Tag: Digital Rights Management

Numbers of Mass Distraction

2009 Is Record Year For UK Singles Sales
Innovation boosts record label income as licensing and rights deals generate £195m in 2008
New business models boost income for British record labels: licensing and multiple rights deals net £122m in 2007
New BPI Stats show strength of digital music

Just some of the headlines from a group of people not known for their progressive thinking when it comes to music and downloads and filesharing.

But let’s not look at the headlines. Let’s look at the facts:

2009 has already become the biggest ever year for UK singles with more than 117m sold to date, recorded music body the BPI today announced.

“Sales of single tracks in 2009 have now surpassed the previous all-time record of 115.1m, set in 2008. The total of 117m has been reached with 10 weeks of trading, including the vital Christmas period, still to run in 2009.

“That singles have hit these heights while there are still more than a billion illegal downloads every year in the UK is testimony to the quality of releases this year and the vibrancy of the UK download market.  Consumers are responding to the value and innovation offered by the legal services and these new figures show how the market could explode if Government acts to tackle illegal peer-to-peer filesharing.”

“The UK Top 40 is now almost entirely comprised of digital singles. During this year, 98.6% of all singles have been retailed in digital formats.   More than 389.2m single track downloads have now been sold in the UK since the launch of the first mainstream online stores in 2004.

All from that well-known friend of illegal downloaders and filesharers, BPI. I have to consider the statements to be largely factual since they have no incentive to report these particular numbers falsely.

It’s not just about digital sales either. The Beatles are reported to have sold 2.25 million albums in two weeks recently. Again, data with some backing.

I like numbers. But not when they’re Numbers of Mass Distraction (NMD). Not when 136 people can become 7 million people.

Why should I care what numbers are bandied about in the press? Why should I care when someone says “Only 1 in 20 downloads in the UK is legal” or words to that effect?

Well, maybe the excerpt from Wikipedia on WMD will give you some idea why:

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When “tentative” numbers get repeated often enough, even if they get corrected later, people tend to remember the original “tentatives”. That’s what the research shows. And by the way, when I refer to numbers or research, I try and refer to the source openly and transparently.

The ITU projects the total number of broadband connections in the UK to be 18.4m by the end of this year. Let’s take that number for a start.

BPI then says that there are already a minimum of 117m legal downloads this year, with 20% of the year to go. Without even going for seasonal adjustment to allow for Christmas, let’s take a worst-case legal download total for 2009 to be 150m or thereabouts.

If we then take the Mandelson pronouncement that only one in 20 downloads is legal, that would assume that 2009 will see 3 billion downloads in the UK. There’s been a similar pronouncement that we have 7 million illegal downloaders in the UK, which was the previous NMD or Number of Mass Distraction.

So let’s try and see whether these numbers look sane, smell right. 3 billion downloads represents 163 downloads per broadband connection per year, or one illegal download every two and a quarter days. Do you know anyone who buys a single every other day? Would you believe it if you were told there were people who did that?

Hang on a second. Why should I use the 18.4 million ITU overall broadband lines in the UK number? What happens if I use the 7 million NMD number? Now I have to believe that there are seven million people in the UK who download 429 singles each illegally every year, or 1.17 every day.

The 117m figure is solid. There is money to show for it. Till receipts.

The 18.4 million is solid. There is money to show for it. Telco billing records.

The 3 billion figure is an estimate based on digits (of the finger kind) whirling through the atmosphere.

The 7 million figure is an estimate based on conversations with 136 people.

If the 7 million figure is correct, then it means that nearly two in five people with broadband in the UK are illegal downloaders. People in the UK reading this post will know other people in the UK with broadband connections. Does this seem reasonable?

If the 7 million figure is wrong, do you think it is wrong on the low side or the high side? Imagine what that does to the daily illegal downloads that 40% of your friends now have to achieve as a NMD target.

I tend to think that maybe, just maybe, the 7 million number is a tad on the high side.

So now let’s move to the other number, 3 billion. If we assume 61.4m people in the UK (Source: National Statistics Online) then we’re talking about one illegal download every week or so for every single person in this country. Does that feel reasonable to you?

Let’s say the number of illegal downloads is not 20 times the number of legal downloads. Would you think the right number is higher or lower?

I tend to think that maybe, just maybe, the 20 times number is a tad on the high side.

Numbers can be so distracting. But let me not paint a gloomy picture. Taking the statements of the BPI alone and the events of the past year or so:

  • There is evidence that the number of legal downloads sold is sharply on the increase.
  • There is evidence that new business models are emerging, from iTunes through to OneBox, from last.fm through to spotify and we7.
  • There is evidence that people in the UK care about their digital futures.

KeepOnTruckin'

My thanks to Robert Crumb for not copyrighting this image in 1968.

Musing about culture and customers and choice: the eBaying of “content”

I have the privilege of spending time with many startups, in a variety of guises: as incubator, as advisor, as investor, as chairman, as well-wisher, friend and supporter. The startups differ widely and wildly: they range in size from a handful of people to hundreds;  they have annual burn rates in the thousands and in the millions; they have different strategies and different ways of executing them; the motives that drive them are different, the things that keep them awake at night differ as well. They make different types of products and services, for different markets, with different social and economic aims and consequences.

But they share one thing: They keep asking themselves the same set of questions:  “What does the customer want? What will she do with our product or service, how will it be used? Why will she come to us for it? And what will she pay for it?”

This isn’t rocket science; it isn’t even illuminated startup management. It’s Customer 101. So we speak a lot about customer choice, and, much of the time, we do something about it.

When it comes to culture, however, we seem to forget. Which is strange, because the changes that are taking place are at their most severe in the cultural arena. Changes that are taking place to reverse the developments of the last fifty, maybe even hundred years in a number of key aspects of culture.

  • These changes are simple yet far-reaching:
  • Consumption to Participation: The television and broadcast ages brought the ability for people to consume events globally, but it took the tools of today to let them participate globally. Obama’s campaign is a classic example. There were people all over the US, even in the “red” states, who contributed to his campaign, who participated in the discussions. Yes, there were people in Europe who tried to donate money into Obama’s campaign and failed for good legal reasons; but they could still engage.
  • One Place to Many Places: You couldn’t be part of an orchestra unless you went to where the orchestra was. Now the Mountain comes to many Mahomets, the orchestra comes to you, there are many examples of distributed music ensembles.
  • One Time to Any Time: Gone are the days when Super Bowl Monday was a nightmare for young men in Europe, who had to stay up into the early hours of Monday if they wanted to make an “evening” of it. Now they can still do that, but they don’t have to. They can hold their party on Monday night if they want. Not everything is streamed live, or needs to be. YouTube passed a billion hits a day and doesn’t stream anything live.
  • Hit Culture to Long Tail: When costs of warehousing and distribution were a significant proportion of overall cost, it made sense to reduce the number of items in inventory. As that changed the size of “inventory” available changed dramatically. So for example I buy many books from Amazon or Abebooks that aren’t in their top 10,000 sellers. Many of these books would be impossible to get via a traditional bookshop. The same goes for music and video. It doesn’t matter how many studies I see that seek to pooh-pooh Chris Anderson’s thesis, I look to what I do and what I can do. What I can do is a lot more than what I could do, because my transaction costs for “long-tail” items have reduced sharply.
  • Using to Making: The proliferation and ubiquitous availability of tools that are themselves participatory by nature has changed the basis of participation. Think of the number of video cameras you saw in the 1960s, the 1970s, the 1980s and now. Just look at the photographs, videos and notes that make it on to Facebook. Soon, Facebook will be a country whose population exceeds that of every country bar India and China. A country where everyone has feedback loops to the mother ship. Say what you like about the Borg, but don’t underestimate it. A critical change is taking place there. A country with more photo uploads than Flickr, more games players than World of Warcraft, more people than most of Europe or America. And global in reach. The stuff that gets uploaded to Facebook is not “copies of originals” but often mutations. Think of the number of video cameras you saw in the 1960s, the 1970s, the 1980s and now. More on this later.
  • Scarce to Abundant: One of the most fundamental changes is that of the internet as a copy and remix machine, making artificial scarcity something very difficult, something almost impossible. The very concept of artificial scarcity is relatively new, born of the consumption mindset driven by mass marketing. Things analog were, or at least could be, scarce. [If they weren’t scarce then you could hoard them or cartelise in order to make them seem scarce]. Things digital are fundamentally infinite in abundance, since the cost of reproduction and transmission is trivial.
  • Forced to Voluntary: Payment for cultural services has always changed from age to age; sometimes it’s been about patronage; sometimes it’s been about passing the hat around; sometimes it’s been about levies and fees, as with library schemes and radio broadcasting. The fixed purchase scheme is relatively recent in comparison and is in the process of being rendered obsolete. People will now pay what they are willing to pay, even for ostensibly free things.

I could go on, but won’t. The point is simple. We’re moving from an analog world to a digital world. That means that many things change. The most important change is that in a world of abundance, the buyer sets the price. The customer is in control.

The story is one of empowerment and inclusion, of enfranchisement. And one of the key shifts that is taking place is in the almost-random repurposing of things past. For example, take the concept of “literal videos“, as exemplified by Dustin McLean. What a lovely idea. Take an old video, keep to the original pictures and backing music, rewrite the lyrics to reflect what’s actually happening on the video rather than in the song. My particular favourite is the literal video version of Bonnie Tyler’s Total Eclipse of the Heart. My thanks to Dave Morin, who pointed it out to me via Facebook.

I keep trying to tell people that while the internet may have been discovered or even invented by Al Gore, it was definitely not invented exclusively as a new distribution model for Hollywood or its musical cater-cousin. Who could have predicted that someone would do this to Carl Sagan and to Stephen Hawking.

People are creating value from things long forgotten, long abandoned, long deemed worthless.

There is an eBaying of content going on, as people repurpose stuff they find in the digital garage and attic that is the Web.

Some people will become the new scavengers, looking through the detritus of the web for things to reuse and remix. Some will build the places where they look, the tools they look with: the Bit Torrents and Pirate Bays of this world. Some will do the remixing, as in the Dustin McLeans. Some will buy, but not all: there is already a plethora of data points about freemium models and conversion rates.

If we allow this to happen, then new revenue streams will begin to emerge, new business models will come about.

If we allow this to happen, then we can participate in these new revenue streams and models.

If we try to prevent it from happening, we will fail. And therefore not participate in the new revenue streams and models.

The customer now has choice.

And we have a choice. To be on the customer’s side. Or not.

Swiftly going West: Digital parody comes of age

kanye_swift_mashup_main

I know my readership is “old” but most of you are not as old as I am. So that means you’re more than likely to have heard about the Kanye West/Taylor Swift incident a few days ago. I heard about it, found it at least mildly distasteful, despite Kanye’s apology; I was therefore glad to hear about Beyonce’s touch of class later.

But that’s not the point of this post. Why would I write about two people I don’t listen to, on a programme I don’t watch, and whose lives I have no interest in? Simple. I write because of this video:

2009-09-17_2240

Chris Messina tweeted and alerted me to this, a mash-up between Kanye West and Taylor Swift.

Stop there, just for a second. Shut your eyes and imagine. Imagine what will happen if the video goes viral. So-called rights holders crawling out of their shells and demanding recompense, when none is called for in a sensible copyright regime. Am I being sensationalist? I don’t think so. Just take a look at this article, brought to my attention by friend and colleague Kevin Marks.

Experiencing things by watching and hearing and reading. Learning from those experiences. Borrowing from the experiences you have. Letting your imagination run rampant and riotous. Using that imagination to praise, to teach, to lampoon, to savour alone, to share with all.

We have to allow the Matt Kammerers of this world to do their thing. Sampling from here and there in order to make a new thing. A new thing. Copyright law used to be reasonable for centuries, despite attempts to mutate it at critical stages: the inventions of the press, the radio, the copier, the tape, even the CD. Since the dawn of the digital age, attempts to enshrine stupidity in law have increased. Much of what passed for creativity and comment and parody and satire may not be possible in the future if the law is allowed to become more of an ass.

The current battles are really not about downloading or filesharing or mashing up. There is far too much evidence that the downloaders, filesharers and mashup makers are themselves the ones behind the massive growth in digital sales.

The battles have been about control. Control that allows owners of obsolete marketing and distribution systems to exert power on a new generation, because they can. Because we let them exert that power throughly poorly thought out law.

The battles are about control. Control that is alien to the very basis of the internet. Centralised and monolithic, able to criminalise a cohort in the twinkling of a cataracted eye.

The battles will be about control. Control of an entire generation and their right to their culture.

Guess what? Not much stands in the way. Except you and me.

Thinking about downloads

A few weeks ago, Peter Mandelson announced his intention to push forward on stringent measures to deal with “illegal” filesharing and downloading. The measures went much further than what had been envisaged in the Digital Britain report, with responsibility for the decisions and implementation passing from Ofcom to Mandelson.

[Disclosure: I work for BT; we operate an ISP; our position on this subject has been made clear by CEO Ian Livingston here and by other senior executives here. As clearly stated in the disclaimer at the top of this blog, these are my personal views and not necessarily those of my employer.]

It now appears that “internet suspension of illegal downloaders could become law”. Before that happens, I thought it would be worth while to share some of my thoughts about this.

1. Neither filesharing nor downloading is illegal per se.

The word “illegal” regularly precedes the word “download”, to such an extent that people are used to seeing the two words together; as a result there is a risk that people perceive all downloads to be illegal. George Lakoff pointed out something very similar when analysing Katrina, showing how “citizens” became “refugees”. Earlier, there were attempts to equate “Muslims” with “terrorists”. It is important that we frame this debate correctly.

Let me put this in context. Have you ever bought a CD and transferred tracks from that CD to anything else: your iTunes software, an iPod, a smart phone, an MP3 player, even another CD? If you live in the UK, then you have broken the law. What you have done is “illegal”.

So it’s important to bear in mind that not everyone who downloads something is doing something “illegal”, there are legal downloads as well. And sometimes something appears illegal because the law is out of date, even though in practice it is not illegal.

2. Downloaders do pay for their downloads.

Last year’s best-selling MP3 album on Amazon was Nine Inch Nails‘ Ghosts I-IV. Not particularly remarkable, until you realise that the same album was available for free download as well.

Radiohead proved something similar with In Rainbows. Just because people download music, don’t assume that they’re trying to rip artists off. Most downloaders support their artists.

3. Downloading is good business for the music industry.

It’s not just the Amazon MP3 album chart that shows what’s happening. Digital music album sales are growing 32% year on year, while CD album sales are down 14.5%, when you compare 2008 with 2007.

If you have the time, go visit the Internet Archive. Take a look at what the Grateful Dead have been doing there. 3093 audience recordings available for free download. 3823 stream-only recordings available as well. Free. You see, the Grateful Dead have figured out what’s abundant and what’s scarce in their business. Digital things are abundant. Physical things are scarce. So I can record their concerts, trade the “bootlegs”, download away to my heart’s content. But they get my money for the concerts and the merchandise. As well as the CDs and DVDs that are “official”. [I now have 54 Jerry Garcia ties!].

Music is about performance, not just studio. We’ve been in a time warp where people have forgotten that and gotten hung up about other ways of making money. Like getting suckers like me to pay repeatedly for the same content across different formats. The new generations aren’t into buying physical copies, other than collectible vinyl.

4. Claims about illegal downloads can be misleading.

Yesterday, Lady Gaga was announced as the Queen of Downloads. What intrigued me was the others on the Top 10 list. Kings of Leon. La Roux. Leona Lewis. Alexandra Burke. Snow Patrol. Nickelback. Not the kind of stuff I listen to. The kind of stuff my youngest child listens to.

What struck me was this: young people seem to do the downloading, old people seem to do the anti-download complaining. I’ve seen claims that in the UK alone, £1.2bn is lost to illegal downloads. And I think there’s a fallacy there. It’s a bit like Rolex claiming lost revenues because people are buying rip-off Rolexes for $25. Does Rolex really think that someone who pays $25 for a “Rolex” is actually a potential customer for a $25,000 watch? I saw similar claims made for software purchases in India. So let’s put this in context. Does anyone really think that someone, anyone, downloads Cliff Richard illegally? Puh-leese.

5. There are many potential flaws in the suggested way forward.

What Mandelson seems to be asking for may be technically infeasible, to the extent that, as John Perry Barlow put it, the internet tends to route around obstacles. Howard Rheingold also makes the point that customers tend to get what they want; this is a customer-driven proposition. The Pew Internet and American Life Project published a fascinating report recently, headlined The State of Music Online: Ten Years After Napster. It’s well worth a read. One of the points made there is that customers now expect five kinds of freedoms:

  • Cost (zero or approaching zero)
  • Portability (to any device)
  • Mobility (wireless access to music)
  • Choice (access to any song ever recorded)
  • Remixability (ability to remix and mash up the music)

We can prevent some of these freedoms with artificial scarcities, like putting region coding on DVDs. But the market works around such things, every artificial scarcity is met with an equal and opposite artificial abundance. And there are more of “them”.

Even if a piecemeal technical solution were to be implemented, the likelihood is that it will be exorbitant in cost. There is also the consideration that the solutions put forward may breach basic human rights. When we look at what’s happened in France, Australia, New Zealand, there is definite evidence that any such move would be grossly unpopular. On top of all this, even the RIAA appears to have concluded that prosecuting the downloader is not worth while, and that DRM has had its day.

Technically complex, unlikely to succeed. Expensive. Potentially illegal. Unpopular. The list grows and grows. And of course there is the matter of asking ISPs to criminalise their customers in order to protect third-party rights, why would any ISP want to do that?

6. Do we really want to alienate a whole generation? Are there good reasons to?

The point is actually something else. It’s about culture. It’s about the way the millenials think and act. They have rediscovered something we’ve gone and forgotten, the sheer pleasure of getting under the hood of things. Making things. Making new things out of old things. Changing things.

This process of make, remake, change is part of the way they express themselves. Part of the way they think. Part of the way they create. Part of the way they protest.

Marcel Duchamp remixed the Mona Lisa. Ogden Nash remixed Joyce Kilmer’s Trees. Lampoon and Satire are culturally significant as well, no less creative than other forms of expression. If you haven’t done so already, go read Cory Doctorow’s Makers and Larry Lessig’s Remix. They will help you understand more of what is happening.

There have always been generation gaps. There have always been pushbacks against every new reproduction technology: the book, the printing press, the copier, the tape recorder, the CD. And now the internet, the world’s biggest copy machine.

Whatever you may have been told, the internet was not actually created to become a new distribution mechanism for failing entertainment industries. There is considerable pressure on the industry to change, to innovate. New business models are emerging, based on patronage, on subscription, on advertisements.

We have to allow the innovation to continue. Today, even the worst enemies of downloaders would accept that somewhere between 13% and 16% of all downloads are legal and paid for, whatever those terms now mean. There are 6 billion people out there, all getting connected to the commons that is the internet. The industry should learn from Grateful Dead and Prince and Nine Inch Nails, focus on growing the size of the pie to make sure that 13-16% represents a very big number. Because that is possible, even likely.

There are other considerations. Andrew Savikas, writing in O’Reilly TOC, puts forward an interesting argument for Content as a Service. Companies like LendAround are beginning to pick up new trends, trends that are moving away from an ownership culture to a sharing culture. Gift-based cultures and economies have been around for some time now. Millenia.

Most people are law-abiding. Most people want to make sure that artists are rewarded. Sometimes laws are out of date and need changing. Sometimes business models are out of date and need changing.

In the internet we have something precious and valuable. In the millenial generation we have something precious and valuable. It is time to keep our heads and do the right thing, foster innovation, encourage cultural expression and adaptation. And avoid seeking to alienate an entire generation…. in order to try and implement a failed proposition.

Of ragu and bolognese and Cory Doctorow

Regular readers of this blog will know that I have a thing about ragu, as described here, here, here, here and most recently here.

One of the great things about dishes like ragu with pasta is that there’s so much scope for experimentation.

You can vary the pasta in use: the traditional spaghetti, the more recent penne, the gramigna that the people in Bologna swear by, the paccheri that the Neapolitans used to smuggle garlic, any of thousands of varieties of pasta.

In fact you don’t even have to use pasta.

You can vary the meat. Some swear by pork, some by lamb, some by beef. Some mix pork and lamb. In Sorrento I was served buffalo. Those in the know in Bologna said that the best thing to do is to use salsiccia, a local sausage. But you know what? Even they would say it’s up to you.

Up to you. That’s the beauty of cooking. Someone makes a recipe up. Someone else uses a recipe that’s been in her family for generations. Someone else uses a cookery book. Or even the Web (I’m a regular user of epicurious).

You can use a recipe, but you don’t have to follow it.

It used to be said that human beings go through three stages of development: dependence (as in parent-child); independence (as in adolescent); then interdependence (as in grown-up). These stages are also visible in organisations as they develop: how business units have a dependent relationship on the centre, then flex their muscles as they grow, finally coming to a mutually respectful and valuable relationship over time.

So it is with cooking. I remember a time when the only way I could cook was to follow a recipe parrot-fashion. Then came a time when I wanted to do my own thing, experiment with abandon. Now I read recipes and change them as I want or need: sometimes I have to vary ingredients because one of the guests has a medical condition, known allergic reaction or low tolerance for some critical component of a dish.

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What’s all this got to do with Cory Doctorow? Simple. This post is a review of his latest book, Makers, which you can read “serially” for free over here at Tor, or pre-order here.

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I’ve been fascinated by the concept of open multisided markets for many years now. How innovation flourishes, how business flourishes, how people flourish and how society as a whole gains from using open models for business. [If you want to learn more about open multisided markets, try reading Paying With Plastic or Invisible Engines, two excellent books on the subject; David Evans and Richard Schmalensee know their stuff and tell it well.]

Cory has done once again what he does so well: he has created a world where we can learn about the rich possibilities ahead of us in terms of cultural development, yet one which is fraught with risks because of the incredibly stupid things we can do. If we let ourselves.

I don’t want to spoil the book, so I’m going to say nothing whatsoever about the plot. What I am going to say is this:

Our world is full of franchise-based models, where people make money by doing something formulaic and controlling input ingredients, manufacturing process and output quality. In itself there is nothing wrong with a franchise model.

But you know something? I can make myself a hamburger or pizza any way I want. I don’t have to go to a particular franchise operator, or buy their ingredients, or use their recipes, or work their processes. I can if I want to. I don’t have to.

Imagine a world where someone managed somehow to patent the burger or the pizza, where it was no longer possible to make your own. You had to use someone else’s systems, their processes, their ingredients.

In a physical world this is hard to imagine, or, for that matter, to implement and police.

In a digital world it is a different matter altogether. We can police it. We can implement systems that force people to use particular systems, particular processes, particular ingredients. We can create artificial monopolies. And suffer the consequences.

I have always maintained that every artificial scarcity will be met with an equal and opposite artificial abundance; that’s why region coding on a DVD is an abject failure, why the music industry moved away from DRM, why we have to find new and pragmatic models for making sure creators and distributors of “content” are appropriately rewarded. [I’ve been visibly influenced by much that Cory has written in this respect; I’d also recommend the works of people like Larry Lessig, Terry Fisher, Jonathan Zittrain, the Berkman Center in general (with the mercurial Charlie Nesson). Rishab Aiyer Ghosh and the people at First Monday are also well worth a visit.]

There are many reasons to avoid creating new monopolies, not all of them pinko tree-hugger in origin. We are learning every day about the value of diversity in genes (I was lucky enough to hear Cary Fowler speak on the subject recently: if you’re interested, take a look at The Threatened Gene, even though it was written nearly two decades ago.)

Gene diversity gives us options for the future, options for conditions and scenarios we haven’t faced, don’t face but could face in the future. What is true for plants is in its own way true for cultures, for the way we think and act, for what we believe.

And there’s something far more important at stake here, how we as human beings learn and develop and create and experience things. What Pat Kane builds out so majestically for in The Play Ethic. What Dan Bricklin expounds so masterfully in his essays on tools in Bricklin on Technology.

As a founder of the Electronic Frontier Foundation, Cory knows a thing or two about the world we’re entering. The wonderful possibilities ahead of us. The potential for awful waste. The social, economic and political consequences of getting it right. Or wrong.

Makers is a book about that future. A book that brings together open multisided platforms, opensource and democratised innovation, distributed “edge-based” production, customer-driven demand creation, customer-participated supply.

Makers is a book that brings that future into shape in front of us, allows us to visualise the models that would make it work. Or break it. The implications for patents, for intellectual property rights in general. The role of money and credit and payments and micropayments. The rule of law; and where the law could be an ass.

Makers is a book which lets us get into the heads of the born digital, the grown up digital, the way they think about things. What their values are. Why we should take a leaf out of Larry Lessig’s Remix and make sure we don’t criminalise a whole generation by our lack of understanding.

Go ahead and read the book. Electronically. Or physically.

Go ahead and pay for it. Or not, as the case may be.

It’s your future. And mine. And ours. And those of our children. And a rattling good read as well.