A-Clue.Com
by Dana Blankenhorn
Volume V, No. V
For the Week of February 05, 2001

This Week's Clue: Dealing with Digital Copyright

This Week's Clue: Dealing with Digital Copyright

SSP (Shameless Self Promotion)

A Challenge to Nielsenism

Death to the "Incubators"

Dopey, Goofy, or just Clueless?

Stonewalls: Good for Generals, Bad for Business

Clued-in, Clueless

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The question of digital copyright is coming back to Congress since it has become evident the 1998 Digital Millenium Copyright Act isn't working .

Industries subject to the new law don't believe this, and their lobbyists are actually demanding more protection. This comes despite the fact that, under the act, courts have already declared certain software illegal, certain hyperlinks illegal, and the hacking of encryption codes - previously thought the key to privacy - also illegal . The fact that the DMCA implements an international treaty, the World Intellectual Property Organization (WIPO) also means the bans are worldwide.

Let me propose a principle. Laws that can't be enforced are useless. Like laws against drinking by college students, they only serve to reduce respect for all law. Law should be a bright line agreed-upon by consensus, so those who break the law face universal condemnation. Is this the case for the DMCA? Of course it isn't.

The digital copyright conundrum is a job for the market, not the legislature. What's needed is a business model under which artists are compensated transparently and seamlessly, one users can accept. The system by which radio stations pay for the music they broadcast is a fine model . The problem with implementing this lies in the middle-men, music companies like BMG that sell CDs and expect a cut on value they don't create.

Publishers fill two roles. They put product into the channel, and they adapt products to the market's needs. In book publishing they identify writers whose words might sell, edit them, and push them into bookstores. In music they "discover" and "produce" Britney Spears' sound, helping define her look and publicizing her so people like my daughter will demand I buy her next release.

We all know mass media has made the copyright industries a "winner take all" affair. What isn't as well reported is that this has made copyright holders desperate to completely exploit the few winners in order to pay the bills of everyone else (and thus maintain control of the industry's future). When Audiogalaxy  allows you to download a song that's out of print or one that hasn't found a market yet, no one is hurt and the artists actually benefit. When you download Spears' "Baby One More Time," or even a parody of that song, she and her publisher get hit in the wallet.

How do we compensate the hit-makers as well as the hitless wonders? One way would be to calculate the number of copies of a song that are passed on a network, and to compensate the biggest downloads on a sliding scale. A song that's not passed often is worth 1/10th of a cent for each pass, one that's passed 1 million times is worth 10 cents. Users could be charged either by subscription or through pre-paid accounts.

This is how artist compensation works in book publishing - as your sales increase the percentage the author gets from each book goes up. A version of this system could be applied to text files and video files after it is proven to work on music files. ISPs could be enlisted as collection agencies, earning transaction fees that will keep many in business.

All these funds, and these databases, would go into a common pool managed by companies that already have experience in the radio business like BMI. BMI would pass these monies either directly to the artist or to their publisher, depending on the contract, just as is done in book publishing.

None of this is really hard to do. The problem is that the publishers want their money up-front. This is as important to them as Microsoft's control of the operating system. With the gatekeeper function the record companies can mold popular tastes toward their artists and control the industry. Without it they can't.

The next move is up to BMI and its chief rival, ASCAP. They can either endorse guaranteed-to-fail systems like SoundExchange controlled by the big publishers or step up to the plate with something better.

One thing should be clear, however. The digital copyright war won't be won in courts or legislatures. It can only be won in the market. The sooner publishers get that message the better.



SSP (Shameless Self-Promotion)

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My Clues come from daily writing for ClickZ. I write monthly for Crain's B2B, and Boardwatch. I write weekly for WorkZ and Internet Content . My monthly column has launched in Publish Magazine . I have written for Advertising Age and others as well. Yes, I'm very busy, but you can still buy my book. (Yes, I am working on a new one.)

Remember that it's journalism that keeps the Clues coming...


Takes on the News

A Challenge to Nielsenism

Jakob Nielsen teaches that you test the usability of your site by having some people who are unfamiliar with it try to do something.

But with more and more people getting more and more experience using your site, should you still limit yourself to this? Not according to Catalyst Group Design of New York . (Offering a Web version of the paper alongside the Adobe Acrobat version would have been nice, guys.)

Site design should also reward frequent users, the company says , and the point is well taken. As people become accustomed to using your site even a redesign may leave them cold. Here are some ideas that make sense to me:
 

The sites most likely to have learned these lessons are those that are most heavily used in the consumer market, like Amazon and CDNow. But there's no reason why you can't learn from their experience.

Today's Clue: A Challenge to Nielsenism

Jakob Nielsen teaches that you test the usability of your site by having some people who are unfamiliar with it try to do something.

But with more and more people getting more and more experience using your site, should you still limit yourself to this? Not according to Catalyst Group Design of New York . (Offering a Web version of the paper alongside the Adobe Acrobat version would have been nice, guys.)

Site design should also reward frequent users, the company says , and the point is well taken. As people become accustomed to using your site even a redesign may leave them cold. Here are some ideas that make sense to me:
 

The sites most likely to have learned these lessons are those that are most heavily used in the consumer market, like Amazon and CDNow. But there's no reason why you can't learn from their experience.

Death to the "Incubators"

A technology incubator can be a wonderful thing. It can give ideas time, space, and money to prove themselves. It can bring together technical, business, and marketing expertise that brings in jobs. But is it a business model? No, it is not.

The purpose of an incubator should always be to get out of the way. If it makes an investment in a company an incubator should be looking to cash out quickly, so that money can be put into more start-ups. When an incubator overstays its welcome it becomes a mutual fund and (worse) a mutual fund masquerading as an operating company.

Such were the stories of CMGI , Internet Capital Group and idealab . During the boom times these guys were so successful that every new Internet billionaire wanted to be them - at least half-a-dozen who were lucky to cash out in 1999 said they would plow their money into becoming the "next" CMGI.

Remember the lesson. An incubator is a venture fund, whose benefits are public and not private. A holding company must make sure all its holdings make money or it's worthless.

Dopey, Goofy, or just Clueless?

It takes real chutzpah to waste billions of dollars and blame others for the debacle. So raise a toast to Michael Eisner, the biggest dope of the Internet economy .

Let's recount a few things, shall we? Eisner bought Infoseek from Harry Motro's team, chased everyone out, combined it with Paul Allen's Starwave, chased everyone out from there, mixed it all together into Go.Com (whose logo was a rip-off of goto.com), and a year later it's all gone?

Who gets the blame for the $790 million write-off shareholders have to eat, and the 400 jobs lost in Sunnyvale ? It should be Michael Eisner. But you can bet it won't be.

Stonewalls: Good for Generals, Bad for Business

"There is Jackson standing like a stone wall." Steadfastness in the face of enemy fire is an admirable quality, but when businesses ignore reality they make enemies. (Nixon helped redefine the word as "to be uncooperative, obstructive, or evasive.") Journalists and workers don't forget when they're stonewalled. If you want to be around for the long haul stonewalling is a very bad strategy.

Microsoft has been absolutely silent concerning its recent technical problems . This causes speculation that is damaging in the market, and it will hurt the company's credibility for years to come. What should they be saying? How about, "we don't know, we're working with authorities to catch the criminals, and we'll get back to you as soon as we know something, but we can't speculate."

Sometimes stonewalling can put a big red bulls-eye on your back. Cobalt Group CEO John Holt gave himself one recently by e-mailing employees that unions aren't welcome even in the absence of an organizing drive! Holt said he even updated his employee handbook to signal union antipathy. The proper thing to do (especially in Washington state) is to just shut up.

What makes these actions worse is that the ill will generated seeps out into the rest of the industry. You are more likely to face a skeptical press and union antipathy because of this Cluelessness.

Clued-in, Clueless

Clued-in is Verio for refusing to immediately knuckle under to MPAA demands it close a cryptography site for posting DECSS code. The hosting market is a small town, and this move will resonate all over it, to parent NTT's benefit.

Clueless is Jupiter Media Metrix , for predicting that "promotional e-mails will become a major ISP revenue stream by 2005." AOL continues to lose market share, and you should examine what percentage of its households use AOL exclusively and how many have it as just an alternate. (AOL is the only company to have "monetized" delivery of promotional e-mails.) Any ISP that gets in bed with spammers will lose customers to those that don't. This is more great news for ISPs that charge users fair prices.



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