Entertainment & Entrepreneurship: Technology Archives

Wiki Authorship, Social Media, and the Curatorial Audience

For those of you who follow my occasional posts, you know that most of my writing is in much longer formats. I'm very pleased that my most recent law review article was just published and made available on the Harvard website at: http://harvardjsel.com/current-issue/.

The article is Jon M. Garon, Wiki Authorship, Social Media, and the Curatorial Audience, 1 Harv. J. Sports & Ent. Law 95 (2010). It can be accessed here: http://harvardjsel.com/wp-content/uploads/2010/04/JSEL-Garon.pdf. The focus of the article is that shared editing websites - wikis - provide a social service that would be greatly expanded if the norms of authorship were better valued in the wiki architecture. The article, of course, goes well beyond this. I discuss the importance of an author's attribution rights and rights of integrity (the right to protect a work from being mutilated); I highlight how important research would be easier to access if online scholarship were used to reward researchers; and I stress the importance of understanding the nature of social media for creation of art, literature (whether pulp or profound) and scholarship.

For those of you who have never read a law review article before, you might find the excessive footnoting and format a bit off-putting, but I hope you can see past the form for the content.
The abstract of the article is below.

Jon M. Garon, Wiki Authorship, Social Media and the Curatorial Audience, 1 Harv. J. Sports & Ent. Law 95 (2010).

Wikis have become an important source of information and a go-to destination on the Internet. The shared authorship and social editing represent an increasingly influential model for content creation and dissemination, which will continue growing in prominence for education, training, newsgathering and entertainment.

Wiki authors undertake their participation based on their agreements regarding the ownership, attribution and integrity of the copyrighted material they contribute. To accomplish the goals of the wiki, both copyright law and contractual licenses are needed to allow unlimited republication, editing (or creation of derivative works) and waiver of control (or integrity) over the resulting publication.

At the same time, today’s participants increasingly want to be recognized for their part in social networks and media activities. As part of the newly identified curatorial audience, today’s media consumers participate by creating content, collecting media, commenting on works and building community around their various interests. Commercial content producers have been driven to reinvent their production and distribution methodology to meet the participatory role of this curatorial audience. Wikis are highly susceptible to these forces, and will inevitably evolve to incorporate other forms of social media.

Wiki’s traditional norms included a social networking of authorship which excluded not only control and integrity of works, but also the sublimation of attribution for particular authors. While the curatorial audience embraces collaborative authorship, the lack of attribution may be running counter to the developing social networking expectations.

This article explores the legal structures and normative rules likely to develop in socially edited content for the Wikis of the future. In keeping with the public migration to attributed online content, this article suggests that collaborative authorship must adapt its normative expectations regarding attribution. Improved attribution will benefit the accuracy and reliability of all social media and new sources, a critical step if news and other content providers hope to regain public trust. For wikis, and particularly for those with academic content, sites should emphasize attribution, content resiliency and audience relevance. These parameters should be integrated into the reporting software. In this way, contributors who have made quantitatively and qualitatively significant submissions can be recognized by research sponsors and academic employers. The ability for academics and researchers to demonstrate their success in creating and disseminating knowledge would propel the continued expansion of social editing resources and public information they generate without harming the open and egalitarian values of wiki culture.

Posted by Jon M. Garon at 10:17 AM | Permalink | Comments (0) | TrackBacks (0)

Keller v. Electronic Arts - Reclaiming some California Publicity Protection in Video Games

Last month the Federal District Court in Northern California answered a motion to dismiss in part of the litigation involving former Arizona State University and University of Nebraska quarterback Samuel Keller against Electronic Arts and the NCAA. Electronic Arts tried to have its case dropped because it claims First Amendment rights to use the names and likeness of players, based on California case law. In particular, the decision of Kirby v. Sega, 50 Cal.Rptr.3d 607 (2006), found the First Amendment to bar publicity rights cases involving video games. While the appellate court in Kirby purported to apply the transformative test set forth by the California Supreme Court in Comedy III Productions, Inc. v. Gary Saderup, Inc., 25 Cal.4th 387, 391, 106 Cal. Rptr.2d 126, 21 P.3d 797 (2001), it essentially found the creation of a video game sufficiently transformative as to make every depiction protected by the First Amendment:

Ulala is more than a mere likeness or literal depiction of Kirby. Ulala contains sufficient expressive content to constitute a "transformative work" under the test articulated by the Supreme Court. First, Ulala is not a literal depiction of Kirby.. As discussed above, the two share similarities. However, they also differ quite a bit: Ulala's extremely tall, slender computer-generated physique is dissimilar from Kirby's. Evidence also indicated Ulala was based, at least in part, on the Japanese style of "anime." Ulala's typical hairstyle and primary costume differ from those worn by Kirby who varied her costumes and outfits, and wore her hair in several styles. Moreover, the setting for the game that features Ulala—as a space-age reporter in the 25th century—is unlike any public depiction of Kirby. Finally, we agree with the trial court that the dance moves performed by Ulala—typically short, quick movements of the arms, legs and head— are unlike Kirby's movements in any of her music videos. Taken together, these differences demonstrate Ulala is "transformative," and respondents added creative elements to create a new expression.

In Keller, by contrast, the court gave a very thorough analysis for a mere motion to dismiss. Although it cited to Kirby v. Sega once, it did not follow the blanket First Amendment protection Kirby provided to video games, instead sticking with the transformative test borrowed from copyright fair use by the California Comedy III decision. In particular, the Keller opinion suggests that the transformative test will go much further to look at the amount of transformation involved, rather than merely looking at whether the person is interjected into a video game environment.

EA's depiction of Plaintiff in “NCAA Football” is not sufficiently transformative to bar his California right of publicity claims as a matter of law.In the game, the quarterback for Arizona State University shares many of Plaintiff's characteristics. For example, the virtual player wears the same jersey number, is the same height and weight and hails from the same state. EA's depiction of Plaintiff is far from the transmogrification of the Winter brothers. EA does not depict Plaintiff in a different form; he is represented as he what he was: the starting quarterback for Arizona State University. Further, unlike in Kirby, the game's setting is identical to where the public found Plaintiff during his collegiate career: on the football field.

This certainly does not end the question of transformation. Stating that the work is not sufficiently transformative as a matter of law does not mean that a jury might not find sufficient transformation as a matter of fact, based on the evidence - only that the factual question will need to be litigated fully (and at considerable expense).

Undoubtedly this raises the stakes in this case and will likely lead to a very visible battle over blanket first amendment protection for communicative works like films and video games (which have First Amendment protection).

Personally, I favor a blanket rule that communicative works - films, books, publications and video games are exempt from publicity rights; goods, services and advertisements for same are per se violative of publicity rights without written permission; and the transformative test is for tee-shirts, souvenirs and similar items where the primary intrinsic value is the content on the item rather than the item itself. Such a rule would fix 95% of the publicity rights confusion.

Posted by Jon M. Garon at 07:47 PM | Permalink | Comments (0) | TrackBacks (0)

iPads, KinDroids and the Future of Books

The Apple iPad has finally become official. The 9.7 inch screen provides an expanded platform for iPhone apps and features a proprietary chip selected to move beyond the present state of interface interaction with the Apple A4 microchip. The $829 version will have increased storage and 3G wireless connection for a $30.00 monthly fee.

More interesting are the features missing - the camera, the ability to run Flash, and removable storage and battery.

The most important aspect is the ability for the iPad to run the iPhone apps. This makes it a natural extension for the happy iPhone owners. The $30 monthly fee may not make iPhone owners happy to pay the additional charge, and it would make sense for AT&T to bundle service to the two devices. It positions Apple as a much more economically significant competitor to Microsoft then it has ever been before. When configured with an optional keyboard, it makes for a powerful competitor to Windows, something Apple has never before achieved. Microsoft is trying to play catch-up with its Zune, but absent dramatic leaps in functionality, a Zune phone and tablet will have as much impact as the Zune music and video player has had the past two years.

The market response will be fast and furious. The price will likely be a ceiling on competition. The weight and functionality will also set a very high bar. But Apple is not alone. Amazon's recent decision to add apps to the Kindle will do little to make the single-function book reader into the competition. Microsoft will be trying hard with both Windows 7 devices and Zune compatible devices.

The greatest competitor is likely to be Android (or Android/Chrome) from Google. The platform has its own significant app base, a host of Google tools and of course the Google Book Search repository for the ebook experience. There are no Andoid announcements yet. Give it a week or two and be prepared for a new paradigm in books and media.

Authors - time to start writing again.

The Android platform may provide

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FTC Issues Second Report: Not Impressed with Virtual World Protections for Minors

In a recent post, I discussed the rather anemic FTC report on voluntary parental ratings and suggested that better standards are needed. The FTC has provided a much more pointed report on the concerns for virtual worlds, particularly regarding sexually explicit content in these worlds. The FTC Virtual World report includes the startling finding that "some virtual worlds designed for teens and adults allow – or even encourage – younger children to get around the worlds’ minimum age requirements."

Part of the difference between the two reports stems from the difference between sex and violence - sex can be obscene and is much more the focus of regulation. Violence is somehow more permissible in U.S. content. But sexually explicit material seems to pose a more obvious danger to children, particularly the youngest children. And sexual content comes from peer-to-peer interactions as much as from the creators of content, a more insidious form of abuse for the participant.

The findings, then are not surprising. The companies involved in virtual worlds are less responsive than their motion picture, video game and music counterparts. The voluntary efforts are less effective and more actively undermined by the companies in the field. This is certainly not true of every company and those who do well should be recognized. Parents should know more about their children's online activities and respond to those companies that intentionally cheat.

Ten-year-olds are told by their peers how to get past the controls on Facebook. (I know - it is amazing what the children in the back of the car will say, when the driver just listens without participating.) But the same behavioral advertising tools that allow vendors to know exactly when to send the birthday card seem never to be used to say "are you really three years older than you were when you signed up for the birthday club?"

The tools are available. A parent-centered behaviorial advertising model should be available to protect our children - even from themselves.

Does this sound like a First Amendment advocate has lost his focus now that his children are of that age? Not really. I'm not calling for virtual world police. But I am calling on the advertisers and publishers to give me tools to make my job easier and create presumptions of protection rather than presumptions of predatory conduct.

The default rules need to be designed to protect families; family profiles should enable computers to know who uses machines, so that when an under-age child logs on, the check against the family profile posted by me to my computer stops my child from lying about his age or at least sends me an e-mail asking if this is correct. The FTC also suggests that better language screening tools be employed for these sites and provides more suggestions.

Finally and perhaps most importantly, the 13-year-old line should not become the line of majority. Most of these sites should be adult-only sites. College students do not hang out with high school and junior high school students at dances or at the mall; neither should they do so online. Make sites more age specific. This may not necessarily 'clean up' high school virtual worlds, but it will at least separate out the activities among the peer groups.

More from the FTC:

“It is far too easy for children and young teens to access explicit content in some of these virtual worlds,” said FTC Chairman Jon Leibowitz. “The time is ripe for these companies to grow up and implement better practices to protect kids.”
The FTC surveyed 27 online virtual worlds – including those specifically intended for young children, worlds that appealed to teens, and worlds intended only for adults. The FTC found at least one instance of either sexually or violently explicit content in 19 of the 27 worlds. The FTC observed a heavy amount of explicit content in five of the virtual worlds studied, a moderate amount in four worlds, and only a low amount in the remaining 10 worlds in which explicit content was found.
Of the 14 virtual worlds in the FTC’s study that were, by design, open to children under age 13, seven contained no explicit content, six contained a low amount of such content, and one contained a moderate amount. Almost all of the explicit content found in the child-oriented virtual worlds appeared in the form of text posted in chat rooms, on message boards, or in discussion forums.
The Commission observed a greater amount of explicit content in worlds that were geared towards teens or adults. Twelve of the 13 virtual worlds in this category contained explicit content, with a heavy amount observed in five worlds, a moderate amount in three worlds, and a low amount in four worlds. Half the explicit content found in the teen- and adult-oriented virtual worlds was text-based, while the other half appeared as graphics, occasionally with accompanying audio.

Posted by Jon M. Garon at 08:49 AM | Permalink | Comments (0) | TrackBacks (0)

FTC Issues Detailed but Essentially Empty Report on Voluntary Entertainment Ratings

The FTC recently published its seventh report focusing on "violent entertainment products" that are available to children. The report focuses on the motion picture, music, and video game industries. It reports generally good self-enforcement of the purchasing guidelines. Of course, at 80%, one of five attempted purchases goes through without objection. Toys-R-Us is singled out for even worse enforcement: "The Commission’s undercover shop found that retailers are strongly enforcing age restrictions on the sale of M-rated games, with an average denial rate of 80%. Only Toys ‘R’ Us lags far behind on enforcement (56%)." So the first lesson of the report is that otherwise savvy tweens who would rather not be caught dead in the Giraffe's den of lame childhood wonder, is that they can at least stop by to pick up the goods other stores won't sell.

The in-store enforcement does little to stop those non-adults with access to online accounts and gift cards to purchase anything they want without limit. The role of the store cashier has changed from that of gatekeeper to the monitor light on a freeway on-ramp. They moderate traffic flow, but will not stop the consumption.

I don't suggest that the non-adult ratings should be anything more than advisory for parent. On the other hand, I disagree with the line of court decisions which suggest that obscene material must be sexual to be obscene. Even under the auspices of the First Amendment, a society can identify that content which is so far beyond the acceptability on depictions of violence that the material is beyond First Amendment protection. This, along with requirements that any such obscenity label, must be fully adjudicated before any police action can take place against the content, should give states the right to declare ultra-violent material as obscene. Like sexual obscenity cases, the actual cases should be rare and the evidence 'beyond a reasonable doubt' because of the potential criminal enforcement.

Without the ability to identify content as obscene, the parental guidelines do little to manage content. They provide some helpful information for our under age and adult consumers. They are like food labels. They make us feel guilty after we have binged, but probably have little impact on what we actually consume unless we individually choose to follow them.

I look forward to next year's report. It is nice to know some things won't change.

Posted by Jon M. Garon at 09:25 AM | Permalink | Comments (0) | TrackBacks (0)

FTC Updates Rules for Endorsements, Testimonials - Extending Regulation o Blogs and Social Media

The Federal Trade Commission announced this week fairly sweeping changes to the
FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising, which "address endorsements by consumers, experts, organizations, and celebrities, as well as the disclosure of important connections between advertisers and endorsers." Under the FTC Act the FTC has the power to stop unfair trade practices and fraudulent advertising.

The Guides, last updated in 1980, have been updated to reach commercial endorsements hidden as consumer comments on blogs and in social media.

According to the FTC "The post of a blogger who receives cash or in-kind payment to review a product is considered an endorsement" which will make the blogger obligated to disclose the payment (whether cash, free products or other inducements). The new Guides codify the existing policy that both the advertiser and the endorser may be liable for false or unsubstantiated claims.

In addition, the 'results not typical' ads should disappear. "Under the revised Guides, advertisements that feature a consumer and convey his or her experience with a product or service as typical when that is not the case will be required to clearly disclose the results that consumers can generally expect. In contrast to the 1980 version of the Guides – which allowed advertisers to describe unusual results in a testimonial as long as they included a disclaimer such as “results not typical” – the revised Guides no longer contain this safe harbor.

The result of this change is yet another indication that the days of the Web's Wild West past are disappearing. But for those of you who like your content wild and unsubstantiated, there remains hope. The Web is a very big territory and the FTC will be hard pressed to enforce its new policies. The rules have become much more rational, but it will take time and investment to make the reality on the ground (or on the virtual terrain) match the rules on the books.

Posted by Jon M. Garon at 09:44 AM | Permalink | Comments (0) | TrackBacks (0)

Google Book Search - A Horizontal Price Monopoly in the Fine Print

The Google Book Search is coming under increasing fire. Later in the month I will be giving a talk about Google at the Midwest IP Institute, but the summary paper I've written includes a bit on the settlement. Given the timeliness of that debate, I'm posting that section (footnotes and all) for more general access. The paper is available at SSRN. The excerpt follows:

Proponents of the Google Book Search settlement point to the societal benefits. Mark Lemley, a highly regarded intellectual property professor at Stanford, is also a lawyer for Google and explains the benefits as follows:

The settlement will permit Google to digitize most books published in the U.S. Members of the public will have access to electronic copies of previously unavailable works: It will be possible to search the content of the books for free, and to preview full pages from out-of-print books for free, allowing members of the public to find the books and the information they need. People who decide they want a book for themselves will be able to buy a digital version that they can read online. Libraries will be given licenses to provide free, complete access to out-of-print books at terminals in their buildings. And institutions will be able to buy subscriptions to vast catalogs of works. The public gets access to works that have, as a practical matter, been unavailable for years or decades and have never been searchable; authors and publishers get revenue from works that had long since stopped generating any. The result is clearly beneficial to all concerned.[1]

Lemley’s analysis, however, does not address the antitrust issues involved with Google’s position in this system. Nor does it address the costs associated with these benefits.

One cost associated with the benefit is borne by the rights holders to so-called orphan works, those copyrighted books for which the rights holder cannot be identified. In some cases, the orphan works are created when publishers go out of business without assigning their copyrights; in other cases orphan works arise from poorly managed estates, or in other situations where the rights transfers are forgotten, lost or mishandled. In these cases, no party has the legal right to enforce the copyright.[2] Parties who respect copyright law cannot find a legitimate copyright holder from whom to license the rights; infringers can act with impunity if they dare.

Despite suggestions to the contrary,[3] the practice experience for many entertainment attorneys may bear out the proposition that orphan works do not actually dominate the out-of-print market. In many situations, the copyright has descended to multiple family members by will or intestacy transfer. These family members have limited interest in policing the copyrights of out-of-print works unless the book suddenly becomes the focus of a possible film deal or other high-value transaction. In most cases, the rights holders for out-of-print books are known; they just are not interested.

From an antitrust perspective, the settlement provides Google a unique market position to be free of the risk of litigation for all orphan works.[4] Google will be the only company that can lawfully sell the orphan works or monetize advertising related to them. Every other company that elects to do so risks the orphan finding a parent. The Google Book Search highlights the orphan works problem and should encourage rights owners to seek their rights with the lure of obtaining lost revenue. Part of the settlement requires Google to support a non-profit, collective rights organization called the Book Rights Registry (“BRR”), to collect and distribute the revenue. The BRR is required to provide provenance information about the works claimed, further reducing the scope of the orphan works problem.[5] If the revenue is significant, the number of phantom works will shrink. If the revenue is not significant, there is no market to monopolize.

A legislative or court modification could further improve the situation. A second class action lawsuit or act of Congress should provide a safe harbor for any publisher that wishes to publish a work from the BBR which has not had its right owners identified following the five years that royalties have been collected on behalf of the work. The safe harbor would protect such publishers until the rights holders come forward, if ever. Such a solution would negate the cultural, rather than legal, monopoly that Google’s presence in the Book Search provides.[6]

While there is no doubt that Google will receive some network effect benefits from the orphan works, the scope of these rights is trivial to the overall publishing market. This should not be the source of antitrust concerns. The real value in improving the search algorithms and other products flows from the scope of the database, which is largely built by publishers that have acceded to the class action settlement as well as physical access to the public domain works in the collection.[7]

A different aspect of the case, however, does raise more serious antitrust considerations. The proposed settlement affords Google, the Authors Guild and the Association of American Publishers to agree on a pricing mechanism for digital works. For example, the settlement allows Google to set an institutional fee for access to the collected database on a full-time-equivalency or FTE basis.[8]

The economic terms for Institutional Subscriptions of Books will be governed by two objectives: (1) the realization of revenue at market rates for each Book and license on behalf of Rightsholders and (2) the realization of broad access to the Books by the public, including institutions of higher education. Plaintiffs and Google view these two objectives as compatible, and agree that these objectives will help assure both long-term revenue to the Rightsholders and accessibility of the Books to the public.[9]

To the extent that the Authors Guild and the Association of American Publishers agrees with Google that broad access and maximizing revenue are compatible, they are engaging in behavior that should be questioned under the Sherman Act.[10] The goal of authors and publishers is to maximize revenue. The goal may be achieved by raising prices or by lowering prices to encourage greater adoption, but in either case the activity of combining the class action of publisher and authors with Google is a massive agreement to set prices.

Similarly, digital copies of books may be sold at a price “to be determined by an algorithm (the “Pricing Algorithm”) that Google will design to find the optimal such price for each Book and, accordingly, to maximize revenue for each Rightsholder.”[11] This optimization and maximization allows Google to quantify the market for books based on sales data and other information that private publishers could never share with one another. Such optimization is unlikely to be in furtherance of price competition or the best interests of the consumer public.

Contrast the proposed Google settlement with the settlements involving ASCAP and BMI. In the case of the consent action involving the performing rights societies, the court administrating the consent decree retains jurisdiction over the competitiveness of the licenses.[12] Unlike the Google settlement, ASCAP and BMI are not left to set the market prices without supervision. “Although, under the terms of the BMI Consent Decree, BMI bears the burden of establishing the reasonableness of its rates, the setting of appropriate rates remains the responsibility of the District Court.”[13]

Absent this continuing supervision, the ability of the parties collectively – or Google on the parties’ behalf – to set the prices for digital content certainly appears to reach the same anticompetitive heights as ASCAP and BMI meet with regard to public performances. The court’s failure to recognize this in its preliminary approval is more likely to be the source of Justice Department interest than concern for orphan works. While the consent decree involving ASCAP and BMI suffers from excessive judicial entanglement, it has created a mechanism for fair licensing and public accountability for collectively managed private intellectual property resources. This is the accountability missing from the current proposed settlement. Worse, the internal dispute process is subject to a blanket of confidentiality, further hiding the mechanisms of the content pricing.[14]

As with other concerns, Google faces scrutiny over the Google Book Search in many countries. The outcomes and solutions are likely to vary considerably from country to country. In most countries, the performing rights societies are government agencies, so the ASCAP/BMI consent decree is unique in the world. As such, this proposed resolution is unlikely to be adopted by other nations. The Internet may be global, but nations remain territorial and apply their laws accordingly. Hopefully the Justice Department will insist that the court exercise far greater control over the pricing and other collusive aspects of the proposed settlement, inserting its own authority for that of the American Arbitration Association.

[1] Mark A. Lemley, An Antitrust Assessment of the Google Book Search Settlement, available at: http://ssrn.com/abstract=1431555 (last visited August 17, 2009).

[2] See Pamela Samuelson, The Dead Souls of the Google Book Search Settlement, 52 Comm. ACM (July 2009) available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1387782 (last visited August 17, 2009).

[3] Professor Samuelson suggests that orphan works are “most” of the seventy percent of the books in the Book Search repository. But that appears to conflate books for which the transaction costs of enforcing the copyright outweighs the value of the copyright of those works which have no one able to enforce their rights. See id. at 1.

[4] Id.

[5] Settlement Agreement, supra note __ at § 6.6(d).

[6] To comply with Berne, it may be necessary to make such a safe harbor apply only to U.S. works. The scope of such a proposal is beyond the scope of this article. Google has also recognized this issue:

Under the settlement Google will be able to open up access to truly orphaned books, but we still think more needs to be done to allow anyone and everyone to use these works. Any company or organization that wants to open up access to this untapped resource should be able to do so. The settlement is not a panacea, since it only covers a subset of orphaned works, provides only certain uses, and is not able to extend these uses to other providers. The need for comprehensive orphan works legislation is not diminished.

Derek Slater, Google Book Search settlement and Access to Out of Print Books, June 2, 2009, http://googlepublicpolicy.blogspot.com/2009/06/google-book-search-settlement-and.html (last visited August 16, 2009).

[7] Undoubtedly, the opt out designation for the class has helped Google win over these publishers. See generally, Richard Thaler and Cass Sunstein, Nudge: Improving Decisions about Health, Wealth, and Happiness (2009).

[8] See Settlement Agreement, supra note __, at § 4.1(a)(iii).

[9] Id. at § 4.1 (a)(i).

[10] 15 U.S.C. § 1, § 2 (2009).

[11] Settlement Agreement, supra note __, at § 4.2 (b)(i)(2).

[12]United States v. Broad. Music, Inc., 426 F.3d 91, 93 (2d Cir. N.Y. 2005) (“Because of the inherently anti-competitive conditions under which BMI and ASCAP operate, they are regulated by court-approved consent decrees. See BMI Consent Decree; ASCAP Consent Decree.”) citing United States v. ASCAP, 1940-43 Trade Cas. para. 56,104 (S.D.N.Y. 1941), as amended, United States v. ASCAP, 1950-51 Trade Cas. para. 62,595 (S.D.N.Y. 1950).

[13] Id.

[14] See Settlement Agreement, supra note __ at §§ 9.1, 9.8.

Posted by Jon M. Garon at 10:22 AM | Permalink | Comments (0) | TrackBacks (0)

Mickey a Mutant? Marvel's Comic Creations Line Up Behind the House of Mouse

The Wall Street Journal today reported that Disney is providing stock and cash to acquire Marvel Entertainment, in a deal reported to have a $4 billion total value. The transaction, which will garner antitrust scrutiny, will likely be one of the largest realignments in tent-pole film production.

Marvel has been the inspiration for summer blockbusters for at leas the last decade, and it owns thousands of characters with potential for films, television, Internet, theme park and product lines. Disney has done a better job than any company in maximizing the return for its copyrighted characters, so the combination will reach much further than the slate of the summer blockbusters.

Though not discussed by the Wall Street Journal is the extent to which Disney hopes to use the Marvel content to redevelop its web strategy, including a pay model for premium content on its exclusive pages. The ownership of the popular Marvel characters will shift Disney's median demographic up to the peak Internet age, adding content to its delivery system.

Marvel already has licensing deals for a number of its characters with Fox, Sony and Paramount. The existing relationships will slow regulatory approval, but are unlikely to halt the transaction, given the level of competition in the industry and the lack of market power held by any of these companies.

The full impact of the transaction will take years to play out on the silver screen, but Disney has been very savvy at maximizing value from lesser characters and ancillary markets. The potential is for web-based content and merchandise to begin appearing later this year.

Not only has this increased the value of Marvel, but it is likely to be a boost to its competitors as well. Interesting how the comic book is the one publishing sector growing in the Internet age.

Posted by Jon M. Garon at 10:19 AM | Permalink | Comments (0) | TrackBacks (0)

Redbox Kiosks update the battle over distribution control

In a fight reminiscent of Sony v. Universal, Universal and now Fox are trying to control the sales of their DVDs to Coinstar's Redbox DVD kiosks. Despite a pending lawsuit between Coinstar and Universal regarding the legality of the limits, Fox just demanded that it receive a 30-day delay in kiosk distribution.

The idea certainly is not new. The movie industry has long used distribution windows to protect the pricing of its entertainment product. First run theaters which charged the highest ticket prices (and were often owned or operated by the studios) received licenses to exhibit films before the small theater chains had access to those films. Later, the studios briefly tried to control which video stores had access to video releases.

But the legality of controlling the content has also been well established. The tactics used by the film industry to protect the first run theaters were declared an antitrust violation which was upheld by the Supreme Court in 1948 in U.S. v. Paramount Pictures. Sony v. Universal, which focused on the fair use of recording over-the-air broadcasts for time shifting, was as much about whether the studios could demand a license fee from the sale of the playback machines as about video taping. By losing the fair use claim, the studios lost the leverage to demand those licenses.

According to its press statement, "Redbox is available at more than 17,000 locations nationwide, including select McDonald's restaurants, leading grocery and convenience stores, and Wal-Mart and Walgreens locations in select markets."

Universal demanded a 45 day release window, revenue sharing and the destruction of previously purchased DVDs, all steps designed to support the sales price of DVDs. Fox is demanding the 30 day release window or "agree to better economic terms" according to newspaper reports.

The attempts by the studios to force other distributors not to sell to Redbox looks to be a violation of the Sherman Antitrust Act as a conspiracy or contract in restraint of trade. Moreover, the Copyright Act specifically provides that the owner of a particular copy of a copyrighted work has the right to resell or dispose of that particular copy as the owner sees fit, without any obligation to the copyright holder. Known as the "First Sale" doctrine, the U.S. law denies publishers and distributors the right to downstream control over copies of the work.

So where is the need to increase rental prices coming from? Blockbuster is certainly hurt by Redbox. Blockbuster is owned by Viacom, the parent of Paramount Pictures and a number of cable channels. (Paramount has not made the same demands as Universal or Sony, perhaps out of the more obvious antitrust concerns.) More generally, as the prices for videos in kiosks drop, the price pressure will increase on video-on-demand through iTunes or other retailers. Even more broadly, $1 video rentals make waiting until a movie comes to video more appealing than going to a movie theater. But the $1 movie also makes the idea of video piracy economically stupid and indefensible.

In the short run, the limits on Redbox actually hurt the DVD distributors because it reduces a revenue stream. It also paints the industry as greedy at a time of deep economic difficulty. It is likely to violate the antitrust laws and runs afoul of the copyright laws.

The studios should look at the big picture and rethink their kiosk strategy before real harm is done.

behind creating a 30-day window for

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Damages for Tenenbaum under Review

As widely predicted, the peer-to-peer file sharing case ended quickly and decisively after U.S. District Judge Nancy Gertner disallowed any evidence on fair use. The jury awarded $675,000 to the plaintiffs. But as mentioned in the previous post, the approach of Judge Gertner has been rather favorable for the defendants (despite the ruling on fair use and her frustration with Professor Nesson).

Taking a cue from a ruling in the prior jury trial ruling out of Duluth, Judge Gertner may follow some of the dicta by Judge Mike Davis in the prior case and review the appropriateness of the damage award in the context of due process and Eight Amendment claims.

Judge Davis wrote of his grave concerns regarding the disproportionate damage awards. This may be the decision that directly addresses the concern that a very few individuals are being held responsible for the costs to the entire industry. At the same time, of course, there may be evidence that there are far more songs traded than those actually named in the case. Jurors understand that as well, which can definitely impact their decision regarding damages.

Posted by Jon M. Garon at 10:27 PM | Permalink | Comments (0) | TrackBacks (0)

Is Court's Rebuke of Fair use in Tenenbaum P2P Case a Win for Fair Use?

According to a recent report from Arstechica, Judge Nancy Gerntner has thrown out the fair use claims in the file sharing trial of Joel Tenenbaum. The trial has been something of a circus due to attempts to broadcast the hearing over the Internet and a fairly bitter relationship between Harvard Law Professor Charlie Neeson and the Judge. She threw out their fair use defense as a matter of law in the hours just before the trial started.

Her ruling reads, in part:

To be sure, this Court can envision certain circumstances in which a defendant sued for file-sharing could assert a plausible fair use defense. Indeed, an amicus brief previously filed in this consolidated action by the Berkman Center at the Harvard Law School (on which Defendant's counsel was a signatory) outlined some of those circumstances—for example, the defendant who 'deleted the MP3 files after sampling them, or created MP3 files exclusively for space-shifting purposes from audio CDs they had previously purchased.' The Court can also envision a fair use defense for a defendant who shared files during a period of time before the law concerning file-sharing was clear and paid outlets were readily available.

The advent of the internet in the late 1990s threw a number of norms into disarray, offering sudden access to a wealth of digitized media and giving the veneer of privacy or anonymity to acts that had public consequences. At the beginning of this period, both law and technology were unsettled. A defendant who shared files online during this interregnum but later shifted to paid outlets once the law became clear and authorized sources available would present a strong case for fair use. It might matter, too, who the defendant shared files with—his friends, or the world—as well as how many copyrighted works, and for how long.

But the Defendant has offered no facts to suggest that he fits within these categories. He is accused of sharing hundreds of songs over a number of years, far beyond the infancy of this new technology or any legal uncertainty.

The outcome will be hard on the defendant. Mr. Tenenbaum has admitted to file sharing (which was a much better choice than Jamie Thomas' hard drive issues). Without any factual evidence on fair use to try and befuddle the jury, the case comes down to the need to document ownership of the copyrighted works and assess damages. The damage portion of the case could prove interesting, if Prof. Nesson can convince judge or jury that the statutory damage range violates the Eighth Amendment because it bears no relation to the value of the songs copies or the economic harm caused by any particular file sharer. (Each individual should not be responsible for the cumulative economic impact of peer-to-peer file sharing, assuming arguendo that the illegal sharing was one of the causes of the music industry's economic collapse.)

But Judge Gertner's denial of fair use is more generous than most. Her ruling adds additional support to the idea that sampling might be acceptable, that using peer-to-peer as a technological work-around for content owned in other formats (think albums and 8-tracks, not just CDs), or because the law was unclear when the technology was first introduced all suggest a very broad vision of fair use.

The ruling does nothing for Mr. Tenenbaum. I can only assume his lawyers were much more circumspect about the small likelihood of success with him in private than the rather blustery approach they have taken in public. But the ruling says a good deal about the expansion of fair use as a consumer protection statute, which is a significant expansion from its meaning during the past 40 years. The ruling is mindful that fair use must have its limits and protect the rights of copyright owners, but it goes further than most to recognize the interest of consumers as well.

The approach suggests that the court may pay more attention to the issue of damages than has been given in the past. So this case is still not over.

Posted by Jon M. Garon at 04:23 PM | Permalink | Comments (0) | TrackBacks (0)

Amazon's next Kindle class action suit

Only days after Amazon changed its refund policy in an attempt to settle a class action suit over Kindle eReader covers that had a habit of cracking the screens on the computers, Amazon finds itself in murky legal water after using its embedded software to delete books from consumer's Kindles that had been improperly sold to those customers.

As first reported by the New York Times, Drew Herdener, explained by e-mail that the company which uploaded the books to the Kindle Store had not acquired the rights to sell the books in the Kindle format. “When we were notified of this by the rights holder, we removed the illegal copies from our systems and from customers’ devices, and refunded customers,” he said.

Oops.

Of course Amazon was obligated to immediately stop selling the bootleg copies of the books. It could even face copyright violations for the sales of those books. Worse still, it might have been obligated to inform the purchasers that they had unintentionally purchased illegal copies and were responsible to destroy the illegal copies or face their own copyright liability. At that point, of course, Amazon would also be expected to refund the cost of those books and perhaps offer a coupon to those customers as a goodwill gesture.

But Amazon skipped the step where it informed its customers of the customer's obligation not to keep bootleg books. Instead, Amazon used its software to delete the books directly from the Kindle. As the New York Times correctly pointed out, the Terms of Service do not give Amazon the rights to exercise the self-help it just chose to use.

Use of Digital Content. Upon your payment of the applicable fees set by Amazon, Amazon grants you the non-exclusive right to keep a permanent copy of the applicable Digital Content and to view, use, and display such Digital Content an unlimited number of times, solely on the Device or as authorized by Amazon as part of the Service and solely for your personal, non-commercial use. Digital Content will be deemed licensed to you by Amazon under this Agreement unless otherwise expressly provided by Amazon.

Amazon's license does not include either self-help or revocation. If the Kindle is a networked computing device of the type protected by federal law, then the tampering with the content stored on that device could potentially be considered a federal crime. More likely, however, the interference with the devices done in a manner beyond the terms of service agreement will be considered a violation of the Federal Trade Commission Act.

Section 5(a) of the FTC Act, which provides that "unfair or deceptive acts or practices in or affecting commerce...are...declared unlawful." It is a broad, general catch-all. It was the statute that forced Sony to stop putting hidden encryption software on its music CDs, and will serve well in this case. Section 5(b) allows for administrative processes. Expect the FTC to respond to consumer complaints with an administrative process and an agreement by Amazon not to use its software tether in this manner ever again. Amazon will also pay a fine and the adminstrative costs of the investigation.

Whether this will satisfy the lawyers lining up to bring the class action lawsuit in this case remains to be seen. But I doubt it.

Given that the books deleted include George Orwell's Nineteen Eighty-Four, the lesson of a corporation being able to delete (or at least technologically - to alter) the text of a purchased book should not be lost on anyone. (A second irony is that a website has Orwell's complete works online.) This is more than a mere gaff. Amazon needs to be found liable for this mistake by a court or administrative process that makes it clear that companies cannot retain this right in their terms of service agreements.

So perhaps we should be thankful for the blunder Amazon has made. Deleting copies of Nineteen Eighty-Four should serve to provide another reminder of the liberties we take for granted and the technologies that have the potential to put those liberties at risk.

Posted by Jon M. Garon at 10:55 PM | Permalink | Comments (0) | TrackBacks (0)

Comic-Con's Coming - the future of Entertainment

On July 22nd, the 40th anniversary of Comic-Con will grace San Diego with its assortments of Wizards, Warlocks, Elves, Demons, Vampires, Warriors, along artists, writers, software programmers, and filmmakers. A funny thing happened to the costumed prom for geeks and freaks - the event has grown into the cultural touchstone of new media.

The film program feature over sixty films - not counting the special screenings and other film events outside of the competition. (Self-interest disclosure: My client, Derrick Comedy will be presenting a panel and more regarding their upcoming release of Mystery Team.)

The striking aspect of Comic-Con's breadth is the way in which Internet culture has shifted towards Comic-Con's agenda. Comic books are not necessarily a larger industry than at other times in history. Comics have waxed and waned in different eras. But comics do not lend themselves to e-book readers and may have some resilience to avoid digitization. At the same time, comics have come to dominate epic film making. Comic books are inherently visual and easy to conceptualize on the big screen. Filmmakers should never give screenplays to prospective investors. They are simply too difficult to translate into the finished product and tend to read very flat. Comic books, on the other hand, translate the power and pacing of film on the page.

In addition to film, comic books translate elegantly into video games and virtual worlds, an increasingly critical aspect of modern culture. Comic book characters have come alive on game consoles and computer screens for years. With better avatar software and increasingly interoperable software platforms, the superheros, villains, monsters and myths are freeing themselves from their creators' formats to populate computers and devices of the audience's choosing.

So look to Comic-Con as a the new harbinger of taste. And remember to sharpen your broadsword.

Posted by Jon M. Garon at 09:51 AM | Permalink | Comments (0) | TrackBacks (0)

New Choices to Pay for Webcasts

SoundExchange and a group of Internet "Pureplay" webcasters today agreed upon a new royalty formula to keep the Internet-only radio stations alive on the Net. Pureplay stations are those stations that exist only through Internet music streaming; those that have no terrestrial or sattelite versions,

Authorized by the Webcaster Settlement Act of 2008, the agreement will have the force of law once it is published in the Federal Register. Webcasters can elect to use this new settlement instead of the 2007 rates set by the Copyright Royalty Board. It uses a revenue sharing formula so that the costs of broadcasting are tied to the income generated by the broadcaster.

For this settlement, the agreement affects three rate classes are large pureplay webcasters, small pureplay webcasters (defined as those earning $1.25 million or less in total revenues with a cap on music streamed) and pureplay webcasters that provide bundled, syndicated or subscription services. It does not address the concerns of microwebcasters with revenues below the $1.25 million threshhold.

As presented by SoundExchange "SoundExchange views these newly negotiated rates as an experimental structure intended to provide an innovative approach for a particular genre of webcasters and does not consider these terms indicative of fair market rates. Time will tell if revenue sharing is the right move for both the recording community and webcasters,” added John Simson, Executive Director of SoundExchange.

The settlement provides a floor of $25,000 in royalties, so it applies to companies with significant revenue.

The newest settlement is only one of a myriad of potential licensing schemes available for Internet broadcasters. At the other end of the pay spectrum, non-commercial, tax exempt charities (501(c)(3) organizations), pay only $500 plus a usage fee for programming in excess of 159,140 aggregate tuning hours in any given month.

The settlement remains good news that the Internet tubes will continue to be stuffed with music: at rates webcasters can afford - and hopefully with payments that will reach the artists.

Happy Listening.

Posted by Jon M. Garon at 04:59 PM | Permalink | Comments (0) | TrackBacks (0)

New music industry appears on the horizon

Fortune Magazine covered the recent announcement that iTunes has crossed the 5 billion song download mark. "It took Apple (AAPL) nearly three years to sell its first billion songs (Feb 23, 2006), ten months to sell its second billion (Jan. 6, 2007), seven months to sell its third (July 31, 2007) five and a half to sell its fourth (Jan. 15, 2008), and five months to sell its fifth (June 19, 2008)." Moreover, the report states that 50,000 movies are purchased or rented daily. The apps store has been an even bigger hit, propelling sales of iPhones and the iPod Touch.

But Apple claims the iTunes store operates at just break even (though other reports suggest 10% to 30% margins, according to Fortune), including the movies and apps store.

Worse for the musician, the artists royalties for the less expensive digital albums reduce the price on which the artist's income is based.

So the artists need to take advantage of iTunes, Napster, and other online services while controlling more of their own marketing and revenue. The elements for this new model are just appearing on the horizon.

First, there are the sell-thru services, CD Baby, Tunecore and ReverbNation. Each provides artists the ability to move their music directly through the major digital outlets. The pricing models all provide a greater return to artists than the artists would receive working with traditional record companies. But access to the audience is not nearly enough. Artists need the promotion and marketing services provided by record companies to the top of their roster.

The answer to the promotion may come from new tools in the semantic web. Google provides simple, word-based alerts, but those don't have predictive power. Instead, services from The Echo Nest, a music recommendation platform built to read the music and the music press like a musician. In addition Band Metrics builds a media analysis - social networks, blog, YouTube, and the related music press. Both these services fall into the vaguely defined (but critically important) semantic web.

The semantic model utilizes algorithms to "read" the web, including non-indexed information, develop predictive models and track interests. It is a powerful tool to develop behaviorial advertising and allow companies to know what you want to buy around the same time you do.

So it should come as no surprise that the next piece of the new music model is advertising-embedded music.

ReverbNation has jumped into these waters with its "Sponsored Songs" program, "a new online music distribution program that will give music fans access to unlimited free song downloads from 1,000 artists. Through this innovative pilot program, a passive advertisement is embedded alongside the album cover art that is seen by music fans when they play the song on their computer, portable device or phone. The advertising in Sponsored Songs travels with the fans wherever they enjoy their music - following them onto the subway, going with them to the gym, and showing up at the party - giving the advertiser frequent and regular brand exposure, and the fan free music."

Windows is the first advertiser to participate in this program. The 'free' music is at www.MySpace.com/Windows.

The advertiser-based song support makes good business sense for advertisers. Songs are a low-cost distribution tool for the advertising - far lower than television or motion picture product placement. The movement of music in peer-to-peer systems, social networks and on YouTube makes the advertising inherently viral and trackable. And the pricing can already be modeled on a per-copy basis. Music fans may not like the advertising-based music, but for now, at least, the ad-based music is just one option.

A robust music industry free of the traditional record labels needs some powerful marketing tools. The semantic web tools available to artists or independent labels will allow them to target the interested audience directly. Since the semantic web provides such a powerful tool for advertising, it is inevitable that as the semantic web tools improve, the advertisers will become increasingly interested in music as its delivery device.

So the new shape of the music industry is shaping up. Let's just be sure that the artists continue to be paid.

Posted by Jon M. Garon at 10:34 AM | Permalink | Comments (0) | TrackBacks (0)

Today's the Last Day to Visit a Virgin - US Megastores will be no more

For two tortuous years, The British-based Virgin Megastores remained the largest music-only based chain. But the sales of CDs have dropped by half since 2000, iTunes has grown to control 20% of the market, Amazon has taken 8% of the market while WalMart and Target continue to stuggle to maintain their market share. Tower Records demise in 2006 merely heralded the dramatic transformation of music sales. With the sale of the last New York and Los Angeles Virgin Megastores, the chain will leave the U.S. It still has over 100 stores worldwide.

Rollingstone does find a glimmer of a silver lining in the long lines outside the 14th Street store as people pick up deeply discounted discs for their collections. But this silver lining is thin indeed. The economic downturn has put pressure on music sales and live ticket sales. The industry's strategies to stop illegal downloading have failed. As CBS news pointed out, the top album in 2000 had a 3.6 million CD sales opening week. This year's Green Day achieved the goal with 600,000 units. ('N Sync's No Strings Attached sold 9.9 million in 2000; Lil Wayne's "Tha Carter III" sold 2.88 million in 2008 - the first time the top album was below 3 million, according to Billboard. Coldplay's "Viva La Vida or Death and All His Friends" followed well behind at 2.15 million.)

Ringtones, video games and other music genres are replacing some of the revenue streams, but the shuttering of Virgin Megastores should not go unnoticed. Today may not be the day the music died, but we've lost a friend nonetheless.

Posted by Jon M. Garon at 08:23 AM | Permalink | Comments (0) | TrackBacks (0)

Pew Internet & American Life Project - 10 Years After Napster Publishes Monday (June 15th 2009)

The Pew Internet & American Life Project provides an excellent array of surveys and empirical data of the development of online media and its societal influence. The Project has covered music, teen behavior, election fundraising, the digital divide, and a host of issues.

One of their more interesting projects comes out next week. On, Monday, June 15th, it will report "The State of Music Online: Ten Years After Napster."

From the Project release:

In the decade since Napster's launch, selling recorded music has become as much of an art as making the music itself. The music industry has been on the front lines of the battle to convert freeloaders into paying customers, and their efforts have been watched closely by other digitized industries - newspapers, book publishing and Hollywood among them - who are hoping to staunch their own bleeding before it's too late.

Having some statistical data to help assess the changes in the music business and the dramatic shifts in audience access to music should assist the debate over the future of the music industry and the financing and delivery of music. Downloads are expected to overtake CDs as the most popular form of music sale by next year and likely to become the larger source of revenue in the year following. Strategies for giving away music as part of product sales have not proven too popular and the variety of Internet-based music services continues to change as companies struggle to find the right mix of content, service and profitability.

The Pew Report will not end the debate, but it should provide some better grounding for the assumptions in the media. Stay tuned.

Posted by Jon M. Garon at 07:20 AM | Permalink | Comments (0) | TrackBacks (0)

Bing & Pre - Outrunning the Crowd Instead of the Bear

One of my favorite business rules comes from an old scouting lesson: A bear jumps out of the woods and begins chasing the campers. Everyone runs in fear. A boy shouts to one of the girls, "I'll never be able to outrun that bear." "Don't worry," she replies as she passes him, "You just have to outrun someone else."

Smart businesses know that to succeed they need to outrun at least some of the competition, but they do not necessarily need to outrun all of it. We see a reminder of this in the recent launch of both Microsoft's Bing.com search engine and Palm's new smartphone, the Pre. In both cases, analysts have focused on the new products ability to topple the industry leaders - Google and Apple, respectively. But this is the wrong question.

Google has a dominant lead, overwhelming name recognition, and an advertising business model that makes search its only real market. Apple has redefined the music player business and built the iPhone into a hot gaming device and programming platform that can almost do everything. (But "almost" suggests not quite.) Neither will disappear with the launch of new competition.

But in less than a week, Bing has moved to surpass Yahoo in search, giving Microsoft a healthy market share and a chance to compete with Google. The Palm Pre has caught the attention of a loyal Palm following, a large swatch of IT departments unwilling to go down the ultra-proprietary Apple path, and even Verizon which intimates it will have its own Pre device in coming months. For individual buyers, the Sprint-Pre package has been reported the best value of smartphone now on the market.

So sure, Google and Apple will retain their place atop the leader boards. But the twin assault on Google may make it refocus on its core business instead of investing in Android.

For Yahoo, Google's Android division (and perhaps even Blackberry), the bear may just be getting a bit closer.

And with the slate of new and different devices coming out of Computex, the Tiawan computer show, the race from the bear (economy- that is) may be more confusing than ever.

Posted by Jon M. Garon at 07:57 AM | Permalink | Comments (0) | TrackBacks (0)

Accounting Tricks Not Just Used on the Little Guys

Cher, the Rock Legend and heir to Sonny Bono's musical legacy, has sued Universal Music Group according to a report by The Hollywood Reporter. According to the California state lawsuit just filed, UMG has used the well known tricks of selling albums through its controlled subsidiaries to avoid royalty obligations to Cher and song producer Snuff Garrett. In addition to Cher and their music producer, Bono's second wife Mary Bono-Mack and Bono's children also have an interest in the royalties.

Of course, these tactics are nothing new for the music industry. But as Cher's attorney reportedly commented, "Universal is playing a game of catch-me-if-you-can with one of the most popular and iconic artists of all time."

Still, at a time when the music industry is under intense scrutiny for its anti-piracy efforts and hoping to reform itself into a less parasitic industry, lawsuits like this which highlight the extent to which the labels take advantage of their artists are particularly embarrassing. If the allegations are true, the UMG should go well beyond a mere accounting correction and think about a more representative business for its artists.

As a result, I expect the stakes may be much higher than other cases where "accounting irregularities" are identified by their victims.

Posted by Jon M. Garon at 09:54 AM | Permalink | Comments (1) | TrackBacks (0)

All the world needs is Beatles

Led by Paul McCartney and Ringo Starr, E3 hosted a press conference for the September release of The Beatles: Rock Band. The game will be available for Playstation 3, X Box 360 and Wii, so everyone can get together and play the game.

The graphics range from stunning to strange as we experience the Beatles move from their 1964 Ed Sullivan barnstormer image to the psychedelic image of the '70s. Even more exciting may be the replica instruments, including brand name guitars and the logo-emblazoned drum kit.

The dedicated website explains it all:

The world’s leading music game meets the greatest band in history! The Beatles™: Rock Band™ gives fans what they’ve been waiting for: a chance to experience the Beatles’ legendary story from the inside. You won’t just watch and listen as the Beatles make rock history, create landmark records and conquer the world—for the first time, you’ll be part of the band.

Join John, Paul, George and Ringo onstage at legendary shows, behind closed doors in the recording studio, and in dreamscapes that bring their psychedelic imagery to life. The acclaimed Rock Band elements of interactive play and full-band capacity are here, but with brand-new additions. This will be the first music game to offer harmonies, challenging you to recreate The Beatles’ vocal blend. There are custom-built models of the instruments the band itself played; audio straight from the masters; and graphics that take you on a magical tour through the key moments in Beatle history.

Produced with the full cooperation of The Beatles and Apple Corps, the game is packed with fab extras. Master the songs to hear rare audio and view unseen photos from the archives!

Catch the trailer here:

Rock Band Beatles Trailer from E3 featuring Gameplay

The "game" may be less a platform for the current generation of gamer rather than a digitized re-imaging of history. With powerful graphics, games like this may become the next battleground on the "truth" of history. Academics might not view the history of The Beatles as the same as the Civil War, but all history is selective and written by the victors.

Playing with history may be taking on new meaning.

Posted by Jon M. Garon at 08:08 PM | Permalink | Comments (0) | TrackBacks (0)

Free Expression and Fair Play in Regulating Video Games

Earlier this month, California asked the United States Supreme Court to hear a case concerning the constitutionality of its statutory prohibition to the sale or rental of violent games to minors. At the district and federal court level, the case law has been uniformly against the position taken by Governor Schwarzenegger. In each case, the courts have found that video games are entitled to First Amendment protection and that the exceptions to the free speech rights of the video game producers (and their users) simply do not extend the concept of obscenity to obscenely violent games.

Of course, it was not all that long ago that the First Amendment was even applied to mere entertainment. (See, Playing in the Virtual Arena: Avatars, Publicity and Identity Reconceptualized through Virtual Worlds and Computer Games, http://ssrn.com/abstract=1334950.) But as video games have become more realistic, the distinctions between games and other traditionally protected forms of speech - novels, music, photography and film - have dropped away, providing video games the same level of protection as other forms of entertainment.

To enable the cities, counties and states to regulate the video games, clever politicians drafted statutes that closely mirror obscenity laws in crafting anti-violent game laws. California's summary is typical:

California Civil Code sections 1746-1746.5 prohibit the sale of violent video games to minors under 18 where a reasonable person would find that the violent content appeals to a deviant or morbid interest of minors, is patently offensive to prevailing community standards as to what is suitable for minors, and causes the game as a whole to lack serious literary, artistic, political, or scientific value for minors.

As explained in California's brief before the Supreme Court, "[t]he respondent industry groups challenged this prohibition on its face as violating the Free Speech Clause of the First Amendment. The court of appeals affirmed the district court’s judgment permanently enjoining enforcement of the prohibition."

Similar statutes have been struck down in every case. Instead, the industry relies on voluntary labeling. As an alternative, voluntary labeling is little more than a political figleaf. Voluntary labeling restrictions do little to discourage the purchase or rental of these games. Increasingly, the point of purchase for these products is through a computer download which gives parents little opportunity to review the content or discuss the appropriateness with their children.

So this returns us to the core question: should there be a legal standard for obscenely violent content, either for adults or for children? In my earlier article, Playing in the Virtual Arena, I made the following comment:

“[The Appellate Courts refuse] to label graphic content “obscene” to minors, finding that historically only sexual content can be deemed obscene. In doing so, the [courts reject] the attempt to make a new category of unprotected speech for violent content that is sold to minors, despite the lawful regulation of non-obscene sexually explicit content sold to minors and commercial advertising directed at minors. …

“While it is axiomatic that obscene materials (which have no constitutional protection for any reader) can be banned for children, the Supreme Court recognizes the state’s interest in protecting children from harmful speech that is beyond regulation for adults. While a modern court may demand a more substantial standard than that of Ginsberg, the interest in protecting minors from harmful content has not been repudiated.”

The simply phrased question presented to the Supreme Court is asking that this question be revisited. When California asks "Does the First Amendment bar a state from restricting the sale of violent video games to minors?" it is asking whether violence can ever be treated the same as obscenity.

As a frequent world traveler, I see media from across the globe. Many countries are much more comfortable with nudity and sex than we in the United States. Those same nations are shocked at the level of violence in our media.

I hope that the Supreme Court looks carefully at the question. I am distrustful of any government regulation of content and believe in a very expansive First Amendment. But the notion that violent content, no matter how repugnant is protected speech, while judicial panels can draw distinctions regarding levels of pornography simply makes no rational sense.

The question should be brought to the attention of the public. Certiorari should be granted and the debate engaged.

Posted by Jon M. Garon at 03:23 PM | Permalink | Comments (0) | TrackBacks (0)

Changes in Entertainment Consumption may lead to New Sales at Blockbuster

A study released last week by NPD Group stated that 63% of Americans have played a video game in the past six months, higher than the 53% who went to the movies during the same period. (The study notes that 94% of those surveyed listened to music, but does not report what percentage saw a movie either in a theater or at home.) The financial impact is that gaming accounts for one third of the consumer's average monthly spending, according to NPD survey data.

The statistics explain why companies selling video game systems and high-cost premium games are faring somewhat better in the economic downturn. Given Blockbuster's difficulties (see my previous post), the company's recent announcement that it will begin experimenting with the addition of video games to its subscription service should come as no shock.

Blockbuster intends to add the service to its online rental service, initially testing it for existing subscribers. The company has yet to announce the fee structure, but expects to add both an additional charge for the game rentals and count the games against the number of rental items the subscriber has "at home."

GameStop has been one of the more successful companies in the current economy, with its first quarter sales rising 13%. Ironically, the game company did not play the Wall Street game particularly well and lost some value because the sales were below analyst targets. Despite the analysist expectations and the potential of Amazon entering the used game market, GameStop's quasi-rental model of easy resale may be a better model than Blockbuster has in mind.

There are two problems with a game rental service. First, the demongraphics may put the gamers as younger members of the household. Parents will join Netflix for the family, and they will have as much benefit as the children in the household. Parents tend to buy game consoles and games for their children, and tend not to admit to being the primary consumer of these games.

Second, games should have a longer home-life than DVDs, so the idea of churning through 2-4 games per week seems less likely than doing the same with DVDs. Of course, in actuality, many of the DVDs sit in Netflix subscriber homes for weeks or months, but no consumer would buy the service if they intended this result. In other words, the upside of the video game subscription does not have the value that a DVD subscription can have.

If Blockbuster (or Netflix, Amazon or GameStop) changes to a pricing model based on quarterly rentals or a guaranteed return price, then consumers will see the potential to save if they play enough and consider trying the service. Like club discounts, subscription services are built on the differential between what the consumer thinks is possible and what the consumer actually does.

There is more money in gaming than ever before. But Blockbuster still has yet to understand the market.

Posted by Jon M. Garon at 10:36 PM | Permalink | Comments (0) | TrackBacks (0)

New Tools for the Self-Distributed Band

Both CD Baby and TuneCore announced expansions of their services enabling bands increased access to national distribution without the need of even a pressing and distribution agreement. CD Baby allows bands to create packaged CDs or digital offerings. They have expanded the service to allow for digital singles to be sold in addition to the digital albums, given greater flexibility for musicians pushing singles or adding cuts between albums.

At the same time, Digital Media Wire reports that TuneCore has expanded the services it provides through Amazon.com, and will provide a new pressing and distribution service for the nominal charge of $31.00. CD Baby has a $35.00 membership fee.

The two services are slightly different, with CD Baby having a larger revenue base, but TuneCore offering more international options and advanced production services. Since iTunes and Amazon have moved to dominate sales of music, the access to these markets by both services makes either a good choice for most bands.

For example, I love the TuneCore tee-shirt service. Having the tee-shirts made along with the CD artwork is a stroke of marketing brilliance. Mixing services, banner ad campaigns and other add-ons can push the costs up, these services represent the bits and pieces of the traditional music industry. The radio service Jango goes a step further, offering paid airplays - the Internet version of payola. Other services offer to promote songs to radio stations.

These new services reflect the unbundling of the traditional music industry. Musicians have the ability to select which services they want and what price they are willing to pay. The trend will likely result in each of these discrete services being unbundled from the label - only to be offered again on a package basis for the band. The choices seem to be growing quite rapidly.

Posted by Jon M. Garon at 11:05 PM | Permalink | Comments (0) | TrackBacks (0)

Blockbuster closer to the chopping block

In its weak quarterly earnings report, Blockbuster blamed some of the weakening sales declines on improved movie house attendance.

As reported in the LA Times, Blockbuster said "we estimate nearly 3 million more people are going to the movies each week in 2009" than in 2008, he said on a conference call with analysts. "This has been pulling traffic from Blockbuster stores."

The same article noted that Netflix revenue has not been damaged by the 14% increase in movie ticket sales. Netflix gained almost one million new subscribers.

The business model is shifting. People do not like to be reminded of costs each time they listen, read, or watch. Netflix understands the changing market. Blockbuster is tied down to a retail infrastructure that will not help them without dramatic restructuring.

For all its size, Blockbuster reports only $27.7 million net income on $1.12 revenue. Stock prices are tumbling.

Blockbuster needs some quick innovation. Perhaps becoming a retail showroom for Amazon as it launches its Kindle 2 and Kindle DX, or Sony and its stuggling line. Better yet, add a subscription model that is more generous than Netflix and add an e-book subscription service as well.

The time for incremental change is gone. Blockbuster must cannibalize itself or prepare to join the list of nostalgic names that people used to visit when getting their entertainment.

Posted by Jon M. Garon at 11:58 PM | Permalink | Comments (0) | TrackBacks (0)

Is it too late for three-strikes?

Europe is headed for an internal culture clash as French politicians endorse an industry-backed proposal to battle online piracy by barring people who repeatedly download illegal content. Known as three-strikes laws, the proposed policies would allow an ISP to remove customers who have repeatedly ignored notices to stop illegal downloading.

The French proposal is more circumspect than some similar proposals in the U.S., though it is often described as more far reaching. As a law, the system has some procedural safeguards in place to provide for a hearing prior to the enforcement of the provision. At the same time, if enacted the rule will be positive law rather than merely a policy of a particular Internet provider. Potentially, this gives its adoption a much more powerful impact.

Even as France is moving in this direction, the European Parliament is moving to ban such laws. In fact, the EU went a significant step further, adding language stating that "internet access is a fundamental right such as the freedom of expression and the freedom to access information."

Despite my deep concerns over Internet piracy and its real impact on jobs in the U.S. and development of new artistic works in the U.S. and abroad, the Internet has simply become too integrated into the public's access to news, governmental services, and social interactions to adopt this policy approach.

Increasingly, government documents, public records, and other essentials are available only on the Internet. The Internet is an essential tool used by most educational institutions. Arguably those cut off from their ISP can rely on public libraries for their access, but those cut-off without water and electricity can also be directed to public shelters.

The question is not whether shutting off the ISP is appropriate, but whether it should be done without some significant oversight. To the extent that the French proposal requires an administrative hearing, such a system might work. To be viable, such a hearing must put the burden on the ISP to demonstrate that the person abusing the ISP is guilty of the misconduct and allow for the accused misuser of the ISP to enter evidence in his or her defense.

In the modern information age, the ISP has taken on the role of a public utility, and like electric companies, water suppliers and gas companies, the utility should have a heavy burden before it cuts users off. Also, the ban must be limited in time. The British proposal, for example, caps the ban at one year. Three months would probably be sufficient for a first time offender unless the specifics were egregious.

The present proposals in the U.S. call for ISPs to control and regulate their users. This allows for none of the critical safeguards. The time-frame in which ISPs could have privately operated a three-strikes policy in the U.S. has probably passed. While Internet access has not been declared a fundamental right in the U.S., most of the public treats the Internet like a utility and any attempt to take self help will likely result in some form of utilities regulation.

The debate on this issue may continue for quite a while, but as the implications of a three-strikes policy gain attention, the popularity of this solution will likely erode.

Posted by Jon M. Garon at 11:30 PM | Permalink | Comments (0) | TrackBacks (0)

Nielson v. Google - who really knows what we watch

The Los Angeles Times reported a major "glitch" in the software used by its servers lost a significant amount of data collected for the May sweeps - the tracking which sets advertising rates for the upcoming television period. In fact, the article reports that the glitch was really the second significant failing by Nielson during the sweeps. Nielson also reportedly admitted that its users generally do not know how to use the set-top 'people meters' designed to track their viewing patters.

So why rely on Nielson for ratings? Google has already established it can predict the geographic distribution of flu by tracking its search engine data can probably predict the viewership of particular television shows based on audience reaction. There is no question that the data can be used to track very particular responses from viewers.

Of course, general viewership interest is not precisely the same as minute-by-minute viewership tracking. But then again, the 12,000 homes tracked has its own sample problems. In particular, it has long been known that the home patterns miss the university living environments for a large segment of the 18-25 demographic and may paint a distorted picture of the growing online viewership. Rather than people meters, surveys, e-mails, and other less-instrusive tools could be used by the 12,000 volunteers to gain far greater data. (But please, let's be sure those surveyed are participating volunteers.)

As a side note, television news does not even report on its viewership, with a recent study by the University of Pennsylvania's Annenberg School for Communication reported only 22 news reports related to television viewership trends in the past nine years.

Perhaps the two stories have something in common. The data regarding television trends is probably troubling to television executives. Revenue is down, but so is viewership. Perhaps its not the economy ... stupid.

Neilson's technicial glitches only remind us that television is an aging medium trying to keep to its traditions. Perhaps that's why there is such a good musuem dedicated to its history.

Posted by Jon M. Garon at 12:53 AM | Permalink | Comments (0) | TrackBacks (0)

Warner Music "disappointed" - Well aren't we all?

As reported by DigitalMediaWire, Warner Music is stopping all plans for future capital investments in digital distribution after being required to write down $33 million in its recent investments. As reported, Warner CEO Edgar Bronfman Jr. said he is "disappointed" with the MySpace Music joint venture, because it "has been slow to create monetization tools and to be able to impact revenue-generating way, the massive audience that they have been able to attract."

Having complained about MySpace failure, he signaled the retreat of Warner Music from its ownership model of digitial distribution in comments made to investment analysts:

"We do not intend to make more digital venture capital investments. The intention was to (invest in) young companies pursuing innovative business models. Some of these digital venture capital investments have not met expectations. It makes sense to recognize the very different valuations these companies are receiving in the current economic environment," said Bronfman.

In the print financial report, Bronfman sounded a different note: "We are laying the foundation for future growth by extending our digital presence and increasing the number of expanded rights agreements to now include about one-half of our current global artist roster."

Bronfman's frustration at failing to see any competitive success in digital distribution and the shift to focus on licensing agreements minimizes the role of the record label. Of course the frustration of Bronfman and Warner is not alone. Google is adding commercial film and television content because the YouTube model is not generating revenue either.

In the weakened financial environment, the warchests of traditional media have been tapped, leaving Apple, Microsoft, and Google to fund - and control - the future of digital media content.

Posted by Jon M. Garon at 12:52 AM | Permalink | Comments (0) | TrackBacks (0)

Brief update - Red Flag Rules Delayed Again - August 1st

Just as the Red Flag Rules were about to go into effect, The Federal Trade Commission announced another delay, stating that the agency would delay enforcement until August 1, 2009.

As noted by the FTC, however, "announcement does not affect other federal agencies’ enforcement of the original November 1, 2008 compliance deadline for institutions subject to their oversight."

The FTC explained its action as follows:

“Given the ongoing debate about whether Congress wrote this provision too broadly, delaying enforcement of the Red Flags Rule will allow industries and associations to share guidance with their members, provide low-risk entities an opportunity to use the template in developing their programs, and give Congress time to consider the issue further,” FTC Chairman Jon Leibowitz said.

Time will tell.

Posted by Jon M. Garon at 09:13 AM | Permalink | Comments (0) | TrackBacks (0)

Kindle Getting New Competition - From Kindle

For months, stories have been circulating regarding the rapid expansion of the book-reader market.

Sony has updated its Reader Digital Book, Amazon has recently begun shipping the Kindle 2, Libresco's iLiad Reader is already shipping a large-format reader in the UK, News Corp. and Hearst Corporation are reportedly developing their own developing large-format devices, and so the marketplace is getting crowded.

Re-enter Amazon. Reports originating from the New York Times state that Amazon will be announcing a new device later this week with a large, 8 by 10 format.

Having previously posted on the demise of the print newspaper, in March, I discussed the recommendation that newspapers give away book readers as part of subscription contracts. (In fact, I went further, urging pharmacies to brand the readers, put in applets to remind/confirm daily medication schedules, and give them to their heavy users as a way to improve medical delivery.)

There are two surprises in the most recent announcement. First is the speed with which Amazon is scheduling the creation and obsolescence of its reader formats. I have often been impressed with Amazon's use of social networking for reader feedback and both impressed and concerned regarding its vertical integration of self-publishing, but the realization that it must move from format to format in a few month will press all other developers in the field. If Amazon has a real shipping date for the new device, it will steal the serve from News Corp and Hearst, leaving the media publishers behind yet again.

The other surprise comes from the competing technology to digital ink, namely the netbook market. Apple has decried the netbook market, labeling it "junk." At the same time, however, reports have Apple in talks with Verizon Wireless regarding a large-format iPhone. Not precisely a netbook, not precisely a book reader, but potentially a new format ideally suited to the market.

The battle between Apple and Amazon will focus on the most valuable publishing space - student desktops. Newspapers may be fading, novels are entertainment, but highschool and college students consume millions of dollars in very expensive and very cumbersome print products.

While serving as a law school dean, I tried to advocate switching our materials to digital formats using netbooks. While I like netbooks very much, Apple is right - they simply did not deliver the necessary quality at a price to make the system work. The large-format digital book or iPhone will solve the problem. And Apple has some advantages. Students care less about the eye fatigue, they want color, and they want a fast browser. Moreover, since both devices are based on wireless phone networks, they free the academic institutions from the bandwidth problems of laptops. Students and schools have both been waiting for these technologies.

I expect Pearsons and other educational publishers to be scrambling to make themselves relevant. Ubiquitious classroom tablets will further energize social authorship of school texts. An academic Wikipedia on a classroom tablet will transform the market. It is too early to know whether Apple or Amazon will dominate, but everybody else has a lot of cramming ahead if they hope to catch up.

Posted by Jon M. Garon at 11:25 PM | Permalink | Comments (0) | TrackBacks (0)

New Action in the Google Book Settlement

A number of events have begun to reshape the Good Books proposed settlement. In a recent ruling, District Court Judge Denny Chin extended the fairness hearing by four months, until September 4, 2009. Judge Chin's order noted requests from authors and from Professor Pamela Samuelson from Berkeley School of Law as some of the parties requesting the extension to review the merits of the proposal.

In an e-mail from the Authors Guild, they continue to urge their members to stay in the class. "We don't recommend opting out -- this settlement is a good deal for authors, bringing their out-of-print books back to commercial life (while leaving the marketplace for in-print books alone...)."

Professor Samuelson's concern is not for the authors represented by the Authors Guild or works in the public domain but rather for the "orphan works," those out of print works where the copyright owner cannot be found or no longer exists. For example, if a copyright was assigned to a company that went out of business, it may not have transferred the copyright when winding up its assets. The copyright owner is therefore extinguished. Authors who have died without heirs knowing they have been given the copyright or rights escheating to the state also result in orphan works.

An orphan work cannot opt out of the settlement. For the public, this creates legal access to these works. But for other publishers, libraries and those concerned about Google's unique position in the new book marketplace, the settlement provides it a significant legal advantage over other archives. Of course, owners of orphan works are highly unlikely to sue. The risk of liability may be overstated by the other archives, but immunity is a wonderful thing. The Internet Archive attempted to benefit from this immunity by joining the suit as a defendant, but the court was unwilling to allow the claim. (How must it feel to fail to even be sued!)

The economic advantage is less clear. Despite the potential for 'the long tail' in publishing, Amazon is betting that the marketplace for published works is new works. But the breadth of the catalog may provide a strong market edge. Readers will use Google - allowing it ever more ad revenue. And as Google partners with Sony or others, it may leverage the scope of its collection into the sale of new works.

This leverage has raised concerns in the Justice Department. Concerns raised by Pearson and four other publishers regarding Google's use of the settlement to create a legal monopoly in publishing has triggered a Justice Department review into the settlement.

Ultimately, the case should generate a statutory amendment to the Copyright Act, giving other archives and libraries the ability to publish the same content as Google on similar terms, subject to opt-out provisions. There are some implications to such legislation and U.S. compliance with international treaty, but that can wait for another blog - or for someone to introduce the legislation.

Posted by Jon M. Garon at 09:55 AM | Permalink | Comments (0) | TrackBacks (0)

The Red Flag Identity Protection Requirements will fly May 1st

In 2003, Congress passed the Fair and Accurate Credit Transactions (FACT). Pursuant to the Act, the FTC issued regulations known as the "Red Flag" rules to govern the banks, credit unions, or others that holds "consumer transaction accounts." It also covers creditors (which includes telecommunication companies as well as mortgage brokers, car dealers and many others). After many delays, these rules officially come into effect May 1, 2009.

The point of these rules is to combat identity theft. Any covered creditors must establish a written identity theft prevention program to prevent identity theft in their practices. According to the FTC, the rules fall into five categories:

alerts, notifications, or warnings from a consumer reporting agency;
suspicious documents;
suspicious personally identifying information, such as a suspicious address;
unusual use of – or suspicious activity relating to – a covered account; and
notices from customers, victims of identity theft, law enforcement authorities, or other businesses about possible identity theft in connection with covered accounts.

These rules will originally scheduled to go into effect in November 2008, but had been delayed to give covered entities more time to put their programs in place. Theoretically, these programs should all be operating, but consumers are likely to see an increase in identity checks as companies begin to implement these programs with greater vigor beginning in May.

The FTC website "Fighting Fraud with the Red Flag Rules," though not the catchiest title, provides considerable help and guidance. I anticipate that given the FTC's role, these rules will quickly become best practices for all institutions holding identity data and that from there, the failure to meet those best practice could become an unfair trade practice if the situation were sufficiently egregious. In other words, the Red Flag Rules have the potential to be the national identity protection statute that has been missing for so long.

Even if it does not evolve directly into such a statute, state and even municipal lawmakers may look to these rules for guidance on additional legislation. This helps explain why companies were trying so hard to slow their adoption. But the time has finally come. Now we will see whether these regulations have any practical impact on the growing pandemic of identity theft.

Posted by Jon M. Garon at 06:55 AM | Permalink | Comments (0) | TrackBacks (0)

Will the Music Four follow the Big Three?

Reuters-UK reported the latest music sales figures from IFPI, the international recorded music trade association. The news is not good. Overall, recorded music sales fell worldwide by 8% to $18.42 billion. The U.S. accounted for much of the fall, dropping 19%.

The transition from CDs to digital downloads continued, with CDs dropping 15% globally while digital sales increased by 24%.

Also out from IFPI is its 2009 music report. Among the reports findings, "the Report highlights the critical problem of online piracy, and in particular the impact it is having on the local music sector in markets such as France and Spain." According to John Kennedy, IFPI CEO, "In France in the first half of 2008, album releases by new artists fell by 16 per cent and local repertoire accounted for 10 per cent of albums, compared to 15 per cent in the first half of 2005. In Spain, just one new local artist featured in the Top 50 albums from January to November 2008 - compared to 10 in 2003.""

The four leading music companies -- Vivendi's Universal Music Group, Sony Music Entertainment, Warner Music Group and EMI Group. -- account for most of the sales. Like the once Big Three U.S. automakers, these companies have seen drastic drops in work forces and changes in every aspect of their product acquisition, development and distribution.

The IFPI report is a bit rosier than the numbers suggest. Of course, there will always be a music industry, but what remnants of the former record industry will remain is not yet clear.

Posted by Jon M. Garon at 02:56 AM | Permalink | Comments (0) | TrackBacks (0)

Crowdfunding and Preselling - What you give makes all the difference

In a New York Times article, "Movie Makers Appeal to the Crowd, for Money," the newspaper reminds us that a direct appeal by filmmakers or musicians to their fans known "crowdfunding" can be used to raise considerable funds in support of a project.

The article focuses on buyacredit.com, a nicely designed website for three young British filmmakers, Adrian Bliss, Benjamin Robbins and Toby Stubbs. The filmmakers are approximately ten percent of the way to their goal of £1 million with a reported £100,000 ($149,000 U.S.) from more than 10,000 donors, reports the Times.

But the article does not explain how these filmmakers are going to bridge the other ninety percent budget gap or the details of crowdfunding and federal securities laws, so here are a few pointers.

Crowdfunding works by selling something directly to the public. In the case of buyacredit.com, the item sold is the purchaser's name in the end credits. That's it: £1 buys you your name on the list. The purchaser is not an investor in the movie.

The more traditional method of publicly funding a project is known as a public offering. In a public offering, a filing must be made by the seller of the securities with the Securities and Exchange Commission that provides an extensive amount of detail regarding the seller and its key executives, the use of the funds, and the financial risks associated with project. The purchasers are then entitled to an ownership interest in the seller - in an amount explained in the securities filing and the prospectus provided to every buyer. Selling film stock or other company stock can be done directly over the Internet, but it is a very detailed process and requires the guidance of securities laws experts. There are stiff civil and criminal penalties for getting this wrong, and I think the government has gone back to enforcing these laws again.

So if the buyacredit.com project is ninety percent short and the sale of corporate securities is too difficult, what should an aspiring filmmaker or musician do? The answer, my friend, is presell!

Crowdfunding is a great idea, but in most cases it provides too little value to the public, so it fails to raise sufficient funds. Instead, project funders should consider preselling the DVD or CD along with the special thanks credit. For $50, a supporter receives a credit in the film and an advance copy of DVD prior to its general release. Depending on the nature of the project, filmmakers could also consider adding a copy of the screenplay or production tee-shirts into the package (necessarily at a higher cost). Only 20,000 purchasers are needed for a $50 purchase to get the $1 million needed to produce the film. Add ticket sales at advance screenings and the income can really make a difference.

There are details that need to go into the sales contract to protect the filmmaker or musician and make clear precisely what the purchaser is receiving. But combining a creative sales package with a good crowdfunding appeal can move many projects along.

Posted by Jon M. Garon at 12:31 AM | Permalink | Comments (0) | TrackBacks (0)

Weakening Economy Reaches Video Game Industry

The buoyancy of the video game industry may be over. In March, the market research firm, NPD Group has reported a 17% drop in video game sales. This comes after thousands of job losses in the motion picture industry, and dramatic losses in the music industry.

The decline suggests that the constricting economy has slowly reached teenagers and college-aged consumers, who had been relatively immune from the first waves of the mortgage and banking collapses. The economy has trickled ever downward, reaching into the dorm room.

But there may also be other powers at play. The pricing of video games has been growing ever higher. The iPhone has become an excellent, a cool, high quality gaming platform (that happens to be a phone, music player and video player, etc.).

Pricing models should mirror the economy, not try to ignore them. The video game industry has just received a wake-up call. Expect to see some creative pricing in certain segments of the market. And some refusals to acknowledge the drop in sales by others until it is too late.

Posted by Jon M. Garon at 08:55 AM | Permalink | Comments (0) | TrackBacks (0)

Amazon's Ham-Fisted Rankings Deletion Highlights its Role

The Wall Street Journal reported on the accidental deletion of rankings for gay-themed books, ostensibly because of an internal cataloging mistake. As reported by the Journal, Amazon explained only briefly: "'This is an embarrassing and ham-fisted cataloging error for a company that prides itself on offering complete selection,' wrote Drew Herdener, Amazon's director of communications, in an email."

Reading between the lines, Amazon seems to have inadvertently relabeled all gay-themed works as adult material, a category for which it does not provide rankings. The same error is reported to have affected many health books as well.

The error highlights important phenomena regarding online content distribution. First is the importance rankings, and by extension, the entire editorial side of online distribution. The tracking of rankings does not reflect merely the vanity of the authors. Instead, the data provide significant sales information that authors and publishers can use to shape marketing strategies. The transparent nature of the rankings provides information on every book rather than merely one's own books. This gives every author tools that were once held by only the largest publishers.

Second, authors and publishers raise these concerns because of the assumption that readers rely on the rankings to make their choices. Shopping for books, movies or music is a highly subjective process. The cover artwork, packaging notes and reviews all have some influence on the decision to select one item over another. But into this mix comes the pressure to be "current" within our chosen genre. All things being equal, a buyer wants to select the item that everyone else in their interest group is also reading, watching or listening to. (There is another group that wants to be opinion shapers, selecting the newest works, but even here the publication data and rankings shape the selection. Rediscovering back catalog works is a much harder way to influence opinions.)

The reality of the importance of rankings tends to undermine the "Long-Tail Hypothesis" that the Internet will result in greater longer term life spans for creative works. The Internet is great at generating market segmentation, so that one's relevant rankings can be focused on lesbian autobiography, Samaritan religious theory, or quantum astrophysics without the category being lumped into a broad, general topic and lost. But newest and most popular will still apply within each category. While a consumer can theoretically find anything, the editorial tools will not send consumers into the digital stacks.

This leads to the last and most important insight from the controversy. The cataloging is an editorial process, subject to decision-making by the retailer. Amazon has elected not to provide ranking information to its adult selections. Why? Is it afraid of promoting Lady Chatterly's Lover (or its hard-core equivalent)? Walmart is known for controlling the stock in its physical stores and banning albums depending on the content or artwork on the cover of some popular bands. In the same way, the New York Times best seller list is an editorial process which excludes works like the Bible and Complete Works of Shakespeare out of the results. It does not necessarily reflect sales tracking data.

There has been the impression that Internet retailers like Amazon, Netflix, iTunes and others are less involved with editorial and economic selectivity than their physically constrained counterparts. But this is not the case.

So when reading the rankings in the future, we should be careful to remember that the rankings and categories, the popularity and even the availability have all been influenced by real people.

The ham-fisted editorial mistake may ultimately be remembered the most for its brief lifting of the curtain. We have been given a glimpse of the wizard and his hot air balloon.

Posted by Jon M. Garon at 01:39 AM | Permalink | Comments (3) | TrackBacks (0)

Kitnyot of Copyright - Minding the fences around the fences

As I mentioned in my last post, I am in Jerusalem. I write this on the day between the Seder (not the first Seder, as Israel has only one) and Sabbath. While touring Jerusalem, Masada and other areas in Israel, I have been struck by the lessons Torah provides for the topics on which I write. Admittedly, this blog may be one of the more obscure, but bear with me.

On March 20, 2007 the Bet Din or religious court of Machon Shilo issued a religious ruling ending the debate within Israel regarding the consumption of "Kitnyot" which literally means legumes, but has been extended to many oils and foods that extend the prohibition of Passover foods well beyond the biblical prohibition regarding the ownership of leaven during the Passover holiday. (The Hebrew ruling is available here.)

In many ways, the debate regarding kitnyot reminds me of the debate regarding the scope of copyright protection. For at least the past decade, since the passage of the Digital Millennium Copyright Act and the Supreme Court decision in Eldred, copyright academics and lawyers have been at odds regarding the proper fences or boundaries for copyright policy. This was precisely the same debate our rabbinic sages had when they debated the rules for various religious practices.

The sages taught that one should "put a fence around the law" so that a person would not inadvertently violate the law. As a result, Jews are not generally permitted to climb atop the Temple Mount which is home to the Foundation Rock underneath the Dome of the Rock. When the High Temple existed, the "Holy of Holies" - the Ark of the Covenant - sat on the location. Since we cannot know precisely where the spot existed, the law has been that Jews should not go atop the Temple Mount to avoid inadvertently stepping in a forbidden part of the mount. Of course this ruling also serves a political purpose of assuring the Muslim world that the Jewish community has no claim to the Temple Mount and the important Islamic holy places there.

Copyright policy has followed these same rabbinic precepts. First, there is a tendency to put a fence around the law - to protect an author from copyright infringement, the law added rules making it illegal even to disable technological measure to acquire the copyrighted works. This rule is a fence around the copyright law, making it easier to stop the trafficking of "black boxes" for descrambling cable signals and stealing encoded content. Similarly, the interpretation of fair use that allows copyright holders to show the potential market for the work as evidence that the unauthorized use was not a fair use tends to highlight copyright protection for what may be in addition to what already exists. But other rules, such as the extension of the copyright term and increasing civil and criminal penalties tend to be fences around the fences. They do little to protect the core values of copyright and frustrate the public.

The lesson of kitnyot, then, is that it may sometimes be appropriate to put fences around the law, but it is not appropriate to put fences around the fence. Banning beans, rice and a growing list of foods in recent decades had made it difficult for observant Jews to identify the purpose behind the laws, to meet the religious requirements, and to maintain their identity. Such fences may be useful for zealots to prove their fervor, but I expect that they encourage more and more people to throw up their hands and stop obeying all the laws.

The same risk exists with copyright. The RIAA policy of suing individual consumers for copyright infringement as a result of their unauthorized file sharing frustrated the public, even as raised awareness to the risks to the music industry. But with the education came a public backlash that did nothing to help the music industry.

As copyright academics and lawyers, we must strive to find the same common ground as did the Bet Din of Machon Shilo, so that the core legal values of copyright are reinforced to protect authors and artists while also removing those fences that do not serve creators or the public interest. One good example of such an attempt has been the Best Practices guide for documentary filmmakers, which explains fair use well and encourages broadcasters, insurers and filmmakers to use fair use rather than fear the ad hoc nature of the determinations.

More such examples should be highlighted. In such a way, we can tear down the fences that interfere with creativity while maintining those that protect authors and artistic integrity.

For artists, this is another aspect of their freedom and something worth celebrating during Passover.

Hag Sameach.

Posted by Jon M. Garon at 09:46 AM | Permalink | Comments (1) | TrackBacks (0)

Israel's IP as Diplomacy

I have had the pleasure this past week to be traveling in Israel, lecturing at Hebrew University and touring the country. As part of the trip, I have been trying to get a better understanding of both Israel's intellectual property laws and its approach to technology.

Recently, David Shankbone wrote a blog entitled "In the Israeli desert there is life." Shankbone described some of the efforts in the Negev desert to lower barriers for solar power use. He mentioned the Jacob Blaustein Institutes for Desert Research, "where some of the world's leading solar energy and water research is conducted" and the Ben-Gurion National Solar Energy Center (home of the world's largest solar dish). Shankbone identifies one of the driving forces behind Israel's push for solar energy is a political independence from oil. Shankbone does not specifically mention the geopolitical ramifications of cheap solar power would be a reshaping of the power politics within the Middle East.

Also today, I visited the Herzl Museum with my family. This interactive museum and movie provided an excellent introduction to the father of Zionism and the Nineteenth century vision of the Jewish state. At the end of the film, a projection of Herzl acknowledged that Israel continues to struggle to win peace with its neighbors and reconcile its relationship with Arabs both inside and outside the nation. But the Herzl personification also described the tremendous technological innovations of Israeli industry and the role Israel is playing in draught relief, food production, power infrastructure and communications as assistance for African nations and leadership around the world.

Thinking about the role of technological innovation as a diplomatic tool occurs too infrequently. The Ben-Gurion National Solar Energy Center reportedly reinvests all proceeds from its solar technology into research to further the efficiency and cost reductions needed to make the solar power available to people all over the world. It reminds me of Benjamin Franklin's decision to eschew the patent for his high-efficiency wood stove as a public benefit. The choice was highly regarded and earned him adoration.

In the same way, Israel's technological innovation makes it a leader among industrial nations. More importantly, its focus on clean water, renewable energy and other problems of the third world create the opportunity for the nation to improve the quality of human life around the globe. Such successes rarely earn headlines and the impact may be hard to measure. Nonetheless, it is a lesson in IP diplomacy that all countries should follow.

Posted by Jon M. Garon at 12:55 PM | Permalink | Comments (0) | TrackBacks (0)

Is the Netbook the Future of Computing?

Mercury News’ SiliconValley.com today ran a story suggesting a 65% growth in sales of netbooks this year. Frankly, had the economy been better, I would have expected sales in the 2X range from last year. Prices have fallen dramatically even as features have grown to make these new machines increasingly capable as a primary computer rather than merely a second machine.

The opinion piece by Brandon Bailey and Matt Nauman made an important connection to the potential for multiple operating systems on these machines. Of course, some ship with Windows and others with Linux, but the article speculated that HP might be exploring the potential for Google’s Android operating system. The small laptops might be an excellent place to extend these programs.

Personally, however, I’m rooting for Palm to enter this market with its Pre operating system. A package that includes a WebOS PDA phone and an 6x9 web device could redefine the market segment for Palm and for users who wish to connect these tools.

With a good book reader, automatic synchronization of files between the two devices and other features that tie the two machines together, the combination of a smart phone and its larger-screened companion might be the combination of devices that Palm has been trying to develop for years.

Posted by Jon M. Garon at 07:56 AM | Permalink | Comments (1) | TrackBacks (0)

The Softer Side of Piracy Enforcement

According to a story by AP writer Peter Svensson, AT&T, Inc. (ATT) will begin forwarding notices of illegal trafficking in pirated music to customers whose IP address has been identified by the RIAA. This approach replaces the notorious lawsuits brought by the RIAA against individuals involved with illegal file sharing.

As an attorney who represents artists who fear a loss of their profession to illegal downloading, as well as a writer, my sympathies are decidedly with the copyright holders. So it may be surprising that I’m very pleased with the quite moderate approach reportedly taken by AT&T.

According to the article, AT&T will forward the warnings, but it will not employ a three-strikes policy of terminating accounts for those individuals who have received three notices. Jim Cicconi believes that the notices are sufficient to accomplish much of the RIAA’s goals. According to AP, “AT&T will only forward the notice and won't threaten its customers with suspension of service or any other sanction. If copyright holders want to go further, it's up to them to bring court orders.” Cicconi added, "it seems to engender a good response from customers, and we've seen a fairly dramatic drop-off in file-sharing activity once people receive a notice, so we feel this works."

The Electronic Frontier Foundation has been critical of the RIAA, both because of its now abandoned litigation strategy and its agreement with ISPs to drop repeat offenders. But the effectiveness of iTunes and Amazon’s downloads are a direct result of slowing the growth of free, on-demand unauthorized music distribution. At some point, the public has become convinced that it isn’t worth the savings of $.99 to risk thousands of dollars in copyright damages.

The suggestion that the ISPs are unable to incorporate the three-strikes rules into their terms of service agreements is wholly misplaced. Most already require users abide by a host of rules to protect from unauthorized conduct.

So this is why I am impressed by AT&T’s approach. While doing less than it can, it is taking action to educate its customers and reduce illegal downloading without adding to the hysteria around copyright policy. Parents will have the ability to learn about their children’s use and misuse of the home computer; unauthorized activity on open networks can be curtailed; and the relatively few aggressive pirates can be identified.

As has often been the case with copyright throughout history, most enforcement comes from establishing acceptable norms of behavior and educating the public. As technology changes and new norms develop, the expectations shift. AT&T’s approach will serve as a good example of how to build these norms and improve satisfaction for both the customer and the copyright holders.

Posted by Jon M. Garon at 08:53 PM | Permalink | Comments (0) | TrackBacks (0)

The Next Generation of the Daily Read

In a previous post, I described my assumptions about the end of the printed newspaper. Now I’m not predicting a particular date certain when this will happen – and I’m certainly not alone in this prediction – but I want to suggest two new services that will hasten this end by proving benefits for the user that overcome the drawbacks of digital print media.

Tie Daily Newspaper to Daily Medications

The first suggestion is based on an “ageist” assumption that newspaper readership skews significantly to an older audience. If this is true, and if it is also true that newspaper readership is a daily habit, then I suggest that the Kindle, Sony eReader, iPhone or other device include a “daily medication” feature.

Proper daily dosing is a significant problem for health care. If your daily paper reminded you to take you pills, it would provide an important personal service. More significantly, if senior citizens could let their adult children (or out-of-home nurse) to know that their pills were taken each day, the person’s health outcomes would improve. The health care savings would easily pay for the cost of the devices, so that the adult children or insurance companies might even pay for the devices in exchange for agreements to sign up for the service. (I would also insist that the enrollment forms limit the use of the behavioral data. Insurance companies, for example, should be barred from adding punitive premiums for those who do not use the devices or skip their pills.)

There are other privacy issues that need to be regulated, but the medication data is already being utilized for behavioral advertising, so this usage only makes the privacy intrusion more obvious, so consider it a form of forced transparency.

Add Digital Coupons

The second suggestions extends the experiment of the airline industry to remove the last bit of paper from the e-ticketing system for domestic flights. One can now download a two-dimensional, encrypted bar code for an iPhone, Blackberry or other web-enabled device and use it to board an airplane. Gate agents can scan the screen in lieu of the paper ticket. The airline experiment tends to fizzle since most TAS officials require paper to scribble on as part of the screening process.

Grocery stores and other coupon companies have no security limitations. Newspapers can continue to tie special savings to their daily delivery of news and information. The newspapers could allow customers to “clip” the relevant coupons to a digital wallet that can be displayed on the device and scanned, keyed or wirelessly uploaded at checkout. Again, the cost savings from eliminating print coupons (and reducing the photocopying fraud that plagues grocery stores) would more than pay for even free give-aways of the devices.

Free Readers from the Pharmacies

Given the twin suggestions, I propose that pharmacies – which both accept grocery coupons and sell prescription drugs – be the source of free newspaper readers. If I’m right, then either Target or WalMart will shortly be offering free readers – which accept only their store coupons on course. Everything free comes with a price.

Posted by Jon M. Garon at 06:00 AM | Permalink | Comments (1) | TrackBacks (0)

Newspaper Revitalization Act just another milestone on the road to the end of news print

A new piece of legislation has been proposed by Senator Benjamin Cardin of Maryland (D), in which he hopes to provide an additional business model for newspapers.

The Newspaper Revitalization Act would allow newspapers to operate as non-profits, if they choose, under 501(c)(3) status for educational purposes, similar to public broadcasting. Under this arrangement, newspapers would not be allowed to make political endorsements, but would be allowed to freely report on all issues, including political campaigns. Advertising and subscription revenue would be tax exempt and contributions to support coverage or operations could be tax deductible.
The measure is targeted to preserve local newspapers serving communities and not large newspaper conglomerates. Because newspaper profits have been falling in recent years, no substantial loss of federal revenue is expected.

Not too long ago, Jacob Weisberg wrote in Newsweek, lamenting the troubles of the newspaper industry.

The sorry predicament of the newspaper industry has given rise to a testy argument about journalism's future. In one corner are editors who believe news organizations committed a fatal mistake by giving their content away for free on the Internet. These people think that a successful digital business model demands revenue from users as well as from advertisers.
Another camp favors philanthropic support … more like universities, with their independence underwritten by charitable endowments. A third faction, which includes most Web journalists, doubts both those models and looks to online advertising for sole support. The New York Times now draws about $200 million in annual revenue from Internet ads—not far short of the cost of its global editorial operations. Without a print edition, the Times would be smaller business, but quite possibly a better one.

In presentation I made last week, I mentioned what I see as the eventual future of the newspaper:

Physical delivery has been fully eliminated [or disintermediated to keep with the theme of my presentation]

Kindle, micro-laptops and ever-lighter readers will put digital papers on kitchen tables and in bathrooms

Behavioral advertising and personalized content will have moved beyond geography

Reading patterns, click-thru, purchasing patterns will inform the make-up of the paper
Tied to other-site searches, uses, contact books, etc.
The customization by the reader will be secondary to the customization done by the ‘paper’ on behalf of the reader, based on the reader’s tracked activities

Consolidation
- 2-5 national papers
  Network of local content providers (which in some cities will provide local content for all nationals)

Oligopoly will allow for price protections on advertising

Winners will be highly profitable
Affinity will dictate winners and losers

The specifics of the Newspaper Revitalization Act will need to be changed. There is simply no reason to provide newspapers a better tax arrangement than the arrangement available to public broadcasting or educational institutions. Advertising revenue should be treated as taxable income just as it is in the other media. But this will not create problems for those newspapers which choose to become tax exempt charities, since the taxable income will be offset by the companies operating expenses.

For many communities, physical delivery of newspapers will continue to be important for the next few years, until the technologies for digital paper make these devices cheaper, lighter and easier. But the time will be coming. The new legislative proposal is just another milestone on the road.

Posted by Jon M. Garon at 07:23 AM | Permalink | Comments (1) | TrackBacks (0)

Any hope left for Palm?

I have been a fan of the Palm for many years, and like many I miss my Treo. It worked. The contacts were always available, the web applications were nicely integrated, and I actually prefer a stylus to buttons or my fingers. (More specifically, I prefer a stylus whenever my children borrow my phone and rub chocolate, peanut butter or mud over the screen.)

So I am hoping that the new Palm Pre breathes new life into Palm.
According to the New York Times, "Palm reported smartphone revenue for the quarter ending Feb. 28 declined to $77.5 million, from $171 million the preceding quarter. Its net loss of $94.7 million was its seventh consecutive quarterly loss."

Will the Pre be enough to return Palm to a meaningful contender dominated by Apple's iPhone and Rim's Blackberry? No. Sorry.

But as the Washington Post described Sprint as continuing to "hemorrhage subscribers who have flocked to rival wireless carriers."

The iPhone significantly benefited AT&T but unless the Pre is a miracle, the third entrant into the modern smartphone battle will be unlikely to convince consumers to switch to a carrier that is dying on the vine. Instead, the carrier may be the most important consideration regarding the choice of smartphones. So long as Palm stays with its exclusive relationship with Sprint, the potential market will be quite limited.

Making the WebOS interface better than iPhone or Blackberry will be a challenge, particularly since Apple will be launching its third generation software around the same time as Palm finally gets its products to market. Palm also promises additional products built on the WebOS, but none of these have been demonstrated yet.

I really hope Palm finds a strategy to succeed. But a good strategy requires understanding the customer needs, not just building a better product. Poor alliances make for very poor launches.

Perhaps it isn't too late? Here's hoping.

Posted by Jon M. Garon at 09:47 PM | Permalink | Comments (3) | TrackBacks (0)

Entertainment & Entrepreneurship

April 26, 2010

Wiki Authorship, Social Media, and the Curatorial Audience

March 04, 2010

Keller v. Electronic Arts - Reclaiming some California Publicity Protection in Video Games

January 27, 2010

iPads, KinDroids and the Future of Books

December 11, 2009

FTC Issues Second Report: Not Impressed with Virtual World Protections for Minors

December 10, 2009

FTC Issues Detailed but Essentially Empty Report on Voluntary Entertainment Ratings

October 06, 2009

FTC Updates Rules for Endorsements, Testimonials - Extending Regulation o Blogs and Social Media

September 08, 2009

Google Book Search - A Horizontal Price Monopoly in the Fine Print

August 31, 2009

Mickey a Mutant? Marvel's Comic Creations Line Up Behind the House of Mouse

August 09, 2009

Redbox Kiosks update the battle over distribution control

August 01, 2009

Damages for Tenenbaum under Review

July 29, 2009

Is Court's Rebuke of Fair use in Tenenbaum P2P Case a Win for Fair Use?

July 20, 2009

Amazon's next Kindle class action suit

Comic-Con's Coming - the future of Entertainment

July 07, 2009

New Choices to Pay for Webcasts

June 25, 2009

New music industry appears on the horizon

June 14, 2009

Today's the Last Day to Visit a Virgin - US Megastores will be no more

June 12, 2009

Pew Internet & American Life Project - 10 Years After Napster Publishes Monday (June 15th 2009)

June 08, 2009

Bing & Pre - Outrunning the Crowd Instead of the Bear

June 03, 2009

Accounting Tricks Not Just Used on the Little Guys

June 01, 2009

All the world needs is Beatles

Free Expression and Fair Play in Regulating Video Games

May 27, 2009

Changes in Entertainment Consumption may lead to New Sales at Blockbuster

May 23, 2009

New Tools for the Self-Distributed Band

May 17, 2009

Blockbuster closer to the chopping block

May 13, 2009

Is it too late for three-strikes?

May 09, 2009

Nielson v. Google - who really knows what we watch

May 08, 2009

Warner Music "disappointed" - Well aren't we all?

May 07, 2009

Brief update - Red Flag Rules Delayed Again - August 1st

May 04, 2009

Kindle Getting New Competition - From Kindle

May 01, 2009

New Action in the Google Book Settlement

April 28, 2009

The Red Flag Identity Protection Requirements will fly May 1st

April 23, 2009

Will the Music Four follow the Big Three?

April 21, 2009

Crowdfunding and Preselling - What you give makes all the difference

April 20, 2009

Weakening Economy Reaches Video Game Industry

April 15, 2009

Amazon's Ham-Fisted Rankings Deletion Highlights its Role

April 10, 2009

Kitnyot of Copyright - Minding the fences around the fences

April 06, 2009

Israel's IP as Diplomacy

April 03, 2009

Is the Netbook the Future of Computing?

March 28, 2009

The Softer Side of Piracy Enforcement

March 26, 2009

The Next Generation of the Daily Read

March 25, 2009