Almost exactly three years ago, Mike wrote up a post that discussed Planet Money pulling together five economists with differing political views to see what they could all agree on. The result was several policy ideas that appeared to transcend politics if economics was the driving motivator instead of any kind of partisanship. The whole post is awesome, and has influenced my thoughts on economic policy and taxes to a large degree, but I came away from it with one general concept firmly in mind: tax what you want to discourage, don't tax what you want to encourage, and never tax innovation or the future.
A ruling by Chicago’s Department of Finance allows the city to add an extra nine percent tax onto “electronically delivered amusements” and “nonpossessory computer leases.” In an odd combination, buying a subscription to streaming media, such as Netflix or Spotify, would qualify, as would using a cloud computing platform, such as Amazon Web Services. Each would be subject to 9% tax; Chicago is the first major American city to levy a tax on either streaming services or cloud computing services.
Amusement taxes in and of themselves generally violate the concept I highlighted in the opening. After all, if you're a municipality, taxing fun is essentially saying you want less fun. But what makes this re-write of the amusement tax already on the books silly is that it is purely a money-grab. Here's what happened: the amusement tax in Chicago worked primarily to collect revenue from book stores, music stores and movie rental stores, which are obviously becoming increasingly in short supply as consumers move to online stores and streaming services like Netflix and Spotify and Amazon for all of the above. This is actually a good thing from a public interest standpoint for a variety of reasons: less pollution from physical products, more efficiency in the marketplace, the opening of more creative outlets for members of the city, and more access to more content from more places and devices, meaning a more robust economic marketplace. The future, in other words, although increasingly the present as well. And Chicago wants to tax all this, effectively discouraging its use, in order to collect an additional $12 million a year.
Chicago, mind you, is in the hole for roughly one hundred times that amount.
Cities with amusement taxes have lost revenue as more people forgo book stores, record shops and video rental stores in place of online outlets. But $12 million isn’t going to be much more than a drop of water in the bucket of the city’s $1 billion operating shortfall.
Fighting the future doesn't even yield much of a reward, so why do it at all? Don't tax what you want to encourage and tax what you want to discourage. This makes it look like the city of Chicago really wants a tax policy to make the city operate like it was 1995.
If you like PC games, chances are you already know all about GOG, or Good Old Games. The GOG website has done more to extend the life of gently-aged games by building a platform for old games that will work on new machines while having one singular principal dominate their products: there shall be no DRM. Digital Rights Managment seems like it's always existed and has equally never worked, what with cracks, hacks and other methods for getting around games that employ DRM being available almost immediately after games get released. It's a losing strategy. GOG, on the other hand, has made their insistence on DRM-free games a winning strategy for themselves, for customers, and even for once-apprehensive publishers. DRM certainly hasn't disappeared from the gaming industry, but GOG's working experiment has gone a long way to reduce its use.
They're starting small, launching with a handful of independent documentaries for $5.99 a piece in hopes of eventually branching out to studio films and television shows. The folks at GOG are pushing hard on the "DRM-free" angle here too, promising that nothing they sell will be saddled with the copyright restrictions you might get while buying a TV show on iTunes or Amazon.
"Most of [the studios we spoke to] admit that DRM does not protect anything, all protections are cracked on the day of the release of the movie or even before and that there is no DRM that can protect a movie against piracy," said a GOG representative in an e-mail to Kotaku. "The whole industry knows DRM is just smoke and mirrors and it does not work, so why not abandon it?"
Why not indeed? Though streaming is becoming a dominant method for viewing content, there still must be a market for the ownership of movies and television shows. DRM from the likes of the current marketplaces serves no end except to annoy actual customers, while pirated versions of pretty much everything already exist for those not willing to do right by content producers. What GOG did for games certainly seems like it should work for movies and TV shows: remove the annoyance and provide a clean and slick market for DRM-free show/movie content. As they said, they're starting small, but if this is successful we might finally start to see a landslide of a perception-change when it comes to DRM.
Interestingly, it seems that talks for a wider catalog are proceeding more successfully than I might have expected.
"These are very smart people and they see that the anti-piracy measure does not work at all," said a GOG rep in an e-mail. "We realize that the movie industry is much older than the gaming industry and it moves slower, with caution. As such, we'll get started with some real examples to show that it works–hence our first batch of 20 documentaries."
What also interests me is how the documentaries for this pilot program are all focused on gaming and internet culture, arguably attractive to a demographic that might be most knowledgeable about piracy and perhaps more willing than the general population to pirate content. If they can be successful there, I'd argue the rest of the general public ought to be a cinch. Get on board with this, studios. Someone is trying to save you from yourselves.
For years, we've argued that the role of middlemen in the entertainment industry has been changing drastically. Most were built up on the basis of being gatekeepers: choosing who would get to go out and perform to the world, and using that gatekeeper status to (1) put themselves (the middlemen) in the center of everything and (2) demand nearly all ownership and profits from the results. But the new world is one in which gatekeepers are obsolete. The natural limits of things like broadcast television or movies are fluttering away thanks to the internet and all the technology that allows anyone to be a creator. That doesn't mean that middlemen aren't necessary any more. They absolutely are. But their roles are as enablers, not gatekeepers. They have to put the content creators back in the center and accept that they don't have full control, and they don't get to keep 85 cents of every dollar earned.
Famed comedian Patton Oswalt took to the stage at the "Just for Laughs Comedy Conference" in Montreal recently and made this point brilliantly in the form of two "letters." (Thanks to Pickle Monger for calling this to our attention.) The first letter was to fellow comedians -- more or less telling them to take control over their own career. They had to stop looking for the gatekeeper to come along and pick them, and take charge. Here's just a snippet, but the whole thing is worth reading:
[Following a brief description of his very successful career] But if you listened very carefully, you would have heard two words over and over again: “lucky” and “given.” Those are two very very dangerous words for a comedian. Those two words can put you to sleep, especially once you get a taste of both being “lucky” and being “given.” The days about luck and being given are about to end. They’re about to go away.
Not totally. There are always comedians who will work hard and get noticed by agents and managers and record labels. There will always be an element of that. And they deserve their success. And there’s always going to be people who benefit from that.
What I mean is: Not being lucky and not being given are no longer going to define your career as a comedian and as an artist.
The second letter addresses the gatekeepers quite directly. Again, a snippet, though you should read the whole thing:
You guys need to stop thinking like gatekeepers. You need to do it for the sake of your own survival.
Because all of us comedians after watching Louis CK revolutionize sitcoms and comedy recordings and live tours. And listening to "WTF With Marc Maron" and "Comedy Bang! Bang!" and watching the growth of the UCB Theatre on two coasts and seeing careers being made on Twitter and Youtube.
Our careers don’t hinge on somebody in a plush office deciding to aim a little luck in our direction. There are no gates. They’re gone. The model for success as a comedian in the '70s and '80s? That was middle school.
He goes on to talk about how they can stop being gatekeepers and start actually helping (first by being "fans") but then goes on to point out why the gatekeeper role is gone in a very simple fashion:
We can just walk away.
You know why we can do that now? Because of these. (Oswalt holds up an iPhone)
In my hand right now I’m holding more filmmaking technology than Orson Welles had when he filmed Citizen Kane.
I’m holding almost the same amount of cinematography, post-editing, sound editing, and broadcast capabilities as you have at your tv network.
In a couple of years it’s going to be fucking equal. I see what’s fucking coming. This isn’t a threat, this is an offer.
It's an offer so few gatekeepers have been willing to take up.
I think it's great that Oswalt is saying this stuff. For the last few years, as Louis CK has revolutionized various parts of the comedy industry (as we've detailed here), it's been interesting to see how other comics have reacted. I keep hearing about how comedians want a "Louis CK deal," -- which is a deal like the one that Louis got for his show on FX (where he basically has full control over every aspect of the product). The problem, of course, is that no one else wants to give out such a deal -- and even if other comedians got it, many wouldn't know what to do with it. Because of that, I've heard some suggest that there isn't much to learn from Louis, since his situation is one of a kind.
I think Oswalt is much more on the right track, though. Of course, the answer isn't just in "getting the Louis CK deal" or even just copying exactly how he released his last comedy special. It's in recognizing the larger point of Oswalt's keynote: that the old rules and old gatekeepers are meaningless. You can forge your own path, and whereas you used to have to work within the confines of the system, nowadays you have lots of options. Every opportunity is there.
While it seems like US politicians keep insisting that Wikileaks' release of State Department cables has put people in harm's way -- despite a lack of evidence to support that -- some are pointing out that at least some of the cables actually show that some of what the US is doing in the Middle East has been quite effective. Prashanth points us to the news that one of the leaks showed that American TV and movies in Saudi Arabia are actually "are doing more to dissuade young Muslims from becoming jihadists than virtually anything else." As the cable noted: "Saudis are now very interested in the outside world and everybody wants to study in the US if they can. They are fascinated by US culture in a way they never were before."
Of course, the same politicians blasting Wikileaks as a "terrorist" organization can't admit that some of the leaks are actually showing that some of what the US is doing is working quite well. As Prasanth notes in his own blog post, if US politicians were smart, they'd use cables like this to play up evidence that they're doing some things well:
I feel like this is along the lines of winning the people's "hearts and minds". The reason why this works is because as opposed to state-sponsored propaganda (which is pretty obvious when shown), this more subtly shows what's so great about the US.
Finally, I think this report is a great send-up of all the politicians who are equating Wikileaks with terrorism. Quite the contrary: while a lot of what it shows is what we've done wrong (and of course these politicians will hypocritically call for press freedom in other countries yet repress it here), it also shows a lot of what we've done right. Why not publicize that more?
Let's take a step back to explain this. We've discussed, in the past, that the way China operates its "Great Firewall" is not by explicitly banning anything. Instead, it simply puts liability on third parties such as ISPs and says they'll take the blame and face the consequences for any "bad stuff" that is allowed through to Chinese users. As MacKinnon notes, this is really "intermediary liability," or (obviously enough) putting the liability for actions on an intermediary to force them to try to curb the behavior of end users. In this way, the Chinese government can claim that it doesn't censor the internet and there's no such thing as a "Great Firewall," because it doesn't exist as a single thing. It's just that the government will punish ISPs who don't block "bad stuff."
But this "intermediary liability" is a big deal, because under any common sense approach to things, you should never blame an third party/intermediary for the actions of end users. And yet, that's exactly what the entertainment industry has been pushing. One of the key components being pushed for the internet section of ACTA is the idea of expanding "secondary liability" or "contributory copyright infringement" or whatever they want to call it. In reality, it's the same intermediary liability that China uses to have ISPs censor content. The idea is that if you put the liability for file sharing on ISPs, then they will be forced to figure out ways to stop it -- just like ISPs in China are forced to create their own censorship campaigns.
And, of course, this isn't even hypothetical. We've got some real world examples. That's because much of the early language in ACTA was modeled on the "free trade" agreement that the US pressured South Korea into signing. That included such intermediary liability for ISPs when it came to copyright infringement, and guess what happened? First, the country felt it needed to start kicking people off the internet based on a "three strikes" plan, just to satisfy the treaty. Then service providers quickly started banning all sorts of activities, including any music uploads and many video uploads. After all, it's not worth it for the service providers to be liable, so they block the ability to upload all sorts of content. And, of course, with such liability there, others went even further, with some service providers even banning advertisements for any kind of website that could allow copyright infringement, because of the fear that, via such intermediary liability, they may get blamed just for allowing an advertisement that pointed to a site that could be used for copyright infringement.
When you look at the details, it's incredibly similar to the way in which China crafted its Great Firewall. Impose such secondary liability that puts the responsibility on a third party, and and watch those third parties basically lock down all sorts of additional things, just to be safe. Of course, the old school entertainment industry doesn't mind, because preventing you from communicating isn't their problem. They don't see the internet as a communications platform anyway. They're hoping it's the next broadcast medium, and clearing the decks via a Great Firewall an intermediary liability system works right into those plans. The more you look at the details, the more it looks like the entertainment industry is doing everything possible to encircle the internet to make it appear more like a broadcast entertainment medium, rather than a communications medium.
Someone once told me that Viacom's top lawyer, Michael Fricklas, has been known to read Techdirt on occasion. I have no idea if this is true, but it still is interesting to watch him give a lecture to some Yale law students where he offers a somewhat nuanced position on copyright issues (thanks to JJ for being the first of many to forward the video to us), but which repeatedly seems to leave out certain pertinent facts:
He starts out by saying that he's a strong supporter of fair use, and doesn't like the idea of having to get licenses for creating new works -- but is concerned about the "exact copy" problem. So, basically he's in favor of fair use for creating new works, but not direct distribution.
He discusses copyright vs. free speech -- and insists that there's no "tension" between the two (despite many recent studies suggesting the exact opposite). Of course, he does a bit of a twist there, by saying that copyright is pro-free speech because it creates incentive for speech. The problem with this statement is that while that's the theory, the evidence for it is somewhat lacking. However, there is tremendous evidence of cases where copyright is used to stifle speech -- and of all the massive extensions and changes in copyright laws over the past 200 years, almost all have served to stifle more speech than they have encouraged.
He then trots out the industry's own numbers claiming how much copyright contributes to the economy, even though those numbers are based on a variety of questionable assumptions, including the idea that all content covered by copyright is only created because of copyright. Along those lines, he also credits copyright for things like the iPod and the Kindle, saying that no one's buying those devices just to look at them. This is correct -- but note the trick. He did not say that it was content that drove the iPod and the Kindle, but copyright. He's wrong. It's content. Not copyright.
He notes that some say that "unlicensed IP" might drive this innovation, but he favors "sustainable innovation" (as if anyone doesn't). And then he makes this odd statement:
"A more sustainable innovation is one where, if you make an investment, you have the opportunity to make a return."
Now, that's a great (by which we mean, useless) statement, because it's obviously true. Who would ever deny that? But it's a sneaky and disingenuous statement, because it implies something that's simply not true: that without copyright or without restrictive licensing, the investors do not have an opportunity to make a return. As we've shown over and over again, plenty of content creators who "free" their IP have not only made a return, but have made a better return than they did under older models that relied on copyright. But it's a sneaky trick that's often used by folks in this debate. You set up this strawman argument and then knock it down, despite the fact that no one ever made the argument, and you argue that something is fact (that you can't make a return) when it's empirically false. It's frustrating that this argument still gets made and people should really start calling the folks who make it out whenever they state such falsehoods.
Later, he talks about the "losses" from piracy, insisting that the findings come from a "sophisticated" analysis, not just from counting all downloads as lost sales. Of course, these numbers came from the same study process that led to some results that even the MPAA (of which Viacom is a major member) had to later admit were bogus. This is also the same "sophisticated analysis" that includes ripple effects in one direction only, so it's actually double, triple, quadruple, quintuple counting some numbers, while totally ignoring how those numbers actually help the industry in other ways. So, sorry if I don't take those loss numbers seriously, no matter how "sophisticated" he thinks they are. They're not. They're only "sophisticated" in how misleading they are.
He does have a short discussion on RealNetworks' RealDVD offering, which he implies enables piracy -- even as he admits he wants the functionality, where he could move a copy of a legally purchased DVD to his hard drive for backup or other viewing, but says his "concern" is that people would do this with Netflix DVDs. He believes that the problem with this is that RealNetworks had to break the encryption put in place by the studios. Notice, again, what Fricklas conveniently leaves out. First, he leaves out the fact that it is already legal for people to make backup copies of content they legally own -- but, thanks in part to Hollywood lobbying, Hollywood itself can block that right, simply by putting encryption on something and then saying that you can't circumvent it without breaking the law (thank you, DMCA anti-circumvention clause). He also leaves out (conveniently) the fact that RealDVD doesn't actually "break" the encryption and that the resulting copy still includes DRM that prevents copies. The fact that he's "concerned" about the Netflix model is of no consequence whatsoever. McDonalds is "concerned" about Burger King, but that doesn't give them a legal right to block them from being in business.
Then he pulls out the ever popular "$200 million movie" myth, which I thought was a favorite of NBC Universal, but I guess Viacom is going with it now as well. It's not a myth that there are movies that cost $200 million. The myth is that people want movies that cost that much. No one watching a movie cares how much it costs. They want good movies, no matter how much they cost. I'm sure people would like some $1 billion or $100 billion movies as well, but that doesn't mean we need to grant Viacom extra special legal privileges to make sure it can make a $1 billion or $100 billion movie profitably. People like good movies. Viacom wants to make profitable movies. We agree. But the $200 million number is meaningless. There are ways to make good movies for both less and more than $200 million and there are ways to make profitable movies even in the face of piracy. The claim that piracy undermines the $200 million movie, which is some sort of "necessity," is simply not supported.
On top of that, he tosses out the debunked claim that if something is "free" it means it's devalued. That's simply not true, no matter how many times people repeat it. If it were true, and the content had no value, no one would want it. Value and price are two separate things.
Then, he discusses the "Kanye West" MTV Video Awards "Imma let you finish..." example, by talking about how Viacom used various filtering tools to pull that clip off of various "unlicensed" user uploaded video sites. But he also talks about how they drove people to use the official Viacom clip, which allowed them to "participate in the benefit" of the video. Now, that's interesting, and it's great that they put their own clips up and made them embeddable. But, again, it's important to note what he left out. In forcing everyone to view the content through Viacom directly, it also increased Viacom's own cost in terms of bandwidth. The advantage of letting others help host and distribute the content is that it actually eases that cost.
His discussion on kicking people off the internet via a "three strikes" mechanism is getting much of the attention on other sites, because he mentions, totally in passing, that suing users "feels like bullying." This may sound like a big deal -- and certainly some other sites (and industry lawyers) are making it out like a big revelation, but it's not. The movie industry has never sued individuals for such things -- only the recording industry has. And even way back in the Jack Valenti days, he talked about why he didn't like the idea of suing individuals. So, this isn't a shift in positioning at all. Rather, it's a repeat of the new silly strategy of some in the industry to try to pretend that kicking people off the internet is "consumer relief." Not quite. Shooting someone in the leg instead of the head is certainly "better," but I doubt that the person shot in the leg considers it "relief."
Towards the end of that discussion, though, he makes another interesting statement, saying that: "there's no way to deal with this problem other than to move viewing into licensed contexts." Except, that's not true. There are other ways. It's called setting up a business model where people actually do have a reason to buy things, whether they view the content in a licensed or unlicensed manner. I recognize he's on the legal side, rather than the business side, but the idea that the "only" way to deal with piracy is to attack it, rather than embrace it, is a position that the industry long ago should have learned was a mistake.
His final point is discussing how DRM "enables new business models," and he more or less dismisses criticism of DRM as really just being criticism of "bad" DRM (of which there is plenty). However, what struck me, was how none of the "new business models" he described actually required DRM at all. You could do them all in some way entirely without DRM. All the DRM does is add restrictions. Of course, rather than adding restrictions, why doesn't the industry focus on employing new business models that give users more and make them want to buy, rather than trying to enforce artificial limitations?
On the whole, it is an interesting video, and well worth watching, but it conveniently misstates or leaves out important facts throughout. Unfortunately, the Q&A session that follows the presentation wasn't included, so I have no idea if any of the students challenged some of his assertions or pointed out some of the points that he left out. Anyway, maybe we can hope that Fricklas is, in fact, an occasional reader here and can stop by to address those questions and omissions.
It seems that the Associated Press continues to struggle to figure out how to deal with this whole online thing. It's still trying to revamp its pricing structure after a bunch of newspapers canceled their contracts as they were pretty pissed off that the AP is effectively competing with its own member papers. The AP has also had a bit of a run-in with bloggers over its ridiculous fair use policies. Its latest move seems to, once again, be getting pretty much everything backwards. Famed film critic Roger Ebert is complaining that the AP has sent down word from on-high that all entertainment articles must be 500 words or shorter -- including film reviews, interviews, news stories, trend pieces and (best of all) "think pieces." Apparently, if you need more than 500 words to get people thinking, you're a bit too verbose. On top of that, the AP is asking those same entertainment writers to focus on more salacious, attention grabbing stories in picking what to write.
It's not difficult to see what's going on here. The AP is trying to be more "bloggy." Shorter, more attention grabbing pieces? Apparently, it's decided that people online only want to read the quick hits on salacious stories. Of course, despite what some may think, that's not really true. The AP has an opportunity to be better than all of that. It could draw serious attention by creating real content that people want, rather than running after the latest fad. But, apparently, that's not in the AP's plan. It has the resources to do what various small-time blogs can't do, but apparently, it's going in the other direction. Perhaps it's not too surprising, but it's no less a mistake.
Yes, short, attention grabbing stories get traffic, but that doesn't mean good, thorough journalism would get ignored. The problem the AP is having isn't that its stories are too long, or not attention-grabbing enough. It's that it still views itself as a gatekeeper of information, rather than an enabler of both news gathering and news distribution. Of course, with each misstep by the AP, others are quickly moving in to take its place.
"We don't want to spend a good chunk of our time in a 30-second spot trying to entertain people."
That's part of his plan to move away from a series of rather entertaining commercials that have provided plenty of free advertising for the firm, as people passed them around virally. Apparently, Kia would prefer that no one help them advertise and, indeed, that no one actually watches their ads. Time to think again, Kia. If you want advertising to be effective, it does need to entertain people.
One of the points we've been making for years is that advertising is content. That is, as people have more and more media options, advertisers can no longer assume they have a captive audience who will watch ads because they have nothing better to do. Rather, advertisers have to make their ads entertaining, so that people will want to watch them. The latest example of this is a New York Times article about how TV networks are bringing back the live commercial. For example, Jimmy Kimmel has been doing amusing live pitches for Nikon, Pontiac, and Quiznos on his late night show, and Jay Leno hosted a silly American Gladiators segment on his show to sell Klondike bars. Hollywood executives have a bad habit of viewing commercials as the spinach viewers have to eat in order to get the content they're actually interested in. But these examples illustrate that commercials don't have to be boring. With a little ingenuity, and funny pitchmen like Kimmel and Leno, commercials can be made interesting enough that consumers are actually interested in watching them. Part of the reason people hate commercials is that they're so repetitive, but live pitches can help break up the monotony by performing the pitch differently every time. And once commercials are actually interesting, the TiVo "problem" goes away, because even most consumers who have PVRs with commercial-skipping functions won't use them because they're actually interested in watching the commercials.
It's incredibly obvious -- to everybody but the Hollywood movie studios, apparently -- just how bad movie-download sites are. When the first studio-backed efforts launched several years ago, the problems were clear. In the following five years, they haven't been fixed, despite plenty of reviews pointing them out. The studios made "protecting" their content with ridiculously restrictive DRM their top priority; delivering a good user experience came in somewhere down towards the bottom. Now, a new study has yet again pointed out that consumers don't like these services, and yet again makes it clear why: poor selection, unreasonable prices, poor quality. Add in the general difficulty in getting video from the services to users' TVs, and you've got a recipe for failure. These are many of the same points that have been made over the download services' lifetime, but that the studios and companies running the services have largely failed to address. It's little wonder, then, to see a site like Movielink, the studios' own download site, get sold at a huge loss since it's going to take wholesale changes to give it any chance of success.