Talking to people works. People have always been able to influence people who seem beyond influence. The Northern Island ceasefire only happened when the British government began talking to the IRA behind closed doors, which would have outraged the British public had they known. The U.S. government is currently talking to Iran despite this being a deeply unpopular decision. Governments talk to their enemies even when people don’t think they should, because it is often the only way to get real results. Companies should talk to pirates for the same reason.

An independent game developer named Cliff Harris from Positech games just proved this. He’s been fighting pirates his entire career, as most game developers have, but he decided to give diplomacy a try, asking pirates to tell him why they were stealing his games. The question migrated from his blog to Slashdot to Arstechnica to Digg and around the world, and the responses from pirates began to pour in.

His post on the results is fascinating. Some highlights:

“A LOT of people cited the cost of games as a major reason for pirating. Many were kids with no cash and lots of time to play games, but many were not. I got a lot of peoples life stories, and a ton of them were my age. Even those who didn’t cite cost as their main reason almost always mentioned it at some stage. A lot of anger was directed at the retail $60 games, and console games. People in Australia were especially annoyed about higher prices there. My games were $19-23, but for a lot of people, it was claimed this was far too high. People talked a lot about impulse buying games if they were much cheaper.”

“People don’t like DRM, we knew that, but the extent to which DRM is turning away people who have no other complaints is possibly misunderstood. If you wanted to change ONE thing to get more pirates to buy games, scrapping DRM is it. These gamers are the low hanging fruit of this whole debate.”

“Maybe 5% of the total … basically said “I do it because I like free stuff and won’t get caught. I’d do the same with anything if I knew I’d get away with it.” This is depressing, but thankfully a small minority. I also got the occasional bit of abuse and sarcasm from hardcore pirates who have decided I am their enemy. Who would have thought that would happen? They give the other 99% of pirates a bad name, and are the reason people don’t listen to pirates.”

(For what it’s worth Cliff, those same 1% of pirates decided I was the enemy too. But trying to tell hardcore pirates who see this whole thing as a movement that we need to legitimize it is like telling a punk in the 1970s we need to find a way to sell Ramones T-shirts in every mall in America.)

What did Cliff learn from this? An awful lot it turns out. As a result of this experiment he’s removing DRM from all his games.

“I only used DRM for one game (Democracy 2) and it’s trivial. It’s a one-time only internet code lookup for the full version. I’ve read enough otherwise honest people complain about DRM to see that its probably hurting more than it help’s. I had planned on using the same system for Kudos 2, but I’ve changed my mind on that. I have also removed it from Democracy 2 today. I now use no DRM at all.”

He’s also making demos better, lowering prices on older games, improving the quality of new ones and making it easier to by all of them online. He says “I’ve gone from being demoralized by pirates to actually inspired by them, and I’m working harder than ever before on making my games fun and polished.”

Other companies can learn from Cliff’s experiment. Give peace a chance.

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.

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.

Thanks Cat!

“For somebody who has spent 30 years in the music industry, you instinctively know this stuff is going on. But when you actually sit looking at your computer and see a number that says 95% of people are copying music at home, you suddenly go, ‘Bloody hell.’”

Feargal Sharkey, former Undertones front man and British Music Rights chief

The Guardian reports this morning that more than half of young people in the U.K. copy the songs on their hard drives to friends and even more swap CD copies.

“Research carried out by the University of Hertfordshire suggests that for 18-24-year-olds, home copying remains more popular than file sharing. Two-thirds of people it surveyed copy five CDs a month from friends… Overall, 95% of the 1,158 people surveyed had engaged in some form of copying.”

Full story here.

The battle over the future of music appears to be coming to an end, but a new and hopefully smaller skirmish is about to begin between those pushing ISP taxes, and those favoring voluntary licenses.

The argument is no longer about whether or not the industry should compete with pirates or fight them, but how exactly the labels should compete. Last week it was announced that Warner Music Group had hired Jim Griffin to figure out a way to implement a $5 a month surcharge on your monthly internet bill, which has come under fire already from the tech community for being too much like a tax, or as Micheal Arrington put it, a protection racket. “The plan essentially comes down to telling ISPs that they can avoid any copyright infringement liability if they pay the fee on behalf of customers” Arrington writes, “and while the government wouldn’t be directly involved, the willingness of law enforcement agencies and the judicial system to enforce civil and criminal copyright infringement laws is the stick by which Griffin will convince ISPs to jump on board. It’s government endorsed extortion, nothing more and nothing less.”

One concern is this move would chill innovation in the music industry. Another objection is that the labels rejected this same idea years ago. “People were excited about this idea in the last days of Napster,” Eric Garland, CEO of BigChampagne, told Frank Rose at Wired. “But the music companies were not only not receptive to it, they considered it treasonous. Now the music companies are desperate — and people are saying, ‘No, we had that conversation, and you said we’ll see you in court.’”

The other solution being put forward by the EFF, music lawyer Bennet Lincoff, and in fact, most of the file-sharing community, is a voluntary licensing scheme, which in my opinion makes a lot more sense. As the EFF’s Fred von Lohmann writes:

When need a solution that allows for many organizations to operate, at different price points in different markets and doesn’t concentrate power. File-sharing communities are already criticizing the tax suggestion, but are open to the idea of a free-market solution. This isn’t just an economic/technological fight anymore, it’s also cultural. Piracy has become a youth movement in its own right, and if the industry wants to win this fight, it needs to come to the table with this community in real and meaningful way.

Last week in San Jose, Attorney General Michael Mukasey made the claim that piracy is funding terrorism. “Counterfeiting and piracy generate huge profits, much of it flowing to organized crime” he said at the Tech Museum of Innovation. “Criminal syndicates, and in some cases even terrorist groups, view IP crime as a lucrative business, and see it as a low-risk way to fund other activities.”

Mukasey was widely criticized for this statement, partly because everyone is so bored of this administration using terrorism as an excuse for all kinds of ass-hattery, but mostly because he didn’t have any evidence to back up his claim. But he’s not the first person to say this, and he’s probably right, at least in part.

The revenue streams that fund terrorist organizations are both legitimate and dishonest, not to mention diverse, and trickle through complex financial networks that make Bear Stearns hedge funds look as sophisticated as a lemonade stands. Along with drugs, prostitution, slavery, identity theft, smuggling and all other forms of organized crime, it’s very likely that organized for-profit piracy is a source of funding for a number of terrorist outfits. Piracy is a low-risk illicit activity that can help all kinds of shady businesses save money. Why wouldn’t the terrrists be getting into it?

So ignoring, for a second, the poppy fields of Afghanistan, the flow of money from the oil industry, state sponsorship of terror, blood diamonds, the diversion of funds from suspect charities and all the other vastly more significant capers that fund terrorism, let’s assume piracy is the most threatening of all freedom-hating cash cows. If pirated software, DVDs and CDs are such a grave threat to Western civilization, then what Mukasey is really saying, without actually saying it, is that in the interests of national security and the American economy, not to mention freedom, peace and justice for all, we need to legalize file-sharing right now.

As Nate Anderson notes over at Ars Technica, General Mukasey “managed to make it through an entire speech on crime and intellectual property without suggesting that noncommercial P2P file-swappers are somehow equivalent to criminal gangs running huge Asian stamping operations.” Read between the lines people. What I think Mukasey is trying to tell us, without upsetting the RIAA, is that file-sharers are the good guys here. Freedom fighters. What he’s insinuating is that rendering pirate goods irrelevant by monetizing and legitimizing digital distribution in all its forms is a way to quash terrorist threats.

If we can use digital distribution legally the way we are using it anyway, who needs $5 DVDs and bootleg copies of XP? (no one wants to pirate Vista, which isn’t something Microsoft should be too excited about) Prohibition style wars don’t work, this we know. Repealing prohibition got rid of the racketeers in the 1930s, so by Mukasey’s logic, monetizing file-sharing should take care of the terrorists right?

I feel safer already.

Music is a central part of many of the stories in The Pirate’s Dilemma, so naturally I tend to talk about music a lot in my keynotes. It would be great to use some of the music I mention in my talks, but there is no legal way for me to do this. I would happily pay for this privilege, but it is impossible. I checked with someone I know at ASCAP, I asked my speaking agency – same answer. There is simply no way for this to happen legally.

However if I do decide to use a few snippets of music anyway, there is a huge legal machine that could come after me. Some large organizations make you sign a contract indemnifying them for up to $1m in damages, just in case you do use something you weren’t supposed to. You’re not given an opportunity to pay to use music, but if you do it anyway, it’s possible you’ll pay dearly.

And herein lays the problem with the music business. There can’t be much money in royalties earned from people using music clips in PowerPoint presentations, but there is some. There are a million other ways people use music that the music business would never consider as revenue streams, because they are tiny. But if you use music anyway when legally you’re not supposed to, which all of us do, apparently it’s not too much trouble to punish you.

The future of digital media is not one large revenue stream. Lawsuits cannot control the flow of digital information. People are going to use your stuff anyway. The only thing you can do is give them the option to pay for it.

Current TV just put up an interview I did a few months back with Brooklyn producers John Carluccio and Mark Kotlinkski – They dug up some cool slides I haven’t seen before. Mark also has a production outfit called 88 Hip Hop which does some great stuff – look for his film The Mural Kings about legendary graffiti artists TATS CRU – which is well worth checking out.