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Archive for July, 2008

Cory Doctorow: Trying to kill pirates makes them stronger, blanket licenses are the only option.

Napster

Cory Doctorow is one of the smartest people currently writing about technology, see today’s piece from him in The Guardian if you don’t believe me. The backroom deal that just went down in the UK between ISPs and the major record labels is not good news for the future of the music business, or for the future of the internet, period. But Cory compellingly makes the case that the only real security blanket left for the entertainment industries, is the idea of the blanket license:

“It’s historically inevitable: whenever technology makes it impossible to police a class of copyright use, we’ve solved the problem by creating blanket licenses.

“The record industry itself was the first beneficiary of this system: when the US sheet-music publishers sued the record-makers for selling recordings of their compositions, they were given a simple solution: anyone is allowed to record your music, provided they pay you a set fee for it. No one has to pay a lawyer $500/hour to negotiate whether this track on this album will cost $0.10 per disc or $0.05. And when the record companies objected to the radio stations playing their discs without compensation or permission, the answer was a blanket licence for records played on air. It’s the tried-and-true answer to the problem of copyright-disrupting technology:

* acknowledge that it’s going to happen;

* find a place to collect a toll;

* charge a fee that’s low enough to get buy-in from the majority;

* ignore the penny-ante fee evaders;

* sue the blistering crap out of the big-time fee-evaders.

“This is the shareholder-value-maximising answer that actually brings revenue into the pockets of artists and record companies. It co-opts the majority of filesharers into being active participants in a legitimate transaction instead of everyone starting off as outlaws who have nothing to lose and no reason to come to the bargaining table except for fear of legal reprisals (this fear is notoriously ineffective at moderating the behavior of children).

“Ten years ago, the record industry had a simple little problem they could have solved by showing a tiny amount of future-looking flexibility. A decade of intransigence and stubborness has bred a killer strain of antibiotic-resistant filesharing technology that grows more and more difficult to police by the year. The sheet music publishers didn’t get to control the destiny of the record companies, who couldn’t control the broadcasters, who couldn’t control the cable operators, who couldn’t control the VCR makers.

“The record industry will not be in charge of the characteristics of filesharing systems. They may get remunerated for their use, but they won’t be able to dictate their functionality, no matter how many children they criminalise. If they want to cash in on filesharing, they’d better do it soon, before every potential licence fee payer decides to opt out of the system forever.”

Read the whole thing here.

What part of this game do the record labels not understand?

mole

A wack business model. Picture by Jrubinic

A few people emailed me asking what I thought about the new measures against pirates being taken in the UK. According to the BBC, six of the UK’s biggest net providers have struck a deal with the music industry to tackle piracy online. Hundreds of thousands of letters will be sent to net users suspected of illegally sharing music. I don’t comment on every single piracy story that comes up because I find so much of the action being taken so wrong-headed that it’s not worth discussing. I felt that this was one of those stories.

First of all, letter writing campaigns are for pressure groups and knitting circles, why the BPI is engaging in something this futile is beyond me. Competing with pirates has to be part of the equation, this is becoming widely accepted. Any company or industry pretending they can fight piracy with the law alone is going to find out the hard way that they cannot. The record industry seems to think this is a game of cat and mouse, when they are in fact playing wack-a-mole.

You can’t win this game with a big hammer, it just keeps going. The majors won’t beat music pirates by pretending the current legitimate methods of distributing recorded music are more efficient. On top of that, there are many ways around this type of snooping, such as encryption, Usenet, wifi leeching, USB transfers, switching to smaller ISPs, the list goes on. The pirates are always going to be a step ahead. In practice there are so many problems with implementing this, it doesn’t even sound workable in any way that won’t be a giant PR disaster for Ofcom, not to mention every ISP involved.

Musicians deserve to make a living like everyone else. But despite file-sharing, artists are making a living, many continue to make a very good living, and the rise of independent labels (which now accounts for 30% of the market in the US) suggests more people are making some sort of living from music now so many barriers to entry have been removed.

It’s not file sharing, it’s HBO.

All this talk of a music tax isn’t helpful either. But a subscription service not unlike HBO’s model in the States could be a good idea. Millions of people, me included, pay upwards of $20 for HBO on a monthly basis. I’m not sure exactly how much we pay for it in my house, but I know it’s more than I would pay in any other circumstances for the privilege of watching Norbit fifty times a month. But great shows like The Wire and Generation Kill, not to mention the convenience of having all that content in one place, means I’m happy to keep paying. In the long run I feel like I’m getting my money’s worth. HBO doesn’t just sell good content, it sells a good experience.

Giving people the option to pay $5 or $10 a month for all the music they can eat is the industry’s best shot at vanquishing the threat from pirates. There are some problems with this, common standards need to be in place, and a royalties system needs to be figured out, but while these things might be an administrative headache, they are by no means impossible. The majors need to develop a system or service based on the file sharing model the way Apple and Amazon have, but to compete they must go that extra step. The products need to be superior, the customer experience needs to be great but most of all the price needs to be right. They’ve already lost ground to incumbents like Apple, and the longer the focus stays on trying to stop individual fans from downloading, as opposed to innovating, the more ground they stand to lose.

The Joker’s Trap

Joker

Like everyone else, I went out to see The Dark Knight this weekend. I had just spent the week in LA talking to a lot of people in the movie business about piracy. We waited in line for over an hour and spending a total 0f $60 on tickets and various overpriced snacks, which reaffirmed my belief that Hollywood is going to be just fine. But I would have happily paid twice as much had I known the film was going to be as amazing as it was, and such an eloquent explanation of the fundamental problem with the Prisoner’s Dilemma.

Towards the end of the film The Joker rigs two passenger-filled ferries with explosives (please look away now if you didn’t already see it). The first ferry is filled with upstanding citizens of Gotham. The second contains the most dangerous inmates from Gotham Prison. The Joker has wired each ship with explosives, and left the detonator for each ship on the other ferry. Game theorists in movie theaters everywhere dropped their popcorn – a prisoner’s dilemma with real live prisoners! And Batman!!!

For a great rundown (and some serious maths), see The Quantitative Peace’s discussion: “The use of the detonator saves the ship while killing everyone aboard the opposing ship. Thus, if any member of Ship A pushes the detonator, then Ship B is destroyed and all of Ship A is saved. Additionally, if either ship fails to use the detonator to destroy its opponent, then both ships will be destroyed by the Joker. Assuming that the actors must make their decision simultaneously, this would lead to the following game:”

joker game

The Joker is convinced one ship will blow up the other, but he makes a huge mistake. He assumes that humans are rational, and only act in their own self interest. As a society we often subscribe—in theory, at least—to this idea. This theory has been a dominant force in economics, political science, military strategy, psychology, and many other disciplines since the 1950s. It has informed some of the most important decisions the human race has ever made, from the nuclear arms race of the Cold War to the way we share all kinds of resources today. This simple game of two prisoners trying to make decisions based on what the other will do helped shape the structure behind the supposedly dog-eat-dog world we live in.

But in practice the game is flawed. The most basic assumption—that we all act only in our own self-interest—is simply not true. When econo¬mists test this theory, real people do not always act this way. In real life, in every corner of society, people cooperate with one another in the interest of both the public good and their own private interest. That’s why we have nonprofits, nurses, and teachers. If prisoners really thought it was okay to rat on each other all the time, Stop Snitchin’ T-shirts would not exist.

In fact the only rational human beings who only act in their own self-interest are most likely certifiably insane, as indeed The Joker is – which is what makes this movie such a perfect place for this story. But I thought he was smart enough to realize the rest of us play by different rules. Batman understands this, so he rightly guesses that neither ship will blow up the other and beats The Joker. The only way The Joker might have beaten Batman would be by filling at least one boat with exclusively self-interested people, such as the economically rational residents of Arkham Asylum.

This plot line was a really clever way to explain the flaw in the simple Prisoner’s Dilemma game, but it also explained something else about Game Theory beautifully – the importance of diversity. In the movie the diversity is shown in the very different opinions of the prisoners on both ferries about whether or not they should blow up the other ship. In the simple Prisoner’s Dilemma game you only see the prisoners understanding the benefit of cooperating after they have played it a few times, the diversity of ideas about the best thing to do only emerges after a number of games have been played.

But in real life, diversity is key to how we think about these decisions and tackle complex problems. Economic models are useful for sure, but they don’t take into account the diversity of the real world or the human experience. In the Pirate’s Dilemma, people always end up competing with pirates (assuming those pirates are adding value to society in some way) in the long run because cooperating with what society wants is always the best option, fighting is a losing battle. But in the short term it’s difficult for many companies and individuals to see the value in that strategy. For those interested in more on the problems with Game Theory and how they affect all of us, check out The Trap, a great three-part documentary by Adam Curtis, check the intro below, or click here for it on google video.

Pirates at CAA

Pirate’s Dilemma CAA

I’ll be out in LA all next week in connection with this whole TV thing (see below), and on Wednesday I’ll be delivering a speech at CAA. I’ll be talking about the TV idea I’ve been working on with Jesse Alexander (who is very kindly introducing me), and what Hollywood can do to compete with pirates.

It’s free to get in, and it should be a good one, including (at least) 33% new material. All you need do is RSVP to curious@caa.com, but get there early, capacity is limited to 300 people. Give me a shout if you need any more info.

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