Fighting Piracy in Real Time

Ever since Meerkat and Periscope popped up on the scene, live event producers and rights owners have worried about the potential for piracy from mobile live-streaming apps. In fact, Periscope more or less made its bones, with the public at least,  during the Floyd Mayweather/Manny Pacquaio title fight last year, when the Twitter-owned app led to so much re-broadcasting of the HBO and Showtime feeds of the bout that then-Twitter CEO Dick Costolo, rather indiscreetly, declared Periscope the real “winner” of the night.

Since then, the threat has only grown greater as live-streaming apps have proliferated.

iphone_TV“We saw a lot of new live-streaming apps at CES that are just around the corner,” Clint Cox, VP of technical operations at the Ultimate Fighting Championship said at the Copyright & Technology conference sponsored by GiantSteps Media and the Copyright Society in New York this week. “It’s fairly common technology and it’s becoming a unique challenge for rights owners. It’s a very easy place to put infringing content quickly.”

The problem is doubly complicated by the fact that not all unauthorized streaming of live events is clearly infringing from a copyright perspective, particularly when it comes to live sports. While a licensed broadcaster’s pictures, descriptions and accounts of a sporting event are clearly copyrighted, the game itself — the action on the field, court, ice or ring, as it unfolds in real-time — is not.

Someone sitting in the stands pointing a Periscope-enabled smartphone at the field, therefore, may be violating the venue’s terms and conditions printed on the back of the ticket, but they may not be infringing anyone’s copyright. Read More »

A World Of Difference: Copyright in TPP and the EU

The full and final text of the Trans Pacific Partnership agreement was officially released today, giving the public and Congress their first look at the long-gestating and controversial trade deal. And it’s clear from the chapters on intellectual property and investment that content creators and copyright owners got more or less everything they were seeking from the deal.

The treaty, which Congress will now have 90 days to vote up or down but cannot change, would require countries to ban the circumvention of EU headquarterstechnical protection measures (i.e. DRM) and, like the the Digital Millennium Copyright Act in the U.S., to sever liability for circumvention from any actual infringement of copyright. In other words, circumvention is verboten whether or not it results in an infringement under a participating country’s national copyright law.

The text does allow countries to pass exceptions to the ban on circumvention for non-infringing uses, as the DMCA permits through a triennial rulemaking by the Library of Congress, but it does not make those exceptions mandatory. The text also avoids any reference to a U.S.-style fair use principal while extending the term of copyright in all TPP countries to the U.S. standard of the life of the author plus 70 years. Read More »

#MayPac: When Piracy Goes Mobile

Pay-per-view operators in the U.S. had trouble handling the last minute rush of signups for the “Fight of the Century” on Saturday, forcing promoters to delay the start of the welterweight championship bout between Floyd Mayweather and Manny Pacquaio by 45 minutes as operators scrambled to process the late orders and maximize the take.

MayPac_PPVIn contrast, the live-streaming apps Periscope and Meerkat worked flawlessly — so much so that it was possible to watch the entire fight for free as thousands of “Meerkasters” and “Periscopers” turned their phone cameras to their TV sets and rebroadcast the official HBO and Showtime broadcasts. There were so many streams available that Twitter users were able to catch every round, even as Periscope and Meerkat scrambled to respond to DMCA takedown requests, simply by jumping from one stream to the next.

There were also, of course, any number of free live streams of the fight available online for those who wanted to search for them, just as there are for any such big-ticket event, many of higher quality than anything you could see on Periscope or Meerkat. Boxing promoters in particular, in fact, have been battling pay-per-view piracy since the days of illegal, “black box” decoders in the 1980s and 90s. Read More »

Alarm bells come too late for Sony Pictures

The memo Sony Pictures co-chiefs Michael Lynton and Amy Pascal sent to employees Monday announcing massive layoffs, most of which will fall in the home entertainment and IT divisions, obviously wasn’t meant to be made public. But it’s fitting that it was leaked when it was, the same day that Bernstein Research analysts Michael Nathanson and Peter Choi published what amounted to an obituary for packaged media as a profit driver for Hollywood.

According to Bernstein:

  • For 2009-2012, we [previously] forecast overall U.S. home entertainment industry revenues to decline at a -2.1% CAGR. This underscores the mature nature of the industry, plus the importance of share gains for individual players. Over this time frame, aggregate operating profit declines of low single digits are also expected.
  • Now one year later, looking at the cold hard facts of 2009, retail spending on sell-through DVDs and Blu-Ray discs dropped by -18% while rental of these products actually increased by 4%. As a result, the sell-through of physical discs declined from 63% of the market to 57%.
  • This massive change in behavior continues to have negative implications for studio profitability as every home video executive would rather book the $16 of profit contribution per transaction from selling a disc vs. the $3.50 to $1.40 per disc profit contribution from rental.
  • [snip]
  • Our analysis also shows that the Blu-Ray format is having a more modest acceptance rate that traditional DVD. In 2009, three years after its introduction, Blu-Ray’s penetration of TV households stood at 4.4%, compared to 13.0% for DVDs in 2000. We also find that Blu-Ray [sic] has seen lower numbers of titles shipped per converted household relative to DVD. We don’t see Blu-Ray stemming the decline of physical sales. Read More »

Getting nowhere on TV Everywhere

The Media Wonk is en route to Las Vegas for the Consumer Electronics Show as this is being written, where I expect to be inundated with all things 3D. Between taking off from Washington, DC and a stopover in Minneapolis, however (there’s a reason Delta Airlines went bankrupt awhile back, by the way), my BlackBerry was bombarded with “urgent” communiqués from all sides of what looks to be shaping up as a nasty policy fight over TV Everywhere.

The hoo-hah appears to have started with an item in the Washington Post Monday about calls on federal antitrust regulators by various public interest groups spearheaded by Free Press to begin immediately to investigate TV Everywhere. The calls were ostensibly prompted by a “study” paid for by Free Press, which purportedly discovered that TV Everywhere is actually a plot by “giant cable, satellite and phone companies,” along with Time Warner, to “eliminate the threat of online competition,” so they can continue to gouge consumers.

“This is a textbook antitrust violation,” thundered University of Nebraska law professor Marvin Ammori, the study’s author. “The old media giants are working together to kill off innovative online competitors and carve up the market for themselves…The antitrust authorities should not stand by and let the cable cartel crush Internet TV before it gets off the ground.” Read More »

Selecting outputs at Best Buy

The Media Wonk got a fair amount of feedback on a post from last week on the controversy over the MPAA’s petition to the FCC for a waiver on the rules on selectable output controls. Some readers liked my analysis; others were something less-than convinced. I commend both to this feature article on Best Buy in the current issue of Bloomberg BusinessWeek (nee BusinessWeek), which provides a very useful perspective on the same phenomenon I was trying to get at in my SOC post, namely, the complex and conflicbest-buy-storeting business relationships that retailers, content owners and device makers increasingly must navigate in the digital age, and how that might manifest itself in their strategic moves.

The thrust of the piece is that Best Buy, as the last CE retail giant standing since the liquidation of Circuit City earlier this year, is starting to flex its muscles with vendors to influence product design, merchandising strategies, customer service and other aspects of their business as it looks for ways to fend off new competition from the likes of Wal-Mart and Amazon. Read More »

Selectable outputs, or selectable logic?

The long-running battle at the Federal Communications Commission over the MPAA’s petition for a waiver of the rules banning the use of selectable output controls on devices that can receive TV signals is turning into a textbook example of how regulation can distort business decisions. I almost hate to write that sentence because I don’t want to sound like some sort of Cato Institute ideologue with a jones for deregulation. But the SOC debate has become terminally absurd.

And petty. Just before Thanksgiving, the MPAA filed an ex parte brief with the commission in which it called Public Knowledge legal director Harold Feld, in so many words, a liar.

First and foremost, MPAA would like to respond to certain Public Knowledge statements about the waiver request that, quite frankly, constitute blatant untruths. MPAA appreciates that different parties can reach different conclusions about matters of public policy. Indeed, MPAA has welcomed the opportunity to engage with Public Knowledge and its allies in an honest and open debate about the merits of the SOC waiver request. Regrettably, however, Public Knowledge, apparently having determined that its arguments on the merits have failed to gain traction with the Commission, has resorted to outright distortion and falsehoods. In particular, MPAA believes that the Feld Video Blog contains statements that are simply and irrefutably untrue.

 That drew a sharp retort from PK president Gigi Sohn, and a melodramatically “more-in-sorrow-than-anger” reply from Feld in a subsequent video blog post.

fcc-sealFor those joining us late, the MPAA’s petition has been pending before the commission for more than two years, but was victim of a pocket veto by the previous FCC chairman, who refused to put it before the other commissioners for a vote. With the Barack Obama Administration now in charge, however, there is a new FCC lineup and new chairman, and the studios have tried to capitalize on the changes to breathe new life into the old petition.

In very broad strokes, the MPAA argues that its member companies would like to introduce a new high-definition video-on-demand window for movies immediately following the theatrical window and before those movies are released on DVD and Blu-ray. The new window, according to the MPAA, would allow consumers to watch movies on their home theater systems earlier than they can today based on the current sequence of rlease windows, which generally doesn’t make movies available for home viewing until three to six months after their theatrical release when they come out on DVD. But the studios would only do that, the MPAA argues, if they’re allowed to remotely disable any analog outputs on receiving devices by inserting the appropriate “flag” into the VOD signal.

Why? Because analog outputs on HDTV sets and other devices do not support digital copy protection encryption like the High-bandwidth Digital Copy Protection (HDCP) system supported by HDMI and certain DVI connections. The studios fear that permitting their “high-value” content to travel over unprotected outputs would allow users to record the movies and then redistribute them over the Internet.

Public Knowledge and other opponents of the waiver argue that allowing the studios to turn off analog outputs would “break” as many as 25 million devices by preventing them from receiving or displaying the content and and is therefore anti-consumer. (There are also technical arguments over whether the MPAA has met its legal burden of proof to qualify for a waiver and other super-wonky issues that even The Media Wonk won’t delve into here.)

Here’s the problem: Because the debate is occuring in a public-policy context the MPAA is playing what it considers to be its best public-policy card: fear of piracy. We would only be too eager to offer this shiny new benefit to consumers, the studios say, if  we could just do something about the terrible scourge of piracy. But there’s a far more compelling business case for granting the SOC waiver that the studios are not making.

For its part, Public Knowledge is offering counter-arguments that, while they may address  the public-policy questions at issue, are utterly naive as to the business considerations distributors face when releasing a movie.

The studios know perfectly well that turning off the analog outputs for the proposed VOD transmissions will have little effect on the broader piracy problem (or, I should say, some people at the studios know that, some of them really are crazy). The reason they need to do it is to give themselves cover with Wal-Mart and other large DVD retailers who would raise holy hell over a new “unprotected” window ahead of theirs. Of course, they, too, know the piracy argument is a feint. But they would nonetheless use it to squeeze the studios on shelf space and price at a time when the studios can ill-afford to lose more DVD business.

Theater owners would also squawk, of course. But the studios have no doubt calculated that there is nothing the theaters can really do about it. They need Hollywood’s movies far more than Wal-Mart does.

Cable operators, who would benefit from the new window, have predictably come out in favor of granting the waiver. But they, too, would be all too happy to turn around and use “piracy” during the new window to squeeze the studios on licensing fees in the traditional VOD window. It’s business, after all. not a morality play.

And that, ultimately, is the flaw in Public Knowledge’s case against the waiver. To argue, as it has repeatedly, that the fact that a few independent distributors like Magnolia and IFC have released movies on VOD ahead of their theatrical or DVD release proves that piracy is not a real problem, and that the studios could release movies the same way now, is simply a non sequitur. Independent distributors are in a different business from the major studios. They do not have business relationships with Wal-Mart and Best Buy to protect.

family-watching-dvdAs things now stand, routinely releasing movies on VOD ahead of their DVD/Blu-ray release would not be a sound business decision for a studio to make, given all of the considerations that must go into the distribution of movies, and no business person answerable to shareholders is likely to make it. Would the use of SOC change that? It might, but not because it would do anything to prevent piracy. It might because it would give the studios a tool to manage their business relationships through a period of technological and industry transition.

That may not sound very noble (or compelling to regulators), but I don’t find it particularly nefarious, either. Making and distributing movies is a business, and expecting that it would operate on something other than business principles is absurd.

For similar reasons, I don’t find the “breaking 25 million TVs” argument very compelling, either.

Public Knowledge and the Consumer Electronics Association complain that “allowing the MPAA to shut off analog outputs will leave over 20 million TV sets and downstream devices like Slingbox unable to receive the MPAA’s content.” That may be so, but it’s also so that NO TV sets or downstream devices can receive the MPAA’s content in the proposed window as things now stand. And they’re simply not going to start receiving it just because Public Knowledge and CEA think they ought to be able to because it’s not in anyone’s economic interest to let them.

Granted, it may be that the likely consumer benefit of the new window is not a sufficient trade off for changing the rules that have governed TV receivers up to now. But “no one should have it if some people can’t” is not an argument to that point one way or another. In fact, it’s not really an argument at all. It’s an attitude.

And it’s not a sound basis for either business or public policy decisions.

Asking the wrong questions on e-books

The New York Times published a story the other day asking,Will Books be Napsterized? It’s conclusion? Probably, now that e-book readers are going mainstream and file-hosting sites like RapidShare are making it easier than ever for people to post pirated e-books online (speaking on a network filtering panel at the Future of Music Coaltion Policy Summit in Washington on Monday, Daniel Klein of London-based cyber-security firm Detica Group gave it 12 months before RapidShare becomes the new Public Enemy No. 1 among copyright owners).

napster-logoWhile the article, written by Randall Stross, professor of business at San Jose State University, is never explicit as to what it means to be “Napsterized,” it’s pretty clear it is referring to the loss of legitimate e-book sales–and perhaps even hardcover sales–due to people downloading for free illicit electronic editions of books rather than paying for the licensed product–much as the recorded music industry has suffered a sharp decline in CD sales since the advent of Napster and other peer-to-peer file-sharing networks.

“We are seeing lots of online piracy activities across all kinds of books — pretty much every category is turning up,” said Ed McCoyd, an executive director at the [Association of American Publishers]. “What happens when 20 to 30 percent of book readers use digital as the primary mode of reading books? Piracy’s a big concern.”

[snip]

We do know that people have been helping themselves to digital music without paying. When the music industry was “Napsterized” by free file-sharing, it suffered a blow from which it hasn’t recovered. Since music sales peaked in 1999, the value of the industry’s inflation-adjusted sales in the United States, even including sales from Apple’s highly successful iTunes Music Store, has dropped by more than half, according to the Recording Industry Association of America.

Read More »

Join me at the first Digital Breakfast DC on Oct. 1

The Media Wonk will be hosting the first Digital Breakfast DC conference on Oct. 1 in, not surprisingly, Washington, DC. The topic for the panel is Using Tech to Safeguard Content and IP. Panelists include Rick Cotton, general counsel of NBC Universal, Prof. Peter Jaszi of Washington College of Law at American University, Jon Baumgarten, partner with Proskauer Rose, Bill Rosenblatt of GiantSteps Media and the irrepressible Chris Castle an entertainment attorney from LA who is appearing on behalf of Arts + Labs.

digital-breakfastDebating points will include the implications of the FCC’s net neutrality rulemaking for filtering and other online anti-piracy efforts, the French three-strikes law, Veoh’s recent court victory and its implications for UGC and the over/under line on when we’ll see the new White House IP Czar named. All packed into a fast-paced one hour. Plus bagels.

Click here to register today!

Is MKV the MP3 of video?

The release of the Napster client in 1999 is seen by most in the music industry as a watershed event. It was the moment when millions of people began “trading” individual music tracks over the Internet and–in the received version of the story–stopped buying CDs. The industry’s response was, first, panic, then to attempt to get the genie back in the bottle by suing Napster and its creators Shawn Fanning and Sean Parker. That led to similar suits against Friendster, Aimster, Grokster,  and any other peer-to-peer network “operator” the RIAA could identify clearly enough to serve with papers.  

napster-logoWhat had really hit the music industry, however, wasn’t P2P technology so much as the MP3 codec. The first MP3 encoder was released in 1994, and by 1995 it was being used in commercial consumer software such as WinPlay, and later WinAmp. Using MP3 compression, WinPlay users could store tracks ripped from a CD on a hard drive in files that were a fraction of their original size (a critical issue at the time given the small size of most consumer hard drives), albeit with some loss of sound quality. All Fanning had really done was to figure out a practical way to tie those hard drives together into ad hoc networks so that compressed music files could be exchanged at the relatively slow bandwidth speeds then generally available. Read More »

Redbox, RealDVD and Hollywood’s long stuggle with consumer demand, Part I

There’s something about the video rental market, to borrow a phrase from Barack Obama, that causes the studios to get all wee-weed up.

Back in 1983, not long after the Hollywood studios began, ever-so tentatively, to release movies on the newly introduced half-inch videocassette for watching at home, they were horrified to discover that some enterprising video shop owners had begun renting the cassettes for a few bucks a night, sparing their customers the need to shell out $30 or $40 for a movie they might watch only once. Worse for the studios, the video shops had not licensed the right to rent movies and were not sharing any of their rental earnings with the studios.

Hollywood huffed and it puffed but, in fact, the video shops had the law on their side, specifically Section 109 of the U.S. Copyright Act of 1976, which provides that:

[T]he owner of a particular copy or phonorecord lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.

In other words, the rental shops didn’t need a license, and the studios couldn’t stop them from renting. So Hollywood did what copyright owners had done at least since the introduction of radio: they went to Congress to get the law changed more to their liking.

Never mind consumers’ manifest interest in renting movies.

In the sausage factory of Capitol Hill, the repeal of Section 109, known colloquially as the First Sale Doctrine, became twinned with a separate studio initiative to outlaw the use of VCRs to record TV programs, or, short of that, to impose a royalty levy on VCRs and blank tapes to “compensate” copyright owners for such copying.

In 1984, however, with the legislative battle still raging, the U.S. Supreme Court threw a wrench into the works by handing down its decision in the famous Betamax case, which held that recording TV shows off the air with a VCR for private use was perfectly legal and that no royalty payment was required. With that, the studios’ effort to ban or tax recording equipment died in Congress, and with it its legislative twin, repeal of the First Sale Doctrine.

The studios were not ready to make their peace with rentals, however. Their next move was to implement a series of ever-more baroque “rental plans,” which involved various schemes to try to distinguish between “rental” cassettes and “sale” cassettes, including the use of different color plastics for the cassette shells. Thus, “rental” cassettes were red, while “sale” cassettes were blue.  The idea was that “rental” cassettes would not actually be sold to rental stores but licensed, thereby pulling an end-run around the First Sale Doctrine. Since the stores would never legally own the cassettes, they could not unilaterally exercise their right to rent them under Section 109 of the copyright statute. Instead, they were compelled to pay a “royalty” to the studio on each rental transaction. Read More »

Feels like old times

Some news out of China last week laid a nostalgia trip on those of us who covered the long saga of the Blu-ray vs. HD DVD format war. According to a report in the Timesof London, a recently introduced high-def DVD format developed in China, called China Blue High Definition (CBHD), is already outselling Blu-ray in the Peoples’ Republic by a margin of three-to-one.

bluray-vs-hddvdThe Times called the development a “new format war” but it’s really a continuation of the same format war that had simply gone underground after Toshiba pulled the plug on HD DVD  in the West back in February 2008.

The roots of CBHD go back to 2005, when the Chinese government set out to “break the monopoly” of Western and Japanese companies on the technology underlying the DVD format by creating new intellectual property controlled by China to be used in a next-generation format.

In 2007, the DVD Forum fomally approved specificationsfor a “China-only” version of the HD DVD standard, which was to be based on the HD DVD physical specs developed by Toshiba and Chinese-developed audio and video codecs. Instead of MPEG 2, VC-1 and H.264, for instance, the Chinese format would support only the Advanced Video System (AVS) developed in China, saving Chinese manufacturers boat-loads in royalty payments to foreign technology owners. Read More »

Creation and the Internet

Last week saw two interesting developments in the ongoing debate over effects of file-sharing and what to do about it. On Thursday, a federal jury in Minneapolis ordered Jammie Thomas-Rasset to pay $1.92 million to Universal Music Group and other record labels after finding she had downloaded 24 songs illegally. That works out to a staggering $80,000 per song.

thomas-rassetEven Sony BMG’s lead lawyer in the case, Wade Leak, admitted to being “shocked” by the size of the verdict.

On Friday, two Harvard Business School economists, Felix Oberholzer-Gee and Koleman Strumpf, released a working-paper version of a new study (PDF), which found that, pace the media companies, the conclusion that rampant file-sharing and other types of digital piracy will reduce incentives to produce new music and movies ultimately harming the public, has no empirical foundation.

In fact, the data point in precisely the opposite direction. The researchers found that the number of new albums released each year soared from 35,500 in 2000, to nearly 80,000 in 2007 (including 25,000 digital-only albums), despite a decrease in gross revenue from CD sales over that same period. Similarly, the number of feature films produced worldwide each year rose from 3,807 in 2003 to 4,989 in 2007.

The increase in film production held true even in countries where film piracy is rampant, such as South Korea (80 to 124), India (877 to 1164) and China (140 to 402). Feature film production in the U.S. over the same period rose from 450 films in 2003 to 590 in 2007.

What does one development have to do with the other, apart from their coincidental timing? Read More »