MLB.tv Blackout Restrictions, originally uploaded by sogrady.

They announced the iPad yesterday. Dude, have you seen it? Large capacative touchscreen, 1.5 pounds, wifi, 3G: it’s everything you could want in a mobile media device. Which the folks at MLB have clearly figured out, as they, with but a scant two weeks lead time, cobbled together an application designed expressly for the device. The iPad and MLB.tv are the perfect combination to watch every team but your favorite.

Wait, what?

Yeah, it’s a fact. You can’t watch your hometown team, unless you find yourself far from home. Look it up. Undoubtedly some baseball fan somewhere is going to get suckered into buying an iPad, at least in part, to watch games when they’re out and about. That’s certainly why I would buy one. Unfortunately, after they get home and have paid MLB.tv, they’ll discover that unless they root for a team in a different region, they can’t actually watch the games they want. Thanks, MLB Blackout rules.

You know, the same blackout rules that are an artifact of the 60′s, that the commissioner himself said he didn’t “understand,” and that Bob DuPuy was going to fix back in 2008?

If they fixed it, it’s certainly not obvious. So while there are undoubtedly many good reasons to buy an iPad, MLB.tv is not, as far as I’m concerned, one of them. Regardless of what they showed on stage yesterday, because you won’t be able to watch what you want, just what those who gerrymandered the map together fifty years ago want you to.

Technology’s a wonderful thing, but it’s no match for decades of broadcasting fear and protectionism. Which is sad because man, did you see that MLB.tv app?

Amazon MP3 Downloader

Originally uploaded by sogrady

Given that I’ve been waiting months for its release, you’d think that I’d be more excited about the availability of the Amazon MP3 Downloader client for Linux. And I was, initially.

For the one or two of you that don’t track the availability of Linux clients for non-DRM music stores in minute detail, here’s the short version: Amazon made clients available, Adobe AIR-style, for Mac and Windows only. The poor unwashed masses were informed that “a Linux version of the Amazon MP3 Downloader is under development,” but provided with no real timetable.

The importance of the Amazon offering, for me, was the major label support. While largely content with my current DRM-free music vendor – eMusic – there are occasional major label acts that I’d like to buy from that are unavailable on the subscription music service. Enter Amazon.

In spite of the lack of a client, it remained possible to buy from the store. But you had to purchase track by track, and pray that your browser didn’t die in the transmission (Amazon only lets you download once). Worse, album pricing was limited to those able to run the client. Those on Mac or Windows, in other words.

But credit to Amazon, they kept their promise and last week released a downloader client for the Linux operating system. In multiple distribution friendly flavors, no less. All of which is terrific.

Less terrific is the fact that it doesn’t work. At all. In trying to purchase a Working for a Nuclear Free City track yesterday, the browser triggered the client as it should, and then…nothing. No download, no activity within the client, nothing.

Customer service eventually reinstated access to the download so that I could bring it down manually using a machine which has not had the client installed yet, but it took four individual exchanges. Nor was there any word on what the problem might be: the only emails I received were form letters, nothing more.

Initially I thought it might be an isolated problem, possibly unique to my distribution (Ubuntu Gutsy), but I heard today from three other folks that had the exact same problem. Two of those folks were running different distributions (Fedora and Debian).

From which I conclude it’s a problem with the software, not my installation or distribution.

So for the folks out there eager to buy from Amazon while running Linux, I have good news and I have bad news. The good news is that there is a client for you. That bad news is that it just doesn’t work at the moment.

Update: While I’m not alone in my issues, the overwhelming majority of commenters seem to be experiencing no issues with the client. So maybe it is my installation. Still, I’d love to know what.

SharpMusique Screenshot

Originally uploaded by sogrady.

Let me be upfront about one thing here: I don’t like DRM, and I probably never will. In my job as an analyst, I try always to be open minded about technologies and their implications. I can’t claim to be perfectly unbiased, as I do have predispositions to certain technologies like thin clients as discussed here, but I think one would be hard pressed to build a case that I’m a bigot one way or another. Or, for that matter, that I’m reluctant to alter my thinking when faced with a new set of compelling data. In that vein, I positively love the John Maynard Keynes quote cited here:

“When facts change, I change my mind. What do you do?”

But DRM is, I’m sad to say, the lone exception that mindset. Candidly, I’d say it’d be near impossible for anyone to persuade me that DRM is a positive, a good thing. With few exceptions, I think in large part DRM is an attempt to solve the wrong problem. Here’s how I put it previously:

Basically, I believe that any given business will have three types of customers: those that will pay you, those that might pay you, and those that will never pay you. Without over generalizing, I think that far, far too many businesses focus an unnecessary amount of attention on the latter category, when they should be focused a.) on the folks that actually pay them, and b.) moving folks from the second category into the first.

DRM, as it’s employed within the record industry, seems to me to heavily penalize the first two categories in a desperate attempt to monetize the third. This attempt to squeeze blood from the proverbial stone not only doesn’t recognize the fact that even folks that don’t pay you can still be of material benefit in sales and marketing, it also doesn’t recognize that it might actually drive folks from the first two categories in the wrong direction – to the third.

Case in point is one of Berlind’s latest where as the owner of $20K worth of audio equipment (as an aside – 20K? I must be in the wrong damn business , he can’t play the music he’s purchased because of the incompatability of various DRM systems. For a more mundane example, there’s my friend who bought a couple of seemingly ordinary CD’s only to discover that she couldn’t even get them onto the iPod in the first place. The CD’s didn’t call out this limitation beforehand, of course, including only some vague wording about “unauthorized duplication.” Why? Because how many iPod owner buyers would skip buying the disc if they knew that, and the record companies can’t have that – instead they’d prefer that they buy it once in the store and then again online. That practice so embarrassed the folks from the Sony band Switchfoot, BTW, that they posted to a Sony forum explaining to their fans how to get around it – linking to this application (a post which Sony appears to have subsequently removed, unsurprisingly).

What are these fine, upstanding citizens to do? They’re not looking to steal music, they’re not looking to pirate it or resell it for profit. They just want to listen to their music, where they want, when they want, on the device they want. So they begin looking at alternatives like Allofmp3.com; not so that they don’t have to pay – they’re fine with that, but so that they don’t have to jump through the absurd hoops placed on them to monetize an audience that won’t pay them either way. And while I know opinions about this vary, as DRM and the RIAA do have some defenders out there – even a few who read this space – I personally can’t blame them. The scariest thing is that I think these experiences are just the tip of the iceberg – as Mr. Bray says,

What all the DRM dreamers don’t want to admit is that 95% or more of the population hasn’t yet encountered DRM, and when they do, they aren’t going to like it. They’re going to scream and scream and scream and get mad as hell and not take it any more. I’m talking about the honest people who play by the rules: they buy a house and the vendor moves out and pulls no more strings. They buy sofas and flowers and wine and paper and the store where they bought them doesn’t try to limit what you can do with them, and when the digital-media vendors try to horn in on this relationship, the response is going to be “you and whose army?”

The really unfortunate thing here is that it doesn’t have to be that way. Why were people pushed towards Napster in the first place? If you’re on the RIAA’s side, you might argue that it’s people are intrinsically inclined to steal. For my part, I think it’s because it was easy, and the experience was better – people got what they wanted now. Why, for example, is the iTunes/iPod combination the most popular by an order of magnitude? Because it’s easy.

Well, non-DRM services such as emusic.com will *always* be easier than obtaining files illegally through P2P networks, so unless you’re obsessed with the impossible dream of ensuring that every single person who’s ever listened to your music pays you, they’re a nice compromise. But instead, the RIAA is apparently set on continuing to alienate their customers, and repeating the mistakes of that past. And in the process, instead of converting more “might pay” customers to “paying” customers, they’re spurring defections from the “paying” crowd. Doesn’t make a whole lot of sense to me.

One final note to Mr. Berlind – this statement:

If you’re a customer of Apple’s iTunes digital music store, you will eventually reach that point of no return where you’re basically committed for life to Apple’s DRM scheme known as Fairplay.

is only partially true. The inset picture here is of an application called SharpMusique. Written by DVD Jon (whose blog is appropriately titled “So Sue Me”) and ported to C# for the Mono stack, it’s currently available on Linux but thanks to Mono’s cross platform compatability should soon be available for Windows. Why is it important? Because what you’re looking at is the new Detroit Cobras album available for purchase in the fair interface to the iTunes Music store. SharpMusique allows you to purchase anything from that store, DRM free – it even permits redownloads of your purchased content. Or so my friends tell me, as I won’t confirm that I’ve used the purchase functionality myself. Might be worth a look, if you’re addicted to iPods.

Though I haven’t posted on it in a little while, there are few things that get me more worked up than digital rights management. I wrote this piece that got picked up by el Reg a few years back, but since then I’ve been relatively quiet on the subject simply because I’ve more or less said what I had to say, and because Cory said everything that I think needs to be said. The evidence that the RIAA (the very same wholesome, honest folks that colluded me and my fellow consumers out of $480M) is protecting themselves from a threat that doesn’t exist continues to grow, as DeWitt notes here.

But last night DRM kicked me in the face yet again. While I was at a friend’s house for some routine PC maintenance, I was asked to explain how to import purchased CD’s into iTunes so they could be copied onto an iPod Shuffle. First up was a homemade-looking CD from a band called “The Frays,” and the CD included the curious (from an RIAA perspective) label on it – “PLEASE BURN FOR YOUR FRIENDS.” Weird, hunh? Why on earth would a band want more people to listen to their music? No problem with that one. The second CD to import was the latest Foo Fighters double disc. Unfortunately, the CD was – you guessed it – DRM’d, asking me to install some sort of copy protection scheme, “for my benefit,” of course. Remembering an old workaround, I ejected and reinserted the disc holding down shift key and sure enough the copy protection didn’t load. Unfortunately, the resulting import into iTunes included a not-so-tuneful assortment of skips, pops and chirps indicating that the technical wizards at the RIAA had adapted to this latest strategy (after they’d gotten around the “Sharpie” vulnerability). It was the same deal with the new Killers disc.

So my question is this: if I purchase a CD, is the RIAA’s stance now that I can’t listen to it in the media player of my choice on a PC – not to mention a portable music player? And if so, do they think the average consumer realizes that? Because I don’t – and it sure came as an unpleasant surprise to my friend. While there is an FBI warning label on the disc discussing the “UNAUTHORIZED DUPLICATION” of the disc, do they believe an average consumer knows importing a disc into iTunes constitutes unauthorized duplication? And what of the bands? Do they think this doesn’t reflect on them?

The real question here is a simple one: if I buy a CD, is it my music? Or not? Because if it’s not, and I can’t do certain things with a CD I’m buying, I think that’s something the RIAA should be required to label clearly on every CD they sell.

In an entry from around a year ago, I warned software vendors to be wary of becoming too closely associated with Digital Rights Management technologies, because when it inevitably ends up pissing off consumers they tend to be none too particular in who they blame for their irritation. Well, as it turns out, I should have warned the artists at the same time.

While reading an Amazon review for the new Kings of Leon (Southern fried Strokes is what some have called them) album – which I did end up purchasing on iTunes, incidentally – I came across this comment in a 1 of 5 star rating from one Jacob Wolman:

Sorry, Kings of Leon–I’m sure this is a spectacular album, but your label screwed us both.

Here’s another one from Eric Asetta:

Why do I need to sign an “agreement” to listen to a CD on my own computer? You can’t even skip through or fast forward through tracks because the CD only runs on its own designated player! Ridiculous. Don’t justify Sony’s actions by giving them your money; most bands barely see any revenue from album sales anyway. I wish I could return the thing and just use the cash for a ticket to a KOL show instead. Way to promote a young band, morons!

The point here is not to justify the vilification of artists for the labels choice (although to be fair, I have no idea if the band had input on this ill-considered decision), merely to recognize that it’s the reality. DRM tells customers in simple terms that they are not to be trusted and left to their own devices, they’re criminals. Regardless of the business, beginning a relationship with customers – fans, in this case – in that fashion seems to me to be an exceedingly poor idea. The perceived tactical gains that might be realized from a theoretical reduction in pirated content are likely to be more than offset by the damaged relationships with fans.

So the lesson for vendors is the same – be very, very wary of DRM in any form. But perhaps it’s the artists that really need the advice, lest some of them get reviews similar to what Kings of Leon did today.

As everyone has probably heard by now, Bill Gates – in a nod towards the importance of blogs – granted the folks from Gizmodo an interview while at CES. The latest segment – part four – is, to me, the most interesting. In it, he clarifies his statements around “communists” to some extent, which I have to confess I found ill-considered, but only insulting if you view communist as a straight perjorative. Given that the Creative Commons, which we support strongly, does share some precepts with Marx’ system (please note, however, that I am NOT equating the two), I do not. Gates’ opinion, I believe, is based on an extreme and rather unrealistic view of the values that the Commons espouses, and unfortunately he ignores the possibility that alternative financial incentive systems might exist.

But once more, it’s his comments on DRM that I find most disturbing. Essentially, he argues that DRM is a tool – a necessary tool – and it’s not Microsoft’s responsibility for how it’s wielded. In other words, it’s the NRA argument. And consistent with the conversations I’ve had with various Microsoft folks on the DRM subject previously, Gates is quick to evoke a nightmare scenario (medical images, although the one I hear most often is pictures of grandchildren), as opposed to what will be far and away the most common usage, music DRM (kudos to Gizmodo for calling him on it).

This laissez faire approach to the ethics of DRM is where I think Microsoft has fallen down, unlike Apple. Here’s something I wrote back in March:

In many of the conversations we’ve had with software providers and enablers of so-called Digital Rights Management technologies – so-called because many would argue that DRM has everything to do with restricting rights and little to do with guaranteeing them – we often hear the argument that the implementations should be left up to the providers and content distributors. As is their right, software vendors claim that they’re in the business of providing software solutions to meet demand. As content holders are demanding software that will restrict what consumers can do with their content, they are all but required to deliver it, so the argument goes. Fair enough. But we highly encourage all of the software firms developing such technologies to think carefully about who they’re getting on board with, because if the wheels come off, fine distinctions about content providers versus technology providers may get left behind in a hailstorm of consumer backlash.

I strongly believe that’s still the case. Apple, I would argue, is perceived as a friend of consumers not for any technical reason, but because they were the first to persuade big media to adopt more relaxed restrictions. Microsoft, on the other hand, is arguing that it’s not up to us – in Gates’ own words, “Are those authors wrong or right? That’s up to them. We don’t take a position on that.” In other words: big media’s your problem, not ours. Well that may be, but I still believe that the technology firms that take up the fight on our behalf – as Apple is at least perceived to have done – will be the big winners.

To put Microsoft’s lack of a position in context, consider the following: where might we be if Apple was not around, and the only major music software provider was Microsoft? Think we’d still be able to burn CD’s? Or load our music onto multiple machines? I doubt it, because Microsoft doesn’t have a position on that. No wonder Steve Gillmor says thank god for Apple.

Want to win us over, Microsoft? Be our champion. Fight for us. Don’t hand the folks who stole $480 million from us the means to lock us up, and then tell us you’re our friend. Homey don’t play that.

Robert Scoble – a Microsoft evangelist/blogger/etc – was asked if he had anything to highlight for Bill Gates’ radar screen. He responded in part with the following (link):

I told him to understand the content-creation trend that’s going on. It’s not just pod-casting. It’s not just blogging. It’s not just people using Garageband to create music. It’s not just people who soon will be using Photostory to create, well, stories with their pictures, voice, and music. It’s not just about ArtRage’ers who are painting beautiful artwork on their Tablet PCs. It’s not just the guys who are building weblog technology for Tablet PCs. Or for cell phones. Or for camera phones.

This is a major trend. Microsoft should get behind it. Bigtime. Humans want to create things. We want to send them to our friends and family. We want to be famous to 15 people. We want to share our lives with our video camcorders and our digital cameras. Get into Flickr, for instance. Ask yourself, why is Sharepoint taking off? (Tim O’Reilly told us that book sales of Sharepoint are growing faster than almost any other product). It’s the urge to create content. To tell our coworkers our ideas. To tell Bill Gates how to run his company! Isn’t this all wild?

I agree with pretty much everything in there, except for perhaps the Sharepoint comments. James has been all over the content producing meme for a while now, and I’ve been talking ad nauseam about the power of the network. So we’re all aligned there. More than that, we’re in violent agreement. What’s the problem then?

Well, as always, the Reg says it best: Love DRM or my family starves: why Steve Ballmer doesn’t Get It.

As that article points out, Microsoft does appear to be far more wedded to the platform than they should be – Lettice’s term is “PC religion”, but its devotion to DRM is the real killer. As much as Microsoft might argue it’s a separate issue – they’re not talking about DRMing your family photos (except if you want to), only paid content sources – DRM and content are inextricably linked. It’s tough to ask consumers to distinguish Microsoft’s behavior and commentary in music from its positions on photo sharing or blogging. Ballmer therefore did Microsoft a great disservice with his characterization of iPod users as thieves (and to give him credit, Scoble did gingerly take him to task here). Why would any iPod user rush out to hear what Microsoft has to say on sharing and publishing content, when the organization regards them as a thief?

Overall, the damage from Ballmer’s words, while repairable, is symptomatic of a larger problem. Ballmer and Microsoft can remedy that gaffe, but the underlying institutional mindset of DRM as the future that likely spawned the comments – born from their own deeply held beliefs on copyrights and IP – simply does not mesh with most consumer beliefs today. Microsoft as an organization often appears far more aligned with big media than with consumers, and that’s not a helpful position to be in when you’re attempting to court the latter.

There’s also the platform questions [1], but it’s the ongoing notion that DRM’s tight control is good for users that is the fatal flaw. It’s not, as Cory brilliantly points out here. So whatever Microsoft’s efforts are in this space, they’re likely to be shackled by the religion of DRM, the culture of control.

Scoble’s right – the future is about publishing and producing. But it’s also about letting go, understanding that open != stealing. That the Commons is important. That sometimes you have to give to get. These are the lessons that are difficult to grok. The technical side, whether it’s RSS, podcasting, blogs, photo sharing, etc, are trivial to Microsoft. I have absolutely no doubt that Microsoft can develop (or acquire) the widgets it needs. But delivering the functionality in such a way that does not treat its customers as born criminals? Ah, that’s the trick.

So if I was going to put something in Bill’s radar, it’d be Cory’s piece, and any of Lessig’s works. If they can internalize those lessons, then I’d be a believer. Until then, count me in the skeptic’s camp.

Scoble’s a sharp guy, and I suspect that he knows much of this already, but has chosen to limit himself to suggestions that are actually actionable in the context of Microsoft’s beliefs. That may be the wise course of action for Scoble the person, but I can’t see how it’ll do Microsoft the organization much good.

[1] I have trouble seeing this experience as a typical case, and I’m pretty geeky. If anything, I think a wifi laptop/TV/networked Tivo combination is far superior, at least until large scale LCDs become price competitive with TVs. I have little interest in watching DVDs on a 19 inch LCD when I have a 32 inch WEGA sitting around.

Just got this Macworld UK article forwarded to me by my brother. Detailing the results of the not-so-subtle campaign Real is waging here (interesting that the Real relationship to this site is downplayed to a few links, maybe a bit of foreshadowing?) against Apple for attempting to maintain tight control over the iPod, it makes for a fascinating case study in community behavior.

It’s fascinating because most enlightened music and technology fans would say what Public Knowledge did here – namely, that Apple’s in the wrong here. Or maybe it’s just that I would say that. I think it’s a silly business decision in any case, because if Apple was to open the iPod to Real, they could win kudos for being open and still win because their player is better.

As Sun’s Jonathan Schwartz is fond of saying, open standards are great for laggards and poor for industry leaders, and Apple is proving that point perfectly with its refusal to open the most popular digital music player, the iPod.

But what happened when Real started a petition in support of its efforts? Not what they’d hoped, I think. They got flamed. Big time. And in case you think that it’s just the Macwork UK article revealing its prejudice, News.com also covered it here. You can’t actually view the flames anymore because it seems as if PetitionOnline has turned that off, but we’ll take News.com’s word for it.

So the question then is, why? Why are music fans actively fighting choice, openness, and all of the other things they claim to believe so strongly in? The standard answer is probably that it’s just the traditional zeal of Apple customers manifesting itself. In other words, it’s just a random phenomenon.

But to me, that at once ignores something Apple has done extraordinarily well and something Real has done remarkably poorly, which is cultivate customer loyalty. Apple obviously has had its fans over the years, despite a number of ups and downs, and has appealed on the basis of usability and design. But in the arena of digital music, via iTunes and the iPod, they’ve attracted a whole new type of customer to a device that is expensive yes, but highly functional, easy to use, has an impact on their lives. Whether it’s on the commute to work, a party at a friends house, or flying, iPods are everywhere. And these people are often – I’m exhibit A – not traditional Apple users. But Apple’s done a good job at recruting them.

Real, on the other hand, is maybe known for being an option that people click when they want online music or video, but just as much for having an application that exhibits borderline spyware behavior. A few years ago my PC was dialing the internet unattended at all hours of the night. It took Dell support almost a half hour to figure out that the culprit was the Real media player. It wanted to phone home and had no problem dialing the internet to do so – and this was the default behavior. It has always insisted on running in the Windows system tray – as do too many other applications, unfortunately – and has been difficult to configure otherwise. It’s always been demanding in terms of personal information, and light in terms of what it returns. In short, the relationship Real as had with its customers has been pretty much all about Real, all the time.

The result of this contrast? Flames from iPod fans, even when they’d actually be better off. Go figure, things like community do matter.

UPDATE: Spelling error

In many of the conversations we’ve had with software providers and enablers of so-called Digital Rights Management technologies – so-called because many would argue that DRM has everything to do with restricting rights and little to do with guaranteeing them – we often hear the argument that the implementations should be left up to the providers and content distributors. As is their right, software vendors claim that they’re in the business of providing software solutions to meet demand. As content holders are demanding software that will restrict what consumers can do with their content, they are all but required to deliver it, so the argument goes. Fair enough. But we highly encourage all of the software firms developing such technologies to think carefully about who they’re getting on board with, because if the wheels come off, fine distinctions about content providers versus technology providers may get left behind in a hailstorm of consumer backlash. And if you don’t think consumer vitriol can be an important concern, just talk to Intuit, which several months back had to resort to an ad campaign apologizing to its users.

The Music Industry: A Pilot Gone Terribly Wrong

The case study for how not to operate in the new era of digital content thus far has been the RIAA. We’ve argued before that the RIAA’s campaign against downloaders would be shortsighted and ultimately futile, but late last year the RIAA claimed victory in the shape of a Pew Internet & American Life Project study that indicated overall downloading numbers were down from May 2003 to December 2003. A January report from NPD, however, seemed to call Pew’s findings into question, with an indication that after an initial decline, file trading was back on the upswing. Without question however, the numbers have declined from their peak. This must be an indication that the RIAA’s draconian campaign of suing users – which Pepsi memorably made light of in their Super Bowl ads featuring one of the eighth graders sued – is working, right? That must be it.

From the RIAA perspective – where everyone downloading music is a criminally inclined pirate in need of “education” – that is the logical conclusion. Mitch Bainwol, the Chairman and chief executive of the RIAA, concluded as much by asserting that these lawsuits are educating the public here. But approached from a different perspective, one in which users were tempted by the convenience of downloading but pushed towards illegal alternatives by the music industry’s initial inability – some would say refusal – to offer a reasonable service at a reasonable cost, the causative factors appear to be more complex. For example, the fact that the industry’s most popular legal online music store – iTunes – became available for the most popular desktop platform – Windows – in mid October for the first time may have something to do with a drop in the number of illegal downloads.

Even presuming the RIAA is correct and that its campaign is the primary factor behind the current decline in downloads rather than the emergence of relatively fair, legal alternatives, there’s a basic problem – campaigns like this galvanize the public against the RIAA. This is a problem primarily because the public is the customer. This is apparent from not just the Pepsi ads, but from counter suits like that brought by Michele Scimeca recently in which she sued the RIAA for racketeering. The ham-handed approach of the organization at one point led RIAA’s former chief Hilary Rosen to concede mistakes and ask for a “do-over, a chance to reconcile with consumers.”

But worse for potential music industry partners is the emerging realization that, based on the current economics, the online music business is at best a loss leader – and at worst a pure loss. CNET’s Eliot Von Buskirk pointed this out months ago in his piece entitled -What the Labels Still Don’t Comprehend. As he illustrates, the fact that the music industry collects about 65 cents out of the 99 charged leaves little margin for Apple’s profit. That iTunes is a loss leader for the iPod has been known for some time, but what of businesses that don’t have the hardware sales to fall back on (and that’s ignoring the question of how long the iPod can continue to be the dominant music player)? Well, as the San Jose Mercury News found out a few weeks ago the new Napster’s not faring too well, as it’s currently hemorrhaging both cash and executives. So despite the success of such platforms from a volume perspective – Apple has registered over 25M in downloads – the general outlook is cloudy at best, and somewhat reminiscent of dot com era businesses where profits were always on the horizon and never in the bank.

The shame of all of this is that it doesn’t need to be this way. For all the crocodile tears from record company executives concerning the rights of artists and the perils of illegal downloading to their livelihoods, there are models available that would benefit both musicians and consumers – the ones truly threatened are the record labels, as pure middlemen. Not all downloaders (even illegal ones) are malicious criminals, and many musicians have successfully profited from the internet through music downloads and online merchandise sales. As the Electronic Frontier Foundation (EFF) points out, artists from the Beastie Boys to Wilco have made money from internet without suing anyone. Pearl Jam offers a great example of musicians potentially making money from the net directly. From their ill fated crusade against the Ticketmaster monopoly to the decision to release every live show they do on relatively low cost, high quality CDs, Pearl Jam have consistently demonstrated both an affinity for their fans and an understanding that the high price of tickets and concerts can be prohibitive for large segments of their audience. They recently finished out a contract with Epic – owned by Sony – and emerged as free agents. While still unsigned, they paired up with both Apple and Amazon.com to offer up a new single they’d written, thus making available a single to a massive audience without any help from a major label. Does this model herald the death of record labels? Hardly. It does highlight the fact that musicians and music fans can achieve mutually beneficial relationships via technology, and that those relationships need not be antagonistic. You might argue the Grateful Dead proved this long ago by encouraging fans to tape their shows; and has there ever been a more loyal relationship between musicians and their fans, the Deadheads?

In the UK, Marillion have shown that the Internet can be used directly in a grassroots way to invigorate interest in a band’s fans, rather than record labels, have paid upfront costs for recent albums and tours, by subscription. Meanwhile Peter Gabriel is building a community of artists called Mudda, the “magnificent union of digitally downloading artists”. The business behind the community is called On Demand Distribution.

Music isn’t the only industry that can benefit from compromise-driven, mutually beneficial approaches. By forgoing the typical litigation-based approach currently in vogue, content providers can drive further paid business. By providing some free content to webmasters and offering $25 bounties for subscriptions funneled its way, Playboy increased its subscription revenue by 74% in 2002. It’s difficult to say whether lawsuits would yield similar results, but the laissez faire approach unquestionably allows for a better relationship with anyone interested in Playboy’s content – aka its potential customers.

RedMonk Take

Digital content distribution is not going away; nor, for that matter, is downloading. What needs to be found is an acceptable balance between the two, and that depends entirely on the business model enforced by the technology providers. The most successful DRM mechanisms to date have been those, like iTunes, that take a fairly laid back approach to content restrictions relative to the initial forays. While it would be nice to see the music industry take a hard look at the possibilities of subscription-based services like emusic.com, it’s fairly clear at this point such changes are not going to happen without a significant change in leadership and direction from within the RIAA. The music industry will have to be dragged, kicking and screaming, into substantial change. As CNET’s Von Buskirk put it, “It’s hard to swing to the next vine when you won’t let go of the last.”

As software companies move forward and expand into new content areas, through examples such as Microsoft’s recent Disney deal, it would behoove them to look closely at who they are partnering with. It is critical that potential partners are closely scrutinized because many may not be particularly concerned with an equitable financial arrangement. Modern consumers tend to fairly sophisticated, and as kids at heart, hate being patronized. While the dot com era supported businesses that eschewed profits for future gains, the environment today is markedly different. Investor patience with loss leading businesses is far lower. Vendors must tread carefully with content deals though, because much as they might wish to believe they just provide technology and that it’s the providers that dictate business models (and bear the brunt of their decisions regarding restrictions), the public is not always so adept at seeing such a fine distinction. Given the experiences of the RIAA to date, it would seem that being tarred with a similar brush wouldn’t be high on any vendors list (except for SCO, but that’s a whole different story). Bad publicity and associations with organizations bent on litigating their customers hold little promise of future returns; consumers, while rather passive about some issues, care deeply about their digital rights. Even worse for vendors, they tend to be as unforgiving as they are passionate. Because of that, we’d advise vendors to think long and hard about who they partner with, and under what terms, because most technology vendors will get one chance win over a consumer, if that. That might mean taking a second look at existing partnerships and questioning the clichéd “it’s up to the content provider” line, but the alternative – PR firestorms, consumer complaints, and lawsuits – are not likely to be attractive to any vendor. Unless they particularly enjoy asking for do-overs.

It really shouldn’t be a surprise, the news this week. Having exhausted all the potential alternatives – save a thorough reexamination of its business model and specific value offering to customers – the Recording Industry Association of America (RIAA) announced this week that it intends to begin suing individual file swappers, AKA its members’ customers.

This move is the product of a gradual escalation of legal hostilities, beginning with the Napster suitand culminating in yesterday’sthreats that target everyday, ordinary people who download and swap files. RIAA plans to begin targeting ordinary users of P2P services, not just those offering up content on a massive scale, like the students prosecuted a few months back. Basically, it’s ordinary folks who use Kazaa, Limewire, or other like alternatives who are at risk here.

Before we look at the specifics on the announcement, RedMonk would like to be clear on one point. We in no way contend that artists should not be paid for their efforts, nor that file sharing is implicitly benign. Let us repeat that – ARTISTS SHOULD BE PAID FOR THEIR WORKS. But we also believe that the business model for music, and the pricing of it in particular, needs a major overhaul. As it happens, so did the Federal Trade Commission (FTC). The following is verbatim from a ruling on May 10, 2000,

The FTC estimates that U.S. consumers may have paid as much as $480 million more than they should have for CDs and other music because of these policies over the last three years.

The FTC concluded that the Big 5 record companies – Universal Music and Video Distribution, Sony Corp. of America, Time-Warner Inc., EMI Music Distribution and Bertelsmann Music Group (BMG) – all of which are RIAA members, colluded to keep CD prices artificially high. How ironic then, that these selfsame firms are now lecturing the consuming public about “stealing.” These “moral” crusaders for artists’ rights aren’t right all the time either – the RIAA was forced to apologize in May for sending inaccurate legal notificationsto organizations such as Penn State’s astronomy and astrophysics department.

But is suing the end consumer really the the end game for piracy, as some in the media and the RIAA would have us believe? In her BusinessWeek commentary piece, entitled “Play Taps for Music Pirates,” Jane Black compares the ongoing strife to the war in Vietnam, but concludes

“In this war, however, the RIAA will win. Spreading fear may not be good PR, but it gets the job done far more efficiently than suing faceless software companies.”

We won’t argue with that assertion particularly since some on Capitol Hill seem to believe that the best route to deter piracy is the destruction of users’ PC’s. Whether or not such an idea is technically feasibleit does make fear uncertainty and doubt all the more palpable. We believe the impact on P2P networks could be significant but sounding the death knell for file trading is certainly premature.

After all, haven’t we heard such a call before? When Napster was sued nearly out of existence, many of these record companies patted themselves on the back and concluded that the status quo could now be maintained. Well, unfortunately for them, demand was still there and therefore so was the supply to meet it, via alternative networks like Kazaa and Gnutella-based tools like Limewire. When the RIAA tried to sue these new players, Judge Stephen Wilson decided the defendants could not be held liable for content traded on their networks. Which brings us to today, when RIAA announced it will sue the only other people in the chain, consumers themselves.

But what’s really missing in all of this, as the Los Angeles Times notes, is a positive message, an alternative solution aimed at addressing consumer desires. Rather than understanding the motivations that drive consumers to download music – $20 discs with 2 good songs, for one – it’s their way or the highway. The highway, of course, being multi-thousand dollar fines.

It’s a simple matter of supply and demand. The demand for fairly priced content has not been vaporized along with the services that fed it. It’s still there, and more importantly people are willing to pay, as evidenced by the news that Apple’s iTunes music store had reached 5 million paid downloads. People will find a way, one way or another, to get the music they want. When they shut down Napster, the RIAA lost out on a massive opportunity to address a huge, centralized community of music enthusiasts. Instead their lawsuits spawned multiple decentralized networks which are harder to attack. If RIAA succeeds in shutting down these networks by suing individual file sharers, they might ultimately be killing not piracy – as many have predicted – but their own efforts to shut it down. The demand is still there, and the likely replacement candidates for Kazaa and the like will be some combination of Freenet-style anonymous networks and Waste-style encrypted private networks. All we can say is, if those become popular – good luck trying to shut them down.

So why is RedMonk concerned with this story, being an analyst firmthatspecializes in enterprise software? Well, besides our personal interests in the issue as consumers, we believe that enterprise software vendors like IBM and Microsoft are going to have a lot to say in this arena going forward as they roll out products with Digital Rights Management capabilities. These products have the potential to immensely change the world we live in, for better or worse. And if these firms arelooking for guidance in how to tackle the most controversial consumer technology issue in a generation, we’d rather they take a page from the Apple playbook than the RIAA. The RIAA’s lawsuit-oriented strategy is like a game of Whack-a-Mole, except that the only ones who win here are the lawyers.