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.

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.