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Tagged: economics

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.

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.

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Free Doesn’t Mean Devalued

I’ve tightened up my post on why free music doesn’t mean devalued music for Techdirt. If you’ve read the original, it’s largely the same content, but cleaned up a little and much more concise.

Free Doesn’t Mean Devalued:

The concept of zero took ages for societies to recognize, let alone understand. Mike has explained before how it’s been a stumbling block in economics for some libertarian and “free market” types more recently. People who think about economics in terms of scarcity get upset when abundance pushes price down towards zero, as if the economic equation were broken. But if you flip the equation and think of it as a cost of zero, you realize that the trick is to use as much of those abundant goods as possible, adding value to complementary scarcities for which you can charge. Zero doesn’t break economics, it just requires a different approach.

But artists and other creators hit a different stumbling block than libertarians (libertarian artists aside…). Zero is a problem because they feel like their art is worthless; they aren’t hung up on scarcity, they’re hung up on “devaluation.” We’ve heard it from journalists. I hear it most often from fellow songwriters. The economic theory makes them feel as though their work is just viewed as some sort of cheap commodity. The thing is, value and price are not the same. Price is monetary value, but value is so much more than money. Price is what gets driven down to marginal cost, but value factors into the demand side of the equation. Expensive things aren’t necessarily valuable, and valuable things aren’t necessarily expensive. I value oxygen a lot, but it seems silly to pay for the air I breathe each minute, given the abundant supply.

More importantly, songwriters who get hung up on “devaluation” confuse recordings with music. They equate the two. A recording is not the song, it’s just an instance of it, and a digital audio file is just an instance of the recording. Equating these reduces music to recordings to files. As important as recordings are, there’s so much more to music. When you think of a song, do you think of the recording, or a memory you had connecting with the music? Do you think of the file and how much it cost, or the emotions, people and experiences that the music conjures up? The recordings are just a means through which we experience the music. Songwriters (of all people!) should know that the value in music is so much more than the price of a recording. It’s not devaluing music to give it away for free, but it can increase its value by allowing more people to connect with it, to know, love and understand it — to value it. It’s through that experience that music is valued, not price!

Ironically, the underlying concern ends up being economic — how will we make money? A price of zero for digital audio files doesn’t mean that no one values the songwriting profession, or that no one is willing to spend money on music and keep songwriters in business. Sharing digital audio files makes the music more valuable and leads to more opportunities for monetization. When you give music away and connect with an audience, the opportunity for monetization is in the associated scarcitiesaccess, containers, community, merchandise, relationships, unique goods, the creation of new music, etc. — by giving people a reason to buy. Getting hung up on “devaluation” is a distraction from the opportunity — the necessity — to experiment with new business models.

So, can we please stop complaining that free means devalued?

Check out the lively discussion in the comments. Also, usually I’m pretty obsessive with backlinks, but somehow I missed an obvious post worth a link: Free Doesn’t Mean Unpaid

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Is There A Better Word Than “Balance” In The Copyright Debate?

Mike Masnick questions the word “balance” in the copyright debate:

I’ve long thought that balance is the wrong way to look at it. The purpose of copyright law is to incentivize the creation of new content, and thus the standard on which copyright law should be judged is one where the [benefits of the] creation of content is maximized. As such, there shouldn’t be a question of balance, because the ideal situation where content is maximized should make everyone better off. Talking about balance is figuring out how both sides should compromise to meet in the middle. Talking about maximizing content creation, on the other hand, is talking about ways to improve the marketplace of options for everyone.

He links to a paper by Abraham Drassinower of the U of T Law School arguing that balance is the wrong way to view copyright policy. “Balance” as a concept in copyright suggests that the law is designed to reward a content creator for their labour (the “sweat of the brow” argument), Drassinower argues, though Masnick has to tease out the main point: “Balance” falsely implies that this is a zero sum game, when “the goal of copyright should be maximizing the [benefits of the] creation of content overall, such that everyone is better off.

I’m sold. I tried to use this point at the Toronto Copyright Townhall and in my submission to the consultation.

But, if not balance, then what?

Words like “balance” are used often to make sure that the interests of the public aren’t forgotten in the face of copyright holders’ interests. I strongly support the group, Fair Copyright for Canada, but “fair” has similar problems to “balance.” What words might serve to include the public interest without suggesting a zero sum game? Mike described it as “maximizing [the benefits of] content creation,” but that seems more useful in explanation than at the sound bite stage.

What about “calibrate?” I notice that Mike used the word in a subsequent post on why morality isn’t relevant in copyright: “A properly calibrated system is one where there’s the greatest overall economic good and everyone has the greatest opportunity to benefit” (strongly related — if it’s an economic question rather than a moral one, rights holders interests are not necessarily opposed to the public interest). “Calibrate” seems like the most accurate word. It doesn’t directly conjure up the notion of the public interest, but it does so indirectly by suggesting an approach that’s about more than “protection.” But it’s too technical for a mainstream audience.

Is there a more accessible synonym for “calibrate?” Optimize? It works, but “optimizing copyright law” seems a bit too vague, and doesn’t really capture the non-zero sum game and the public interest. Thesaurus.com doesn’t help much either.

So what else? I’m not sure. I like “calibrate,” but it won’t work with all audiences. “Optimize” is nice to use in passing to reinforce the point, but it doesn’t introduce it. “Balance” and “fair” are still useful for drawing attention to the interests beyond that of rights holders, but I won’t offer those terms without a caveat or disclaimer.

Other suggestions?

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Free Music Doesn’t Mean Devalued Music

Update: A more condensed version of this post was published on Techdirt.

Mike Masnick does a great job of explaining why some libertarian and “free market” types freak out when they see a zero dollar price tag. The concept of zero took ages for societies to even recognize, nevermind understand. It’s not a number, but the absence of a number. A stumbling block for mathematics and physics in the past, it’s now misunderstood in some economic circles. Economics is often defined by scarcity, but with digital goods and “intellectual property,” we have an infinite supply — abundance instead of scarcity. Prices gets pushed towards marginal cost in a competitive market, and these “infinite” goods have a marginal cost of zero… so that’s where the price gets pushed. This upsets some people, as if it were a “divide by zero” type error that breaks the equation.

But a lack of scarcity isn’t a problem. Instead of thinking of it as forcing a price of zero, you “flip the equation” and think of it as being a cost of zero. If something can be reproduced for free, the trick is to use as much of it as possible — give it away, leverage the abundance to add value to other complementary scarce goods. Zero doesn’t break economics, it just requires a different approach. (This is all just a condensed version of Mike’s post.)

Songwriters, however, hit a different stumbling block than libertarians (songwriting libertarians aside…). Zero is a problem because they feel like their music is worthless; they aren’t hung up on scarcity, they’re hung up on “devaluation.” A lot of artistic types hear the economic theory and feel as though their work is just viewed as some sort of cheap commodity.

The thing is, value and price are not the same. Price is monetary value, but value is so much more than money. Price is what gets driven down to marginal cost, but value factors into the demand side of the equation. An expensive thing isn’t necessarily a valuable thing, and something that’s available for free isn’t necessarily without value. I value oxygen a lot, but it seems silly to pay for the air I breathe each minute, given the abundant supply.

More importantly though, songwriters who get hung up on “devaluation” confuse recordings with music. They equate the two. A recording is not the song, it’s just an instance of it, and a digital audio file is just an instance of the recording. Equating these reduces music to recordings, to files. As important as recordings are, there’s so much more to music. When you think of a song, do you think of the recording, or a memory you had connecting with the music? Do you think of the file and how much it cost, or the emotions, people and experiences that the music conjures up?

When I listen to Reflection, I am in Rosedale Valley, running a cross country practice in Grade 11 with a friend, as the meaning of the final verse hit me in all its pain and glory. When I listen to Dispatch live albums, I’m at the Hatch Shell in Boston, or Madison Square Gardens, at one of the reunion concerts. When I listen to the Good Lovelies, I’m in Ottawa at the OCFF conference in a packed hotel room full of folk musicians listening to a raw, passionate acoustic performance. You don’t connect with the files, you connect with the music. The recordings are just a means through which we experience the music.

I would hope that songwriters, of all people, could realize that the value in music is so much more than the price of a recording. It’s not devaluing music to give away your music for free, but rather increasing its value by allowing more people to connect with it, to know, love and understand it — to value it. It’s through that experience that music is valued, not price!

Furthermore, a price of zero for digital music doesn’t mean that no one values the profession, or that no one is willing to spend money on music and keep songwriters in business. When you give music away and connect with fans, the business opportunity is to monetize the associated scarcitiesaccess, containers, community, merchandise, relationships, unique goods, the creation of new music, etc. — by giving fans a reason to buy.

Music still has value, and there are still plenty of ways to monetize it. Getting hung up about “devaluation” is a distraction from the opportunity and the need to experiment with these new business models. Recognizing that digital recordings are an infinite good and giving them away for free only makes the music more valuable, and only leads to more opportunities for monetization.

So, can we please stop complaining that freeing up music devalues it?

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Despite Declining CD Sales, CD Baby Experiences Growth in 2008

This post originally appeared on Techdirt

While CD sales dropped 14% overall in 2008, CD Baby — a popular online music store that lets independent artists sell music directly to fans — actually saw an increase of 2%. In addition to selling physical discs, CD Baby offers optional digital distribution through iTunes, Amazon MP3, Napster, Rhapsody, eMusic, etc. and directly through their website. Still, almost 30% of albums last year were only offered as physical discs (though, some of these artists probably use other companies for digital distribution). While growth in digital sales was predictably larger (45%), even a small increase in CD sales in the face of the broader crisis is a sign that CD Baby is doing something right.

There are a few reasons why CD Baby could be having better luck with CDs than the rest of the industry. First, a lot of independent artists are discovered through live performances, and the CD has yet to be replaced as the standard format to sell music at shows. The credit card swipers that CD Baby offers artists accounted for $2.4 million worth of revenue last year (though, that includes sales of other merchandise too). Second, CD Baby seems to be taking advantage of the long tail, with minimal setup fees, minimal starting requirements (artists only need to mail in 5 CDs to start selling) and short-run duplication services, though they haven’t released enough data to confirm how distributed their sales have been. Lastly, great customer service and a sense of humour can’t hurt (e.g. an order confirmation email starts, “your CD has been gently taken from our CD Baby shelves with sterilized contamination-free gloves and placed onto a satin pillow…”). Although it doesn’t make any sense to base an entire business model on selling CDs, there’s still money to be made for artists and companies using CDs as part of their model.

Read the comments on Techdirt.

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Why Doesn’t Girl Talk Allow Commercial Use?

[This originally appeared on Techdirt.]

Legal trouble for Girl Talk — an artist named Greg Gillis who released a “mash up” album using the pay what you want model — is almost inevitable, but the situation gets even more interesting when you consider how the music is licensed. Girl Talk uses a Creative Commons Attribution-Noncommercial license for Feed the Animals, even though the songs on the album were made by using hundreds samples from other artists. Gillis claims his songs are fair use on the basis of being transformative and because the clips used are very short.

Aside from potential legal claims over the license if the fair use defense fails, why would Gillis — an artist making commercial use of samples from others — put a noncommercial restriction on his work? It seems a bit hypocritical. Granted, he does claim that “the CC license does not interfere with the rights you have under the fair use doctrine, which gives you permission to make certain uses of the work even for commercial purposes,” but is the noncommercial restriction for other uses really necessary?

First of all, as Mike Masnick pointed out in his critique of a noncommercial copyright, the distinction between commercial and noncommercial use is extremely blurry. Equally blurry in this case is the distinction between transformative and non-transformative use. At what point exactly does a derivative work become transformative? But, more importantly, Mike asks “if someone else is able to do something commercially useful with my content, why should that be a problem?” Girl Talk ought to be a perfect example of this, yet Gillis seems to deliberately limit the possibilities through his choice of license.

Why attempt to limit the positive externalities? Maybe some of the artists sampled on the Girl Talk album will really like a song their music appears in and want to include it somehow on a release of their own, make use of it on their website, etc. Should those artists then be required to pay for the use of a song which includes samples of their own music? Maybe, but it seems like respecting “upstream” would help an artist like Gillis maintain a better relationship with the artists from which he’s sampling.

Furthermore, what about people who might do something with the album that’s potentially commercially useful for Girl Talk? For example, if someone were to make an interesting remix or video using Girl Talk’s music , not only would they be required to refrain from commercial use themselves (unless it was fair use), but Gillis would require their permission to make use of it himself. If he had used a copyleft license like the Creative Commons Attibution-Share Alike, both he and any artists making derivative works would have the ability to monetize their efforts. Instead, derivatives are relegated to the realm of the amateur because, with a noncommercial license, the barriers of a permission culture are still intact for artists trying to make a living from their work. One would hope that Greg Gillis, of all artists, might realize the benefits of removing these barriers, especially on commercial use.

[This was largely inspired by a couple Rob Myers posts — Noncommercial ShareAlike Is Not Copyleft and Why The NC Permission Culture Simply Doesn’t Work — which convinced me to license my music under a free license.]

[Read the comments on Techdirt.]

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Why don’t record labels act as post-filters?

I’ve attended a few panels on the music industry in the past few weeks. I listened to David “Click” Cox speak and answer questions at Long & McQuade a few weeks back (as part of the Big Schmooze, I believe), and I sat through a few music panels at the Mesh Conference last week. I may write in more detail about that one later, but it’s a general sentiment that I wanted to comment on now. Techdirt picked up on it earlier today.

Why don’t record labels act as post-filters?

I read Chris Anderson’s book, The Long Tail, a few weeks ago. One of the themes in the book is the distinction between pre-filters and post-filters. In the 20th century, the focus of media companies was on hits (the “short tail”). Pre-filters were extremely important to determine what content would end up being commercially successful. Media companies were limited by the distribution methods, by things like shelf space. A CD store can only stock so many CDs, so it was very important for them to determine what would be successful before it got to market. The labels became very good at this, but there were still flops and surprise hits. The business of predicting what will be successful is not easy; it’s a business of predicting the future.

In the 21st century, digital distribution methods have virtually removed all of those barriers. With the essentially infinite shelf space of an online store or service, it’s now economically viable to stock everything, even those items which might only sell once or twice. (This is basically the “long tail”.) Anderon says that “the Long Tail without filters is just noise,” and notes that post-filters are now extremely important.

[Post-filters] find the best of what’s already out there in their area of interest, elevating the good (relevant, interesting, original, etc.) and ignoring or downplaying the bad. When I talk about throwing everything out there and letting the marketplace sort it out, these post-filters are the voice of the marketplace. They channel consumer behavior and amplify it, rather than trying to predict it.

In Long Tail markets, where distribution is cheap and shelf space is plentiful, the safe bet is to assume that everything is eventually going to be available. The role of filter then shifts from gatekeeper to advisor. Rather than predicting taste, post-filters such as Google measure it. Rather than lumping consumer into pre-determined demographic and psychographic categories, post-filters such as Amazon’s custom recommendations treat them like individuals who reveal their likes and dislikes through their behavior. Rather than keeping things off the market, post-filters such as MP3 blogs create a markets for things that are already available by stimulating demand for them.

Apple doesn’t spend time or money determining what iTunes should stock. It stocks everything; the effort goes into helping people find what they want. Google does the same for web pages (and the rest of the world’s information), Napster did the same for files, Last.fm and Pandora do the same for music.

A post-filter attempts to measure success after something goes to market, and to help people find it. This doesn’t make a post-filter inherently successful, but it sure eliminates a lot of the risk and uncertainty of predicting the future by instead analyzing the past and the present.

When I was listening to David “Click” Cox, I couldn’t help but notice that any attempts to adapt to the technology were still inhibited by this notion that record labels are supposed to act as pre-filters. They still expect to be the gatekeepers, to determine what will be successful before it goes to market and to make investments in that and take risks.

That still may be useful, but why not act as a post-filter as well?

Ian Rogers, former GM of Yahoo! Music, has written an open letter to Guy Hands, the head of EMI, suggesting just that. More specifically, Rogers suggests establishing “affinity labels” to group similar artists together. By putting some big name EMI artists on each label and associating them with lesser known but similar artists, such affinity labels would act as a post-filter, helping fans to find similar music.

The record labels won’t succeed by trying to be the gatekeepers after the gates have been flung open and the walls have been torn down. But they don’t need to remain ignorant of collective intelligence, to solely consider themselves as pre-filters and limit their market and potential.

Why can’t labels really take advantage of digital technology by monetizing niche markets? Why can’t labels help music fans to filter the vast amount of content that’s already on the market to find what they’re interested in? Why don’t labels act as post-filters?

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Confusing royalties and salaries

Today, I was sent a link to an emotional rant by Harlan Ellison about paying writers royalties. I admit that I’d never never heard the name before (not sure if I should have or not…), but, from the sounds of his Wikipedia article, I’m pretty sure I wouldn’t like him.

He did an on camera interview about the making of Babylon 5, and the film company doing the packaging for Warner Bros. called him up because they wanted to use it on the DVD. They wanted to use it for free, he wanted to be paid. If he owns the copyright to the interview, he has the legal right to demand compensation, but it’s the ensuing rant which brings up all sorts of problems.

He hopelessly confuses royalties and salaries.

By what right would you call me and ask me to work for nothing. Do you get a pay cheque? Does your boss get a pay cheque?… Do you pay the camera man? Do you pay the cutters?… Would you go to a gas station and ask them to give you free gas?

They weren’t asking him to work, they were asking to use something he’s already worked on. A salary is about paying someone to do work, but royalties are about paying someone to make use of work they’ve already done. So, his pay cheque comments are off the mark. Also, if he was compensated for the use of the interview, would he pay the camera man and cutters who helped produce the original interview? What about the manufacturers of the camera or the audio equipment they used? What about the lighting crew? What about the actors, without whom there’d be no Babylon 5 to do an interview for? What about those who taught him the language he uses in the interview?

It’s not as clear who should be paid when it comes to work that’s already been done, compared to work that’s about to be done. In most other domains, people don’t get paid for work they’ve already done. I don’t pay Lenovo royalties when I develop software on my ThinkPad, I don’t pay Gibson royalties when I play a gig on my Les Paul, and I don’t pay my music or computer science teachers when I apply a concept they’ve taught me on the job.

He says, “they always want the writer to work for nothing.” That’s certainly a problem, but the example he’s ranting about is not about him being asked to do any work. He wouldn’t be doing any more work by saying yes than by saying no. Again, this doesn’t mean he doesn’t have the legal right to ask for compensation, but in confusing payroll cheques and royalty cheques his complaint doesn’t really make sense.

To be clear, I’m not saying it’s wrong for him to ask for money in this case. It’s the way in which he confuses royalties and salaries that’s problematic. Royalties aren’t always the answer, and though it may be convenient, it’s inaccurate to make an argument about paying people for work they do when you’re really talking about work they’ve done.

Ellison also seems to have an elitist complex and a problem with competition. He says, “I get so angry about this because you’re undercut by all the amateurs,” and then goes on to flap his arms (not sure why…) and mock the mindless attention seeking of the amateurs who “have no idea they’re supposed to be paid every time they do something.” Like, every time they take a piss, for example. (“I sell my soul, but at the highest rates. I don’t take a piss without getting paid for it.”)

What about the “amateurs” who realize they can get a competitive edge on the “professionals” by offering they content at a lower rate? Isn’t that called competition? If competition is driving down the monetary value of Mr. Ellison’s interviews, maybe he ought to invest some time in fine-tuning his business model (no, that doesn’t mean suing more people), rather than simply whining about the change in the market.

At the start of the rant, Ellison says “everybody else may be an asshole, but I’m not.” If you watch the video, you might even doubt the accuracy in that.

It’s entertaining though.

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Rogers deliberately disables tracking of roaming charges

Do we really need another reason to hate Rogers? Jack Kapica got a bill for the first half of his trip to Rio, where he was charged for 5,151 kb of data transfer. Guess how much? No, no, guess again. This is Rogers, it needs to be insanely higher than what you think is insanely high.

$241.11.

That’s $46.81 per megabyte. God forbid he watched a video on YouTube during the second half of his trip. He might have to remortgage his house.

Don’t cry yet, it gets worse.

It was my fault, of course. I knew Canadians pay the world’s highest data rates, but I had no idea how much I was incurring while on the road.

So I went to a Rogers store and asked the sales clerk how I could have calculated the charges as they occurred. I expected there to be some website that could tell me what I routinely learn from taxi cabs: a real-time fare update. So where do I look?

I can’t do it, I was told by the sales clerk. It’s not possible.

Why not?

“Because Rogers tells all of its cellphone manufacturers to disable that feature in our cellphones,” he said in a manner that suggested I was the last person to learn this. Perhaps I was.

And why does Rogers do that?

That’s when he dropped the one-word bomb: “Revenue.”

Talk about honesty.

Talk about pure and unadulterated greed.

Evil, evil, evil…

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The Problem With A Music Tax

I’ve written about the SAC‘s proposal to legalize music file sharing several times in the past, giving it mixed reviews. It’s not a new idea, but it’s one of the first times an organization of artists has proposed it, and some record companies are entertaining the idea as well.

I’ve come to a decision about the proposal: I don’t like it.

Royalties were not designed for the digital age. The proposal suggests what essentially would amount to a music tax. There is no way to opt-out and it applies to everyone with an internet connection. Since when are royalties taxes? Since when do royalties apply to everyone? Royalties were meant to regulate a few large distributors and broadcasters. In the digital age, everyone can be a distributor or broadcaster. It just doesn’t work.

The CMCC describes this as a “forward thinking approach.” It’s a forward thinking approach, but from backward thinking minds. Royalties are not the answer to everything.

The no opt-out clause really makes it a deal breaker. The proposal is to charge everyone a fee, regardless of whether or not they are actually infringing any copyright claims. It’s aptly described as a “you’re a criminal” tax.

The EFF writes:

We are big fans of a collective licensing solution for the music file-sharing dilemma: music fans pay a few dollars each month in exchange for a blanket license to share and download whatever they like; collecting societies collect the money and divvy it up between their member artists and rightsholders…. But this should not turn into, as some have called it, an “ISP tax.” Any collective licensing solution should be voluntary for fans, artists, and ISPs alike.

Further, what sort of precedent would this set? Mike Masnick writes:

The biggest reason, as Geist points out, is the second you do this, plenty of other industries will come out of the woodwork demanding a special fee get applied to internet connections as well. Newspapers that think Google and Craigslist are “stealing” from them will demand a special “news tax.” And then think of all those other industries who claim they’re being impacted by the internet. You’ll have a special auto-mechanic’s tax, to pay for mechanics who are upset about the DIY info found online. The “knitting tax” for all the free knitting patterns online. I understand that AAA may be upset about Google maps. Travel agents want that “travel tax” to pay for all that business that Expedia has cost them. Where does it stop?

I do applaud the SAC for bringing forth this proposal and I’m proud to be a member. It is “forward thinking” in the sense that it seeks a way to make the new technology work, rather than to pretend it can be somehow stamped out. But I don’t think this particular proposal provides an answer.

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