Digital rights

Walmart has killed its movie download business, which is not even a year old. There were many problems with it:

• It was not compatible with video-capable iPods.
• It was over-priced.
• It had a lot of clumsy DRM (Digital Rights Management) attached to the movies.

A more general problem with movie downloads is that they are still very slow, compared to things like songs, which download pretty quickly even over a DSL line. The movie download services, including the movies offered on iTunes, have to reduce the quality to speed up the download or force buyers to wait hours to download a high quality version.

DVDs still are very competitive because we do not have fast broadband connections and because the studios are still attaching too much DRM to movies.

A lot of companies are frustrated at Apple's domination of the portable music and video market via the popular iPod, which has about 80% of the market for such devices. NBC recently announced it is pulling its TV programs from the iTunes store, and now Universal is going to distribute its music catalogue via SpiralFrog, which will compete directly with the iTunes store.

SpiralFrog and Universal have decided that the music it sells will NOT play on iPods. Apparently ego and stupidity have combined in some entirely new way at Universal, where they apparently think they can simply walk away from 80% of the market. Why would anyone buy music from Universal if it won't play on your music player and can't be stored with the rest of your music in the iTunes software on your computer?

One of the enduring myths of the iPod is that it will not work with music that is not purchased from the iTunes store. This is not true, and never has been. Another myth is that music purchased from iTunes won't play on anything other than an iPod. This is also not true, as you can simply burn a CD and play the music in any device that reads music CDs.

Apple gets beat up for its market share, but it actually has done a better job than most other online music vendors of trying to be fair to its customers. The music industry is still struggling with the sea change in the distribution of music, and the SpiralFrog/Universal partnership is yet another attempt by music executives to control customers. It is not likely to work.

In yet another Google flop, the company has announced it is closing its video store. Some thing work, some things don't. No problem there. But customers who downloaded videos from the Google store received a letter from Google notifying them that the videos they had "purchased" were going up in smoke. The movies have DRM (Digital Rights Management) attached to them, and once the store is closed, the movies are no longer watchable.

Boing Boing has more on the fiasco. Google has offered the customers Google Checkout credit for the videos they purchased, but the credit is only good for sixty days. And some customers (probably most) may not even have a Checkout account (Checkout is the Google competitor to Paypal). So if you bought Google videos, you get limited store credit and have to find some company that takes Checkout payments (I can't recall ever having seen one).

It is an appalling way to treat customers, and especially so given that Google has billions in the bank, and could easily just write their movie customers a check. Google also breaks new ground by redefining the word "purchase" to mean "you purchase, we own."

Update (8/22/07)
Google has announced that it is giving all the video customers a cash refund, and it is letting them keep the Checkout credit it had already issued. The company has done the right thing; it is just too bad they did not think the refund process through a little more carefully.

Mark Pryor (D-Ark) has decided that Congress and the Federal government should decide what we can and cannot see on our TVs, cellphones, and portable media devices. Pryor is sponsoring a bill that would require the FCC to develop a "super V-chip" that would have to be installed in every device that connects to any third party network, including the network.

There are so many things wrong with this that it is hard to know where to start. First, adding this sort of flawed technology to every single electronic device would raise the cost of everything. And remember that we are rapidly moving towards a time when every single electronic device we own (radios, phones, TVs, computers, music players, etc. etc. etc.) all have some kind of connection to networks. The cost of implementing this would be staggering, and we would get to pay for this with higher prices.

It also beggars belief that we would want FCC bureaucrats in Washington D.C. to decide what we can and cannot look at. Pryor is wrapping this in the usual "it's for the children" bait and switch language, but it would give the Federal government total control over the media. The V-chip was a dumb idea from the start, but if you squinted hard, you could dimly see some kernel of justification for it, since in 1996 a lot of us still got TV over the airwaves, which was still heavily regulated by the FCC. With all the alternative ways to get news, information, and entertainment today, the FCC is hardly needed to "protect" us.

Pornography is a scourge, but as more and more communities move toward an open services model for delivering media, the open market will take care of this problem quite neatly. In open services networks, some Internet access providers will be able to cheaply and easily sell "family friendly" Internet access with all sorts of parental controls built in. It will be quicker, cheaper, and easier than any government-mandated solution, and it will work better. That's the right way to do it.

The New York Times (registration required, links disappear) has an article about the plunging fortunes of the music industry. Sales of CDs have fallen more than 20% in the past year. While the article does acknowledge that a lack of good music may have something to do with it, no mention is made of the possible effect price also has on buying decisions. Most new CDs cost $18 and up.

The music companies continue to try to blame online music sharing as the primary culprit, but I am inclined to believe that they have cause and effect reversed, at least in part. High prices encourage "free" sharing, even though it is illegal. The record companies need to find better music, cut their high overhead, increase royalties to the musicians, and lower the cost of music. Continuing to blame customers and labeling their customers indiscriminately as thieves is obviously not working.

Is the Internet to blame? In part,sure. There is no reason to distribute music on CDs anymore, but the fact that file sharing is easy via the Internet does not automatically kill the music business. Good music at a fair price is step one.

Digital Rights Management (DRM) may be on its way out. Amazon has announced it intends to get into the music business and will offer only digital tunes that do not have DRM, which limits what buyers can do with the music.

Amazon has enough clout that it may succeed where other companies have failed, but even Amazon may not make much headway against Apple's iTunes Store, which is also beginning to introduce DRM-free music. Amazon will offer the music in MP3 format, which is not quite as good in sound quality as the AAC lossless format used by Apple.

It is also not clear how many music companies will offer music without DRM. Right now, Amazon has only one record company willing to do so.

One myth that has been repeated in some other stories on this topic is that iTunes music only plays on iPods. This is dead wrong, and has never been true. You can easily move iTunes music around and it is possible to play the tunes on MP3 players made by competitors.

Apple has consistently said it will remove DRM if the music companies will let it, and it appears that cracks are beginning to appear in the stubborn resistance (so far) of the music companies to sell music without DRM.

Viacom is suing Google over unauthorized video clips on Google's recently acquired YouTube. YouTube fans record clips from their favorite shows (including many shows owned and produced by Viacom), and post them on YouTube for other people to watch. Part of what is going on is the fact that Viacom just bought into Joost, a YouTube competitor that will carry all of Viacom's content. So the lawsuit has two purposes: protect Viacom's intellectual property but also drive people to Joost. Viacom wins, and Google/YouTube loses. It is a clash of the titans, and Google has no traction here; YouTube has relied heavily on unauthorized use of copyrighted material.

I recently installed an 'ebook' reader on my Palm Treo. I went to the Palm Web site where they have lots of ebooks for sale, but the prices are quite silly. Recent releases--the books you are most likely to want to read on an airplane--are priced at about what you would pay for a paper copy on Amazon or some other big box book store. Some books are as little as five dollars, and many others are ten dollars or more. "Classic" books have even more baffling prices. Daniel Defoe's "A Journal of the Plague Year" cost ten dollars, while a much more recent book, H. Rider Haggard's "King Solomon's Mines" can be snapped up for three dollars. For the life of me, I cannot make any sense of the pricing. Three dollars is about where I start to get interested, but who is going to pay $15 or $20 to read a book on a tiny, two inch square screen.

Part of the problem appears to be fear. The publishers fear that once a book has been downloaded, people will simply pass it around without paying for another copy. But it high prices that make this more likely than low prices, and this is the same issue the music industry have been struggling with. DRM (Digital Rights Management) annoys honest customers, and has little or no impact on dishonest people. So it is quite difficult to see what is accomplished with overpriced digital versions of things, other than to slow sales down.

In an interesting essay covered in a Wired article, Steve Jobs of Apple has called for an end to DRM (Digital Rights Management) for music. Apple has found that, on average, only 3% of music on a typical iPod uses the Apple FairPlay DRM; the rest is music that has no DRM at all. Typically, this means most people are simply ripping music from CDs and putting it on their iPod.

Apple has been heavily criticized for kowtowing to the record companies, but Jobs makes it clear Apple has always done so reluctantly, and would happily abandon DRM on the iPod and for the iTunes software. DRM's main accomplishment has been to annoy music lovers, who chafe under the restrictions that limit what devices can play a song, how many times it can be shared, and how it can be shared. Apple's proposal to end DRM puts the target squarely on the record companies, who continue to whine about piracy while suing grandmothers without computers and fourteen year old girls. As I have said in the past, it is mystifying to me that a business would go to such great lengths to alienate its customers, and would state in public that it thinks its customers are all crooks.

A recent analysis of credit card purchases suggests that music lovers hate digital rights management (DRM), the software that tries to limit what we can do with our music and videos. The study shows that sales of digitally-protected music is dropping while online sales of CDs is increasing by comparison--meaning that we are still buying music, but prefer CDs that we can rip without limitations.

But this article, like so many others about the music industry, ignores what I think is the elephant in the room--that there is a shortage of good music to buy, and has been for years. As just one example of the completely backward thinking of the music companies, they are lobbying the online music sites like iTunes to increase the percentage of royalties paid to the music companies and decrease the amount paid to artists--even though the record company cost of distribution is essentially zero for digital downloads. That's just crazy; ultimately, if artists don't have some financial incentive to create new music, the record companies will have nothing to sell.

I have never seen an industry so determined to hate and vilify its own customers. Music sales are down, so it must be that customers are crooks--it could not possibly have anything to do with the quality of the music. Everybody I know, young and old, complains bitterly about the lack of new and interesting music, but it must be our fault for not buying the dreck that passes for popular music. It could not possibly be incompetent record companies. Music is not going away; music is something that is part of our DNA. Every culture in the world has a rich musical tradition, so despite the best (worst) efforts of the record companies to kill music, that won't happen. But one thing that could die is the current music and marketing distribution model. And that might be all for the good.