The Big Picture | Intellectual Property

The Big Picture X 3?

Tuesday, June 24, 2008 | 07:30 PM

WTF ?

First we see the wankers at the Boston Globe stealing my blog name . . . Now the ~~pedophiles~~ bootjacks at the The L.A. Times are doing the same.

C'mon! Get your own f*&%in names!

I may have to follow my readers advice and get the lawyers involved...

Countrywide: "Home price depreciation at levels not seen since the Great Depression"

Tuesday, July 24, 2007 | 03:19 PM

in Derivatives | Intellectual Property | Markets | Psychology/Sentiment | Real Estate

An amazing conference call with Countrywide Financial (CFC), the largest US mortgage underwriter. It was beyond ugly. Here are some notable quotables from Chief Executive Angelo Mozilo:

- "During the quarter, softening home prices continued to affect many areas of the country, and delinquencies and defaults continued to rise across all mortgage product categories as a result."

-Delinquencies and defaults rising across all investment tools.

-Lower home prices may effect credit.

-S&P Case-Schiller is strong tracking tool for health of housing market
[Editor: we have referenced this many times]

-CFC continues to study further tightening of loan standards for both subprime and prime

-CEO believes markets will force the weaker mortgage companies to either work with bigger players or look elsewhere for business

-For a Fed Governor to say that the lending group had this coming is unbelievable.

The WTF line that I don't get is this one:

"no one saw the deterioration of real estate values coming."

Here comes the money shot:

"Company is seeing home price depreciation at levels not seen since the Great Depression"

-Previously, the company had stated they expected a turnaround in mid-2008; now, they say they are not sure when housing declines will cease. Refuse to rule out house price declines in 2009;

-Surprising comment regarding the prime portfolio: so far what they have seen in deliquencies is due to people losing job, losing health, lost marriage, more so than any resets. Stated that the "definition of prime may not be as high as some people think."

-Expects to hear mergers and people going out of business in the near future;

-The company cut its 2007 earnings forecast to a range of $2.70 to $3.30 a share, down from previously lowered guidance of $3.50 to $4.30 range (projected in April). In the beginning of the year, the company said it expected to earn $3.80 to $4.80 a share.

>

All told, a simply brutal and market moving nearly 3 hour conference call . . .

Thanks to Briefing.com for the update

BNN Appearance re: Apple and Palm

Wednesday, June 06, 2007 | 02:30 PM

in Intellectual Property | Media | Web/Tech

We had an interesting chat about Apple's iPhone, Palm and the how technology gets designed on Report on Business Television:

click for video

After Hours with Kim Parlee Market Wrap
Monday, June 6, 2007

Smackdown! Microsoft versus Google

Thursday, February 22, 2007 | 02:45 PM

To be filed under Outsource THIS right off my desktop!

Google has taken aim at one of the two biggest Mister Softee moneymakers:

"On Thursday, Google, the Internet search giant, will unveil a package of communications and productivity software aimed at businesses, which overwhelmingly rely on Microsoft products for those functions.

The package, called Google Apps, combines two sets of previously available software bundles. One included programs for e-mail, instant messaging, calendars and Web page creation; the other, called Docs and Spreadsheets, included programs to read and edit documents created with Microsoft Word and Excel, the mainstays of Microsoft Office, an $11 billion annual franchise.

Unlike Microsoft’s products, which reside on PCs and corporate networks, Google’s will be delivered as services accessible over the Internet, with Google storing the data. That will allow businesses to offload some of the cost of managing computers and productivity software."

There can be no doubt that Microsoft has a dangerous rival in Google, but its more than mere business challenge -- its a philosophical, also. The battle is between Microsoft's approach of owning a stranglehold on desktop computing, versus Google's massive online server cloud accessible by any user, anywhere, no IT dept necessary.

As we noted previously, adaptation of both Vista and the new Office have been slower than expected; indeed, its hard to describe it as anything short of a disapointment. Google obviously recognized this softpoint and decided it was an opportune time to pounce. Very Sun Tsu of the not-so-genteel Google boys: Always take advantage when your adversary is weakened or vulnerable.

This is a potential paradigm shift. Do the math, and you will understand why:

"While most analysts say that businesses will increasingly use software delivered over the Internet and supported by advertising — a formula that Google has mastered — they are split over the threat that Google’s offering represents to Microsoft in the near term.

“I think Microsoft should be very concerned about this,” said Rebecca Wettemann, vice president of Nucleus Research.

Ms. Wettemann noted that a business may spend about $80,000 on a systems administrator to manage e-mail and desktop office software. For the same amount of money, Google Apps allows a business to support 1,600 users, she noted. Simply in terms of staffing, “this may be a better proposition even if Microsoft were free,” Ms. Wettemann said." (emphasis added)

A better value proposition than free Microsoft. Now that's a tough gig to beat (even with Googler's egregious boilerplate).

Critics will note that the Fortune 500 are unlikely to adapt this. After all, Windows XT was called the IT Department Full Employment Act, and well paid CIOs are unlikely to put themselves out of a job.

It is also true that the growth segment of business and computing is NOT the Fortune 500; rather, its in the small start up, the entrepreneur, the solo practitioner. This is the area where Google can lay a pretty decent hurtin' on their older, less nimble rival.

Is Microsoft the next Blockbuster Video? I doubt it. They have too much cash, too many franchises, and too many sharp people to be totally marginalized. But I also very much doubt they are the next GE, a company that has managed to evolve and reinvent itself repeatedly over the course of more than a century, and remain a top layer in numerous niches. Not Blockbuster, not GE, but somewhere in between (if anyone has a perfect corporate parallel, let me know in comments).

Whether Microsoft can do the same, whether they can adopt their monopolist business model to something that thrives on competition, has yet to be seen.

UPDATE February 25 2007 8:42am

IT Wire notes that:

"Google’s newly released online productivity suite Google Apps has already replaced Microsoft Office at more than 100,000 small to medium enterprises and has been deployed at two of the largest companies in the world, according to the search leader’s enterprise product boss."

Google manager: Google Apps replaced Microsoft Office at 100,000 businesses http://www.itwire.com.au/content/view/9889/53/

Source:
A Google Package Challenges Microsoft
MIGUEL HELFT
Published: February 22, 2007
http://www.nytimes.com/2007/02/22/technology/22google.htm

IBM Suing Amazon over Patents

Monday, October 23, 2006 | 11:25 AM

in Corporate Management | Intellectual Property | Technology | Web/Tech

Last week, I gave IBM the nod pre earnings for a number of separate reasons.

One of the factors in our analysis was their rich patent pipeline. we noted:

Huge Patents: IBM Leads in U.S. Patents for Thirteenth Consecutive Year; This is potentially a rich pipeline for the company in the future. They currently garner about $1Billion a year in (high profit) revenue from licensing their patents.

Well, that didn't take long:

IBM now alleges that Amazon has knowingly infringed upon five patents, related to: customer recommendations, purchase systems, advertising, web site navigation and the way its stores data on its network.

This is not the first time we have brought up the issue of monetizing intellectual property. Back in January 2005, we mentioned the Rise of the Pure Patent Business Model:

Patent litigation in the U.S. is substantial and rising. High-profile patent suits will only accelerate in 2005. Why? The new business model: the pure patent play. Consider VC Intellectual Ventures, which has been creating and buying patents. The defunct Commerce One's 39 Web services patents were auctioned off in bankruptcy to the unknown JGR Acquisitions for $15.5 million. I expect to see a slew of patent litigation from these (and other) players in 2005.

This promises to be an intriguing area of investing.

Oneof our biggest winners in 2004 / 2005 was the small cap stock Ampex (AMPX). Understanding the legal intellectual property issues -- and how they could create an investable thesis -- was definitely an advantage in the marketplace . . .

Relentlessly Bearish Fashion

Friday, October 13, 2006 | 08:38 PM

in Intellectual Property

The WSJ call's em as they see 'em:

Barry Ritholtz, in his relentlessly bearish fashion, argues against the conventional wisdom that suggests today's retail-sales report wasn't all that bad. "One might have thought that, given all of the dollar savings at the pump, at least an equivalent amount of dollars would have been plowed back into the economy. Indeed, the new-found energy savings could have led to a wealth effect, leading to more big-ticket items -- including cars," he writes. "Nope. But taking a page from the school of inflation ex-inflation, if we remove the items that went down in sales, we can reach the conclusion that sales were not punk."

I do try to "argues against the conventional wisdom."

And, I admit that I have been very bearish since moving away from the the Summer's Buy 'em for a trade call way back in June.

Hey, at least I ain't short!

>

Update: October 14, 2006 11:07 am

Holy snikes!

This also got picked up by the Afternoon Report, as well as Consumers Impress Economists With Quick Spending Turnaround

A WSJ hat trick!

Source:
MarketBeat: Blog Roll -- Afternoon Edition
David A. Gaffen
WSJ, October 13, 2006 1:12 p.m.
http://online.wsj.com/article/SB116074140433291827.html

Consumers Impress Economists
With Quick Spending Turnaround
October 13, 2006 11:03 a.m.
http://online.wsj.com/article/SB116074596882191867.html

Crude Clouds
TIM ANNETT
THE AFTERNOON REPORT
WSJ, 12:48 p.m. EDT Friday, October 13, 2006
http://online.wsj.com/article/SB116074108171691823.html

Zune: mPod or iClod?

Tuesday, July 25, 2006 | 12:30 PM

in Corporate Management | Film | Intellectual Property | Music

The incredible pace of innovations at Microsoft continues.

As the graphic at right imply, the new MP3 player from Microsoft essentially looks like an iPod, but with a bigger screen.

They called this latest in their series of original ideas the "Zune," but I prefer the name given it by Wired:

"Prior to Friday's announcement, some were calling the new device the "mPod" (Microsoft + iPod) killer. But given Microsoft's typically tone deaf approach to usability and Apple's market lead it will be a miracle if its next nickname isn't the "iClod" (iPod + clone + awful)."

I don't think that many people would agree that hardware or software or user experience or customer service is their strong suit; Business methods are Microsoft's forte.

Here's a run down on the Zune's rumored features:

It would have wireless Internet capabilities, for downloading tracks directly to the device, according to Bloomberg News.
The device could be launched by Christmas, although the company reportedly hadn't yet briefed key retailers as of last week, casting some doubt on that schedule, according to The New York Times.
Led by Xbox executive J Allard, the project, code-named "Argo," reflects a broader strategy that would extend the Xbox brand into a variety of digital-media products, according to The Seattle Times.
Microsoft may be considering giving people free alternative copies of tracks they've purchased from the iTunes Music Store, for use with the Microsoft device, to help convert iPod users, according to some reports.
The final product name may be the "Zune," according to Gizmodo.

How do those guys at MSFT keep thinking these things up? Its astounding!

UPDATE July 25,2006 3:30pm

By popular demand: The parody -- done by Microsoft's own marketing team -- of how MSFT would have marketed the iPod:

Sources:
Microsoft IPod 'Killer' Is Doomed
Eliot Van Buskirk
Wired, 02:00 AM Jul, 24, 2006
http://www.wired.com/news/columns/0,71435-0.html

Microsoft's "Argo" / Xbox wireless portable media player
Ryan Block
Engadget, July 10th 2006 4:52PM
http://www.engadget.com/2006/07/10/microsofts-argo-xbox-wireless-portable-media-player/

Microsoft Dubs Upcoming MP3 Player ‘Argo’ and Mimics iPod’s Design
David Silverberg
DigitalJournal.com, July 10th 2006 4:52PM
http://www.digitaljournal.com/news/?articleID=4822

Tracking Microsoft's portable media device
Todd Bishop
Seattle Post Intelligencer, July 11, 2006 9:20 a.m.
http://blog.seattlepi.nwsource.com/microsoft/archives/104876.asp

The Media Goes Blog Crazy!

Thursday, June 22, 2006 | 10:00 AM

We have previously discussed the MSM's tentative probes into blogging. We first looked at the WSJ's blogging moves, and then the NYT's foray.

Since then, we see a full array of additional bloggers have rolled forth. Barron's tech columnist Eric Savitz has a daily blog, TECH TRADER DAILY. Barron's has (so far) kept that out from behind the firewall. Most of the other WSJ blogs are behind firewalls (a mistake IMO)

Also blogging is a threesome from another Dow Jones property, Marketwatch:

Bambi's Blog by Bambi Francisco
Herb Greenberg's Market Blog
Frank Barnako's Media Blog

Lots of other mainstream journos have been blogging for quite some time. The San Jose Mercury News has had a tech blog for about 10 years (Good Morning Silicon Valley).

I used to think the NYT had the most blogs of any MSM outlet, but it looks like Businessweek has edged them out (although they do a good job hiding them):

• Auto Beat
• Blogspotting
• Brand New Day
• Byte of the Apple
• Deal Flow
• Economics Unbound
• Fine On Media
• Hot Property
• Investing Insights
• New Tech in Asia
• Nussbaum On Design
• Tech Beat
• Working Parents

Finally, TheStreet.com's Real Money has about a half dozen blogs, although I would hardly call TSCM mainstream media. Like the WSJ, theirs are also behind a subscription firewall.

So far, I think the NYT is doing the best job of all the major media with their blogging efforts -- but the WSJ is the dark horse. If they ever figure out what they want to do with their blog collection (I gave them lots of good advice for free here), and execute well, they could leapfrog the competition from the Times.

One of the few things besides p0rn that people are willinhg to pay for on the internet is financial info. This will be intereresting to see how it developes.

Copyright Abuse by Media Bullies

Monday, June 19, 2006 | 04:56 PM

in Financial Press | Intellectual Property

This really gets me angry:

Last week, I send out a few test notices about RR&A to a handful of people in my address book -- less than 30. I get a phone call and email from XXXXX, who works for XXXXXXXX, an (obviously) major media company.

This person informs me that "I owe them money for reprints" that are posted In the section labelled "In the Press."

Excuse me?

Now, I use, refer to and reference alot of other work by other people on the blog. I am meticulous about giving appropriate credit, and I very much try to stay squarely within the boundaries of "Fair Use." I do not merely reproduce in whole or substantial part, entire articles, but rather, take snippets, a paragraph or three, a chart -- and then annotate/comment/add value extensively on them.

On the pro site, there is even less of that.

Anyway, this weasel starts haranguing me for a reprint fee. What reprint? What are you talking about? I couldn't figure out what the hell they were going on and on about. There are no PDFs (except my own) and very little in was of reproduced content from anyone else.

Until it dawns on me -- the links? WTF?!? You want to charge me for pointing to an article of yours? (GET ME LEGAL!).

I go off on her, cite old case law that this was resolved in the 1990s, and then ask her "What's with the not-so-subtle litigation threats?" I politely tell them to take a flying f%$# at a rolling donut, and suggest she contact legal and Sue me!

That was last week, and by now, I have done the slow burn: Instead of selling a legitimate product -- reprints, PDFs, mailer inserts, etc. -- there are some weasel salespeople who (with the apparent power of a major media firm behind them) scare/bully/bluff people who do not know better in paying for something that is free.

>
Here's my promise: The next time one of you copyright weasels tries this, you become my new hobby.

Seriously.

Consider yourself warned.

Warner Bros Goes P2P via Bit Torrent

Thursday, May 11, 2006 | 07:15 PM

in Film | Intellectual Property | Music | Technology

GMSV:

Does Warner Brothers honestly think we're going to pay $20 for a write-once DVD viewable only on our computers?

I hope not, because if it does, its plan to sell movies and television shows online using BitTorrent's peer-to-peer system is truly wrongheaded. This morning the studio, which has been fighting a bitter battle against file-sharing networks, announced a plan that on the surface appears to be a forward-thinking adaptation of a new distribution system.

"We've been struggling with peer-to-peer technology and trying to figure out a way to harness the good in all that the technology allows us to do," Kevin Tsujihara, president of Warner Brothers Home Entertainment Group, told the New York Times. "If we can convert 5, 10 or 15 percent of the illegal downloaders into consumers of our product, that is significant." It certainly would be.

But I can't imagine Warner will ever achieve conversion rates like that if the Torrented movies are priced the same as a shrink-wrapped DVD, yet be encumbered with a robust copy protection that allows them to be viewed only on the computer to which they are downloaded. Leave it to Hollywood to "embrace" peer-to-peer distribution and all the economies and efficiencies that go along with it and then ruin it by using it to peddle an inferior and overpriced product.

Myhrvold on Patents

Friday, March 31, 2006 | 11:54 AM

in Intellectual Property

Following up yesterday's Patent discussion, I noticed that Nathan Myhrvold, who spent 14 years as Microsoft's chief technology officer, had an Op-Ed piece in the WSJ yesterday on Patents. Myhrvold explodes the myths about the danger "patent trolls."

The section I had found most intriguing was this:

"Large tech companies do amass significant portfolios, but often not directly related to their business model. If a rival company asserts a patent, a company like this plays defense and threaten the asserter's products right back. While "defense" sounds benign, what it can mean in practice is having enough patents that you can steal from anybody else with impunity. Between big companies this works like a powerful shield, much like the doctrine of mutually assured destruction with nukes. But the shield is impotent against universities, companies without products or independent inventors. Owners of large defensive portfolios hate that. (emphasis added)

That's a pretty straight forward indictment by someone who knows, right from the heart of the tech industry.

Myhrvold continues:

In the 14 years I served as Microsoft's first chief technology officer, I saw this firsthand across the ranks of the computer industry. Tech companies work extremely hard to use state-of-the-art technology, and either be first to market or a fast follower -- all else falls by the wayside. Big tech companies are happy to hire the best people from rivals, universities and small companies. Their employees attend conferences and study technical papers to stay on the cutting edge. But they pretend that the patents on the technology in those papers, or from universities or small companies, don't exist. Many of the largest tech companies have a standing policy that engineers are not allowed to read patents or check whether their work infringes. Why bother to look, if you know you'll find lots of infringement? Besides the cost, it's a distraction that might hurt time to market. Their strategy is simple -- damn the torpedoes, full speed ahead.

And the problem with this is . . .?

The trouble is, this cavalier attitude toward the law runs afoul of the rights of legitimate patent holders and the big tech companies know this. Rather than pay out a small fraction of their huge profits, they're fighting a campaign to weaken patent laws for the little guy. Some of this has taken place in Congress under the banner of "patent reform." The eBay case aims to achieve the same ends in the courts.

It's hard to go to Congress or the courts and admit that you're one of the richest companies in the world, have huge profit margins and infringe lots of valid patents held by honorable people . . . but you don't want to pay them. So naturally, these companies paint a different picture. They claim that patents are low quality; yet there is no objective evidence of this. They claim patent litigation is exploding; but the actual figures show just the opposite. There are fewer patent lawsuits than copyright, trademark or other major forms of commercial litigation. (emphasis added)

I think Myhrvold paints a pretty compelling picture -- but then again, I am biased.

Source:
Inventors Have Rights, Too!
NATHAN MYHRVOLD
WSJ, March 30, 2006; Page A14
http://online.wsj.com/article/SB114368437650611883.html

Rise of the Pure Patent Business Model

Thursday, March 30, 2006 | 06:42 AM

in Financial Press | Intellectual Property | Technology | Web/Tech

Back in December 2004, I wrote a column titled "Five Under-the-Radar Trends for 2005". One of the below radar trends I predicted was the acceleration of intellectual property lawsuits. That turned out to be rather prescient.

There are actually two different issues here: The first is, should the USPO be issuing so many patents, especially those for business methods? Amazon's One-click buying, and MercExchange's Buy it now auction are certainly questionable "inventions." That's an issue for Congress, who needs to adequately fund the Patent Office so they can hire many more patent examiners, rather than merely have an under staffed patent office rubber stamp applications.

The second issue is that once a patent becomes issued, who gets to use it and how? Very often, we see the first issue inappropriately raised as a PR defense in the second. I don't get the sense that all of the financial media really has a firm grasp on this. There is an entire world of patents, innovation, USPO issues, and large corporate litigants that have not been adequately discussed. Some get it, some don't. Compare this story: "eBay Takes on the Patent Trolls" with this one "In Patent Case, EBay Tries To Fight Its Way Out of Paper Bag." (For some intercorporate litigation, see Apple against Apple Corps. Ltd., and TiVo's against EchoStar's Dish Network).

Incidentally, the term "Patent Troll" was invented by Peter Detkin when he was defending a patent case against Intel. Ironically, Detkin is now managing director with Intellectual Ventures, an intellectual property firm suing patent infringers.

If you recognize the property right inherent in patents, then the term "Patent Troll" is quite meaningless, meant to stir up political opposition to patents. How you use your property is irrelevant to the property right attached to it. What does it matter if you choose to manufacture widgets -- or merely license the patent to thos ethat do?

What is actually going on now is a massive land grab underway by large corporations, looking to keep the fruits of entrepreneurs and innovators labor for themselves. These are not meek and vulnerable entities at the mercy of lawyers; rather, these are very astute players seeking to use the patent to further their own goals -- often at the expense of innovation.

Take Intel, where Detkin was vice president and assistant general counsel, for example. They are certainly no stranger to patent litigation. As the book Inside Intel makes clear, INTC used its patents as a club to thwart competition in the CPU market for decades. That's why its taken AMD so long to become a legitimate competitor to the chip giant.

The stealing of entrepreneurial innovation by large firms is fairly common place. My own experience with patent enforcement is that it is an enormously expensive, difficult, time consuming venture, fraught with peril. Consider the case of Robert Kearns, the inventor of the intermittant windshield wiper. In 1967, he received several patents on his design, which he tried to license to the Big 3 in Detroit. They sent him packing, but later the intermittant windshield wiper somehow found its way into autos. Long story short, he ended up in litigation for decades before finally winning. Thats decades later.

Continue reading "Rise of the Pure Patent Business Model"

Intel & the Patent Trolls

Monday, March 06, 2006 | 11:45 PM

in Corporate Management | Intellectual Property | Technology

Today's WSJ has an Op Ed from Bruce Sewell, general counsel for Intel, about "patent trolls."

"Our patent laws are supposed to be about proliferation of technology. If there is actual competition between patent owner and infringer, an injunction may be appropriate -- it protects the patent owner's right to exclusivity and does not deprive society of the benefits of the technology. On the other hand, if the patent owner has not commercialized the invention, blocking others from using it is a loss for all of us. The right to an injunction also needs to be tempered by a commonsense look at how much real value the patented technology adds to the whole commercial product. A fundamental invention deserves greater value than a relatively minor tweak to work that went before it. A broad application of the injunction remedy makes all patents "crucial," whether they are or not."

The great irony, apparently lost on Mr. Sewell, is that the Intel Corporation was built in large part upon abusive patent prosecutions versus competitors such as AMD. At least, thats according to the book Inside Intel.

The book is a tech investor's must read. If you think Redmond is the evil empire, well then brace yourself -- Intel was every bit as abusive a monopolist as Gates & Co. The key difference is Intel seems to have adapted faster than Microsoft. If you haven't read Inside Intel, go get yourself a copy (50 cents used at Amazon); Its an utterly fascinating history of technology.

Despite their own longstanding use and abuse of the patent system, that Intel's counsel would pen such a blatant hypocritical commentary is simply beyond funny to me.

My own view is colored by being a little guy: I'm on the BoD of a small public company, one with great IP that was ripped off by everybody. So I am talking my book. (We settled with Microsoft last year, and Apple filed for a declaratory judgment action against us). But, jeez, really, Intel's position is so blatantly laughable, especially given their storied history of patent litigation.

Is this something that simply happens to most very large organizations? Not just companies, but, any huge group organized for a specific purpose? At a certain point, do they simply become so full of shit that they lose their way, start believing their own PR, and forget how they got started? This eventually has to impact their performance.

No wonder AMD is kicking Intel's collective asses . . .

Source:
Troll Call
BRUCE SEWELL
WSJ, March 6, 2006; Page A14
http://online.wsj.com/article/SB114161297437490081.html

The Ghost in the Business Model

Thursday, February 23, 2006 | 01:00 PM

in Finance | Intellectual Property | Music

I've been meaning to get to this interesting NYT discussion on CD sharing and copying.

I'm old enough to recall the recording industry's campaign against home (analog) taping: "Home Taping is Killing Music", and MPAA honcho Jack Valenti's dire warning that the VCR would ruin the film industry.

Of course, the VCR and then the DVD were huge money makers for film, and music thrived in the 1980s and early 90s. Just imagine if the film industry refused to move from tape to DVD; As absurd as that has been, it is roughly the equivalent of the recording industry's long refusal to embrace digital downloads -- both legal and not.

In appeasing their brick and morter retailers, they created another problem: By the time they finally agreed to digital distribution (i.e, Apple iTunes Music Store), they had helped train a generation of music fans to get music for free. Simply a horrific business decision . . .

Here's the NYT column on CD copying and sharing amongst friends:
>

Nyt_184336 "After years of battling users of free peer-to-peer file-sharing networks (and the software companies that support them), the recording industry now identifies "casual piracy" - the simple copying and sharing of CD's with friends - as the biggest threat to its bottom line.

And in one company's haste to limit the ripping and burning of CD's, a hornet's nest has been stirred. By the end of last week, that company, Sony BMG, which had embedded aggressive copy-protection software on the Van Zant CD and at least 19 others, suspended the use of that software after security companies classified it as malicious.

At least two Internet-borne worms were discovered attempting to take advantage of the program, which the CD's transferred to computers that played them. And the company was facing lawsuits accusing it of fraud and computer tampering in its efforts at digital rights management, or D.R.M.

Sony BMG seems to have failed that test when, in seeking to limit consumers to making three copies of its CD's, it embedded the First 4 Internet software, which penetrates deeply into the PC's of users with a program that introduced a real, if minor, security risk."

It all began unraveling early last month, after an American customer notified F-Secure, a Finnish antivirus company, of some files attempting to hide themselves on his computer. F-Secure deduced that the Van Zant CD had deposited a program that looked a lot like a "rootkit" - typically a dirty word in computer security circles because it describes software tools used to hack the deepest level of a computer system and hide the footprints of an intruder.

That might have been bad enough, said Mikko H. Hypponen, the chief research officer of F-Secure, but the rootkit also proved capable not just of hiding itself, but any file, folder or process on the computer that used a five-character string as part of its name."

>
Of course, the industry is as wrong about CD sharing as they are about everything else. I make mixed CDs for friends, and if there is an artist I am really hot about, I've made copies of discs for friends. More often than not, it leads to additional sales of discs for that musician. It works as advertising and promotion, not theft.

And as Downhillbattle.org reminds us, its fun.

I like having physical CDs, and I have 1,000s of them. But if I could not rip CDs to my Mac & iPod, if I could not easily make back up copies for the car or summer house, if I could not swap 'em, than I would not buy them.

I suspect lots of other consumers feel the same way . . .

Source:
The Ghost in the CD
TOM ZELLER Jr.
NYT, November 14, 2005
http://www.nytimes.com/2005/11/14/business/14rights.html

Forget the spin, taping is not killing music
Peter Martin
The Sydney Morning Herald, December 31, 2003
http://www.smh.com.au/articles/2003/12/30/1072546532286.html

What happens when bloggers get it wrong, but the MSM gets it right?

Saturday, January 07, 2006 | 02:00 PM

in Intellectual Property | Media | Music

Here's a "Man Bites Dog" type story for you:

Late December, Cory at boingboing blogged about some absurd limitations on Coldplay's disc, X&Y:

"Coldplay's new CD comes with an insert that discloses all the rules enforced by the DRM they included on the disc. Of course, these rules are only visible after you've paid for the CD and brought it home, and as the disc's rules say, "Except for manufacturing problems, we do not accept product exchange, return or refund," so if you don't like the rules, that's tough.

What are the other rules? Here are some gems: "This CD can't be burnt onto a CD or hard disc, nor can it be converted to an MP3" and "This CD may not play in DVD players, car stereos, portable players, game players, all PCs and Macintosh PCs." Best of all, the insert explains that this is all "in order for you to enjoy a high quality music experience." Now, that's quality."

Its a perfect example of how a small omission on the internet can spiral into a series of larger errors.

Amazingly, the mainstream press did not -- to its credit -- get the significant details incorrect.

I had been given X&Y -- I ripped it to MP3s (and AACs), and played it in a DVD and a Car stereo -- so I knew at least the US version was not DRM protected.

The site that posted the original DRM lament was itch.in. The domain ".IN" denotes India -- not the U.S. or Britain.

Indeed, as the itch post stated:

"Virgin Records deserves a spanking. I’ll do what I want with the content I pay for, thank you very much. When will they realize that if it’s in bits and bytes, nothing’s ever secure?

Un. Fucking. Believable. This is India, Virgin. INDIA. Piracy started here, dammit. You can’t play Nazi with India." (emphasis added)

Not only did boingboing miss the India connection, but they also overstated the restrictions. Its not that you are not allowed to play the CD in car stereos or DVD players; Rather, the DRM crippled CD might not work in those devices.

Further, have a close look at the leaflet --

click for larger photo

Source: Itch.in

I sent this info to Cory, and after the long New Year's weekend, he posted a correction, with even more details, at boingboing at 10:19:22 PM on January 5, 2006.

"A knowledgeable source has identified this as a Macrovision DRM and disclaimer, and noted that the label only bought licenses to sell this CD with that DRM in the Europe, Middle East and Africa region.

However, the original report originates in India, which suggests that the CDs are either being exported out of the region, or that the label is issuing the discs without a license for their DRM.

But that was after the vlog Rocketboom picked up the week old tale -- and the details became even more muddied.

Rocketboom's lovely Amanda Congdon -- was that you on Lexington Avenue & 44rd the week of December 21st? -- repeated boingboing's overstatement. Again, its not that you are not allowed to play the CD in car stereos or DVD players; Rather, the DRM crippled CD might not work in those devices.

If you want ot be upset over this DRM issue, than my suggestion is to criticize the misleading labelling of the CD as a Compact disc -- when it is in fact not. That's the larger, legal issue not being discussed: Where are the trademark holders (Philips and Sony?) in this? They need to step up to the plate and defend their IP.

Indeed, as this snapshot shows, the packaging not only claims that it is a compact disc, but is compatible with all these other players, as well as Mac OS:

click for larger photo

Source: Itch.in

here's the ironic part: The NYT's What's Online, to its credit, gets the details correct:

"ANTI-PIRACY FOLLIES Sometimes, real life is just too funny to be parodied. This week Boingboing.net takes a look at a new CD by the band Coldplay. Inside, some music fans outside the United States and Britain will find a hilariously long list of "rules" that are enforced by EMI's antipiracy software. Among them are no converting songs into MP3 format and no ripping and storing songs on a hard drive or CD. "Some" CD players, car stereos, DVD players and PC's will not play the CD. It cannot be played on a Mac. EMI, with no apparent irony, tells CD buyers that the rules are enforced "in order for you to enjoy high quality music."

I suspect that after the MSM screwed up the Bush National Guard forgery last year, the Press might have become increasingly conscious of fact checking. (That's just a guess on my part).

Kudos to the NYT for getting one right, and to boingboing for their correction.

One minor nit to pick in the NYT's piece: X&Y is not a new CD -- it came out on June 7, 2005; It would have been more accurate to state it was Coldplay's "latest release" than a new CD . . .

Sources:
A Blog That Blogs Corporate Blogs:
ANTI-PIRACY FOLLIES
By DAN MITCHELL
Published: January 7, 2006
http://www.nytimes.com/2006/01/07/technology/07online.ready.html

ColdPlay CD DRM -- more information
Cory Doctorow
boing boing, Thursday, January 5, 2006 t 10:19:22 PM http://www.boingboing.net/2006/01/05/coldplay_cd_drm_more.html

coldplay's new music CD has usage rules
amanda congdonRocketboom, thursday january 05, 2006 http://www.rocketboom.com/vlog/archives/2006/01/rb_06_jan_05.html

Coldplay's new CD has rules: No MP3s, no DVD players, no car stereos
Cory Doctorow
boing boing, Friday, December 30, 2005 11:05:35 AM
http://www.boingboing.net/2005/12/30/coldplays_new_cd_has.html

Bad, bad Coldplay
http://itch.in/journal/bad-bad-coldplay/

Promotion and Distribution via ITMS

Tuesday, December 27, 2005 | 09:42 AM

in Film | Intellectual Property | Music | Television

SNL is distributing a recent (and surprisingly buzzworthy) SNL skit via iTunes Music Store -- for free.

How smart is that? What a great way to generate free buzz and publicity for your show! Especially when your prime target audience is slipping away from TV, moving towards net, games, pods, etc.

Kudos to whoever at NBC managed to convince the knuckle draggers in management that this internet thingie is going to be big one day.

Incidentally, Slate podcasts on NPR.

click for free download

The full lyrics are here.

via Gothamist

Which is the Savvier Industry: Music or Film?

Tuesday, December 13, 2005 | 07:43 AM

in Film | Finance | Intellectual Property | Music

I have long stated my belief that the Film Industry is much savvier than the Music Recording Industry. While they may be just as ethically sleazy, as their accounting shenanigans demonstrate, their business smarts just seem better.

As a Business, film seems to outmarket, outmonetize and outsmart the music recording industry on a regular basis. They are the "Survivor" of the Arts & Intellectual Property industry.

The most significant and notable difference shows up in the economics of product pricing. The film industry seems shrewder, they understand how to grab a marginal purchaser, they price their wares dynamically.

Of course, they have a different business models: their products cost much more to produce (than music) and are far less numerous in number.

Even as their theatrical distributors (movie theaters) are having a rough go of it, the film industry, by most measures, is doing well. Yes, DVD sales may be growing more slowly -- but that's an inevitable function of full adaptation by consumers. DVD sales remain robust.

Growing more slowly is better than shrinking.

The strength in the industry was outlined in a Sunday NYT article on "Hollywood's non-slump" (somewhat reminscent of a similar Register column from August). As this more recent column implies, the key difference between the Film and Music industries is their ready adaptability to new technologies:

"American moviegoers are increasingly passing up the chance to hoot and holler in the dark with hundreds of strangers if the films are not big events or smaller genre ones. The number of movies in the $100 million to $200 million box-office range has fallen dramatically the last two years. As a result, executives at the major studios are more closely scrutinizing midrange films - those with budgets from $50 million to $75 million.

In addition, domestic DVD sales have slowed from their gangbusters growth rate of a few years ago. But the slack has been taken up by the surprisingly strong performance of television DVD's like "Seinfeld" and straight-to-DVD movies like "Lion King 1½." And most of the money made off of these DVD's goes to the same entertainment conglomerates that own the movie studios.

To Ms. Snider and others in the film industry, the possibilities of the on-demand world - one perfectly customized to a viewer's life - offer Hollywood the next big leap forward. Videocassette recorders did not, as feared, become the Boston Strangler of the movie studios. And while VHS may be near death's door, the rise of the DVD has more than made up for that disappearing revenue. "There's always been something to replace it that's groovier," Ms. Snider said. "Portable, wireless devices are pretty irresistible."

The Times Art department has been quite busy also; Some nice graphics from the column:

click for larger graphic

Source:
Doing the Hollywood Math: What Slump?
By LORNE MANLY
December 11, 2005
http://www.nytimes.com/2005/12/11/movies/11manl.html

The Hollywood crisis that isn't
By Andrew Orlowski in San Francisco
The Register, Tuesday 4th October 2005 20:31 GMT
http://www.theregister.co.uk/2005/10/04/hollywood_crisis_no_crisis/

No Xmas for Sony

Tuesday, December 06, 2005 | 07:28 AM

in Intellectual Property | Music

Sony has been paying taggers to put up PSP graffitti in various cities, according to Wooster Group:

Which leads us to this too funny badge:

Noxmas

The best round up of all of Sony's DRM foibles can be found via boingboing: Part I, Part II, Part III, Part IV