DRM-Free v. DRM-Stricken

World of Goo, a puzzle game, has a 90% piracy rate -- a rough estimate by the developer 2D Boy. What's interesting to note is that the developers reference the Russell Carroll study that I've written about before to show that the piracy rates between DRM-free and DRM-stricken games aren't any different:

this is in line with a previous estimate by russell carroll (director of marketing at reflexive) for the game ricochet infinity. russell estimated a 92% piracy rate and i found his analysis quite interesting (check it out here if you’re curious). one thing that really jumped out at me was his estimate that preventing 1000 piracy attempts results in only a single additional sale. this supports our intuitive assessment that people who pirate our game aren’t people who would have purchased it had they not been able to get it without paying.

in our case, we might have even converted more than 1 in a 1000 pirates into legit purchases. either way, ricochet shipped with DRM, world of goo shipped without it, and there seems to be no difference in the outcomes. we can’t draw any conclusions based on two data points, but i’m hoping that others will release information about piracy rates so that everyone could see if DRM is the waste of time and money that we think it is. [emphasis/grammar in original]

I think the more important sentence in the quoted text is this: "people who pirate our game aren’t people who would have purchased it had they not been able to get it without paying."

Game developers and publishers should keep this in mind because it means that file-sharing isn't the same thing as lost sales, which is the opposite of what most developers and publishers assume to be the truth.

Ouellette Responds

A few days ago, I wrote my thoughts about Muxtape's closing and relaunch. A commenter suggested that I write to Ouellette about approaching independent labels, so I did. My email to Ouellette is published in the comments section. Yesterday, I got a response:

I did consider approaching independents, but it would've been extremely complicated logistically. Doing a deal with the four majors is possible with a small team of experienced lawyers, but there are literally thousands of independent labels each with their own ideas about how licensing should work and I can't even touch on the complexity of that problem. Also I couldn't have paid for it, especially in light of the fact that what I'd be selling to investors was a crippled version of the original site with a big question mark on the final price and the necessity of even licensing at all.

Even if the label negotiations had gone swimmingly well they still took up a massive amount of my time. Negotiating with independents would've been many times worse in that regard, and the site would've suffered badly. Then who wins? Muxtape was originally possible because I was free and agile to build whatever I wanted to, and that's what I'm trying to get back to. It's not just editorial control, it's the ability to say, write and release an iPhone app without having to ask someone's permission.

I think the only way to do that right now is to make the whole service opt-in. Labels and bands that see the value in it will be able make the judgement call for themselves whether or not it's right for them (and I suspect a lot of them will).

Justin

I want to thank Ouellette for taking the time to respond to my email -- I'm sure that he got a lot of questions/opinions about Muxtape in recent days. He's absolutely right about the logistics of approaching independent labels, and I suspected that would be a major barrier. The opt-in solution is a very good approach, and I also share Ouellette's optimism that many independent bands and labels will opt-in themselves. And if enough independents opt-in, I think Muxtape could have an opportunity to show the major labels and the RIAA why fighting digital file-sharing may not be in their business' best interest.

Good luck, Justin.

EA Admits File-Sharing Does Not Equal Lost Sales

Gamasutra has the story. Mariam Sughayer of EA's corporate communications department states:

Stepping aside from the whole issue of DRM, people need to recognize that every BitTorrent download doesn’t represent a successful copy of a game, let alone a lost sale. [emphasis mine]

Dan Hewitt, the Entertainment Software Association's senior director of communications agreed:

It’s important to remember that it’s not a one-for-one equation. Our calculation isn’t such that we say that every game that’s been stolen [he means downloaded] is a sale loss." [emphasis mine]

This comes on the heels of TorrentFreak's analysis claiming that Spore has been downloaded from bittorrent file-sharing networks more than half a million times. Last week, EA reported that Spore had sold 1 million copies. Now, EA is trying to downplay the record number of Spore downloads.

I have to ask: EA, if a downloaded copy of Spore doesn't necessarily equate to a lost sale, what is the point of your DRM? Are your DRM schemes simply to stop people who wouldn't have bought your games from playing them? That's the only conclusion I can draw, since we can see that your inclusion of SecuROM did not stop people from pirating the game.

Muxtape Reimagined

The most interesting thing about Justin Ouellette's revealing post regarding the RIAA's take down of Muxtape is how the RIAA acted independently of the labels that the organization represents.

Over the next week I learned a little more, mainly that the RIAA moves quite autonomously from their label parents and that the understanding I had with them didn’t necessarily carry over.

As Ouellete points out, the labels understood the inherent value of Muxtape -- viral marketing and mouth-to-mouth promotion of music, which creates a consumer generated community organized in a central location on the internet. The fact that the RIAA moved autonomously of the labels signifies that the organization does not understand the cultural value its content has for consumers, and instead views this content as nothing more than "product."

This fundamental misunderstanding is also evident in their ongoing anti-piracy campaign against 12-year-old kids and grandmothers. Not only is such a campaign doomed to failure, but the industry is targeting its best costumers. The only such case to go to trial, Capitol Records v. Jammie Thomas, awarded damages of $222,000 to record labels. Thomas had shared 24 songs on Kazaa, a once popular peer-to-peer network. The ruling has been challenged, the punishment criticized as unfair, and the judge in the case has expressed doubts about the court's decision. The really interesting part about this case is the RIAA's efforts to solidify "attempted copyright infringement" into law. The RIAA doesn't understand that the "product" is much more than a cut of wax, a wound up analog tape, a plastic disc, or a series of digital bits to fans.

The emotional connection that people have with music goes back far in history, before copyright law and "intellectual property." Music transcends boundaries in ways that other mediums cannot. People have "played" with their culture continually throughout human history -- through sharing, modifying, or creating new works from existing works. The recent extension of copyright term limits has cut off people from these previously exercised abilities just at the same time that technology makes it easier to do so.

Muxtape served this emotional purpose well -- music fans were able to share their favorite songs to any interested party like never before. And on the business side of things, Muxtape provided the best possible form of promotion -- mouth-to-mouth advertising. People are more likely to make a purchased based on the recommendation of a real person, friend or stranger, than from record label advertisements on glossy magazine pages. All that potential, wasted. As I have said before, the RIAA is only hurting their own industry with these actions.

I think Muxtape will demonstrate the positives of sharing music through its new focus on the band feature. I find it unfortunate that Ouellette didn't try to reach out to independent labels exclusively and strike licensing deals while also barring major label participation. I think that such an action could have the effect of showing major labels that repressing people's natural desire to share will only hurt their businesses, while also helping out smaller labels experience more recognition and (hopefully) increased sales for their artists. (I'm confident that sales would increase; however, there's little solid data surrounding this issue. This could have been a great test case.) Perhaps this will occur anyway through the band feature. Only time will tell.

Furthering the DRM Debate

I received a very timely response to my previous post from Christian Olsson this time around, so I'll address his points again in a new post. Again, Olsson in italics:

You’re right, there does not seem to be much academic research and perhaps that’s why companies have resorted to what you describe as ‘commercial research.’ The Goizueta Business School, Emory University, Atlanta GA academic research report “An Empirical Examination of Global Software Piracy: Implications for Pricing and Public Policy” doesn’t focus on software protection but it does investigate the effects of piracy and has some conclusions that you might find interesting.

The paper referenced is interesting indeed. The paper does seem to make the assumption that downloading digital content is the equivalent of lost sales, which I've made clear I think that there isn't a causal relationship between the two. There's no data to support the assumption that those who pirated the software would have purchased it if a pirate version were not available at all. I think it is folly to assume lost sales because of the download of a virtual product. I'd admit that there are still support costs involved, but that's not what the paper is addressing.

I haven't kept up to date on my math since college, so I apologize if I have interpreted the data incorrectly in any way. The paper sets up two stages with choices of either pirating or purchasing software in order to calculate the probability that an individual would pirate or purchase software. The results are interesting.

Remember that higher δ implies that a majority of the piracy costs are suffered in the first stage, i.e., more likely that people don’t pirate at all and a lower δ implies that a majority of the piracy costs are suffered in the second stage, i.e., consumers are more likely to be deterred from holding on to a pirated copy.

I'f I'm reading the paper correctly, then it seems that δ is low for all the years analyzed, which would mean that most of the piracy costs are suffered in the second stage.

The authors conclude:

Our findings show that lower piracy is not merely a result of consumers not pirating at all, rather it is a result of pirates turning buyers in the second stage. The latter is possibly due to the fact that post-updating, those who turn buyers perceive a greater value for the product than those who remain pirates (an indication of piracy’s sampling effect) and/or consumers are stopped by the deterrence costs in the second stage and hence end up buyers. Our results suggest that there is ample evidence of both.

This seems to state part of the argument that I think a lot of proponents of less restrictive copyright law make -- that digital file-sharing creates new buyers who would not otherwise have been buyers. The paper focuses on the effect of piracy deterrence as a motivator for second stage buyers; however, in the text, the paper states that there is also "ample evidence" that individuals become buyers because they "perceive a greater value for the product." In my mind, that means that exposure to new content has caused some individuals to want to support the artists/inventors who created that content. These second stage "pirates" could very well be individuals who lend out copies to friends and family, a practice which many content producers dislike and view as piracy, despite the fact that (at least in the US) this practice is protected by the First-Sale Doctrine. I'd say that this paper isn't conclusive about the effects of piracy, but offers some interesting insights. The bottom of the paper states that research is still in progress, so we'll have to wait to see the final results.

Russell Carroll's post, that you quote, also explains that Reflexive uses an in-house developed DRM that they have repeatedly improved and continue to use.

[...]

From our point of view the Reflexive example shows that DRM has increased revenue, though not as much as they would like. You are making our point that DRM has decreased piracy and increased sales. If Reflexive used ByteShield’s much stronger SUM protection they’d see more sales with very little impact on honest users. [emphasis in original]

I revisited the Carroll posts again, paying close attention to the details. Olsson pointed out that one of the commenters of the original post mentioned that DRM had increased sales by more than 80%. But as other commenters mentioned, an 80% increase on 8% sales isn't a whole lot. The piracy rate of the games that Carroll analyzed was at a staggering 92% to begin with. As Carroll wrote himself:

The 1000:1 ratio is really, I think, the key takeaway of the article. Several people have grasped that and started applying it to different numbers in the industry, and the results are very disappointing.

I agree with Carroll that the ratio is what is really important here. Again, I don't mean to dissuade efforts to prevent piracy; however, I have to wonder what the cost/benefit ratio is when such few sales are the result of implementing increasingly difficult to crack DRM. Even the section of that article that Olsson quotes from Carroll doesn't seem to make the case that further DRM has increased sales significantly:

Clearly, if we could always have a big gain from a fix that maintains itself, it is worth spending the time to fight piracy. However, since that isn't always the case, it can sometimes (often?) be pretty discouraging to try and stop piracy.

In my view, Carroll states that if there is a big gain, fighting piracy would be worth the cost. But as his research demonstrated, that's a big "if," and Carroll seems to believe that a big gain isn't always (or even often -- his own words) the case.

Olsson's other points don't require that I go into great detail. I think that Olsson's points really demonstrate that ByteShield is committed to implementing a DRM scheme that has a lesser impact on the user while also attempting to respect long held consumer rights. Olsson acknowledges the problem with the industry's current approach to "license" software rather than sell it, and I think that is promising. Court rulings have already come down against the practice -- i.e., just calling the product a "license" doesn't make it one.

One thing that I still have an issue with is online activation and persistent verification. I think Stardock's approach provides a good compromise in this case. Instead of requiring online activation, Stardock's games require online registration in order to stay "always up-to-date" and to receive any other free, additional content for purchased games. Users only need to have registered a valid CD-key, which isn't an inconvenience at all. Being online isn't a prerequisite for playing the games, and Stardock is able to have the same kind of protection for its games that online activation provides. It's the carrot approach -- want free updates and additional content? You have to buy the game. At the same time, no additional limitations are forced onto users.

Furthermore, as Olsson has stated, the developer/publisher still has ultimate control over the level of DRM implemented through SUM, and I think that offering tools like online activation and persistent verification leave room for violation of rights. I will say that I no longer think that consecutive offline runs appear to be a problem, since Olsson clarified that this mechanism does not limit the number of installations, only the number of installations running simultaneously.

Piracy of Spore Extraordinarily High

According to Forbes magazine, Spore has been shared via bittorrent clients at an increasingly faster rate than other triple-A titles have been in the past:

As of Thursday [9/11/2008] afternoon, "Spore" had been illegally downloaded on file-sharing networks using BitTorrent peer-to-peer transfer 171,402 times since Sept. 1, according to Big Champagne, a peer-to-peer research firm. That's hardly a record: a popular game often hits those kinds of six-figure piracy numbers, says Big Champagne Chief Executive Eric Garland.

But not usually so quickly. In just the 24-hour period between Wednesday and Thursday, illegal downloaders snagged more than 35,000 copies, and, as of Thursday evening, that rate of downloads was still accelerating. "The numbers are extraordinary," Garland says. "This is a very high level of torrent activity even for an immensely popular game title."

TorrentFreak reported last Saturday that Spore had been downloaded more than 500,000 times, and at this current rate the game is likely to earn the title "Most Pirated Game Ever" within a matter of weeks.

EA can't be this stupid. They have to know that their use of SecuROM DRM schemes are not going to stop people from pirating the game. In fact, the Forbes article reveals that Spore was pirated a full three days before it was launched on September 4th, 2008.

But this may not be about piracy at all -- it may be about ending the second-hand market through technological means.

Copyright Law in the Virtual World

Christian Olsson of ByteShield, Inc. took the time to write an interesting comment on my last post about PC gaming, copy-protection, and piracy. I wanted to respond through another post because I think his comment raises some interesting questions. I'll start first with ByteShield's whitepaper, Is Anti-Piracy/DRM the Cure or the Disease for PC Games?, that Christian mentioned in his comment.

In the introduction of the white paper, it acknowledges that DRM schemes have failed and are rapidly cracked; however, at the same time the white paper acknowledges that piracy would be worse than it is today if no such measures were taken. I can't seem to understand how these two realities can coexist. If DRM has failed, then how has DRM made piracy less of a problem? I don't follow the logic being used here. Again, I see this acknowledgment that DRM has lessened piracy somewhat to be a vapid "conventional wisdom" of the gaming industry, much like peer-to-peer file-sharing is seen as a decrease in sales in the music industry.

The white paper also makes passing mention of digital technology "decimat[ing]" the music industry, as well as mentioning the "threat" to DVD sales. I've written about the music industry before, and there is conflicting evidence about the loss of CD sales due to digital file-sharing. I'm more convinced by the studies that have shown that CD sale losses have lessened as a result of file-sharing, and remember that CD sales were already declining before applications like Napster hit the scene. I'm not familiar with DVD sales, but I'm not convinced that file-sharing is causing a decrease in sales, either.

I'll reference this post again, because I make a point towards the end of the post that I think needs repeating. All too often it is assumed that piracy of digital content equals lost sales. I'm not convinced of this at all because those making this assumption have never provided any evidence to support what is underlying this assumption -- that those who have pirated the content would have purchased the content if there were no means to obtain it otherwise. The music industry makes this assumption all the time -- that a downloaded song is less revenue in their pockets. But they have no reason to think that the individual who downloaded the song would have purchased it in the first place.

There's another piece to this that I think needs to be mentioned as well. Digital content is different from physical content in a number of ways, and the most important is also the most obvious -- digital content is virtual. Why is this important? The virtual nature of digital content means that my consumption of this content does not in any way deprive another of consumption and enjoyment of this content. Perfect copies can be infinitely created at almost no cost. Digital content will never be a scarce commodity, and here lies the problem.

Our entire copyright system is based upon the assumptions and limitations of physical content. Physical content is limited in quantity, deteriorates over time, and the analog nature of physical content means that any copies of the content will be of lesser quality than the original. All of these things make the original more valuable than any copies, which is different from digital content. All the digital copies will be exactly the same, making them the same value. Content producers are trying to force digital content into the limitations of physical content. Copyright works by creating artificial scarcity -- it grants authors/inventors the exclusive right to produce and distribute copies for a set amount of time. DRM schemes are attempts to create that artificial scarcity; however, the nature of computers and software means that copies have to be made in order to run the program. Digital content exists within a realm of infinite copies. Furthermore, making copies of digital content is easier than ever. Just as the printing press lowered the barriers to entry in the book publishing world, computers and software have lowered the barriers to entry in the digital content world.

DRM schemes will always be hacked, bypassed, and subverted. As I argued in the older post, this is because of the nature of encryption. DRM is encryption, but in order to make that encrypted content useful content producers have to provide a means for the consumer to decrypt and read the content. DRM fails because DRM will always give hackers all the tools to crack their code. Without providing those tools, the content is useless and unreadable to consumers who have obtained the content legally.

To bring this all together, I think Brad Wardell sums up everything concisely:

The question our industry needs to ask itself is pretty straight forward: Is the goal of IP protection to increase our revenue or is it to prevent people who aren't going to buy games from playing them?

The white paper does make some good points. There's discussion about the lost trust between gamers and developers, and I think that is a key point. Gamers don't want to feel like criminals, nor do gamers want to be punished with draconian DRM for legally purchasing a game. ByteShield recognizes that, and I applaud them for it. ByteShield also appears to recognize that copy-protection will be hacked at some point in the game's life cycle, but the company doesn't think that DRM is ultimately futile.

The protection scheme in the white paper appears to use some features of the current DRM schemes like StarForce and SecuROM. The key to ByteShield's SUM (Software Usage Management) seems to be a connection to a remote server to run the various security checks. That in-and-of-itself us a huge potential problem for DRM. What happens when ByteShield turns off its servers? Or moves over to a new system, much like what the MLB did for its downloadable game service? What happens when ByteShield goes out of business? There's no guarantee that any of the content protected by SUM will be anything but useless to the consumer.

Also included in the protection scheme are limited number of activations and repeated verification. Gamers screamed to high hell when BioWare announced they were going to use repeated verification for Mass Effect, and the same protest was heard when EA revealed that Spore would do the same thing. Ultimately, that part of the copy-protection scheme was dropped. I don't think that ByteShield is going to have much success with that.

ByteShield is very confident that their copy-protection will be virtually unhackable to all but the most determined programming sadists. I'll be curious to see how their system holds up.

The white paper also goes through a number of common complaints against DRM and discusses ByteShield's response to those complaints. The company claims that SUM will not install hidden drivers or files, and will install transparently. In this spirit of transparency, games loaded with SUM will be clearly marked on the box for consumers. They also claim that they will retain the ability to remove the DRM at any point in the game's life cycle, that the DRM files will not run unless the game is running (gee... where have we heard that one before?), that SUM will not edit the user's registry, that SUM will not require the CD/DVD to be in the drive, that SUM will be uninstalled with the game, and the SUM will not refuse a game launch because of programs like drive emulators. If true, this is all well and good.

There are a couple of things mentioned that trouble me -- number one being the required internet connection to activate the game. Not everyone uses the internet at home, or even has access to broadband. Some gamers have a separate "gaming" PC, which is never connected to the internet. Patches and updates can usually be downloaded from another computer and then transferred to the computer without an internet connection. If repeated verification is used, then I think there is too much of a burden placed on users. What should someone, who has legally purchased a game, do if they lose their internet connection and SUM decides that a verification is in order? Moreover, people should not be required to have an internet connection for a game like Mass Effect, which is entirely single-player.

Another thing that is troubling, and maybe I'm just not entirely clear about it, is the limited user/installation distinction. ByteShield claims that the number of users will be limited, not the number of installations. I'm not sure I understand how ByteShield will go about differentiating the two. Other DRM schemes track the number of installations as if they were users. In any event, I see the potential that a legitimate user could be denied re-installing a game at some point. I need further explanation about how this actually works.

ByteShield is also offering a lot of options to developers -- the ability to offer full feature trial versions is good for the industry. Many gamers complain that demos do not accurately represent what the game is, and therefore, they become less likely to make a purchase. One thing that I think would be beneficial is the full disclosure of all the options a developer has chosen. Since it seems that each developer can customize the copy-protection using ByteShield's system, it would continue that spirit of transparency to be open and up front about what gamers can expect to be able to do with each protected game.

In the end, I feel that ByteShield will be different enough from StarForce and SecuROM to actually respect some consumer rights; however, I think the same potentials for exploitation exist within the SUM system. In addition, I think that these kinds of protection schemes are still missing the point -- digital content is too different from physical content to be treated as the same in copyright law. We need more than just a re-appropriation of existing laws to digital content; we need to recognize that digital content and its copyright needs to be handled differently than physical content, lest we stifle creativity and innovation by overprotecting content.

[UPDATE]: Further reading here (Talkjack's 16 point PC Gamers' DRM Charter, referenced in the white paper), and here (discussion of StarForce DRM by Talkjack).

Don't Punish Legitimate Customers

Yet, that is exactly what entertainment industries do when they implement intrusive and inconveniencing DRM schemes. Rob Fahey, of GamesIndustry.biz, wrote a few months ago:

The response from the videogames industry to piracy has, thus far, been utterly asinine. Not, of course, that videogames should be singled out here -- the music and movie businesses, too, have done their fair share of asinine things in the last five to ten years as they desperately struggle to understand the changes which internet piracy is causing to their market. Only the music business, which has been struck hardest by online, user-driven piracy, has begun to learn its lesson and adapt its business intelligently. It remains to be seen whether movies and games are condemned to repeat the same costly mistakes, or whether they can learn from their sibling industry and avoid the traps.

The core of the response of both games and movies (although our focus here is on games, obviously) to internet piracy -- the response which leads me, with absolute confidence, to describe these efforts as being asinine -- is to treat their legitimate users as though they were criminals. Almost every single effort which has been made by these industries to protect their products has had the result of inconveniencing, frustrating and disenfranchising honest, paying customers.

[...]

There will always be a core of people who can't or won't pay for things, and who will go to incredible lengths and inconvenience themselves awfully just in order to get stuff for free. However, it's a stupid and useless dogma to claim that all piracy happens because of that impulse. The reality is that when pirates are offering a better user experience than you are, your business model is broken -- and rather than punishing your loyal customers, or whinging to national governments in the hope that they'll cover your backside with unpopular, civil liberties infringing legislation, you need to fix your business model. Or find a new job. [emphasis mine]

Another key thing that Fahey mentions, regarding music, is this:

Lo and behold, consumers aren't actually against paying reasonable prices for music - they're just against having to go out and buy CDs with spyware on them, or having to download tracks that are crippled, locked up and liable to be unplayable as soon as the company you bought them from goes bust. [emphasis mine]

This is exactly the problem with the new trend of game developers requiring gamers to be connected to the internet to play their games. What happens when the developer goes out of business? What happens when the publisher and/or developer cease to support their older titles? The only conclusion I can draw is the same one that Fahey draws -- the games will be unplayable, utterly useless.

I recently installed Company of Heroes: Opposing Fronts. This is an expansion to the first game, Company of Heroes. The Opposing Fronts expansion pack came with some hefty DRM, unlike the original game, which came DRM-free. It took me several hours to install the game simply because of the DRM. My experience was one of frustration.

First, the expansion required that the original game be uninstalled before installing the new DRM-laden expansion. OK, did that, no problem. The expansion took a very long time to install, even on my Intel Core 2 Quad Q6600 processor. After installation, I went to run the game, but was unable to do so because of a required patch installation to play online. I wasn't even interested in playing online; however, I was required to install the patch to play at all. Every time I tried the in game patching process, the game failed to connect to the internet and download the patch (and yes, I had created a firewall exception for Company of Heroes). I was forced to shut the game down and hunt for the patches online (which wasn't easy), download them individually (there were at least a half-dozen), and install each patch individually.

After I had completed this time-consuming endeavor, I opened up the game again. This time, I was prompted to log in with a user name and password in order to play the game. The DRM with this expansion required either the DVD in the drive or an internet connection to play. I had my DVD in the drive, so I was a bit puzzled why the game would require me to create a login. But even this didn't work correctly -- the button to "create" a profile was shaded, meaning that I couldn't access the profile creator in-game. I was forced, yet again, to shut down and create my profile on the developer's website and then start the game back up again. Finally, many hours later, I could play!

To a more casual player, it's likely that s/he would have given up at some point during this ordeal. Perhaps this person would recommend to friends that the game isn't worth the time it takes to install. Perhaps this person is now less likely to buy a future title from the developer. Perhaps this person is likely to return his/her legal copy and instead download a pirated copy because the pirated copy is easier to install. Perhaps this person is now more likely to pirate future games from this developer. Company of Heroes has plenty of pirated copies available on the internet, so all this DRM has done is inconvenience a legitimate customer, potentially encourage a former legitimate customer to pirate games, and/or drive away a legitimate customer from PC gaming to more convenient, legal gaming systems like consoles (PS3, XBox 360, Wii).

Further reading: Cory Doctorow's DRM talk, which discusses all of these issues at great length.

Another Reason the RIAA Doesn't Get It

I just discovered that Nothing Nice to Say came back a number of years ago (I had stopped reading the comic after I thought it had ended), and I came across this gem:

You May Not Share Your Culture

During the first week of April, I discovered the website Muxtape.com. The site allows people to create free accounts to put together online “mix tapes” to share with others. Muxtapes are limited to 12 songs, and users are not allowed to upload more than one song from a single release or artist or have multiple muxtapes. Muxtapes are not available for download and all submitted songs are accompanied with a link to Amazon.com’s mp3 downloads section. I thought that this website was a great compromise between music fans who want to share music via the internet and a music industry that is increasingly hostile to such sharing. I also just wanted the chance to make my own virtual mix tape to share with other people!

One of the songs that I selected for my first muxtape was from the mostly unknown Philadelphian band FNU Ronnies, titled, “Silver Bullet.” I had only first heard about the band a week prior from a close friend, but was nonetheless impressed with the song. I recorded the streaming audio on my computer as the song played on the band’s Myspace page, much the same way I used to make cassette tapes from songs recorded from radio. Up went the song onto my muxtape.

A little more than two weeks later I got an email inquiring about the song. The author of the email wanted to know how to get a copy -- I only mentioned that I had recorded the song from Myspace, as I was still waiting for my copy of FNU Ronnie’s debut 7” from Parts Unknown Records. About a week after responding to the email, I received a strange comment on my blog. The post was about Yoko Ono’s lawsuit against the producers of the anti-science film Expelled for their use of John Lennon’s “Imagine.” In the post, I discussed the copyright issues involved. The comment on this post asked me how I felt about individuals “illegally trying to sell” music “ripped on the internet”; a strange comment, considering its lack of relevance to the post. That tipped me off to search around for information about the commenter.

After a short Google search, strong circumstantial evidence led me to believe that the comment came from FNU Ronnies, as did the email I had received a week prior. This turn of events puzzled me. My experiences with music subcultures, specifically those rooted in punk rock, have given me an anti-copyright impression. Many of the bands I have known and have been involved with never considered actually copyrighting music. Labels I have known and have been involved with were never concerned with file-sharing or lost sales. Furthermore, my close friend who introduced me to FNU Ronnies informed me that the debut 7” is nearly sold out. Clearly, my inclusion of “Silver Bullet” cannot be cutting into sales, right?

I must admit, though, that this all is likely to have been in jest. FNU Ronnies is a part of a new musical movement -- Skull music -- which combines early ‘80s American hardcore (YDI, Black Flag) with the strange-yet-hard-sought-after punk classics (Mentally Ill, The Eat, Remo Voor) released on the Killed by Death (fan music blog link) record label. Self-described Skull bands, such as Clockcleaner and Homostupids, engage in a sort of confrontational performance art along with their music. Clockcleaner’s Nevermind album (a re-appropriation of Nirvana's second album title) was named as such to enrage listeners -- guitarist and vocalist John Sharkey stated in an interview with Dusted Magazine, “I kind of wanted people to react like, ‘What balls! Who the fuck are these assholes?’” The fun doesn’t stop there, either: legend has it that Sharkey pissed all over the merch of rival band Bad Wizard at one show and intentionally knocked over a kid with cerebral palsy at another performance (I know; I was there). So my confrontation with FNU Ronnies is likely to be a part of the Philadelphian humor; however, the incident did get me thinking further about copyright issues.

Sites like Muxtape allow people to share music (hopefully) without the fear of a “Cease and Desist” letter from their ISP or a lawsuit from the RIAA. I was a bit shocked that an artist would take offense from a fan putting one of his/her songs on a muxtape for other people to hear. My intentions had been to share the music that really resonates with me. That’s how I’ve almost always discovered new sounds -- someone I knew made me a copy of some new music and gave it to me for listening. This is classic mouth-to-mouth advertising, arguably the best advertising one can get.

There is one critical difference, in the eyes of the industry, between mix tapes/CD-Rs and digital file-sharing -- scale. Sharing music online is easier and faster than sharing has ever been. But how different is a site like Muxtape from a radio broadcast? What about a Myspace music page? Why are these digital streams viewed as different from their analog counterparts?

What are Muxtape and a Myspace music page, ultimately? They are both platforms for distributing music digitally. Instead of a corporate, computer generated play list that is simulcast throughout tens -- even hundreds -- of radio stations, fans and artists are put in the DJ seat. Those who enjoy the culture of their music are participating in that culture by sharing it with others. In other words, they are in a position of control at the individual level of the culture they enjoy.

And that is the difference -- control. Radio broadcasts happen on federally licensed airwaves. Only a select few have access to these avenues of distribution. The content providers have a vested interest in their distribution model succeeding because of the vast amount of resources spent. The internet appears to be the great equalizer in this equation -- it provides a democratic distribution model. Anyone, anywhere, can share music with anyone, anywhere. The music industry is used to being in control of their distribution model and now the industry is trying to apply that system of control to a distributed network based upon protocols. The end result of this is technological quick fixes that have no way to enforce a control model -- DRM (Digital Rights Management) and copy-protection is easily hacked, bypassed, and subverted.

What does this mean for the future of music and file-sharing? The music industry is already of the opinion that file-sharing is the equivalent of lost sales. The data on this varies by who you ask -- in 2004, a study conducted by Felix Oberholzer-Gee of Harvard University and Koleman Strumpf of the University of North Carolina concluded that file-sharing increased CD sales for top selling albums. The RIAA will point to research by Edison Media Research which claims that file-sharing has decreased CD sales; however, Jupiter Research conducted two studies (in 1999 and 2002) which concluded that music fans who shared music files for six months were 75 percent more likely than average online music fans to purchase more music. If file-sharers are the industry’s best costumers, how can they be the cause of a loss of sales?

Instead of attempting to circumvent possibly the best form of advertising being offered on a silver platter by fans, the music industry should embrace these technologies which can bring music to people’s ears faster than ever before. Music fans are so rabid about their favorite artists that the industry wouldn’t have to do much to promote those artists. But this is a risky new democratic model, as it could lead to super-smash hits being relegated to a lesser role and will remove the control the industry has relied upon to make low-risk investments in new artists. But couldn’t such risk stimulate an environment that feeds off of creativity and innovation, rather than following a tried-and-true model?

The Pay-Per-Play Scheme

Something I forgot to mention in my previous post came back to me during a conversation on the train the other day. A friend of mine mentioned that Comcast wants to premiere new film releases by streaming them to subscribers on the day of release. This reminded me of some of the proposals of posters in the Quarter to Three forum thread that making video games a subscription service as a solution to large scale, peer-to-peer file sharing.

The pay-to-play scheme is a content provider's dream. Perhaps most importantly, it removes ownership completely from the consumer, and therefore, strikes out one of the content provider's greatest dislikes -- the doctrine of first sale. First sale doctrine stipulates that once a physical copy is sold that the consumer has the right to resell or give away that copy to another without compensating the content provider. First sale is a leak in the system for copyright holders. Pay-to-play schemes do this by not actually "selling" the consumer a physical product, but by instead "licensing" a copy for a one time use.

Computer software companies have been attacking the doctrine of first sale for some time now. According to the EULA (end user license agreement; that dialog box software users will check the "Yes, I agree" box without reading in order to install the software), computer software is not sold but licensed.

There have been differing court court decisions regarding first sale and software. In SoftMan Products Co. v. Adobe Systems Inc., Adobe attempted to prevent Softman from reselling their bundled software programs separately; however, the U.S. District Court for the Central District of California ruled that the terms of the EULA did not apply because Softman had never agreed to them (Softman never ran the program -- installation is the only point in which the EULA is presented); therefore, Softman maintained the right of first sale because a physical copy of the software was sold in a single transaction. In Davidson & Associates v. Internet Gateway Inc., the US District Court for the Eastern District of Missouri ruled that Internet Gateway had forfeited its first sale rights by checking the "I agree" box.

The two previously mentioned cases appear to uphold the concept that software companies can force consumers to forfeit their right to first sale in order to install their software. But the issue is not so simple because other court cases contradict this opinion. Bobbs-Merrill Co. v. Straus introduced the doctrine of first sale in 1908. In this case, the US Supreme Court ruled that the statute of the right to sell does not also grant the right to limit resale. Bauer & Cie. v. O'Donnell supported this decision and also added that simply calling a sale a license does not make it one.

While the Supreme Court decisions set the precedent of first sale doctrine, the previously mentioned lower court cases are challenging the established law. Specifically allowing software companies to force consumers into an EULA which takes away their consumer rights is only the first step towards a pay-to-play system.

Regarding the suggestions from Quarter to Three posters, the only conclusion I can draw is that many game developers and publishers would prefer this system. There are already precedents -- the most well-known being Blizzard Entertainment's World of Warcraft. World of Warcraft is an MMORPG (massively multiplayer online role-playing game) which is subscription based. Players pay a monthly flat-fee in order to play the game. Players have accepted the idea that such games will be subscription based because the game requires the use of the company servers to play. Furthermore, the game is given constant attention by the company through the release of free updates, patches, and additional content to the game. But many of the Quarter to Three posters want to place all games into a subscription system, or even a pay-to-play system.

Some suggestions mimicked the MMORPG system of a monthly flat-fee. Others were for an hourly-rate, i.e., players would pay based on the number of hours logged into the game. This is basically pay-to-play lite, in that there is still an initial sale of software to the consumer, but that there will also be additional charges to play the game. The next step would be to "license" (for lack of a better term) software to consumers free of charge, but then charge the consumer for each time or for how long the game is played, or charge the consumer based on a subscription fee. This would be much like the arcades of the '70s and '80s. The end result would be that no players would actually own their games anymore.

Such systems would also require 24/7 internet connections, which means that all games would have to be played while the computer is online. Some posters pointed this out as a huge drawback that might cause many players who enjoy single-player games to object to purchasing any future games. Supporters of this system argue that it would be an effective way to combat PC game file sharing. The question is, then, would such a system do that?

If Vivendi Universal v. Jung says anything, the answer appears to be no. In this case, bnetd.org was an open-source software package reverse-engineered from Blizzard's battle.net service (Blizzard's online multiplayer service for its games using the company's servers). The software was licensed under the GNU General Public License, and provided an emulation of battle.net for players on their own privately run servers. Of note is the fact that bnetd.org circumvented Blizzard's online CD-key check, therefore allowing invalid CD-keys full access to the emulated multiplayer service. The United States District Court for the Eastern District of Missouri ruled that bnetd.org violated the DMCA (Digital Millennium Copyright Act) by circumventing the copy-protection of Blizzard's games. Despite bnetd.org being shutdown (the website is now under Blizzard's control and redirects to battle.net), other services have popped up in locations that the DMCA does not have influence.

Just as I wrote before, someone will find a way to get around any copy-protection or DRM employed in digital media. The simple fact that in order for encrypted content to be useful for consumers is to hand them the information, decoder, and key will mean that all copy-protection and DRM will always fail at some point. There will never be a hack-proof system that also makes content useful to those who the content provider is trying to prevent certain access.

There are more important reasons than the fragility of such systems for why this is a bad idea. As I have outlined before, these pay-to-play schemes designed to prevent unauthorized copying will stifle creativity and innovation. Users will no longer have access to the content in the same way they would by owning a physical copy. They will be unable to interact with the content to alter or improve upon it. Such limited access cuts a people off from their culture.

Just as the Quarter to Three posters advocate a system of pay-per-play for video games, we see the first steps towards that system with film. Comcast's move to stream new film releases could be the first step in streaming all films in the future. We already have streaming films for a fee via various On Demand services. Adding new releases to the rooster could give the film industry reason to slow, or even halt, DVD/Blu-Ray releases as some point in the future. I don't think it's that much of a stretch.

PC Gaming and File-Sharing

I've written before about my opinion on copyright issues, usually specifically regarding music, but I haven't said much about copyright, piracy, and PC video games.

Over the weekend I bought the game Sins of a Solar Empire, a 4x (explore, expand, exploit, exterminate) real-time strategy game in which players create and manage a fleet of spacecraft and conquer different worlds within the galaxy. I went over the the Sins of a Solar Empire forums to get some starting pointers from more experienced gamers and I found this post, which points towards this post by Brad Wardell, President and CEO of Stardock Entertainment (publisher of Sins of a Solar Empire).

Wardell begins by acknowledging the existence of piracy in the PC game market, but dismisses any further discussion on that problem specifically. Instead, he gives a very intelligent insight:

When you blame piracy for disappointing sales, you tend to tar the entire market with a broad brush. Piracy isn't evenly distributed in the PC gaming market. And there are far more effective ways of getting people who might buy your product to buy it without inconveniencing them.

Blaming piracy is easy. But it hides other underlying causes. When Sins popped up as the #1 best selling game at retail a couple weeks ago, a game that has no copy protect whatsoever, that should tell you that piracy is not the primary issue.

In the end, the pirates hurt themselves. PC game developers will either slowly migrate to making games that cater to the people who buy PC games or they'll move to platforms where people are more inclined to buy games.

In the meantime, if you want to make profitable PC games, I'd recommend focusing more effort on satisfying the people willing to spend money on your product and less effort on making what others perceive as hot. But then again, I don't romanticize PC game development. I just want to play cool games and make a profit on games that I work on. [my emphasis in bold]

Sins of a Solar Empire is a game that shipped without any copy-protection at all, but despite this the game was the #2 top selling PC game of all February 2008 releases. Kieron Gillen makes the observation at Rock, Paper, Shotgun that Sins of a Solar Empire is one of the least leeched torrents on Mininova, the largest torrent site on the internet. The point that Wardell is getting at is that game developers should concentrate on the consumer market for games, not the user market -- i.e., make games for buyers, not players.

I don't disagree with Wardell's recommendation, and it's largely because the gaming market is very different from the music market. While research has shown that those who share music files are also the music industry's best costumers, I haven't seen any data to show that those who share PC games are also the gaming industry's best costumers. For example, it was revealed by Infinity Ward that a staggering percentage of online players for Call of Duty 4: Modern Warfare were playing on cracked/pirated copies of the game. Call of Duty has also been one of the top selling PC games since its release.

Of course, all of this is anecdotal evidence, and I know of no such comprehensive analysis of whether or not PC game file-sharing has affected PC game sales. It's difficult to draw any kind of conclusion with the available data, but what we can see is that sharing music and sharing games are two different beasts.

All of this led me to this forum thread at Quarter to Three, in which Michael Fitch, Creative Director of THQ, offered some commentary about the February closing of Iron Lore Entertainment. Fitch immediately assumes that piracy equals lost sales, though I'm not convinced. I'll get to that later, but suffice it to say that Fitch throws this claim out without elaborating. Here's the take home message of his post:

One, there are other costs to piracy than just lost sales. For example, with TQ, the game was pirated and released on the nets before it hit stores. It was a fairly quick-and-dirty crack job, and in fact, it missed a lot of the copy-protection that was in the game. One of the copy-protection routines was keyed off the quest system, for example. You could start the game just fine, but when the quest triggered, it would do a security check, and dump you out if you had a pirated copy. There was another one in the streaming routine. So, it's a couple of days before release, and I start seeing people on the forums complaining about how buggy the game is, how it crashes all the time. A lot of people are talking about how it crashes right when you come out of the first cave. Yeah, that's right. There was a security check there.

So, before the game even comes out, we've got people bad-mouthing it because their pirated copies crash, even though a legitimate copy won't. We took a lot of shit on this, completely undeserved mind you. How many people decided to pick up the pirated version because it had this reputation and they didn't want to risk buying something that didn't work? Talk about your self-fulfilling prophecy.

Discussing file-sharing can be tricky, because it's easy to get backed into a corner of defending theft. That's what happened later in the thread, as poster SirBruce boxed himself in. Ultimately, theft is not the issue, but the copy-protection schemes implemented by developers. Fitch's statement quoted above makes it very clear that the copy-protection scheme used caused a negative side-effect (whether warranted or not) of giving the game a poor reputation. Several posters in the thread hit on this point, and several others seemed to think that solution is more DRM and copy-protection. I'll make my case why this is an incorrect solution.

First, I want to argue from a practical standpoint. I'll need to lay out a quick-and-dry explanation of encryption history to get started. Afterall, that's what copy-protection is -- encryption.

Encryption systems go back a long time in human history. Encryption is used to protect information from being interpreted by people whom the author of the information does not want to give access. For example, say we have two warring nations. The king of Nation A wants to send a surprise attack order out to his/her generals in the field. Obviously, it would not be desirable if this information were to fall into enemy hands -- if Nation B were to get a hold of the message, the attack could be thwarted. So Nation A employs an encryption method -- the message is encrypted and the only way to read the message is to have both a decoder and a key. When the messenger is sent out of the castle gates, s/he is only given the message. Those in command positions will already possess the decoder and key. This makes the information within a closed system -- if Nation B were to intercept the messenger, they would have no way to read the message at all.

But modern digital encryption is quite different. Content producers encrypt their information to prevent unwanted copying; however, all this is for naught. In order for the consumer to be able to use the content, content producers have to provide not only the information but the decoder as well as the key! Using my example above, it is as if Nation A has sent the messenger out with all the necessary components -- message, decoder, and key. In the event of a Nation B interception, the information would surely be in enemy hands.

This is why copy-protection and DRM (Digital Rights Management) will always fail. There is no way to provide useful encrypted content to consumers without also giving consumers the tools to decode and interpret that content. Siva Vaidhyanathan's Copyrights and Copywrongs and Anarchist in the Library discuss this concept at length.

My point is that no matter what type of copy-protection is used, someone will always hack it. Implementing these copy-protection schemes only serve to inconvenience legitimate customers -- i.e., the people who have actually payed for the game. Shitting on your consumer base is never a good idea.

I can relate my own experience with overbearing copy-protection. When I attempted to install my legally purchased copy of BioShock, everything went fine at first. But when I attempted to activate my game through the online activation process, the program was unable to read my disc. I had to contact SecuROM, the company who authored BioShock's copy-protection, to figure out the problem. Eventually, I was forced to manually activate the game through a website they created because of issues like mine. It took days for SecuROM to get back to me. I had even further problems after I updated my computer and had to reinstall the game. This time, the copy-protection was causing some strange problem with my DVD drive -- basically, it didn't like the firmware and refused to read my disc. I am forced to run the game on my other DVD drive (good thing I have two). Again, the point here is that a legitimate customer is being inconvenienced, while at the same time the copy-protection hasn't done anything to stop file-sharing of the game.

The Titan Quest example is different, though, and thus failed for different reasons. The copy-protection implemented made the game appear to crash randomly, which caused the game to earn a reputation as buggy. It was argued that this was not to tip off the hackers about the copy-protection throughout the game; however, it had the effect of bad publicity. In the process of attempting to circumvent hackers, the developers instead turned away likely legitimate customers.

Second, I want to argue this from an ideological standpoint. The idea here is that these types of copy-protection and DRM schemes will do a disservice to innovation and creativity. As Vaidhyanathan also argues, excessive copyright protection in addition to technological quick-fixes will only hamper the people's ability to interact with culture.

Yes, software development is a part of culture. Putting up walls and protecting this information means that interested parties cannot use it for further derivative and transgressive works. I've seen how game developers and publishers will clamp down on modders who alter a game's code to make something different for non-commercial use. There is a much more protectionist attitude in the gaming industry than in music, to bring back my earlier comparison, in that music is more lenient about sharing and reusing information (though, now their are significant licensing fees for samples; see Copyrights and Copywrongs for more on this subject), but that is really for another post. My point in mentioning this here is that games are very protected pieces of culture. People enjoy culture because it is an interactive experience, and so, people will do what they can in order to interact with the culture they enjoy.

Furthermore, we are a democratic society. We should embody and encourage the values of democracy, which includes the free-flow of information. I am not against compensating the developers for their hard work; however, that compensation should only go so far. As with music, these works should eventually fall into the public domain. And considering the incredibly high rate of change within the gaming industry, the current model for copyright extension does not seem appropriate. I'll reference Vaidhyanathan again, as his books offer a unique analysis of copyright law and its effect on creativity and innovation.

Admittedly, this does not directly apply to the situation I've been discussing within this post. However, I add it because many of the posters within the Quarter to Three forum advocate more draconian measures to clamp down on unauthorized copying, while also neglecting to consider the real-world consequences that would have on a culture of open, distributed computer systems. Such measures are likely to increase the barriers to entry of the gaming industry for small, interested individuals. We have seen how such copy-protection has served previous industries, and we can see it in music today -- existing copyright law entrenches established artists while punishing emerging artists.

Finally, I wanted to comment on Fitch's statement that piracy equals lost sales. I'm not convinced of this because it has not been demonstrated that those who have participated in the file-sharing of PC games were likely to purchase the game at all. In fact, Russell Caroll investigated this regarding the casual game genre -- games like Bejeweled and Diner Dash. What he found was that for every 1000 pirated copies thwarted, they only gained one sale. The take-away here is that most people who download games were not going to purchase those games anyway.

This brings us back to the main topic of my post -- that game developers should take Wardell's recommendation to concentrate on making games for those who buy them, not just those who play them. It's a much better solution to the piracy problem than increased consumer inconvenience via draconian copy-protection that can easily be bypassed. Moreover, without the existing protectionist attitude it's likely we'd see more innovation and creativity in gaming titles, because the information to make those games would be available for others to comment on and improve upon.

Program to Check for Bit Torrent Throttling

Torrent Freak reports that some new software, Gemini, will allow users to find out whether or not his/her ISP is throttling his/her internet connection when using peer-to-peer applications.

This comes a little late for me because I had already discovered what Comcast is up to months ago, and I've since switched to Verizon. I've been very happy since -- Verizon's internet connection is much faster than Comcast (I'm getting upwards of 50 times my previous download speed and about 15 times my previous upload speed), and I have not experienced any throttling issues. Still, this could still be useful in the future in case Verizon goes the way of scamming users.

It's just too bad that Verizon wasn't available in my area when OiNK was still around.

Further Thoughts on Peer-to-Peer File Sharing

I wanted to follow up on my previous post about file sharing and the entertainment industry's assumptions about file sharing.

The Digital Entertainment Survey revealed that most users of peer-to-peer file sharing systems are motivated by a lack of availability of content they are seeking, and the survey revealed that a majority of these users would gladly pay for such content if it were available through legal means.

Despite this data, the authors of the survey made the unsubstantiated claim that users of peer-to-peer file sharing systems are primarily motivated by the fact that they can get the content they seek for free.

I wanted to further expand upon what is happening here. As copyright law increasingly protects vaguely defined "intellectual property" of authors and producers, it enables the copyright holders to have a "limited" monopoly (I'm going to ignore, for the moment, the fact that the "limited" monopoly granted is far lengthier in time than it should be -- that's the subject of another post) on the culture they produce. This monopoly grants copyright holders the ability to create artificial scarcity.

By definition, culture and ideas cannot be scarce. Once an idea is "out there," everyone has access to that idea. An idea is non-tangible. But the expression of that idea can be tangible (and it usually is tangible). I'm describing the idea/expression dichotomy, which was the original intent of copyright law. Increasingly, copyright law protects ideas, not just the expression of those ideas.

Since copyright grants the ability to create artificial scarcity, copyright holders have a monopoly on price as well as a monopoly on availability. Before digital mediums became more widespread, users of culture had a difficult time circumventing this artificial scarcity. Mass producing copies of content was not cheap or easy. With digital mediums, mass producing copies of content is very cheap and very easy -- all one needs is a computer with the right software. Moreover, sharing that content with millions of people is even easier with an internet connection. This is what people do with peer-to-peer networks -- they are sharing culture that is not readily available from traditional sources.

Content providers and copyright holders seem to be holding onto the old model of artificial scarcity. They don't re-issue old content often, and some content is not pressed as much as others. As the survey demonstrates, when people cannot find the content that they seek, they will go online and download the content through peer-to-peer networks. The content is readily available through these means and is not available through the traditional gatekeepers.

Instead of fighting their best customers (as the survey states, "Pirates are typically media heavy consumers and purchase considerable quantities of legal content"), content providers should take advantage of peer-t0-peer and digital technologies to provide the content that people seek for free on peer-to-peer networks. A majority of these users (two-thirds) are willing to pay for such content through legal means. You'd think that copyright holders would take advantage of this market; however, you'd also be asking them to relinquish their control of this content by releasing easily accessible digital copies of content.

This is why I think that such change is unlikely; the entertainment industries have been fighting for years to create more legal controls over the flow of information. By nature, peer-to-peer networks are anarchist. There is little in the means of authority and control because the internet is governed by protocols, or a handshake between two talking computers. Power is evenly shared within these distributed networks. The industry would have to be willing to give up its current hold on the power over access to content.

Considering that the industry is now concerned with controlling not only access but use of content, this scenario seems very unlikely.

Poor Consumer Choice Drives Rampant File Sharing Online

TorrentFreak has a great post up today about a new study from UK based Entertainment Media Research titled, "2008 Digital Entertainment Survey." The report states on page 209:

Pirates perceive legal sites don't have the range of content of illegal ones (70%) and take longer to acquire content (68%). That it is free is, of course, the main reason why piracy is so rife but perceptions of a lack of choice in legal sites is a contributory factor.

The claim about content being free as the primary motivator is an assumption on part of the researchers, and they make no attempt to support that claim. And considering the next paragraph on page 209, the researchers actually discredit their claim:

Pirates are typically media heavy consumers and purchase considerable quantities of legal content in addition to unauthorised content. Nearly 2 out of 3 pirates claim they would pay for legal downloads if what they wanted was available.

So, users of peer-to-peer file sharing systems are actually the industry's best customers. 67% of these individuals would be willing to pay for the content that they seek if it were available through legal means. I think that hardly qualifies the fact that current content on peer-to-peer systems is free as the primary reason for its popularity.

I'd bet that the "contributory factor" of lack of choice is probably more influential than content providers would like to think.

Finally, on page 13 of the report there is the evidence that 7 out of 10 peer-to-peer system users would stop using peer-to-peer file sharing if they were to receive a cease and desist letter from their ISP. In fact, the report even encourages the further use of such scare tactics:

All of this makes a more direct ISP warning strategy more attractive to discourage digital piracy. [emphasis in original]

The report states that teenagers are most likely to be persuaded by such tactics (78% of males and 75% of females), which isn't surprising because I think teenagers are most likely to be influenced by perceived authority figures like an ISP.

Judging by this, I think it's probable that the misinformation scare campaigns from the RIAA and the MPAA are likely to continue or even get worse. It's unfortunate that these organizations insist on criminalizing their best customers at the detriment of their own bottom line. If copyright holders simply provided services that customers want -- DRM free, easily accessible content for a reasonable price -- then it seems that they'd have a large share of peer-to-peer users who'd prefer to purchase content through legal means.

"...To This Decaying Business Model"

Time Magazine writes today that Radiohead's new album is going to be self-released. That's nothing new, but here's what makes it interesting:

In Rainbows will be released as a digital download available only via the band's web site, Radiohead.com. There's no label or distribution partner to cut into the band's profits — but then there may not be any profits. Drop In Rainbows' 15 songs into the on-line checkout basket and a question mark pops up where the price would normally be. Click it, and the prompt "It's Up To You" appears. Click again and it refreshes with the words "It's Really Up To You" — and really, it is. It's the first major album whose price is determined by what individual consumers want to pay for it. And it's perfectly acceptable to pay nothing at all.

Simply awesome. I'd be interested in seeing the data collected, as well as the average/median price paid for the digital download. This has the potential to dispel any myths about file-sharing and bittorrent, especially if it turns out that many people will pay a reasonable price for an artist's music if the buyer knows that his/her money will be going directly to the artist, not a record label.

And this quote from singer Thom Yorke sums up nicely what I think of record labels these days:

I like the people at our record company, but the time is at hand when you have to ask why anyone needs one. And, yes, it probably would give us some perverse pleasure to say 'Fuck you' to this decaying business model.

A decaying business model it is. Record labels are parasites on the hard work of (usually) talented performers. With the rise of digital music, mp3 players, the internet, and a continued decline in the sale of physical copies of music (i.e. CDs), there really doesn't seem to be a purpose for record labels anymore. Artists can now do almost everything that a record label would traditionally handle -- production can be done cheaply with a home computer and the right software; distribution, as well as advertising, can be handled through the artist's website or a social-networking website. Add to that the fact that digital files of music are a much more popular method of collecting music than the purchase of physical copies of music, and the expenses of distribution are a lot lower than they have been in the past.

In a related note, I want to point out that Polyvinyl Records is doing something interesting with digital downloads. If you buy the vinyl LP, Polyvinyl will give you a code to download a digital version of the record from their website. A very cool idea, and one that I am particularly taken with, since I am an avid vinyl enthusiast, but I'd also like to make a digital archive of my records. This just makes that process a little easier!

The end of the Time article raises another interesting point:

Meanwhile, as record sales decline, the concert business is booming. In July, Prince gave away his album Planet Earth for free in the U.K. through the downmarket Mail on Sunday newspaper. At first he was ridiculed. Then he announced 21 consecutive London concert dates — and sold out every one of them.

This is nothing new either, since artists have always made more money on tour than through the sale of records. Just read Steve Albini's "The Problem with Music," which lays out in stark terms just how fucked the average major label act really is.

Once artists set up their own distribution networks through the internet, outside of the music business, there will really be no reason left for record labels to exist anymore. Except for the fact that these labels still hold copyright over most of their catalogs, their demise is almost certain if Radiohead's experiment works.