Focus on the ISPs

Michael Geist has a worthwhile article on The dangers of “locking down” the Internet. Attention is shifting away from locking content through digital rights management and towards imposing filters and other technological controls on ISPs. Geist notes “[t]his movement has been most prominent in Europe, where last summer a Belgian court ordered an ISP to block access to a site alleged to contain copyright infringing materials.” The danger is that as ISPs evolve from conduits to gatekeepers the essence that made the Internet the greatest medium for unfettered speech in history will be destroyed.

The idea of using ISPs to regulate content is not new. The first time I heard someone articulate a sophisticated vision of how to implement such control was in 2001. The speaker was a then-student with an unusually keen understanding of the possibilities of Internet regulation. He was ahead of his time, but maybe not by too many years.

iTunes: Up or Down

I posted last week (iTunes iNtrouble?) about a report by Forrester Research that, according to The Register, Bloomberg, and others, disclosed a collapse in iTunes’ sales in 2006. The claims of trouble at iTunes “threw the cat among the pigeons,” as a boss used to say. Apple shares dropped almost 3% after Orlowski’s story, others claimed iTunes 2006 sales are “surging,” and the report’s author criticized the media for taking one sentence of the report out of context. Which figures are correct? It is hard to say since Apple does not report iTunes sales separately. Analysts look at other official Apple figures or figures from other sources to deduce iTunes sales trends and, not surprisingly, different sources yield different conclusions. For instance, the Forrester Research report is based on 2,700 debit and credit card transactions. Carl Bialik, The Wall Street Journal’s “Numbers Guy,” examined the different methods here. (Subscription required)

Commentary branched off from there. Andrew Orlowski’s December 12 article in The Register pointed to digital rights management as a cause of Apple’s declining sales, a theme reiterated by others: ” . . . the metrics are beginning to support the notion that DRM, at least in part, is actually driving people away from Apple’s music store.” (Joe Lewis, Webpronews.com) Orlowski spun another strand, predicting the advent of blanket licenses in which users subscribe to online sites for a small fee and obtain “the right to exchange music freely” and licensors (artists and labels) divvy up the pie in some equitable fashion.

Others attacked Orlowski’s article. In the “‘Collapsing iTunes Store’ Myth” RoughlyDrafted.com characterized Orlowski’s blanket-license model as a “socialist fantasy” mandating a “Soviet style choice:”

The point was not just to create a sensationalist article, but to use it as proof for later articles that followed a preset agenda: iTunes can’t succeed, because Orlowski has other ideas in mind about how to distribute the world’s music.

RoughlyDrafted.com links to a chart and analysis from Blackfriars Marketing of Apple sales supporting the Apple press-release claim that iTunes’ sales are, um, just peachy. Absent actual Apple iTunes sales figures this dispute is mostly noise, revealing more about the use of the Internet to flog a topic into tiny pieces than about iTunes’ sales or the future of digital music. Google, for example, produced over 10,000 hits for “apple ‘itunes sales’ ‘forrester research report.'” I don’t have a dog in this hunt. I’m neither confident of iTunes’ imminent downslide nor optimistic about its continued dominance over the music download market, merely curious about how the future unfolds and how we perceive it.
It reveals something else, too: the passionate, minute interest in the present and future of digital entertainment. It’s hard to imagine a report of, say, declining sales of Sony HDTVs provoking the same type of commentary.

iTunes iNtrouble?

The Register’s Andrew Orlowski reports here that iTunes “has experienced a collapse in sales revenues this year.” Forrester Research’s analysis of credit card transactions shows that since January 2006 iTunes’ average transaction size and monthly revenue have declined respectively by 17% and 65%. Orlowski also reports that revenue is flat across the entire digital download sector. Orlowski attributes much of the blame to low consumer interest in music encrypted with digital rights management when pirated music is freely available. As an alternative to DRM music he points to discussions in the UK about blanket licenses under which consumers might pay a flat fee, perhaps as part of a broadband subscription service. Under such a scheme consumers would obtain the right to download and share music free of restrictive digital rights management and copyright infringement liability, and the collected fees would be allocated among artists and the recording industry.

The issues raised go beyond iTunes’ fate. If the iTunes business model does not work then the recording, television, and motion picture industries must adopt another. I cannot imagine these industries embracing a model in the U.S. that does not include digital rights management as a security blanket. Fighting piracy by allowing users to download and share freely, even after paying to do so, would require a seismic transformation in industry attitudes. It would be similar to the transformation required to fight the drug trade by legalizing drugs and selling them through state-regulated-and-taxed channels. The question is, how badly broken must the business models become for these industries to make the U-turn from “sharing copyrighted material equals theft” to “pay the man and share as much as you like!”?

Freeman to release new film online

In yesterday’s Internet law class, culminating a month of readings and discussion on copyright law and digital technology, we discussed whether and how the entertainment industries might change their business models to move beyond their largely defensive, enforcement-centric response to file sharing. Today I saw a report that Clickstar, Morgan Freeman’s production company, will release his new film “10 items or Less” on the Internet on December 15, two weeks after its theatrical release today. The film, about an actor (played by Freeman) spending a day with a grocery checkout clerk to prepare for a role in an indie film, will not play in multiplexes or large commercial theaters, a factor that may have contributed to Freeman’s decision to release it online. Of his residence in Mississippi Freeman said “[w]here I live, in my town, there’s no movie house . . . There are many, many, many, many people who don’t have access.” The film’s download will be protected by digital rights management coding of a type not described in the article.

Morgan Freeman to release new film online two weeks after theater opening, SiliconValley.com, 30-Nov-06