Techdirt. Stories about "realnetworks"

Ding Dong: Another DRM Is Dead... And With It All The Files You Thought You Bought

Mike Masnick — Tue, 1 Nov 2011 09:45:23 PDT

Every few months, it seems, we hear of another online content store dying or changing... and with it, out goes all the content that people thought they were "legitimately" buying, because the connected DRM server goes dead. It makes you wonder why anyone buys any DRM'd content at all, knowing that in a flash, it might all go away. The latest is that the online music service Rhapsody is officially turning off the lights on its "RAX" DRM, such that anyone who has RAX files had better go through the painstaking process of "converting" all those files ASAP, or they're all gone:

Greetings! This is another reminder to convert RAX music files NOW to avoid losing any of your music. We want to make sure you can continue to enjoy all your music for as long as you please.

On November 7th, 2011 Rhapsody/RealNetworks will no longer support certain music files you purchased before July 2008. These songs will continue to play after November 7th unless you change to a new computer or substantially update your current computer. However, we strongly recommend you back up these RAX tracks to audio CD to ensure you can continue to enjoy your music.

Once you take this small step, you can continue to play these tracks on your audio CD or rip them to any format you desire and play them on your PC.

Please don't delay - after we shut off support for RAX files, you will not be able to play them if you move to a new computer or upgrade your operating system.

I like how Rhapsody pretends that backing up all these songs to CDs, then re-ripping them back to your computer, is just "a small step."

In the meantime, those who continue to insist that music is "licensed" and not "bought," can you explain what happened here? If the music was truly "licensed," why can't Rhapsody just provide non-DRM'd versions of the same music? Once again, all this really does is make you wonder why anyone "buys" any DRM'd product.

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RealNetworks Destroying Dutch Webmaster's Life Because He Linked To A Reverse Engineered Alternative

Mike Masnick — Fri, 26 Aug 2011 10:15:57 PDT

Via Slashdot, we get the story of a Dutch webmaster who is involved in a ridiculous lawsuit that RealNetworks (it still exists?) is putting him through. Apparently there's a bit of free software out there called Real Alternative which, not surprisingly, is an alternative player for Real Media files. RealNetworks hasn't been happy about this software for a while, even though it seems unlikely that many people still encode things in Real Media's format. Either way, the company was successful in scaring the main distribution source about a year ago and has since gone after others.

However, in this case, it seems pretty clear that they've gone way too far. They sued a Dutch webmaster, Hilbrand Edskes, not because he was hosting or distributing the software, but because he had a link to the software on a webpage he maintains that lists a variety of freeware programs. It's not hard to find all sorts of sites, including big names like CNET, that still distribute Real Alternative. Yet for whatever reason, it appears Real Networks chose to go after this guy for maintaining a list of freeware programs.

Making matters even more confusing and ridiculous, is that it appears that Edskes actually did remove the link when asked. Real claims he did not, but the company who seized his computers (after a judge ordered it, following a court filing from Real) admits that the links were actually removed right after he was told to remove them, and Edskes' hosting company also confirms, via its backups, that he removed the link. But Real still saw the link at a later date due to some DNS caching... so it's pushing ahead with the lawsuit. The article details how it's already cost Edskes €66,000 in legal fees, and Real is asking for about €210,000 in fines and for its own €75,000 legal fees.

Even if Real Alternative is infringing (a claim that I think is pretty questionable in its own right), it's pretty ridiculous to then sue someone just for linking to it, and to continue to sue him even after he shows that he removed the link in question. Real Networks was famous for having some nasty business practices and for forcing crapware on people, and it seems to be continuing that trend in the legal world as well.

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Appeals Court Tells ASCAP: A Download Is Not A Performance

Mike Masnick — Tue, 28 Sep 2010 14:04:00 PDT

A few years back, we covered the legal fight pitting ASCAP against Yahoo and RealNetworks, where the two internet companies were told to pay up based on a ridiculously arbitrary fee formula, including a totally made up multiplier called the "music-use-adjustment-fraction." The really scary part was that it calculated the revenue based on all of Yahoo's revenue. So, yes, even though Yahoo makes most of its revenue in ways that have nothing to do with music, its total revenue is used as part of the calculation. The one good thing that came out of the legal fight was the court making it clear to ASCAP that a download is not a performance, which requires a separate fee. As you may recall, ASCAP has been trying to claim just about anything involving music is a "public performance," in a weak attempt to get more cash.

Both sides appealed. Yahoo and RealNetworks appealed the crazy fee formula, and ASCAP appealed the claim that a download was not a public performance. The Second Circuit appeals court has now ruled and gone against ASCAP on both issues. It reaffirmed that a download is not a public performance (and thus, performance rights fees are not applicable) and rejected the bizarre calculation method used, as not "adequately supported" as being reasonable. A few highlights:

The fact that the statute defines performance in the audio-visual context as "show[ing]" the work or making it "audible" reinforces the conclusion that "to perform" a musical work entails contemporaneous perceptibility. ASCAP has provided no reason, and we can surmise none, why the statute would require a contemporaneously perceptible event in the context of an audio-visual work, but not in the context of a musical work.

The downloads at issue in this appeal are not musical performances that are contemporaneously perceived by the listener. They are simply transfers of electronic files containing digital copies from an on-line server to a local hard drive. The downloaded songs are not performed in any perceptible manner during the transfers; the user must take some further action to play the songs after they are downloaded. Because the electronic download itself involves no recitation, rendering, or playing of the musical work encoded in the digital transmission, we hold that such a download is not a performance of that work....

The court also scolds ASCAP for blatantly misreading other opinions on what constitutes a public performance and points out that ASCAP appears to "misread the definition of 'publicly,'" noting that ASCAP's definition of a public performance seems to "render superfluous" the term "a performance" in the Copyright Act. Ouch.

As for the royalty fees, the court is pretty clear that it doesn't buy the formula being used:

First, the district court did not adequately support the reasonableness of its method for measuring the value of the Internet Companies' music use. Second, the district court did not adequately support the reasonableness of the 2.5% royalty rate applied to the value of the Internet Companies' music use.

In other words, you don't just get to make up numbers out of nowhere.

That said, the court does say that it isn't necessarily against using such a "music-use-adjustment-fraction," it just needs the number to actually be supported. This is unfortunate, as it leads to improperly using non-music revenue as part of the calculation for how much should be paid for the music license. However, the court tries to deal with this by saying that the reasonable support needed would justify what the multiplier factor would be. Its main concern with the lower court's ruling was that it didn't take this into account and used a measure that made little sense (time spent listening to streams) which had little bearing on ad revenue:

The district court's MUAF accounts for the value of Yahoo!'s music use by using the amount of time that music is streamed. Streaming time, however, neither drives nor correlates with Yahoo!'s advertising revenue. The record evidence makes plain that Yahoo!'s advertising revenue model more accurately correlates with the number of times a particular page is accessed by users than to the duration of streaming time.

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RealNetworks Agrees To Pay $4.5 Million In Legal Fees To Hollywood Over RealDVD; Gives Up

Mike Masnick — Thu, 4 Mar 2010 01:02:12 PST

We still can't quite understand Hollywood's crusade against RealNetworks over its RealDVD offering. The software presented a way for DVD owners to backup their DVDs. It didn't allow for distribution -- unlike pretty much every other ripping software. In fact, Real basically put a new DRM around each backup copy. Personally, this seemed to make the product less useful, but the MPAA still sued RealNetworks for daring to let people backup their movies, and amazingly won nearly every aspect of the lawsuit. The judge (the same one who shut down Napster, by the way) had already banned the sale of RealDVD, and now she's agreed to a settlement that basically involves RealNetworks conceding every point, and paying $4.5 million to Hollywood to cover legal fees. It's a full capitulation.

So what did Hollywood accomplish here? It shut down a software product that allows people to backup the DVDs they legally own -- not to distribute them. In the meantime, of course, there are a bunch of DVD ripping programs out there that have no such restrictions. In other words, Hollywood's brilliant legal strategists just pushed anyone who wants to back up their movies to use solutions that make it easier for them to share those movies with others. It just made sure that such products will always be underground, rather than where the industry can actually work together with them. Congrats, guys, for killing yet another tech product you didn't like, just because it made your products more valuable.

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Rob Glaser Leaving RealNetworks; A Chance To Reflect On How Being Anti-Consumer Fails In The Long Run

Mike Masnick — Thu, 14 Jan 2010 06:18:00 PST

Lots of folks are talking about the news that RealNetworks founder and longtime CEO, Rob Glaser, is stepping down from the job (though will remain chairman, but without day-to-day operational activities). While several people are pointing out what everyone knows (that RealNetworks has basically disappeared off the online audio/visual map despite dominating the field in the 90s), there hasn't been a huge discussion on why. Some have suggested that Real just "missed the boat" with things like MP3s and YouTube video -- and there's something to that. But a bigger issue may be that so many people absolutely hate RealNetworks because of its long history of spreading adware through really sneaky and nasty installation techniques that hid the (checked off) approval buttons. It reached a point that lots of people never wanted to have anything to do with Real ever again. It should be a lesson for plenty of companies that look at short term profits over providing the best overall experience for users.

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Judge Says No Antitrust Violation In Hollywood Killing RealDVD

Mike Masnick — Mon, 11 Jan 2010 05:45:00 PST

In the ongoing saga of Hollywood's bizarre and self-defeating attack on RealNetworks for its RealDVD offering, a judge has dismissed Real's countersuit claiming antitrust violations by the Hollywood studios in effectively creating a cartel that controls the encryption on DVDs and refusing to license it to Real for the purpose of its DVD backup solution. The court basically said that there is no harm to Real caused by any actions of the Hollywood studios, because the real "harm" is in the fact that it created an infringing product in RealDVD.

This reasoning isn't surprising given the earlier rulings in this case, but is no less ridiculous when looked at in context (and with any bit of common sense). Remember, the product in question does not allow for anyone to make a bunch of copies and pass them along. It allows you to make a single backup copy for personal use -- a use that has been found to be perfectly fair use for software and music. It makes little sense that the law did not intend for movies to be backed up in this manner as well. The only reason this is stopped is because of the bogus DRM that the studios put on DVDs, known as CSS. This has been widely broken and does absolutely nothing whatsoever to stop copying of DVDs. The only thing that CSS serves to do these days is act as a tool for the Hollywood studios to team up to prevent products like RealDVD, because they can use the DMCA's anti-circumvention rule to claim that products like that circumvent the broken DRM they use. And, even if it's for a legal backup that can't be copied again (i.e., like RealDVD, it puts new DRM on top of it), suddenly it's "infringing" thanks to the DRM. In other words, the only purpose CSS serves is for the Hollywood studios to have full veto control over any software product that wants to be marketed legitimately, rather than underground. Under almost any definition of antitrust, it's difficult to see why this is not an antitrust violation. It's the major companies in a market, putting in place a tool whose sole purpose is to block others from offering up products.

Of course, the whole lawsuit and this whole charade is incredibly self-defeating for the studios anyway. Because now, instead of having a product on the market that limits what kind of copies people can make, instead, people who want to back up their DVDs simply get one of the long list of underground products out there that will let you rip your DVDs with no limitations whatsoever. It's simply stunning that the studios think it makes sense to drive users to such a solution. The only possible way it makes sense is if you put on your "studio thinking cap" and realize that the studios, in their infinite wisdom, think that they can ship these special -- much more expensive -- dual layered DVDs that have a DRM'd-up digital copy included. But, again, this should raise an antitrust flag, in that the studios are killing off the RealDVD product to try to protect their own sales of these DVDs with the silly Digital Copy technology. But, instead, many users are simply using the underground technology that doesn't cost them anything and gives them much more value.

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As Expected, Judge Still Bans Real From Selling RealDVD

Mike Masnick — Wed, 12 Aug 2009 03:37:33 PDT

This will come as absolutely no surprise to folks who have followed Hollywood's self-defeating battle against Real Network's RealDVD offering. If you don't recall, Real announced a product that would let users back up a DVD in their possession. Now, it's important to understand a few basic facts: under copyright law, you are allowed to make a personal backup of something like a CD or software. That's been found to be perfectly legal fair use. So, what's the problem? Well, one of the worst aspects of the DMCA is that it includes a totally unnecessary (and constitutionally questionable) anti-circumvention clause. Basically, the DMCA says that if you circumvent (or offer tools to circumvent) any kind of DRM, you've broken the law (and here's the ridiculous part) even if the actual copying you then do is perfectly legal. Yes, it's like saying that breaking into your own house is illegal. It makes no sense at all.

Real tried to get around this issue in a clever way. It figured that if you really were limited only to being able to make a backup copy (rather than an unencrypted copy that could be passed around), then a court would have a hard time finding it illegal. And, in fact, it had some legal precedent on its side. Two years ago, a court found that Kaleidescape, makers of a super high-end DVD jukebox, was perfectly legal, since the device was clearly only designed to make personal backups, and couldn't be used to distribute content.

Unfortunately, it appears that judge Marilyn Patel (who was also the judge who killed the original Napster) disagrees. She's issued yet another injunction blocking Real from selling RealDVD, saying that it violates copyright law. Again, this isn't a surprise. She had issued an initial injunction last year, and seemed quite skeptical of Real's arguments earlier this years, declaring:

"They have the copyright. That's the issue here right? They have the copyright. They have the right to exclude."

This is only partially true. They have some rights to exclude, but those rights are limited. The question is whether or not Real's actions fall outside that limit. But Judge Patel seems to disagree entirely with the Kaleidescape ruling, on that point.

Of course, the real issue here is how pointless a move this is for Hollywood, anyway. There are tons of DVD ripping software offerings out there -- which don't even have the limitations that RealDVD does. I can't fathom who would buy Real's product in the first place, knowing that there are much better, non-limiting products out there. Yet, here was a product that was doing everything it possibly could to play within the rules to make DVDs more valuable by letting people make use of their legal right to back up a DVD they had purchased, and Hollywood wants to crack down on it? The only thing that will do is drive more people to use the other versions of DVD ripping software out there. So, congrats, Hollywood, on pushing more people -- people who wanted to be good, legal, customers of your DVDs -- to go around the law to back up their DVDs, leaving them more open to file sharing.

It's difficult to fathom how anyone could think this was a smart move by Hollywood, or even how this is a "victory" for Hollywood.

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MPAA Points Out That Real Once Argued Against Fair Use Exceptions To The DMCA

Carlo Longino — Fri, 22 May 2009 13:03:00 PDT

The MPAA's suit to block Real Networks' RealDVD software rolls on, with some twists and turns. The latest is that the MPAA says that about 10 years ago, Real made the same argument that the MPAA is making in this case, saying that there is no fair use exception to the DMCA. Real used the argument in a case against Streambox, which created software that let people record Real streams. It prevailed in the Streambox case, so the MPAA asked the judge for an estoppel ruling, which would preclude it from arguing for fair use in the current case, since the argument contradicts its earlier position. Closing arguments in the case have wrapped up, and there's no indication when the judge will issue a ruling -- nor whether Real's apparent change of heart on fair use and the DMCA will hamper its efforts.

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RealNetworks Ups The Ante; Wants To Add Antitrust Charges Against The MPAA

Mike Masnick — Thu, 14 May 2009 02:04:03 PDT

With the lawsuit between the movie studios and RealNetworks off to an inauspicious start, it looks like RealNetworks decided to pull out the nuclear option: it's trying to add anti-trust charges against the movie studios to the case. The company claims it's come across evidence that the studios colluded to boycott RealNetworks and its attempt to let people back up their legally obtained movies. It would be interesting to know the details behind the evidence, as it could make the case a lot more exciting pretty quickly.

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Ocean Tomo Patents Being Used To Shake Down Companies That Have Online Recommendations

Mike Masnick — Tue, 13 Jan 2009 02:48:12 PST

Ocean Tomo is a company that's been around for a few years, trying to establish itself as the auction house for patents. I've already made clear how troubling I believe its business model to be, but the company always tries to put a friendly face on it, claiming that it's not about aiding so-called "patent trolls" but actually reducing the problem of patent trolling. However, that (of course) isn't what's actually happening. A patent on personal recommendation systems ("if you bought x, you'll like y") was bought via Ocean Tomo by what seems likely to be a bunch of lawyers under the company name Quito (though, it's not entirely clear who's involved) and is now being used in a lawsuit against thirteen big internet companies that employ any type of rating system. The companies being sued are: Netflix, Amazon, Yahoo, RealNetworks, last.fm, Pandora Media, Slacker Inc., Veoh, Hulu, NBC Universal, CBS, News Corp., and Strands.

As you look through that list, you'll recognize that some have done significantly innovative work in taking the concept of an online recommendation system and actually making it useful. The simple idea of doing recommendations is pretty straightforward. Making it work well? Not so much. Hell, that's why Netflix is offering $1 million to anyone who can improve their recommendation engine by just 10%. The basic ideas expressed in the patent are not where the value in these recommendation systems lies. It's in the actual effort of figuring out how to make them work better. This patent has nothing to do with the actual success of a recommendation system, but the holders of it may now get a pay day just for holding the patent, thanks to Ocean Tomo's auctions. And, of course, this means that all of those companies that were actually innovating will, at the very least, now need to spend legal dollars defending against this massive innovation blocker.

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MPAA's Suit Against Real About Control And Innovation -- Not Piracy

Mike Masnick — Mon, 13 Oct 2008 12:22:00 PDT

As we've been writing about the MPAA's odd lawsuit against RealNetworks for its RealDVD DVD ripping product, we've pointed out (multiple times) how it doesn't make much sense. The problem was that there are tons of much more effective DVD ripping products out there. Unlike RealDVD, they don't hobble the ripped copies. So, shutting down RealDVD doesn't do anything to stop piracy -- and if anything only increases it, as those who want to rip DVDs are more likely to just download one of those free products that don't encumber the resulting rip with more DRM. Thus, people will still be copying DVDs, and will do so in a way that is a lot more "piratable" than if the MPAA let RealDVD live.

So why is the MPAA doing what it's doing?

The EFF has stepped up with theory that makes a lot of sense: this has nothing to do with stopping piracy, and everything to do with controlling how innovation happens in the movie market. The movie studios that make up the MPAA believe that they own the movie business, and thus any innovation in the industry needs to come through them and get their approval. What Real is doing with RealDVD is ignoring the MPAA's "approval" process, and effectively taking the path of innovation out of the studios' hands.

If this sounds familiar, it's because this has what's been going on with almost all of the "anti-piracy" battles over the last decade. Napster wasn't so much about stopping piracy (which of course, didn't work in the slightest), but about the RIAA record labels freaking out that someone else (a college kid, no less) had established a much better and more efficient distribution mechanism without getting their approval and running it through their filter first.

Effectively, the Big Content players believe that they own their industries, and innovation should come from the top down through the paths that they choose. Thus, these sorts of lawsuits will continue until the management of these firms recognize that innovation is a bottom-up phenomenon. Or, the big firms go out of business. Whichever comes first.

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Judge Keeps Restraining Order On RealDVD

Mike Masnick — Wed, 8 Oct 2008 03:16:00 PDT

Earlier this week we noted that the judge in the lawsuit over the RealDVD software had placed a secret temporary injunction against RealNetworks selling the software. The original promise was that a more permanent injunction -- or a lifting of the injunction -- would come Tuesday. But Tuesday has come and gone and the judge has decided she needs more time to decide on an injunction, and may want to consult some "experts" on the subject.

I can understand the desire to better understand the situation, but it's hard to see how preventing the sale of the software in the meantime does any less harm to the movie industry. In fact, you could easily make the argument that it does more harm to the industry, based on the way the industry defines harm. That is, right now, if someone wants to make a backup copy of a DVD, they're going to look online and find a variety of free ripping options, that offer no additional DRM and make totally free and clear rips. If Real's software was out there, they might discover that option and pay to get additional DRM (why, I don't know -- but some might feel comfortable with the Real brand, for example). Thus, it's difficult to see how the movie industry is any worse off if Real's software is on the market. In that scenario, at least some might end up with ripped DVDs with DRM. Without Real on the market, those who want to rip DVDs will have their rips with no DRM at all.

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Why Was The Restraining Order On RealDVD Kept Secret?

Mike Masnick — Mon, 6 Oct 2008 23:24:14 PDT

Monday morning, we wrote about how a judge had issued a temporary restraining order against RealDVD until he had time to review the details and rule one way or the other on a pre-trial injunction. In our comments, one of our readers suggested this story was incorrect, as there didn't appear to be an actual restraining order on file -- suggesting that Real Networks may have pulled the software on its own. Yet, it turns out that, yes, in fact there was a temporary restraining order, but the judge ordered both sides to keep it secret. This is quite odd, as almost everyone immediately figured it out from Real pulling the software, and then it was confirmed by Real in a filing responding to the court. But all this does is raise a simple question: what could possibly be the rationale for keeping the temporary injunction secret?

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Judge Temporarily Blocks Sale Of RealDVD

Mike Masnick — Mon, 6 Oct 2008 01:29:04 PDT

In the lawsuit between the movie studios and RealNetworks over Real's DVD ripping software, RealDVD, it appears that a judge has issued a temporary injunction against Real, keeping the company from distributing the software until the judge has had a chance to read through the various documents. A more complete decision allowing or disallowing the sale prior to a trial should come on Tuesday. Of course, the movie studios will claim that Real should be barred from allowing the software to be sold because it will cause "irreparable harm." That, of course, is ridiculous. Real's software only lets you make limited backups, by putting its own DRM on the copies. If someone really wants to make backups, and Real's software isn't available thanks to an injunction, then they'll most likely get a copy of other DVD ripping software that doesn't even include the limitations that Real's does. In other words, in taking RealDVD off the market, as the studios would like, it actually would probably lead to more movies being copied without DRM than if RealDVD were on the market. On a separate note, it appears that Real's decision to rush to court and file for a declaratory judgment on this case was a wise move. The lawsuit has been moved from Southern California, where the studios filed suit later in the day, to Northern California, where Real filed suit in the morning.

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Hollywood And RealNetworks Head To Court Over DVD Ripping

Mike Masnick — Tue, 30 Sep 2008 15:48:00 PDT

As was widely expected when RealNetworks announced plans to release some DVD ripping software, the lawsuits are now flying. RealNetworks rushed to court to ask for a declaratory judgment, though the MPAA admitted it had its own lawsuit ready to go as well. Real getting to the courthouse faster may mean slightly more favorable jurisdiction for the company. In the meantime, it seems like the MPAA is facing a huge uphill battle here, as Real's software includes its own DRM, so it's hardly a case of allowing widespread copying. Plus, making personal backups is allowed under copyright law. The real issue is where two conflicting parts of the law collide: the right to make personal backups and the DMCA's prohibition on circumventing DRM. Real claims that since it adds its own layer of DRM, the studios' DRM is not circumvented. That may make the most sense from the standpoint of the lawsuit, but it still seems like a strong case could be made by simply focusing on how people have a right to make personal backups. Of course, this lawsuit is something of a marketing stunt. There are better DVD rippers out there that are available for free, so it's difficult to see Real ever getting very far with this product, no matter what happens with the lawsuit.

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RealNetworks Picks Fight With Hollywood; Plans To Release DVD Ripping Software

Mike Masnick — Mon, 8 Sep 2008 14:08:00 PDT

You may remember about six years ago, a company named 321 Studios released a product called DVD X Copy, that was designed to allow you to rip a DVD to a digital file on your computer. Despite the fact that the law is clear that making a backup copy like this is perfectly legal, the problem (from the movie studios' perspective) was that this software got around the encryption they put on DVDs, and thanks to the "anti-circumvention" clause of the DMCA, the act of getting around that DRM (even if for a perfectly legal reason) was illegal. Unfortunately, 321 Studios lost that suit and eventually went out of business, when it became to expensive to continue to fight the studios. It was a very bad ruling, highlighting the more ridiculous aspects of the DMCA, but without anyone else willing to take the case further, not much has happened in the space since. There are plenty of DVD ripping tools out there, but none from a major company... until now.

Apparently, Rob Glaser over at RealNetworks is so desperate for some attention that Real is releasing its own DVD ripping program, though it's loaded down with its own limitations. You'll only be able to watch the movie on the machine you ripped it to -- or can transfer it to another machine, but with a limit of 5 machines, and each of those machines has to have a purchased copy of the same software. In other words, while it rips the movie, it puts its own restrictive DRM on it as well, which hardly seems appealing -- especially at $30, when there are DVD ripping products for free that don't have such restrictions.

Yet, the nameless Hollywood insiders still think that Real will get sued over the product, which is probably what Glaser is hoping for (in order to get the free press). So, even if the product is likely to be a dud, the resulting lawsuit could be pretty important in determining the limitations of the DMCA's anti-circumvention clause -- or, at least, reminding the American public that the DMCA's anti-circumvention clause leads to ridiculous situations, such as making it illegal to provide a product that does perfectly legal things.

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Do Songwriters Deserve A Cut Of Yahoo Search Revenue?

Mike Masnick — Tue, 13 May 2008 10:45:13 PDT

You may recall a couple weeks ago that a judge set new rates to be paid to ASCAP by AOL, Yahoo and RealNetworks. ASCAP represents the songwriters, and those three companies and ASCAP could not agree on licensing terms for music streamed online. While ASCAP ran around touting the (somewhat made up) $100 million owed, there was plenty more in the decision that deserved discussion. At last week's San Francisco Music Tech Summit, I got into an interesting discussion with a few folks who had read through the 153 page decision thoroughly, and noticed a variety of problems. You can read the whole decision (pdf) yourself, if you want, but there are a few key points that are extremely disturbing, and could spell a lot of trouble. Basically, there's a meaningless "formula" that's applied to a very large segment of these companies' revenue, taking a huge chunk of money that seems beyond reasonable.

The judge seems to consider what AOL and Yahoo do somewhat equivalent to the way TV stations use music, and refers back to the rate agreements set up with various TV networks, despite vast differences in the way these websites operate. It suggests a misunderstanding between the difference between broadcast and interactive content. But what's really troublesome, is when you look at the overall formula for how the royalties are set. It clearly overvalues the music, and undervalues just about every other part of these three companies' businesses. The formula is, basically, the total revenue made by any business unit (minus a few specific costs) multiplied by a bizarre fraction (called the music-adjustment fraction): total number of hours that music is streamed, divided by total number of hours used on the website. Then, you take the result of that and multiply it by the "rate fee" of 2.5%.

This formula is applied to revenue coming in from any business unit that is considered to have used music. This includes things like Yahoo's search engine. That's because Yahoo (smartly, from a consumer perspective) allowed users who searched on a musician or song to stream that song directly from the search results. But, in making that so user friendly, the company has now opened up its cash cow search revenue to this formula, despite the fact that it's incredibly difficult to think that music has anything to do with nearly all of the revenue Yahoo makes from this site. Similarly, RealNetworks has almost its entire consumer division revenue included in this formula, despite the fact that it makes a ton of revenue from its gaming business. Wondering why RealNetworks decided to spin off the gaming business a week after this decision was announced? Maybe because a rate court judge just chopped off a huge chunk of revenue from it and handed it over to songwriters who have nothing to do with these games.

As for the formula itself, it makes little sense. The "music-adjustment fraction" is a totally meaningless number. The number of hours music is streamed is hardly an indicator of how much of a site's revenue is actually music based. If I have music streaming in the background all day, but am still using the site for other purposes, it seems ridiculous to include all of that as music-based revenue. The denominator of the fraction is "total number of hours on the website" which is also a totally meaningless and unrelated number. Even worse, since the court notes that none of these sites actually track that information, the judge ruled that everyone should just use Comscore's numbers instead -- the same Comscore that most people admit is not particularly accurate. So, basically, you're dividing a meaningless number by an even more meaningless number and multiplying it by the total revenue of units who often have very little to do with music, and then taking 2.5% of that. If anything, this ruling should make any site think twice before including any streaming audio from any ASCAP-affiliated songwriters.

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District Court Tells Yahoo, AOL To Pay Millions To Songwriters

Mike Masnick — Thu, 1 May 2008 16:22:03 PDT

In the latest of many arguments about the various rights and payments companies need to pay for streaming music online, a district court has ruled that AOL, Yahoo and RealNetworks most likely owe millions to ASCAP for songs that they streamed to users between 2002 and today (and continuing on to 2009). This has nothing to do with the record labels -- ASCAP represents the songwriters -- but is yet another extraneous "license" where the terms are hardly clear, but basically serve to make it more difficult for anyone to play music. It was never in question that these sites would need to pay some kind of royalty -- the question was how much. The odd part of this ruling, though, is that the rate set by the judge is likely to be higher than the rate that traditional terrestrial radio pays. If there ever were a formula for making companies less interested in streaming music online -- this might be it. Of course, it's quite likely that this ruling will be appealed, so it's far from over.

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The Way To Beat Scrabulous Is Not With Lawsuits Or Crappy Versions Of Scrabble

Mike Masnick — Mon, 7 Apr 2008 16:21:00 PDT

In the ongoing saga of Scrabulous, the unauthorized online version of Scrabble that has found many fans on Facebook but has upset Mattel and Hasbro (who own the rights to Scrabble), it appears that RealNetworks and Mattel have finally put out an official version of Scrabble for Facebook -- but the problem is that it's terrible. As the NY Times reports, "Facebook Scrabble takes a long time to load, does not always quickly update to show recent moves, and the words the game will accept do not reflect standard Scrabble dictionaries, or even the English language." While it's nice to see that Scrabulous still hasn't been forced offline, it seems odd that the authorized version is so terrible. It still probably would have made the most sense to just do a deal with the brothers who created Scrabulous (and there are still rumors that a deal has been discussed, but without a decent resolution), but if that doesn't work, the way to compete is with a better product. Putting out a product that's not very good isn't likely to win over many fans.

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House Approves Bill To Require Universities To Offer Students Music Services

Mike Masnick — Fri, 8 Feb 2008 08:44:00 PST

Late last year, we wrote about a bill that would put pressure on universities to put in place an official approved music subscription service or risk losing federal financial aid support for students. This is a bizarre piece of legislation, as it effectively props up Napster and RealNetworks by basically requiring universities to sign up for such a service, even if they don't want to. Despite widespread criticism of the bill, the House has now approved it, even leaving out a promised amendment promising that failure to obey wouldn't threaten financial aid. Supporters of the bill claim that it wouldn't actually be used to cut off financial aid, but if that's the case, why include it in this bill at all? It would basically be a requirement without any repercussions for ignoring. At the same time, no one has clearly explained why universities should be required to sign up for a private music subscription offering. What possible public policy reason could there be for such a thing?

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Yahoo Finally Dumps The Music Service It Never Really Liked

Mike Masnick — Tue, 5 Feb 2008 02:18:53 PST

A few years back when Yahoo launched its music service, it was pretty clearly designed to fail. Yet, Yahoo kept it going for a while, despite the fact that the executives who ran the program clearly were not fans of the company's own offerings. Thus, it should come as no surprise that Yahoo has simply moved all of its subscribers over to RealNetworks' Rhapsody service, which is having its own problems adjusting to a changing music market place. One could hope that Yahoo's ditching of the music service is a sign that it's actually going to do something more interesting, but given this little merger the company may be involved in, it may be difficult to do very much that's unique or innovative.

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RealNetworks Sues Burst, Seeking Judgment Saying It Doesn't Infringe

Mike Masnick — Thu, 10 Jan 2008 14:02:00 PST

We've covered the history of Burst.com and its questionable patents before. While the company was recently able to squeeze $10 million out of Apple, following the $60 million it got from Microsoft, speculation had begun on who the next target would be. In fact, apparently a Burst investor had started posting videos to YouTube trying to show how a variety of companies all infringed on Burst's patents. Of course, if we had a sane patent system, most people would look at this to suggest that the concepts in Burst's patents were fairly obvious and never should have received patent protection in the first place -- but that's not how things work these days. Among the companies listed in the videos were Google, AOL, Adobe and RealNetworks. Apparently, that was enough to worry RealNetworks, who has filed for a declaratory judgment in Northern California claiming that it does not infringe on Burst's patents. This was, by the way, the same strategy that Apple took (suing first) almost exactly two years ago. With so much fear of cases getting forced into Marshall, Texas, it's no surprise that those threatened would try to file for declaratory judgments on friendlier grounds. It will be interesting to see if Google, AOL or Adobe follow suit.

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How Dare You Make Our Service More Valuable! RealNetworks Shuts Down YottaMusic

Mike Masnick — Thu, 3 Jan 2008 11:58:00 PST

It's sometimes amazing how shortsighted companies can be -- especially when they discover that others are making their own services better and more valuable. We've written about various threats and lawsuits against people who have made better interfaces for websites such as the Ellis Island listings and Odeon Cinemas' site in the UK. Now, as noted by Fred Wilson, it looks like the folks at RealNetworks have forced YottaMusic out of business for making Real's Rhapsody service a lot more userfriendly. TechCrunch suggests that there's some political reasons for the shutdown having to do with what APIs YottaMusic was using, but that's hardly an excuse for shutting down a popular site that only makes Rhapsody's service more valuable by creating an interface that many people prefer to Rhapsody's own interface. Users of YottaMusic still need to be Rhapsody subscribers, so it could only help to increase Real's subscriber numbers -- so it's hard to understand what the business rationale could be for shutting the site down.

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MTV Still Learning That Things Don't Come So Easy On The Internet

Mike Masnick — Tue, 21 Aug 2007 12:22:36 PDT

MTV has had an awful lot of trouble over the years trying to become the MTV of the internet. It seems that the company rested on its TV laurels for way too long, and then totally misunderstood what the online world wanted, originally insisting that its archive of video would make it a player in the space. More recently, it tried to get into the music download business, but offered a me-too package that wasn't even remotely compelling. Almost no one used it. So, it should come as no surprise that MTV is now killing off its Urge music offering, that was launched together with Microsoft, and instead focusing on a new joint venture with RealNetworks' Rhapsody music service. Of course, once again, it's going to face the same questions as before about what differentiates this from anything else out there, and once again, it seems likely that MTV won't have a very good answer.

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