Responses to Valenti
When I first wrote my brief commentary on the interview, I was just trying to cover the basics. Thanks to the blogosphere, I can now post these responses, which flesh out some important issues. I am grateful to all of you who have read the article and especially to those of you who have taken time to write about it. It’s been great fun for me.
So, here’s what I’ve compiled from people responding to the Valenti interview. First, a short list of blogs; then, emails I’ve received. If you emailed me and wanted your stuff published and I didn’t, please tell
me (I’ve tried to keep it to stuff explicitly about the interview). If I have posted your stuff and you didn’t want me to, please tell me.
(most of the blog commentary can be found using this list)
Mark Newton writes
"Right now, any professor can show a complete movie in his classroom without paying a dime--that's fair use. What is not fair use is making a copy of an encrypted DVD, because once you're able to break the encryption, you've undermined the encryption itself."
That's misleading even if you cast it in a good light. His first example is legitimate fair use; his second example may or may not be fair use depending on the *context*, but he's painting it as an unconditional act of piracy and expecting readers to let him get away with it. There are all kinds of fair uses which require "break[ing] the encryption" on a DVD. For example, including extracts from the DVD in another production for the purpose of criticism, satire or social comment. Most DVDs use a combination of Macrovision (so you can't copy extracts onto videotape) and DeCSS (so you can't extract them directly from the MPEG stream), making this perfectly legitimate fair use application impossible without breaking either the Macrovision or the CSS protections.
Valenti has set the goalposts of this discussion exactly where he wants them to be, because it's easy for him to argue against the wholesale copying of an entire movie on fair use grounds. But fair-use is more subtle than that, and we've traditionally trusted the courts to make judgements about that sublety because copyright owners and copyright users tend to be too self-interested to make the judgements for themselves. DRM fundamentally changes that balance, by putting the entirity of the decision-making process in the hands of the copyright owner, none in the hands of the consumer, and (by changing the argument from "Is this fair use?" to "Are you authorized to break the copyright protection") out of the court system.
[Later, Mark added:]
I'm surprised that "the other side" hasn't responded in kind -- The classic way to turn that tactic into a compromise is to argue an equally extreme counter-position which highlights the absurdities of the opponent's point of view, and drives reasonable observers towards a middle road. But there's so little organized opposition at the moment. The war3z crowd sucks legitimacy out of "our" arguments by behaving as if piracy is a god given right, a few academics write books which are largely read by people who are already converted, and life goes on. Meanwhile people like Valenti and Rosen continue to parrot their vast library of 5-second soundbites over and over again, so often that even if you *attempt* to apply reasoned thought to the issues, you have to start by clawing your way through irrational sludge before you can even start.
Phil Agre has written lots on the use of hyperbole to quash debate by confusing those who would otherwise oppose you. There's a lot of that going on here.
Nathan Holmes writes:
I had to inject a couple of notes, though, to refute one of his comments.
"JV: You have to have copy prevention mandated by the government sooner or later because otherwise everybody's not playing by the same ground rules. For example, the standards of my cell phone have to be mandated by the FCC because everybody has to operate off the same standards. Also, all railroad tracks in this country are the same standardized width."
The FCC did not mandate any of his cellphone standards, with the exception of the frequencies they were allowed to operate in and the power they were allowed to radiate. (Perhaps also the modulation schemes, though I don't believe so... I'd need more research - I've forgotten most of my RF stuff as it pertains to cell networks.) There's some serious evidence that the lack of government-mandated standards actually has helped the US build a better cell system than Europe (where the controlling government bodies did mandate the technology). [Read this
] [f]rom the mouth of an ex-Qualcomm engineer himself.
Also, the government never mandated the gauge of any railroad in the US, with the exception of the famous, and so-called "Transcontinental Railroad" (Omaha-San Francisco), built by UP and CP under government contract. Aside from that, companies were free to choose whatever gauge they preferred. The Denver & Rio Grande, among others, used several thousand miles of 3-foot line throughout Colorado and Utah during their heydey, because it was cheaper to build and could respond to emerging customers with greater speed and less risk (from less infrastructure investment in possibly shaky customer bases). A hundred or more of such narrow gauge railroads existed, and as who the real customers were became more clear, those branches were standard-gauged to provide easier interchange with the rest of the world. The rest were abandoned (or a few preserved as historical artifacts), as they usually had lost most of the traffic they were built to carry. Nowhere in these stories do you see the government. It's all about the market being tapped and basic economic theory driving the business. Both are about optimizing the companies' resources to best meet the demands of the customer while minimizing the cost to the businesses. Jack, as usual, is grasping at figments of his imagination and missing horribly.
[Later, he added:]
As for cellular phone networks, I should point out that the FCC does mandate what technologies use what frequency bands, and also licenses where towers/transceivers can be placed. That's just out of pure common sense - it prevents interference between networks, and it's hard to build a multi-band transmitter at those frequencies. Neither of these limited the technology in any way - vendors operating in those frequencies (especially Sprint, with their own flavor of CDMA "PCS" network) are reasonably free to innovate as they see fit.
The US had 20 different track gauges in 1861. However, due to the building of the Transcontinental in the late 1860s to 4' 8.5" (per the Pacific Railway Act of 1864), most railroads built after that conformed to the gauge so as to interchange equipment and generate sources of revenue. Any change of gauge meant that freight had to be transloaded between cars compatible with the railways they would be travelling over - increasing the cost and transit time significantly. The Civil War also helped consolidate gauges, as the Union army chose 4' 8.5" as the gauge for military equipment. Captured Confederate lines were converted to this gauge for two reasons - they could interchange with the North to bring down supplies to the front lines, and the southerners could no longer use their equipment on them.
That said, the D&RGW continued to operate the narrow gauge (3 foot) network in Colorado until the late 1960s, transloading freight to standard gauge D&RGW operations in Alamosa, CO. There was a market, and they took advantage of it. Likewise, the White Pass & Yukon hauled ore out of the Yukon territory to Skagway, AK, on a three foot line until 1982. US Gypsum continues to use a three-foot railway to haul gypsum from their mine to the connection with the standard gauge UP branch at Plaster City, CA. Just to name a few - there are more still in existance, but none as notable.
Scott Hunter, the CEO of Exploit Systems, which is trying to constructively use P2P for everyone's benefit, wrote in
"Mr. Valenti is probably right when predicting the demise of the music industry. How can an industry that pushes away its customers with spoofing, decoying and interdiction of digital files in p2p file sharing networks ever convince those customers of anything after such aggressive, anti-consumer policies. The results are being seen in the bottom lines - revenues continue to suffer and the vastly acquisitive community known as almost 150-million p2p file sharers, continues to grow at a clip of 3-5 million new users per week.
Maybe it is time to stop trying to set up bear traps all over the digital store to mash the legs of your customers. How about instead, when they ask for a file, you don't tell them to leave the store and go elsewhere, but service them right there, take them to the proper aisle, so to speak, show them the way to the cash register, take their money and then try to sell them something else? Some will always steal, but many will buy. It works for the rest of the world.
I've just never understod the logic of having so many in-market customers at your finger tips and not setting up the kiosk to sell you wares post-haste.
Mr. Valenti and the movie industry should continue to learn from the mistakes made to date, or the MPAA might have something to really fear from 60 million, then 160 million broadband households. But, play your cards right, treat the consumer well, sell them what they came to get instead of sending them away and that equals millions more in revenues into the coffers of the copyright owners.
At the end of the day, the customer is still king."
[Later, we discussed what Exploit Systems is all about. Here are some excerpts:]
"We get content to the people not by denoting it with a gold star (which is tantamount to putting one buoy in a lake filled with them, easy to swim around), or having a closed cdn like Centerspan that few people are using because they have no content that anyone really wants. We use software, not servers to restock the shelves and move the legitimate offering in front of the end user doing the specific search. And we only do it for those contracting us to do so. So, the music biz wants to continue to play hardball and watch their revenues and brand erosion continue to decline, fine, let people share it in p2p all day long. But, the video game folks, the software folks, the adult entertainment folks, they all want to get you to buy their stuff and p2p is perfect for them, because they are used to promo versions, lite versions, lower cost versions, trial versions/subscriptions, etc.....
Exploit Systems doesn't want to see free content to go away. We want, alongside legitimate offerings, free giveaways, gift with purchase, purchase with purchase and other similar offerings, as well as independent distribution where the copyright owner wants viral distribution of their content with no regard for anything but spreading the love and building a community of their own, so that then they can ask you to pay.
We want these p2p communities to be just that - communities, with multi-functions, department stores with free splashes of perfume and free makeovers or free samples (price club) as you decide what to buy, because the bottom line is, the longer you spend time in the store, the more likely you are to buy something - all retail studies show this time and time again. Thus, yet another reason why p2p should be embraced - these customers spend a lot of time there and come back time and time again, all month long. So, how can we capitalize on that, not ruin the experience, but bring an equilibrium to the space that allows everyone to live profitably, with some stuff free, some for sale and a legitimate marketplace that doesn't rely on drm or encryption as the holy grail, but rather, that same desire that bonds us as a fan to a rock band or a film or a video game or a software application."
Paul M. Johnson writes
“As far as cell phone standards are concerned I think Mr. Valenti just doesn't have a good grasp on current reality where we have 3 different 'standards' CDMA (Verizon, Sprint PCS) TDMA (Old AT&T Wireless network) and GSM (T-Mobile, Cingular and in some places AT&T Wireless). Of course the reason all phones is Europe are GSM is because the EU dictated it.
As to rail gauge, well Mr Valenti is just demonstrating his lack of historical knowledge. Circa 1860 there were 9 different rail gauges in use in the United States. It was only the increasing demand for interregional traffic that lead the railroads to standardize on a common gauge. (i.e. the free market decided the gauge....not a government mandate). Oh and in other parts of the world some countries still haven't completely standardized on a gauge for all tracks. Notably England which still has narrow gauge rail tracks.”
Scott Best writes
Most figureheads like Jack just deal the rhetoric when asked this question: all content creation businesses, music and movies alike, will go out of business if we don't pass some really good laws really soon.
But I think this rhetoric is disingenuous for a substantial reason that is often overlooked. That is, the ability to easily pirate DVD's (ie, super-speedy broadband) may not actually impact film revenue much at all. As context, let me say that the MPAA members chose to get into DVD's because the incremental revenue (DVD sales versus lost movie attendance because of piracy) was worth it. I think even if film-piracy increased by 100x, it will continue to be worth printing the DVD's (which are sold at, guessing, 90-percent margins?).
Back to the question, though: "how will this really affect content creation?". The effect I think this inevitable future will have is more encouragement towards "serial stories" like Harry Potter, Lord of the Rings, or the Terminator series. In these cases, piracy of the earlier chapters undeniably helps fuel the movie-draw of the later chapters. And my understanding is that the revenue a film will generate is a power-law curve when looked over time. For example, the Two Towers passed $400M in worldwide revenue after being just 1 month old; the record gross of all time is Titanic at $1.4B *including* DVD sales. In this model, piracy of the older chapters can only help you: it drives the power curve of the subsequent release, while cannibalizing the trailing edge of the DVD sales the following Christmas. I think which the studio's would appreciate more is self-evident.
So does this power-curve revenue model exist for music sales as well? Probably not as much: movies have grand theatrical release events that are well before the DVD release, and it's fashionable to see the film with a large group as soon as possible after the release date (yes, guilty: I did see both FoTR and TTT on their release dates).
But if we agree that music piracy isn't going away, and I think we all agree on that, a more interesting question is perhaps how can the music industry drive a high-peaked power-curve on their music releases *without* abandoning their current marketing model of total channel saturation? Put another way, is the lack of an ability to affect a power-curve revenue model similar to major film releases actually the fault of the marketing strategies of the music studios themselves?
Russ Nelson writes:
I did a web of web browsing, and it seems that standard gauge was never promulgated by law, ever. In the UK, Parliament passed a law recognizing standard gauge, but that was because most everybody was using it. In the US, the Lincoln administration specified standard gauge for the intercontinental railroad it was paying for. Initially it had specified California gauge, but was switched to the more standard gauge. Railroad companies that switched seemed to have switched simply because it made sense, not because of any law. Sorry, Jack, the facts are against you. But we already knew that, right?