Entries by David Short

Today EMI announced that they will be selling non DRM music. In fact, their entire catalogue will be availble in an "unencumbered" format for a price. There's a BBC story about this here

This is a highly symbolic move and we won't rehearse the pro/anti-DRM arguments again. The interesting thing for me is that it is not actually much of a big deal for EMI. They already sell unencumbered content in the form of CD's. The price of 99p (UK prices) per track works about about the same as a chart CD [yes, CD's are a rip-off in the UK - maybe that's why they get ripped so often - sorry, couldn't resist the cheap pun ]

So, I don't think that this makes much short term difference to EMI. I guess that the price of a CD has an informal mark-up to pay for the extra copies that users make for the PC, MP3 player, car, friends, etc. All that EMI have done is move that model online, and therefore reduce their distribution costs.

What EMI might have done in the long term is the kill the (content aggregators') dream of locking up content so that users have to pay for every single copy, but I think that that was probably always a dream. If EMI can establish themselves as a trustworthy, friendly aggregator of music then their business model might last for a long time even if some fans get their music free. Actually, even if 90% of fans get music free!

What about movies? If the "non DRM" model becomes the standard, will Hollywood be able to keep its own content locked up? They do have an advandtage as DVDs do have enough protection to stop some users ripping them. On the other hand, I think they are swimming against the tide here. The big problem for Hollywood is maintaining the system of "release windows" in the face of non DRM copies circulating. I have never really understood why release windows have to be staggered around the globe and maybe they won't be in an non DRM future......

It's been a busy week at Broadsight, but I have had this story in the back of my mind as I think there are some interesting lessons and now the weekend is here I have some time to write about it.

For those of you outside the UK, the story is that various TV producers are being less the scrupulous about how they encourage viewers to phone to them. Depending on the show, viewers can call to vote, win a prize or make the (female) presenter take some clothes off. In the UK, many phone numbers have a "premium" added to the basic connection tariff and some of this can go to the TV company. The premiums can range from a few pence to a few pounds per call.

The basic "scandal" was that some of the prize winners were fake, but now that the issue has been opened up to scrutiny it seems that many companies are not following all the guidelines or at least, the aren't sure if they are. There are also wider issues. For example, is it fair to charge people a significant amount of money to vote and do they know the odds when they enter a "prize draw" by phone? See this story for more background.

These are a few points that interested me -

• Consumers are insensitive to money spent on phone calls (at least at the time of the call). Maybe they will get savvy now, but TV producers and many others find that a phone call is a great way to "sneak" money out of customers' pockets!


• TV production and distribution is now very cheap. I don't mean user generated content here, I mean programmes that look like they are professionally produced. There are channels (mainly dating and soft porn) that appear to be sustained mainly by phone calls. I don't know the numbers, but given that they operate late a night and in the small hours I don't think we are talking about large numbers of calls - they can only be generating a few pounds a minute.


• TV producers are desperate for new business models now that conventional advertising looks so shaky. There seems to have been a headlong rush into generating phone revenue - in fact, such a rush that no one had a chance to checkout the guidelines or best practice


• Premium rate phone calls are like a back door pay per view system, albeit voluntary. We often discussed the future funding of content production on this blog and we generally don't think that it will play out quite like the big studios would like, so it's interesting to look at this as an example of a new business model. If there was some more transparency, so people understood what they were getting for their money if might be quite a fair way of buying entertainment. Of course, only about a third of the money gets to the producer, but that's probably comparable to the costs of setting up a content protection or DRM system

This is an interesting article by Tom Robinson about how record companies control the content they have bought from the artists. (For anyone who doesn't know, Tom Robinson is a UK based singer/songwriter, who had several hits in the 70's and 80's.)

We all know that record companies are the BAD GUYS and treat their musicians appallingly But the thing that interested my here was that Tom pointed out that most artists actually make their money from "secondary" activities, such as touring and merchandising. (I Assume this doesn't apply so much to the "superstars", but then they are a minority.)

Now that the cat is out of the bag and people are starting to realise that the isn't any "magic" technology that can keep content safe once it's in the field, various luminaries (Steve Jobs, Bruce Schnier, etc) are starting to muse about alternative business models that don't rely on perfect DRM. The model that Tom describes works very well for the artists in a "post DRM world". Not so good for the aggregators! (Record companies, in this case)

Of course, there is still a need for marketing, distribution, navigation, etc and lots of people are trying to lock up that market and take a slice because it's so temptingly scalable! DRM is the obvious first line of attack as it simply recreates the old model using electronic rather than physical distribution. It's also easier to justify a "closed" system if you can cite security.

Other people are trying to own the search space and bandwidth. However, I think that the good news is that these are basically commodities, so price competition should help both the consumers and producers.

I think we are in for an interesting few years.......

There's an interesting story about the crack on the HD DVD DRM at Bobbie Johnson's Blog. DRM is hard, because as Bruce Schneier (and probably many others) have said digital content "wants" to be copied. In the latest twist to the content protection tale, a hacker has discovered that he can find the keys by looking in the memory of his DVD player. There's a surprise The significant thing about this hack is that Hollywood really did seem to believe that that they had good a "secure" DRM system. I can't find the reference, but I remember Andy Setos of News Corp saying that this was their last chance to get DRM right.

There is so much snake oil in the world of DRM, that I prefer to go back to cryptographic basics. If you want legitimate owners to view content, you have to send decryption keys. If you send keys, then the bad guys will get them unless you can hide them in software or some physical device. Pay TV smart cards try to do the latter and are fairly successful as you need industrial size equipment to hack them. This attack seems to be a standard bit of reverse engineering and the only surprise is that anyone is surprised!

I don’t really buy the “update” idea that the AACS people put forwards, as there must be a root key somewhere!

Here's an interesting article from CNet - Why the Zune will help kill DRM

It seems that Zune doesn't interoperate with other MS DRM systems. It's amazing that MS can't even be compatible with itself when incompatibility is one of the consumers' genuine grips with DRM. I personally avoid "encumbered" media, because I want to play my media on a range of devices without too much hassle. My preferred choice for music, for example, is an old fashioned CD (which usually comes out of it's case once to get ripped and then goes back on the shelf!) There are some interesting attempts to make DRMed media portable (e.g. Coral and Marlin) but I think that the big vendors will scupper these initiatives. They can't help "embracing and extending" standards for their own competitive advantage and in the hope that they can become the de facto standard.

I think there are three big things to understand about DRM -

• It's hard to make it portable and hassle-free for the consumer. It's almost impossible to make it respect traditional "fair use".


• It's impossible to stop people hacking DRM without the use of hardware support e.g. smartcards or "trustworthy computing". That's why the DCMA and EUCD have such ridiculously harsh punishments for attempting to circumvent copy protection mechanisms.


• Digital distribution will fundamentally disrupt the nature of the content supply chain, whereas today's DRM systems are really designed to preserve the "old" economics ie. hit based, expensive content distributed via middlemen who all take a large cut.

So, how will this all end? I think that consumers will resist DRM systems unless they are hassle-free, respect fair use and the content is priced to reflect the lower costs of online distribution. I don't think that the traditional content industries will hit any of those targets, but their are plenty of people waiting in the wings with new business models that don't reply on high cost "premium content". For example, advertising funding, low cost unprotected content, user generated and prosumer generated content.

I was at IBC in Amsterdam, saw all the high tech wonders and marvels. Just about everyone is now an IPTV company or pretending to be, and there was booth after both showing complex diagrams and costly gear.

So, I came home and hooked up my dsl laptop to my big flatscreen TV, connected the PC headphone output to the hi fi and dialled up YouTube - and watched 2 hours of old rock videos.

Priceless...you (literally) can't buy this old stuff, or I would.

And then it hit me - this is real time, real life VoD. No IPTV, no iTV, no TiVO.......just a pure IP pipe, a PC, and a TV. The content quality is not HDTV - far from it - but boy is it relevant to me. Just have to do a bit of fiddling to get the remote to work as a mouse and my couch potato existence can continue.

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Today Apple patented a " converged handheld thingy to do stuff with multimedia" (check out The Register's article on http://www.theregister.co.uk/2006/09/07/apple_handheld_thing_patent/)

To quote The Register

"In the submission, published today, Apple says that the invention is a way of operating a handheld device with limited buttons that includes two or more functions including PDA, mobile phone, music player, camera, video player, game player, "handtop" (whatever that is), net terminal, GPS and remote control.

There's aren't many new phones that don't include most of these features, leading to speculation that Apple has come up with a new smartphone user interface. But can it add anything really new?

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Advertising Age writes that traditional advertising is far more prevalent than the Web 2.0 fraternity assumes
( http://adage.com/article?article_id=111377)

They note that, according to Jupiter Research, "7% of American adults write blogs and 22% read them; about 8% listen to podcasts and 5% use RSS feeds. According to a separate study by WorkPlace Print Media, 88% of the at-work audience doesn't even know what RSS is. And recent data from word-of-mouth research group Keller Fay indicate 92% of brand conversations were taking place offline -- far more than the commonly assumed rate of 80%."

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Bob Briscoe, Andrew Odlyzko, and Benjamin Tilly, writing in IEEE Spectrum, assert that Metcalfe’s Law is wrong ( http://www.spectrum.ieee.org/print/4109). This is shocking news for all the hockey stick business plans of the emerging new dot.com bubble (Bubble 2.0).

To recap, Metcalfe’s Law states that the value growth of a network is a function of the square of the number of users added f(n)**2. The authors propose that instead, the value of a network of size n grows in proportion to n log(n). As they put it:

“Imagine a network of 100 000 members that we know brings in $1 million. We have to know this starting point in advance—none of the laws can help here, as they tell us only about growth. So if the network doubles its membership to 200 000, Metcalfe's Law says its value grows by (200 000**2/100 000**2) times, quadrupling to $4 million, whereas the n log(n) law says its value grows by 200 000 log(200 000)/100 000 log(100 000) times to only $2.1 million. In both cases, the network's growth in value more than doubles, still outpacing the growth in members, but the one is a much more modest growth than the other. In our view, much of the difference between the artificial values of the dot-com era and the genuine value created by the Internet can be explained by the difference between the Metcalfe-fueled optimism of n 2 and the more sober reality of n log(n).”

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There are rumours that a merger is on the cards - Have a look at this article in TV Predications.

There are a couple of points that interested me. Firstly, the argument that the merger would be approved because of greater competition from other delivery channels, IPTV in particular. It wasn't long ago that satellite TV was overwhelming dominant and this argument would not have held any water. There is a similar trend in the UK, where the digital terrestrial TV "Freeview" now matches the penetration of BskyB.

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