you give it to someone else, to control what they do with it and to attempt to control what everyone in the world does with it is an abuse of power and disrespects people’s basic freedom of use.

If freedom two is asserted, then economic laws will eventually bring the price to zero, since the supply is infinite. As I see it, there are two options:

  1. Control your users, even though it is unethical
  2. Look at other economic models, such as monetizing the product’s complement (which is not at all exclusive to free software – proprietary software companies do this too), to make money without doing something unethical

It sounds radical, but I’ve heard RMS (Stallman) say that if there is no ethical way to develop software, then it would be better if no one developed software at all. Fortunately, there is an ethical way to do it. It just may require a shift in economic strategies.

It will always be possible to make some money from your product directly. Red Hat can still sell it’s enterprise GNU/Linux distribution, and I can still sell my CDs. But insofar as these products are digital and abundant, and insofar as copyright restrictions violate people’s freedom of use and freedom of speech, it does not make economic or ethical sense to impose barriers and expect to make your entire living directly from the products.

(3.v) Digital Audio Players

The first thing I thought of when you talked about using derivative products to make money off music which will ultimately approach a price of zero because it has infinite supply was iPods, and how Steve Jobs and company are surely laughing all the way to the bank about DRM-free music, and have been since day one, knowing full well that statistically no one had 20gb of purchased cd music to fill the devices with, but they did have 20gb of file-shared music and that’s how they cashed in. [- John]

I will never buy another iPod (unless I buy it for the hardware and run Rockbox…), but let’s talk Apple for a second. Apple’s 160 GB iPod Classic has an advertised capacity of 40,000 songs. Even at the relatively low iTunes price of a dollar a song, that would mean someone would have to spend $40,000 to fill such an iPod (unless Apple implements the rumoured music bundle). Technology is making music — digital audio files, that is — an essentially infinite good. We have huge, portable storage, and it’s trivial to copy a file. Whether or not this is a problem depends on freedom two.

The revenue from those 100 million plus iPods sold has, however, not been seen nor so much as sniffed by any of the bands whose music populates them. [- John]

Why should bands deserve any money from digital audio player sales? That seems like another popular myth, the type of statement that no one would ever apply equally to any other industry. One industry doesn’t deserve money because it makes another more valuable or profitable. Do hardware developers owe software developers money because the demand for hardware goes up when useful software is created? Do telecommunication companies owe Internet companies money since they’ve made a business around the value such web companies provide (e.g. no one would want an Internet connection if there wasn’t value online, but Rogers doesn’t pay Google royalties for delivering its site to users)? Do home decor businesses owe construction companies money for building the houses that they decorate? Do popcorn makers owe Hollywood for promoting the consumption of their product?

Sure, I think it would be beneficial to both parties to maintain a good relationship, but technology companies don’t owe artists any money. That’s just propping up out-dated business models.

(3.vi) Shakespeare

But the more interesting point is what would Hunt say about this. (For those who bothered to read this other than Blaise, Mr. John Hunt is a counter-cultural English teacher from our high school.) He would say that if music is truly in infinite supply as was suggested, then it must literally have no artistic value, since “there can only be one Beethoven”. [- John]

Funny you should mention Mr. Hunt. Shakespeare (Mr. Hunt’s ultimate hero, for those other than John) is one of the standard examples of how innovation happens without artificial monopolies, and how the best innovation can be choked by it. Shakespeare borrowed so many of his ideas from others, story lines for example. The value was in the innovation, not invention. He told those stories in a much more compelling way than anyone had before or has since. But, were they subject to artificial government sanctioned monopolies, they could have been largely off limits for reuse.

Shakespeare — author of some of the greatest cultural works of all time — lived in a world without copyright. If copyright had existed, he might not have been able to write some of the plays he did. He’s a testament to the free flow of ideas for cultural works.

I’ve explained the difference between price and value above, and compositions versus digital recordings. So, I think you misinterpret me to say “there can only be one Beethoven.” I’m not suggesting otherwise, just that, say, once someone makes a digital recording of a composition by Beethoven, we can have an infinite supply of that recording.

(4) Conclusion

John, your main issue was with freedom two. If you’re saying, “freedom two is unethical insofar as it removes the possibility for the author of a work to profit from it,” I respond that freedom two is therefore not unethical at all. And thus, it’s a freedom that ought to be respected.

I believe copyright is ill-suited for the digital age. It may have once been appropriate, but in the current climate it does more harm than good. It attacks people’s freedom of use and freedom of speech. Free software/culture is a moral imperative and economic considerations are secondary. However, economic considerations show us that a) free [as in price, at least] culture is inevitable and b) free [as in freedom] culture can make economic sense. Business models exist that already have been or are being proven.

There is no excuse but ignorance or fear for taking the unethical route.

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Trent Reznor releases Nine Inch Nails album under a Creative Commons License

The latest Nine Inch Nails album has been released under a Creative Commons BY-NC-SA license (via Lessig). While the license isn’t quite free as in freedom, it’s a huge step forward; it allows sharing (copying, distribution, performance) and remixing, though only for non-commercial purposes.

Reznor, now label-free, released the album online offering it in a variety of packages, including a $300 deluxe edition option which sold out in two days.

The Creative Commons BY-NC-SA license really differentiates this from other similar offerings, even Radiohead’s In Rainbows which involved tracks available at no cost (if you wished) but with all rights still technically reserved. DRM-free does not mean copyright-free; you are still legally forbidden from copying, distributing, performing and remixing it without the consent of the copyright holder, even if it isn’t (attempted to be) enforced by technological protection measures. By releasing his music under such a license, Reznor has protected and guaranteed the ability for people to share and remix his music (though only for non-commercial purposes). Kudos to him!

I release my music under a Creative Commons license as well, though I’ve had a lot of confusion over which license to release it under. Currently, I’ve been using a Creative Commons Music Sharing License, which is rather restrictive (BY-NC-ND). Upon recently discovering the Freedom Defined project, I’ve been seriously considering turning to a license that meets the definition of free cultural works, namely the Creative Commons Attribution-Share Alike license, but I have some reservations about allowing commercial use and need to do some more research.

In the meantime, I’ll probably be sampling the new NIN album with the free download, and then maybe purchasing the NIN $5 option (with all 36 tracks in a variety of digital formats). Kudos to Trent Reznor!

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Why I use MythTV

Mike Ho from Techdirt provides his take on the “glorious future” of video players, sentiments with which I can strongly empathize:

With each new offering, it seems like viewers need a separate and proprietary piece of video playing software which is obviously aimed at enhancing the viewing experience for the audience. The DRM and the crazy number of different time limitations for how long you can watch you downloaded shows are really just bonus features. Imagine the glorious future of watching a la carte videos where every distribution channel has its own player and set of rules for how you can consume the content. Future DVRs will incorporate access control systems that would rival the most complex enterprise content management systems of today. I can’t wait to click through dozens of end-user agreements just to watch my favorite time-shifted shows! Progress is great.

I recently helped a family friend install a Rogers HD PVR at their home. It was an educational experience. They had several devices that needed to be hooked into the TV, but once everything was plugged in I thought it would be ready to go. Not so with Rogers… turning the HD PVR on for the first time displayed only a screen saying: “Your settop box has not yet be authorized. Please call <phone number/>”

I will never purchase a device that needs to phone home in order to turn on and work for me.

Rogers has a right to control the use of their network, sure, but to control your own device in your own house? The most obvious problem that comes to mind would be if you ever cancelled your Rogers cable account (say, to switch to another provider). Sure, the box may not work with another provider, that’s expected, but you wouldn’t even be able to turn it on to watch TV shows you’ve already recorded! Never mind trying to get this device to play nice with other devices you own…

Until a commercial company starts offering something that isn’t defective by design, I’m sticking to MythTV.

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Songwriters’ Association of Canada proposes to legalize music file sharing

The Songwriters’ Association of Canada (SAC) has released a proposal to legalize music file sharing in the country (found via Michael Geist). They’ve proposed a new right – the Right to Equitable Remuneration for Music File Sharing – which would legalize noncommercial music file sharing by collecting a $5.00 license fee per internet subscription to be distributed amongst music creators based on file sharing patterns. This proposal would compliment the commercial distribution of music, whether through physical CD sales or through digital sales, and SAC claims it would render DRM (Digital Rights/Restrictions Management – i.e. copy protection) “obsolete”. The Canadian Music Creators Coalition (CMCC) is a co-signatory of the proposal.

The proposal recognizes that the technology is a blessing rather than a curse and attempts to meet the needs of both music listeners and music creators.

File sharing is both a revolution in music distribution and a very positive phenomenon. The volunteer efforts of millions of music fans creates a much greater choice of repertoire for consumers while allowing songs – both new and old, well known and obscure – to be heard.

All that’s needed to fulfill this revolution in distribution is a way for Creators and rights holders to be paid.

This is quite contrary to the Canadian Recording Industry Association’s (CRIA) calls for more draconian copyright measures. The CRIA is self-proclaimed “voice and guardian of the record industry in Canada,” but they are increasingly out of touch with Canadian artists, representing instead the foreign interests of multinational record corporations. Many major Canadian independent record labels have left the CRIA, and now both the CMCC and SAC stand in opposition to its beliefs.

I am proud to be a member of both the CMCC and SAC – thank you for truly representing the voice of Canadian artists and defending the rights of music creators and music listeners!

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