piracy

 by Brendon J. Wilson

Future Sound of Music

My discussions with Phil Johnson (of the local band Roadside Attraction) at the recent Entrepreneur Meetup were quite thought-provoking. Here’s a guy from a typical band trying to figure out how to “make it” – it sounds like every guy you knew in high school with a band, a three chord masterpiece, and immaculate hair. Except for the fact that Phil is part of a new breed of über-savvy independent artists. When people ask him if his band is trying to get signed by a label, he can only laugh and respond, “Why would we? We can do it all ourselves now!”

We can do it all ourselves? Damn straight – this guy gets what many in the record industry are fumbling to comprehend.

Welcome to the new reality for musicians (or any artist for that matter): any moderately talented garage band can fire up GarageBand and record high-quality audio both at home and on the road, capture photo and live video footage, and release it all via their web site. And they don’t even have to pay for the bandwidth if they use tools like BitTorrent. Anyone with a web browser and half-decent bandwidth can skarf it all down by the gigabyte, as much as they can find, and often as cheap as they can find it. Which brings us back to the dilemma facing the aforementioned recording industry: how does a band make any money?

As my buddy Kevin Burton pointed out, the challenges facing the music industry in its battle with file-sharing networks and darknets are quite similar to those the software industry has been dealing with for a long time: lots of people are stealing precious intellectual property that has negligible marginal cost of production. But, as Kevin points out, aren’t we forgetting the benefits of software piracy? Think of all the economic activity driven by software piracy – didn’t that more than offset the losses incurred by the industry? In particular, I recall one particular urban legend about Photoshop that makes me think this may not be so far-fetched.

A couple years back, there was a rumour that Adobe was leaking its software to pirate sites – or doing very little to prevent it at the very least. I don’t believe it was ever shown to be true, but it’s plausible enough from a business perspective to warrant consideration. The story goes something like this:

  1. Adobe wants to become the dominant player in the industry, so it leaks copies to pirate sites.
  2. Pirate sites distribute the software.
  3. Amateur web designer trying to build their first web sites start using whatever software they can find – and they easily find Photoshop.
  4. Fast forward a few years, those same web designers are now working at dot-coms building web sites – what software do they choose? That’s right, they choose Photoshop. Why? They already knew how to use it and heck, they weren’t footing the $800 for a copy of the software!

Once started, this system formed a nice feedback loop that effectively locked out competitors. Overpriced commercial software drives amateurs to piracy, software that is made easily accessible to those who know where to look. These amateurs get free software, become experts on the software, get locked into the software, and finally businesses hire the (now-expert) amateurs and foot the bill for the software. Can you say “business model”?

How does this apply to music? Well, first consider artists like Elton John – artists who own their whole back catalog (or, conversely, ask The Beatles, who don’t). These guys make lots of money every time they release a new album because fans buy not only the new album, but also two or three albums from the artist’s back catalog. The rights to the back catalog become a value multiplier. Will this model extend into the digital realm?

In a world where the marginal value of an individual song asymptotically approaches zero, albums in their current form cease to exist, and competition for audiences undergoes explosive growth, musicians will have to put aside the idea of making the money off individual songs and albums. Will an artist’s back catalog have value? Sure, but not the way it does right now. No one’s going to get rich selling albums; they’re going to get rich selling experiences. For what is music, but a mental shortcut to all the memories we associate with a particular song?

I predict that the value represented by a band’s back catalog will be indirectly captured in the prices of the only remaining asset of the artist that has any scarcity and hence any value (see the diamond-water paradox): their time. And ours. Think the Rolling Stones‘ ticket prices are exorbitant? Just wait. The winners in this game will be those artists that can that build and sustain an audience over the long term and craft experiences that form a deeper bond between the band and the listener that goes beyond the elements that can be captured in bits and bytes.

Of course, that does beg the question: how does a band keep themselves in mascara and spandex long enough to build this kind of value? This model requires long-term dedication to a band, the kind of dedication the music industry current model is incapable of providing – which, I would argue, is a good thing. The current pump-n-dump model of finding a pretty girl, teaching her to dance, writing songs for her, and hyping the hell out of her is directly responsible for the current deluge of craptacularly bad music. A “slow cook” approach is just the remedy we need – only those acts who actually have the musical talent, the dedication to their craft, and ability to forge lasting relationships with their audiences will be able to survive in this new environment.

in Business / Culture / Entrepreneurship / Technology 1 comments
 by Brendon J. Wilson

Cue The Violins

There I was, sitting through a mandatory pre-movie advertisement marathon, wishing a plague upon the house of the advertising executive who came up with that “innovation” (“Hey, they’re here anyway, why not show’em some more ads!?”), when I saw an advertisement for this website. Yes, the great battle for the hearts and minds of audiences in the battle against piracy has finally begun in earnest, and Hollywood is pulling out all its dramatic tricks.

In the ad, we see a lowly set painter explaining his job, what he loves about doing it, and why piracy is a threat to his livelihood. Hmm, plausible. Except, when you really think about it, the set painter is one of hundreds of people involved in movies that are way down the totem pole – are they really the ones who are taking a big hit when a movie is ripped off? I’m guessing the lead actor, pulling $20 million, the studios, and the merchandisers are probably the real ones taking the big hit. Note to Jack Valenti & Company: boo-freaking-hoo.

The launch of this campaign coincided with a similar action this week by the RIAA, who issued some 911 subpoenas recently to ISPs of suspected file-sharers. Besides the occasional embarrassing screw-up, the motive behind the RIAA’s actions is also starting to seem a little suspect:

“Verizon, which has fought the RIAA over the subpoenas with continued legal appeals, said it received at least 150 subpoenas during the last two weeks.
There were no subpoenas on file sent to AOL Time Warner Inc., the nation’s largest Internet provider and also parent company of Warner Music Group. Earthlink Inc., another of the largest Internet providers, said it has received only three new subpoenas.”

What is the likelihood that there isn’t a single AOL user running Kazaa? Can you say “zero”? Hmm, dirty games at the RIAA? Say it ain’t so!

The big point that both of these actions are missing is really quite simple: you’re going to lose. Why? Because you’re too slow to stop the technology – you had your chance, you dragged your heels, and now the cat is out of the bag. Heck, some of the major players in the RIAA are electronics manufacturers who are building technology to make it easier to enjoy stolen music and videos!

There’s one other reason that the genie won’t go back in the bottle: the tech-heads creating the digital rights technology are usually the same guys that are ripping off the most music. Even they don’t believe technological countermeasures will succeed – one IBM researcher I talked to at the Financial Cryptography 2000 conference noted: “On the record, SDMI will be the greatest anti-piracy technology ever invented – off the record, it’s a piece of crap, and will probably never see the light of day.” Chances are, as these guys create the technology, their close buddy is working on a way around it.

The next generation of technologies will be no different – the only hope for the RIAA and MPAA is legal pursuit. If the technology community is really smart, they’ll devise technologies that perform the same functions, but operate within the law. How? How about:

  • Digital License Exchange Technology: What we need is a technology that will allow users to do with digital copies what they currently can do with physical media. Say I have a copy of “Hootie and the Blowfish” to which I never listen. You, on the other hand, are a huge Hootie fan, with no cash to buy any of their records. With a system to allow users to list licenses they hold, you could “check out” my license for the “Hootie and the Blowfish” songs you downloaded either from me, or through Kazaa, listen to your heart’s desire, and then “check in” the license once you’re done. Seems to me this would be all nice and legal, provided that nobody circumvented a digital copyright protection technology in the process.
  • Finely Segmented and Shared Content: Systems like Freenet use schemes such as RAID-5 to segment data across multiple drives (or peers in the case of file-sharing systems) to ensure data redundancy. Usually data is split over three to five different peers. But why stop there? Why not split the content into very small pieces, excerpts, if you will, that are protected by fair use provisions of copyright law? It’s not illegal to share a 6-second excerpt of a song or movie, is it?

All of these legal and technological cat-and-mouse games avoid an even simpler solution: create content for which people are willing to pay. I went to see the Cirque du Soleil last weekend, and Phish the weekend before. Incredible shows – I’d buy their CDs or movies without a second thought given to pirating them. Why? Because they’re unique, they’re doing something interesting. The movie and record industry has morphed into a giant cookie cutter, modifying the recipe slightly from time to time, but never so much as to invent something completely original.

The sooner the entertainment industries remember their original purpose, i.e.: to entertain, and move to develop true artists for the long-term benefit, the sooner the problem of piracy will go away. People want something new, something that makes them feel that child-like sense of wonder at what they’re seeing. And frankly, the latest incarnation of tired stories starring the flavour-of-the-week actress/singer/clothes-designer just ain’t cutting it with the audiences these days.

in Culture / Technology 5 comments