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Learn To Live With The Devil, And The Devil Can Make You Rich

Like most of the content industry, I used to think that developing capable DRM, encryption and access control was the good fight. It was somewhat doomed in the short run but likely to eventually succeed at least well enough to guide those who’d rather be honest away from easy, often unintentional, thievery. Sony BMG has proven me wrong.

Despite the obvious fact that they are a record label, we in the content business do not really believe that Sony BMG is evil. But everyone else in the world now does.

We believe that Sony BMG made an honest, overzealous mistake in its distribution of a rootkit-based DRM with pop records beginning last summer, and then the responsible boobs within the company and its code-writing contractor covered up their errors while executives took far too long to realize the serious damage these idiots had done to their customers, and eventually to Sony BMG’s reputation.

But the rest of the world is not so charitable, nor should it be: if the label’s DRM software had allowed a worm into your PC that stole your identity, emptied your bank account, or merely provided you with gobs of advertising you couldn’t get rid of, you’d never forgive them. It is not enough to say that, as of the time the scandal came to light in late fall, no one seemed to have been infected by a third party virus; those CDs are still out in the world, and will never all be sent back to their maker. Surely, more than a few are being hacked by ambitious virus writers as we scribble.

So the average music fan crosses over to the dark side and comes to believe that illegal downloads are not only cheaper, they’re safer to listen to...and to watch, too.

Oh, did you think that we were still in the next time zone, here in videoland, able to continue watching the record industry make the mistakes so video, with its bigger bandwidth, could learn and address the problem differently?

Well time’s up. Let’s get real; it is unbelievably easy to get just about any video you want on the Web, for free. Just Google it. Spend a few minutes looking for a forum kept by fans of any particular programming genre. You could Google for Desperate Housewives or Beverley Hillbillies, or TV football, plus forum, then follow a few links. You could look for a Yahoo! Group in which fans believe they are honoring a TV series or a musical performer by sharing clips and songs, or passwords to Web sites, or links to file addresses in one of the file uploading services such as Putfile, Free-Webhosts, Uploadr, Megaupload or scores of others internationally.

A complete novice could find illegal copyrighted material in minutes this way, and never even come close to a file-sharing program such as BitTorrent. It takes maybe an hour’s worth of digital sophistication to download the client for such a file-sharing system—of which there are scores, not nearly just BitTorrent and Kazaa, Freenet and Earthstation 5, Exeem and BigChampagne. But without ever downloading the software, you can easily check a “tracker,” which is like a forum but allows posters to point to files on the file-sharing network. Some helpful trackers even keep Top Ten lists, so those who want to count such things can rate downloads by popularity. In this way, the Internet replaces the Billboard and Variety box office charts, and the Nielsens, even as it obsoletes them by doing away with the old, filthy little exchange of money or advertising involved in seeing a movie or getting a music recording.

We didn’t tell you to try this at home. We are just providing information. This may be what all good file sharing services and forums and trackers now say to keep out of jail, but it works and it’s true...of us, too.

So what are the real-world effects of DRM, and the real story on file sharing, and how do these interact? Some random notes:

--Digital watermarking works, mostly, but it accomplishes next to nothing. It is now easy to do, technically, and viewers and listeners don’t notice it. It’s not particularly expensive. But if everyone’s sharing files, nobody cares if they are watermarked. (This argument does not apply to industrial mass production of bootleg DVDs, where watermarking can be invaluable in proving criminal intent, thus allowing Chinese officials to demand bigger bribes from their brothers-in-law who own the factories.) It takes a big bad record company or RIAA lawyer to put that file-sharing grandmother in jail, making the content owner yet more despicable in the eyes of its customers.

--Limiting play to any small number of devices may leave some customers quiescent, while it engorges others with anti-content-owner venom. For both kinds of customer, though, it has a similar result. It causes them to go out and buy other devices that allow them to record and re-record programs and make use of the content more efficiently. It encourages consumer creativity! That some of these consumers then trade files in ways we can all agree are unethical, and others merely trade files among their own family’s devices—which many content owners believe should be illegal, or at least impossible—only serves to define the nature of the technology it leads them to purchase.

--Apple Computer is lately the most obvious beneficiary of this driver for consumer purchasing, but beneficiaries include most other consumer electronics companies, broadband Internet providers and manufacturers of storage devices. It is now proven that, as people own iPods for longer periods of time, their purchases from the iTunes store go down: 99 cents is really too much, if you have capacity for over 1,000—or maybe 15,000—songs. Instead, iPods symbiotically encourage and are encouraged by bootlegs. Same for TiVos and home networks and disk recorders and anti-virus software. And why else, pray tell, would a consumer need to go beyond more than two or three megabits of Internet service (not including provisioned TV channels over IP)? Yes, all these technology purchases enjoy plausible deniability, just like Bush and Cheney on weapons of mass destruction. But let’s not mince words here: all this technology is selling for the same reason people bought the first Betamax. To make videos of their children!

Betamax and audiotape were pretty discrete technologies, and they made the fortunes of a number of companies that, ahem, advertise in certain quality television-industry journals. They could not be stopped by programmers, and darn good for the programmers that this was so. Step forward in time, and the results of 30 years of entropy and capitalism are a vastly greater number of technologies and companies involved in making them, all in an ecosystem with the same basic effects that Betamax had: file sharing will never be stopped. It can, indeed, only increase.

The more that DRMs and legal enforcement are used to try to stop it, the dirtier those DRM and legal efforts will be perceived to be by the public, because nobody likes to be treated like a criminal. Whether or not they are. Combine stupidity like the DRM rootkit (or the 1980s disappearance of beautiful movie theaters and grown-up movies) with the appearance of some more benign content distributor that seems to condone file sharing while somehow profiting from it, and consumers will fly in mass formation to the new distribution means and favored content, as they did to video rental stores and cable TV in the 1980s.

All the diverse technology purchases co-dependent with file sharing will probably result in increased program sales, just as Beta and VHS did. Is it counterintuitive that the more people steal of a good, the more of it they will also buy? Yes, if file sharing is like stealing a loaf of bread or a car. But software is different. Nobody buys more books than people who go to the library a lot. Nobody buys more Windows PCs than people who swap around lots of Windows applications. Nobody sees more movies over a lifetime than those who snuck into theaters as teenagers.

But just because both hardware and software will be sold, and more of it, doesn’t mean that all’s well that ends well. Multiplex movie theaters may die, just as the ornate one-screen palaces did decades ago. Big record labels may die, to be replaced by management companies that are innovative marketers. Same for CD sales, to be replaced by 15-second spots appended to songs, or by subscriptions.

TV and radio broadcasting is clearly dying by some five to 10 percent a year lately, as advertising dollars shift radically to avails in massively multiplayer computer games, podcasts, Yahoo! and Google. This will probably continue for a while. You might well see that P&G spot your VP of sales lost on a Yahoo! Group or Megaupload page dedicated to downloads of the program that P&G used to buy from you. But companies such as Massive Inc. have learned to sell ads on games, and podcasts from Clear Channel carry radio ads, so there’s no reason all sorts of content owners and distributors can’t profit from the new universe.

As Henry Miller said of New York City, so of broadcasting: it’s dead, but the corpse is twitching furiously.

Neal Weinstock is editor-in-chief of Weinstock Media Analysis and can be reached through