Pandora's Box (or why Dianne Feinstein needs to read this post)

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Pandora's Box (or why Dianne Feinstein needs to read this post)

I came across this article explaining that the RIAA is suing XM over its new Inno device.

The lawsuit isn't the issue I want to discuss. The RIAA seemingly is in the business of suing people and companies, and suing a well loved company like XM is so typical of the way they act that it was predictable.

But later in the article it discusses a new bill called the PERFORM Act (Platform Equality and Remedies for Rights Holders in Music) of 2006, which is sponsored by Dianne Feinstein, Democratic Senator from California.

The PERFORM Act would force the use of protected formats for all streaming media services, whether online, on cable or through satellite radio and TV.

When I go looking for wisdom, I often look back at the myths and fables I learned as a kid. I find they contain the wisom of prior generations that are being passed on to our generation. And few myths are as powerful and full of insight as Pandora's Box.

In this case, Pandora has released digital technology upon our society. Maybe it is a misfortune like the ones released in the fable (clearly the RIAA thinks so), maybe it is a gift from the gods (I certainly think so). But one thing is for sure. You can't put digital technology back in the box and as much as the RIAA and our goverment may try, the rules of the analog world cannot and will not be used to hold back the innovation unleashed by digital technology.

What's worse is that Senator Feinstein's bill requires "protected formats" for all streaming services. Protected formats is a code word for DRM and unfortunately it means proprietary formats that are being used by big corporations (like Apple and Microsoft) and the media companies (like those who are behind the RIAA) to stifle the flow of bits in an open network and an open ecosystem.

Senator Feinstein is from California so I would have thought she was hip to all the amazing amount of innovation, job creation, and wealth that has been built upon open technologies and "democratized innovation". Clearly she missed that boat.

Which leads me back to the music business and this post by Altay where he suggests that once the artists are free from the business models required by the analog world (packaging, distribution, and analog promotion), that they may be better off with a world where the music is in fact free and the money is made in other ways.

I think we are headed in that direction for sure but it will take a long time to get there, and things like the PERFORM Act will only make it harder to get there.

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» Short note on the PERFORM act of 2006 from It looks obvious
When I first read this morning about the PERFORM Act of 2006 (Platform Equality and Remedies for Rights Holders in Music) at Fred Wilsons blog I was sure he got it wrong. So I decided to give it another check. Is something w... [Read More]

Tracked on May 18, 2006 6:35:32 PM

Posted May 18, 2006 in Venture Capital and Technology

Comments

Anything I could say would be redundant, but I think you're missing the bigger thing here. Capitalists will not get to decide what musicians want to create, or how they create it. Musicians own the music.

But maybe I'm wrong. Maybe convenience, thievery, and technology for technology's sake will further ruin the listening experience. I hope I'm dead by then.

BTW… When are you guys going to stop using the $20 price point for CD’s? I’ve haven’t paid $20 for a CD in 15 years. It’s as misleading as the news reports regarding gas prices throwing up last years video snippets of signs reading $4.00 per gallon. It’s blatantly misleading and renders a huge blow to ones credibility. Let AMG know that the RHCP album is selling for $11.96 on Amazon. A fair price I’d say.

Posted by: Tony Alva | May 18, 2006 9:39:06 AM

Typical crap from a Senator from a state where much of the entertainment industry is located.

There are so many problems with this.

First, what about the people's right of fair use? Who protects that? Lawmakers are supposed to be the people's lobbyists. What a broken system.

Second, if you go back and read the Constitution you'll see that the power to extend copyright and patent protection is granted to Congress NOT in order to maximize the on-going profits of creators but in order to encourage creators to share their work so that human knowledge can be advanced. Copyright (and patent) law as it exists in practice today is a horrid bastardization designed to achieve precisely the opposite end--to discourage the the creation of new knowledge if it builds on prior knowledge. Let's get back to first principles here.

Third, why is the government continually putting itself in the business of protecting industries (everything from music to corn farming) by driving up the costs to consumers? Music CD-Rs--which home audio recorders are designed to use--cost more because the government uses its taxing power to collect money from blank CD-R sales. That money is handed to the music business. When federal taxing power is used to benefit private industry at the expense of tax payers something is horribly, horribly wrong.

Posted by: Jason Chervokas | May 18, 2006 9:50:24 AM

PS, Mr. Alva, you need to calculate shipping into the Amazon price otherwise you're not being fair. So $1.99 + 11.96 = $13.95, well below $20 to be sure. But for the purposes of broad discussion it's not so useful to look at the discounted price of a hot new CD. Better to find average and median prices of new and catalog CDs, hits and non hits. Also, better to look across retailers, not just Amazon. What is the average price over a 12 month period of all CDs at Walmart, for example.

Posted by: Jason Chervokas | May 18, 2006 9:57:36 AM

Obviously, I'm not a fan of DiFi on a purely partisan basis, but she is an especially egregious example of a bad, bad, bad senator. She routinely votes for or proposes the worst kind of crony capitalist legislation (such as the copy right law extensions and DRM additions) and has an exceptionally unhealthy relationship with government contracting and government regulated indutries thanks to the investing activities of her husband, Richard Blum.

I'm not a partisan in hating cronyism (Thad Cochran and Trent Lott are disgusting, not only leveraging Katrina for giving billions to local firms and supporters, but denigrating people who are trying to end earmarks) but I do wonder why DiFi gets away with having a husband actively involved in running investments that get substantial ($600M+) contracts from the Feds. The major complaints aginst republican connected firms such as Carlyle is that they hire former politicians, or that Frist has a large stake in a family founded firm. I haven't heard of any other spouse or Senator that has as active & government connected outside interests.

What I find hilarious is that the **AA groups always fight new technology and the new technology (if it has any success) always gives them much greater revenue. One of the problems that the entertainment industry has it that with deindustrialisation, nearly all businesses have exceptionally limited barriers to entry. Those of us who run businesses and have broad natural support for copyright and IP in general disrespect people and companies that focus solely on dead IP rather than on executing great products, services, or innovation. Suing your customers isn't a strategy, and trying to cripple EVERYONE's computers, TVs, radios, etc to satisfy one, tiny, whining industry is horrible and shows a lack of strength and competitiveness on the part of the media industries.

EVERYONE's business model is being destroyed (even accountants, lawyers, surgeons, and radiologists) by global growth and telecommunications. **AAs should be going after industrial pirates (aka everyone in China) who actually cost them sales, rather than people whose alternatives to copying is non-consumption. M$ is an example of a company that in the past leveraged the widespread pirating of its products to make a few dollars. It still does this, by offering a variety of tiers and giving out lots of its expensive software free (buy a SQL Server book and get a 6month trial copy...). They seem to have done ok, but may they may have made more money by suing families that made 2 copies of their software (BSA going after firms with 10s-1000s of pirated copies is different, obviously).

What I find hilarious is that the crap that the companies are doing with their CDs make me actively NOT want to buy music or movies. I can't trust their products in my computers, which I spend nearly all my time with and which serve as key elements in my stereo system. So I have to pirate things that I own to have them useable on laptops, ipod, etc. With internationally crippled digital distribution, it can be very hard to access your music or buy more music when you are travelling. Total idiots.

Posted by: hey | May 18, 2006 10:49:16 AM

"I spend nearly all my time with and which serve as key elements in my stereo system. So I have to pirate things that I own to have them useable on laptops, ipod, etc."

This is why these arguments will never, ever be taken seriously by some of us. Ever.

I HAVE to pirate music.

Give me a break.

I may have to bow out of this "debate". It's not a debate. You people are justifying stealing by trying to hang it on the changing technology. Sorry, but that doesn't cut it and never will.

Guess what? I spent a LOT of time being anti copy protection (because of how it hindered my ability to reproduce MY OWN MUSIC THAT I CREATED), but the more I read in this blog, and on others, the more I change my mind. If anything, these discussions and comments are bolstering the other side's arguments again and again and again.

That last comment did it. I will now start, actively, supporting crippled digital distribution, and pray to God that the record labels and big companies like Apple and Microsoft make it as difficult as possible for you all. It seems like bad business 'cause it is. My life is about creating things, not making money.

I've tried to see both sides, and have made the point time and again that the labels and artists may be headed for a time when this stuff is free (doubtful), but over and over it comes back to being "forced" to steal.

Utterly ridiculous.

Because, to put it simpy, you all don't deserve it.

It's like the YouTube thing. You are, over and over, encouraging people to steal content, and are delighted that the creators are the "bad guys". But, strange... the only content people want to see is that created by the "bad guys". It's not (as people here said it would be) "user generated content", because the average user cannot tell a story or write a song, so you end up ripping it off from those who do, then get mad at them for being pissed.

An utter joke. Impossible to take seriously. Credibilty entirely shot.

Stealing is illegal. There is no debate.

I will not even BEGIN to get into the "people's right of fair use" or the intent of copyright law. Again, you all don't deserve the "knowledge".

Posted by: Chrispy | May 18, 2006 11:38:03 AM

What is the average price over a 12 month period of all CDs at Walmart, for example.

Not a great example Jason. Media is generally a loss leader for big box stores, something to get customers into the store every Tuesday because customers know there will be new releases. They generally carry almost no back catalog.

This is more so with stores like Best Buy, but Walmart also does the same thing.

Posted by: Erik Schwartz | May 18, 2006 11:43:22 AM

It's highly likely that Senator Feinstein is trying to protect the rights of the people who work hard to create entertainment for the ungrateful masses.

If the music and television industry shut down, you'd all be left with nothing to steal, trade, and blog about.

Nobody is going on YouTube to search for somebody's wedding video. They want SNL.

Maybe Pandora's box has been opened, but wrong is still wrong.

How about a little decency and morality coupled with innovation?

Posted by: jackson | May 18, 2006 12:49:54 PM

I'm sure you're aware of this, but it's worth mentioning that Sen. Feinstein is basically on the RIAA/MPAA payroll. So her position here isn't about what's good for the United States and the state of California, it's about what's good for her paymasters.

Posted by: Ron | May 18, 2006 2:47:45 PM

"Which leads me back to the music business and this post by Altay where he suggests that once the artists are free from the business models required by the analog world (packaging, distribution, and analog promotion), that they may be better off with a world where the music is in fact free and the money is made in other ways."

Well, that all sounds very niec and vaguely Marxist, but what are the "other ways" that musicians will make money?

Unless and until digital thinkers such as yourself present a coherent argument as to what those "other ways" of making money are, you will convince few people of your argument.

I don't necessarily disagree with your conclusion, but the reasons you base it upon are rather flimsy.

Posted by: Dave | May 18, 2006 7:48:26 PM

I saw a great documentary yesterday about the Ramones.

During the movie one of the band members commented that MTV ruined the music business (or words to that effect) since the focus shifted from the music to the video.

I was immediately struck by the thought that we may be witnessing the revenge of the Ramones in the sense that instead of relying on videos and CD sales, musicians may have to go back to performing live in order to generate income.

Artists in other parts of the world go on tour more often then their US counterparts for the simple reason that that is the business model that works in regions where piracy is rampant.

Anyone can download an MP3 or buy a copied CD on the street but how many people can perform the music live?

I agree with Fred, Pandora is out of the box, but it doesn't have to be the end of the world, its just time to change the business model.

Posted by: Simon | May 18, 2006 8:32:49 PM

Chrispy:
You need a reading comprehension course. You'll notice in the quote that you used, I mention that I am doing this for music that I have already purchased. As in for that which I have a license to use for my own personal use. As in I'm legally permitted to make copies so I can play it on my iPod, or my laptop, or for a physical backup (rather than buying the same CD 5 times because it gets damaged by being in the car, dropped on the beach, etc). So are you obtuse, or do you have a room temperature IQ?

I have had to go to illegal download sources to make CDs that I OWN useable on my computer. I'm making a copy for my own use, of a CD I purchased retail, but because of record companies actions I need to use an illegal way of doing something that is legal. AGAIN: I HAVE TO DO THIS WITH MUSIC AND FILMS THAT I HAVE ALREADY PURCHASED BUT THE SPYWARE AND CRIPPLEWARE OF THE MEDIA COMPANIES CAN'T GO ON MY COMPUTERS. I can only safely play CDs in my car, while the main soundsystems I use are all computer based and vulnerable to illegal and unethical tampering by the record companies.

Maybe you remember Sony putting spyware on people's computers? The lovely autoinstalls (without phone home features) that only play CDs in "custom" players from other companies? It takes more effort to copy a CD so that it plays safely on a computer than it does to download a CD using a torrent.

This is stupid. I shouldn't have to worry about what a CD or a DVD is going to do to my computer. The media companies should make it easy for customers to use the products they purchase. I can't comfortably put a commercial CD onto my work computer as it is a high security risk and could result in the loss of client files. Minor things like financing, strategy, product designs... I'm sure it wouldn't be a problem if the next Sony backdoor is exploited by Russian gangsters...

I love the work that companies are doing to spoof files on sharing networks. Absolutely brilliant idea. The Madonna "Stop Stealing Music!" track was genius. It was a good response to the threat, and didn't damage people who did pay for their music. What I hate is harming your customers to go after third parties, suing customers rather than commercial pirates, using lawyers to protect an obsolete business model rather than adapting, changing, and outcompeting your rivals (with a broad definition of what a rival is).

Stop telling me that I'm an evil pirate. I'm not. I'll gladly pay for content. I do pay for content. But I want to be able to trust content that I pay for. Russian pr0n sites are more respectful of their customers and are more trustworthy than the Record companies. That's not a good way of protecting a business with a high risk of death. But continue on with you idea that I'm the problem and the enemy, rather than an alienated ally.

Posted by: hey | May 19, 2006 9:28:16 AM

Hey is, was, and it seems always will be completely full of shit.

You don't HAVE to do anything of the sort, you CHOOSE to because you are a scumbag - but again, we knew that.

You are an evil pirate
You are an evil pirate
You are an evil pirate
You are an evil pirate

Posted by: jackson | May 19, 2006 11:29:59 AM

yo Jackson - chill out

Hey is complaining about a real problem that affects millions of music fans every day.

he buys music and he cannot play it where he wants to play it

so instead of paying for it a second time, he gets it on the file sharing networks.

i do the same thing all the time.

i don't think i am stealing.

if i spend $9.99, $13.99, or $19.99 for a CD, i feel like i have the right to play that music wherever i want.

and when some crappy peice of technology stops me from being able to do that, i treat the CD as a license.

a license to obtain the same music from wherever i can get it.

unfortunately not enough people, including musicians, understand this issue.

they think DRM is fine.

it is not.

Posted by: fred | May 19, 2006 11:49:36 AM

but i don't like hey implying that Chris is stupid.

chris may be many things, including a talented musician, but he is not stupid.

Posted by: fred | May 19, 2006 11:51:41 AM

I do it too, everybody does it. Chrispy does it. The point is that Hey is saying he HAS to, and that is rediculous.

"Hey is complaining about a real problem that affects millions of music fans every day.

he buys music and he cannot play it where he wants to play it"

This is the attitude that I find rediculous. I have no problem playing CD's wherever I want to, I just bypass the computer like God intended.

Nobody HAS to download anything.

Just because the technology exists that enables unethical behaviour does not suddenly make that behaviour ethical.

Besides, you make it sound like a plague or something.

"I can't play this song right now, I must steal it or I will die!"

Really, step back a bit and listen to yourselves.

Posted by: jackson | May 19, 2006 1:32:38 PM

Hey - you're a moron. Go buy a CD player, a receiver, and some speakers, and get a life. I don't care if you bought the disk. You did not purchase a license to download it. My reading comprehension is far better than your stilted logic.

Why are you even putting CD's in your work computer? Are we supposed to feel bad that you can't put a commercial disk in your work computer? Is this a joke?

I fully understand the issue. I have dealt with FAR MORE copy protection issues than you consumers, as I create content, not just rip it off. Most musicians understand what's at stake a LITTLE BIT BETTER than Hey and his fricking iTunes and iPod and laptop and God knows what else.

I am also not selfish enough to believe I have a right to have the music in any format, forever. You are legally allowed to make copies for your own use. You have not purchased a license to own the music in all perpetuity in all known universes for all technologies to be invented. If the technology is crippled because millions of you are stealing, tough. It's hard to feel bad for people who have made it VERY CLEAR that they support illegal file distribution. Turning around and making yourselves "victims" of copy protection is disingenuous.

I think everyone has shown their true colors.

Support the RIAA. Support intrusive copy protection. The consumers are stealing content and trying to make excuses.

Pirates are pirates.

Posted by: Chrispy | May 19, 2006 3:29:38 PM

On this licensing argument, I think the distinction is a fine one but one that needs to be made: In the old days when you bought a packaged good for the music that it contained--LP, cassette, CD--you implicitly acquired the right to full fair use, which, according to statue and case law, includes making some undetermined number of copies for your own use, and of course the basic property right of being able to haul the LP/cassette/CD to any location where there was a device on which it could be played back.

You never acquired the right to redistribute copies. Nor did you acquire the right to have a manufacturer make, or otherwise provide you with, additional copies. Nor did you acquire the right to play the record in a commercial venue--nightclub, radio station--w/o paying certain statutory royalties.

What has happened with digital DRM is a reduction in consumer rights. What Apple in particular is selling is a digital copy of a piece of music with a bundle of restricted rights--playback only on certain devices, limited ability to copy for your own use--even less than fair use rights. People are purchasing the music with full knowledge of the rights restrictions, so I'm not sure there's anything wrong with it legally--although restricting fair uses is probably illegal. Still, until a court weighs in it's a matter of caveat emptor, consumers should know that with industry DRM schemes they are buying a lesser bundle of rights at a higher price than the are paying for non DRM protected CDs of the same music. If you ask me, DRM wrapped digital audio, particularly if it's device restricted, is a rip off.

Erik, you're right, good point about calculating average price, the big retailer numbers won't account for the higher prices paid for specialty products, or the different prices paid for catalog. Still there must be a way to calculate an average price per CD that accounts for discounts the way phone companies calculate ARPU while accounting for discounts.

Posted by: Jason Chervokas | May 19, 2006 4:38:19 PM

FYI...

RHCP new on Amazon $13.95 Ship & Handling incl). iTunes 19.90.

Posted by: Tony Alva | May 19, 2006 10:06:49 PM

More money, less rights....consumers are suckers.

Posted by: Jason Chervokas | May 20, 2006 9:36:37 AM

"Capitalists will not get to decide what musicians want to create, or how they create it. Musicians own the music."

Well, 'intellectual property' is an artificial construct created and enforced by the state. It's not the same as physical property, for which a natural right is much clearer.

Why does the state create and enforce IP? For the benefit of society. The idea being that if you give people an incentive to create, they will create more content, and society will be better off.

This is always a balancing act. Just because digital technology gives content creators and owners the opportunity to exert more control over the dissemination of their work doesn't mean that they should have it.

We have to come back to the question of whether it is good for society or not. This is the basic premise for the debate. Musicians (and other content owners) should only 'own' their music - where 'own' = 'can control the dissemination of' - to the extent that it benefits society for them to do so.

Posted by: Stephen Bronstein | May 20, 2006 10:44:35 PM

the first interesting blog I have ever seen, keep it up.

Posted by: imarketing manager | May 26, 2006 7:12:39 AM

Posted by: JEROGatch | Nov 8, 2006 10:00:53 AM

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