"But I don't think it's fair to draw that conclusion based on, "well, ya know, just LOOK at it."
Actually, there's more of that which goes on in the courts than non-legal folks often think. There's even a couple of legal terms, prima facie and res ipsa loquitur which (I'm grossly simplifiying) refer to things that are blindingly obvious. There's also a slightly less formal term that I've heard lawyers use: "the laugh test." These concepts exist because a lot of bad actors go through the courts, and the system can be surprisingly good at quickly calling something a duck if it looks, walks and quacks like one.
"Well, by the same reasoning, knife manufacturers know that knives are used to stab people. They don't pull their knives off the market until they can make stab-proof knives."
Product recalls happen all the time. This is an unpleasant example, but if a toy manufacturer finds out that their toy might be unsafe, they'll pull it from the market. Or, a gun manufacturer might similarly pull their product or at least stop manufacturing it if they discover that the safety mechanism is faulty. Many, many companies exhibit a modicum of corporate responsibility; Grokster, Kazaa, et al simply do not. They give lip service to announcing that their product should not be used for piracy (similar to aftermarket cable box suppliers warning you that their product should not be used for theft of service), but they are being disingenuous. If they truly did not want their product to be used for piracy, and they truly respected others' rights, they would stop making their software available for download. They don't, of course, because their business model relies on piracy.
"Yes, but those usually require a positive action which contributes to a crime. That's not the same as someone being charged for failing to take positive action to prevent a crime."
Not always. A real-world example is knowing that your business establishment is used for prostitution or other illegal activities, but not calling the cops. Or, to get a little more into the geek realm, knowing that somebody's uploading kiddie porn onto your host and not alerting the authorities.
BTW, it's been great discussing this with you. Cheers.
"The media companies are asserting that if a technology is primarily used for illegal activity, then it should be banned."
Where did you read that? I've read the brief and they appear to be saying nothing of the sort. They are trying to put Grokster out of business. They are not trying to ban P2P protocols. There are plenty of ways to implement P2P in a way that respects the rights of others (in fact, Wayne Rosso, Grokster's president, is working on just such a system), but Grokster sure ain't it.
There is a debate technique known as a "straw man" in which one deliberately mischaracterizes one's opponent's argument to make it easier to tear down. I don't know if that was your intention, but there are plenty of intelligent things to say on both sides of this case without having to resort to this technique.
"Since there are statistics showing that a majority of email is now SPAM, which is illegal, shouldn't we have to shut down email as well?"
Of course not. But I can imagine an instance where a spammer that's being taken to court trying the same trick: painting it as an attack on e-mail itself, and not the action of the abuser.
"Ok, then tell me, what is it about Grokster that specifically targets "pirates" as their consumer-base? Do they have something built-in which allows DRM stripping or something? Do they have CD/DVD ripping software built in? I mean, I've never used grokster, so I'm not familiar with what features it has as opposed to other P2P software. So what, exactly, makes the Grokster software makes it more useful for "piracy" than other data-sharing?"
I'm glad you asked. This is my area of exertise, so forgive me if I ramble a bit too much. An integral part of the product design process is market analysis. The folks who launched Grokster (and Kazaa, et al) saw the enormous popularity of the original Napster, understood that 90% of Napster's traffic was pirated material, and (correctly) realized that they could launch their own file sharing application and make money hand over fist in advertising revenues. To draw a distinction between the analysis behind Grokster/Kazaa/etc. and, say, Internet Explorer (both of which can be used for legal or illegal purposes), Grokster/Kazaa/etc. were developed to capitalize on the exploding market for P2P piracy. Internet Explorer was launched to tap into the market of people who want to use the Internet. That's simplifying it a bit, but I hope you get the idea.
"Now including filters and such are valid actions a software designer might reasonably take in order to prevent their tool from being used for copyright infringement, but that would be positive action, not neutrality. So my question is, can you can demonstrate where Grokster has taken positive action to endorse piracy?"
By launching it in the first place with their target market in mind, and making the choice to not introduce features that would make it unappealing for its purpose. Because of the legalities involved, there's a lot of implied stuff going on here. For example, if you are releasing a mouse aimed at gamers, you can put "this mouse is great for gamers!" in your ad and on your box, and show screen shots on your games. Grokster, obviously, couldn't blatantly do this, so they have to be a bit more implicit and subtle and let the customer connect the dots. Other businesses, like the aftermarket cable descrambler business, often work in the same manner.
Perhaps the most important thing implicit thing they've done is left the network running when it's obvious to anybody with a brain what it's used for. If they were truly against piracy, they'd shut it down and stop making the software available until they can come out with a new version with filters or other controls. Naturally, they won't do this, because their business model is based on the widespread demand for pirated material, and (just like MGM) their primary goal is to make money.
"Admittedly, our legal system does, at times, require that people take positive action to prevent crime, but the threshold for that is usually high, and the consequences are usually life-and-death."
I would shy away from the word "usually." "contributory" and "aiding and abetting" are often applied to lots of non-life-threatening crimes and torts.
"laiming P2P networks should be banned because it's used to share copyrighted works is like claiming that HTTP should be banned because web pages are used to slander people, or that knives should be outlawed because knives are used for stabbings."
I think everybody agrees on this. That's why MGM isn't trying to ban P2P. They're trying to put Grokster out of business, because they set up a business to capitalize on the widespread popularity of piracy, and they're profiting from it. It's not MGM vs. technology; it's MGM's business interests vs. Grokster's business interests.
"However, the designs of all of these tools are morally/ethically/legally neutral, as is the case with tools in general."
It depends on how you define "design" in this context. If you're simply referring to protocols, you're 100% correct. But in this case, it's clear that Grokster's founders designed the software as part of an overall plan to provide a medium that would be largely used for piracy, and to make money off of it. That's not neutral.
Compare this to somebody who designs a P2P app from the ground up to be permissions-based, or who designs a P2P app with hooks built in for filtering (as Grokster president Wayne Rosso is now doing with Mashboxx), or somebody who sets up a Torrent site and only allows torrents for content that's published under Creative Commons. Exploiting P2P in a way that respects others' rights takes a little work, and is less of a sure thing in the money-making department (those legal torrent sites don't get great traffic, while Kazaa's founders are now millionaires), but overall it isn't that tough.
"What I don't understand is why it even has to go this far. P2P applications are the same as any other network transmission medium."
Correct you are. That's why it's "MGM v. Grokster" and not "MGM v. P2P" or "MGM v. The Internet."
MGM and/or the MPAA are taking the position that they're trying to shut down the companies whose business model relies on piracy. Grokster analyzed the market and saw that there was big business in facilitating piracy. If they claim otherwise -- if they claim they had no idea it would be used for piracy, or that they really do support the artists, then they are simply lying. This is a case of one company vs. another, both of whom want to protect their business interests. MGM wants to be able to sell movies, and Grokster wants to provide a mechanism that will largely be used for piracy, and make money on ad revenue.
It's relatively simple to have a business model that relies on P2P but which does not rely on piracy for its survival. Similarly, the MPAA has been shutting down torrent sites that contain primarily pirated material, and are leaving the permission-based torrent sites alone.
If I'm not being clear, consider the case of the government prosecuting a child pornographer. This would be "the government v. the child pornographer," and not "the government v. photography" or "the government v. light photons hitting a CCD sensor." I can't imagine the defense taking a similarly specious slippery-slope approach of calling expert witnesses to testify that photography can be used for good purposes, or attempting to infer that prosecuting child pornographers represents a threat toward photography as a whole.
I think the key phrase is "Apple said in an article shortly after the iTMS launch." Lots of Internet ventures take a while to recoup launch costs and hit the point where they start making money.
More to the point, Piper Jaffray has said that they expect the iTMS operating margin to hit 5% - 10% in 2006.
If 5% - 10% doesn't seem very high, keep in mind that Vivendi Universal ended last year with an operating margin of about negative three percent, and a common meme on Slashdot is that record companies have "obscene profit margins."
"Now, RIAA presses in 100,000 to 1,000,000 of units. So I am wagering they are well under a $1."
Nah, the volumes aren't nearly that high for the vast majority of CDs released. Sales of 500K make a gold record, and 1MM is a platinum. I'd guess that typical first runs are more in the 5K - 10K range.
"Now explain to me why I have to pay $12.49 - $21.95 for a single CD that cost under a $1?"
Because the people involved in getting that record from the studio to your hands do not work on a volunteer basis. If you applied to work as a clerk in a record shop, or as a recording engineer, or as a marketer, and you were told that there was no pay, you'd rightfully tell them to fuck off. The recording industry is no different than whatever industry you work in: they are expected to pay their employees.
Additionally, UPS charges you and me money to ship a package across the country; do you really think they're providing this service for free to the record companies? Likewise, it's just not realistic to expect the electric companies to supply record stores with free power.
I hope that clears it up. If you still don't get it, google on "net margin" and "gross margin" or just ask anybody who's ever worked in retail, or in any industry that involves manufacturing products and selling them at retail.
"Online music sales scare the crap out of the recording industry because they become obsolete the second somebody can simply make their music available online to whomever wants to download it."
Nonsense. If the record industry didn't want to sell songs online, it wouldn't -- the record companies would cut Apple off tomorrow if it wasn't a good proposition for them. iTunes is simply another reseller. Your statement is a bit like saying that Amazon.com scares the crap out of the book industry, and is bordering on tinfoil-hat territory. The reality is that iTMS has been a huge success, and the record labels are laughing all the way to the bank.
When something is an enormous sales success, it's quite common to experiment by raising prices. It really does happen all the time. Remember, their goal is to make as much money as possible, and not sell as many units as possible or sell a particular item in a particular format. That's a hugely important distinction.
"If you really, seriously think that the record company execs are consulting economists on their pricing structure, well, we're back to my opinion of silliness."
You can be sure that they are.
Companies -- and entire industries -- experiment with pricing all the time. As I believe has been explained, the market is exploding, so they're experimenting with raising prices to see exactly where that optimal point on the supply/demand curve is. This may not seem intuitive to you, but nonetheless, this sort of experimentation happens a lot.
".99 is too high for me to purchase music. I've bought a few albums at 9.99. If they try to jack the prices any higher, they'll certainly lose my business. They are, of course, welcome to do so."
If $0.99 per track is too high, you've already selected yourself out. Remember, their goal is not go make all potential customers happy, but to make the most amount of money possible. If moving north of $0.99 leaves some folks behind but ultimately makes them more money, that's what they'll do.
Pricing strategy is often far more complicated than folks who've had a few econ classes might believe. I think Slashdot discussions like these tend to exemplify the concept of "knowing just enough to be dangerous." I've learned far more about the realities of pricing strategy in my years in the PC business than I ever learned in school. While this experiment by the record companies is certainly boggling many Slashdotters (many of whom are in college and whose understanding of supply and demand ends at econ 101), those of us with real world experience are not surprised that they're doing this.
"We don't need them and there business model anymore, and they know it, but they don't want you to know it."
Slashdotters have been claiming that the Internet will destroy the record industry since the days of the original Napster. I typically see "the record industry is already dead" or "it will happen real soon now" but that's just not happening. Do you have an estimate of when it will happen? Next year, five years from now, ten years from now?
Unfortunately I don't think it's this simple, and Slashdotters who make this proclamation often forget a few things:
Apple has sold millions of songs via the iTMS. The vast majority of them are from signed labels, and Apple's top tracks and top albums tend to mimic retail sales of physical CDs. In the meantime, companies like Magnatune, which fit many Slashdotters' idea of the future of music, are flailing.
The Internet is not the exclusive domain of Slashdotters and unsigned acts. To wit, notice the record companies' jumping all over iTMS like it was the last chopper out of Saigon, and Universal's recent move to launch an online-only label. They can use the Internet, too, and they can hire smart people, too.
But perhaps most importantly, I think the "The Internet will kill the record industry" crowd tend to see the Internet as a bit of a universal panacea. Make no mistake: many acts, both signed and unsigned, have done a great job of leveraging online distribution to build a fan base or to reach out to their fans when their label dropped them -- They Might Be Giants comes to mind. But the fact remains that:
The Internet will not front you the money to rent a recording studio, or build your own.
The Internet will not pay for your backup singers or session musicians.
The Internet will not pay for a talented engineer to make your music sound good. Music recorded by amateurs in a garage with a PC-based recording system generally tends to sound like... well, it was recorded in a garage.
The Internet will not give you the money to press thousands of copies of your CD and send them to radio stations. The Internet will not call those radio stations and get them to play your song.
The Internet will not arrange and promote your tour.
The Internet will not give you the money for co-op ads on the iTMS and other legimate download sites. While viral marketing can be useful, it is often no match for a record label that has actual cash to spend on online advertising.
In short, the Internet is a network. It transmits bits. It is not a substitute for talented producers, engineers, and marketers.
Now, before you say "but I don't need any of that," keep in mind that if you choose the route of avoiding the record label and taking on all the responsibilities I've covered above (and God bless you if you do), you're essentially in competition with the record labels who will be taking those steps.
As you can guess, my opinion differs from yours on the motives behind the record companies' talks of raising wholesale prices. Online distribution is a format change, nothing more. The record industry has survived a dozen format changes over the past century. Part of a format change is experimenting with the pricing model. Now, frankly, I think that their attempts to go north of $0.99 are completely fucking stupid, but they are doing what many businesses do in developing a pricing strategy: experiment.
"Remember when CDs first came out? Remember the cost of a vinyl album at the time ($7)? Remember the cost of a CD at the time($12-15)? Remember the music industries promise that CD costs would drop when they became popular?"
I remember CD prices being closer to $18 at launch in the early 80s, but we'll use your numbers. That $15 you remember paying in 1984 is $26 in today's dollars. The average price of a new CD is now south of $13, so that's a 50% price drop in the past 20 years. I only wish that all industries followed a similar trend -- that would mean that the average price of a new car would be less than $10,000 today!
I've used match.com on a few occasions. The most recent time, my income had gone north of $150K, so that's what I chose. I noticed a significant increase in women who wrote to me. This was not a good thing.
"I never actually met anyone from match.com in real life. I even subscribed for 3 months and emailed probably 20 different girls. Most didn't reply, and the closest I got to a date was a phone call with a girl who thought the world revolved around her. So if you're thinking about subscribing... don't expect miracles! I think only tall, dark and handsome guys do well online, but they don't really need dating sites anyway!"
I'd classify myself as "average" and I've done quite well on the matchmaking sites -- haven't yet found the right one, but I've met and dated at least ten very attractive women this way. It's all in your schtick. Being a good writer helps. Try experimenting with your approach and your tone, and don't send copy-and-paste generic notes -- people can easily tell when you do this. Meeting people online isn't easy, but like golf or skiing, working on your form helps quite a bit.
Huh? I wrote "indie and specialty stores like Tower." Tower is a specialty store. C'mon, this is basic reading comprehension.
What Tower and Amoeba have in common in this case is that, unlike Wal-Mart, they don't have an acre of children's clothes and camping gear in the back of the store to make the money they don't make on CDs. Wal-Mart can afford to sell CDs at lousy margins because they're a draw to get customers in to buy the high-margin stuff. Tower and Amoeba can't do this; one more reason why big-box retailers like Wal-Mart are putting indie and specialty retailers out of business.
" Wasn't the recording industry nailed for trying to force retailers to up the price for CD's."
Kinda. They set up a MAP (minimum advertised price) program with Tower Records and TWE in which they helped pay for advertising if Tower and TWE agreed not to advertise the price of CDs for below a certain point. The MAP program started because Tower Records and TWE complained that Wal-Mart, Best Buy, etc. were putting them out of business by selling CDs at or below cost. When Wal-Mart and Best Buy found out about the MAP program, they went to the government.
As another poster put it, "nailed" isn't the best term. The MAP program didn't affect the distributor price of the CDs, so the record labels didn't lose any profits as a result of being ordered to stop MAPping. The big winners here were Wal-Mart and Best Buy. The losers are indie and specialty record stores like Tower (who subsequently filed for bankruptcy), as Wal-Mart and Best Buy will continue to drive them out of business. Also among the list of losers is music fans who might be willing to pay a buck or two extra per CD for the opportunity to shop in a cool indie store with great selection, rather than having to deal with the Wal-Mart or Best Buy shopping experience.
"Wouldn't this be just as illegal for Mp3 downloads?"
It's a different scenario here, as in this case, the record companies are actually trying to raise wholesale prices. An equivalent to the price-fixing case would be if the record companies were now offering to help fund Apple's advertising if they agreed to only advertise tracks that sell for, say, $1.29.
"As it stands, this is just one more sad pitiful example of how broadcasters really really really just don't get it!"
Ah... irony!
Either way, it seems obvious that you're clearly in the wrong business. On Monday, why don't you start producing a multimillion dollar TV show, and then give away HD copies for a buck.
For extra credit, write a 100-word essay on one of the following topics:
"The analog cassette tape: the ten year journey from the technology's inception to widespread consumer acceptance and the full embrace by the record industry"
"The compact disc: the ten year journey from the technology's inception to widespread consumer acceptance and the full embrace by the record industry"
"The VHS tape: the ten year journey from the technology's inception to widespread consumer acceptance and the full embrace by the film industry"
"The DVD: the ten year journey from the technology's inception to widespread consumer acceptance and the full embrace by the film industry"
You can compare and contrast this with HD video downloads, and why it is reasonable for you to expect the industry as a whole to be supporting them right this second.
" Do you really believe ANY of that has to do with downloading movies? Or is it much more likely that the movie studios use harsh contracts and creative accounting to make as much money for themselves as possible?"
Not sure what you mean. I certainly think that the film companies lose a certain amount to piracy, but the losses stated are overblown (it's quite common to exaggerate to make one's point; the MPAA certainly isn't the only group to ever do this).
And, yeah, I do know for a fact that most of the people whose names you see in the credits of a film (and the many more whose names don't make it into the credits) are ordinary working folks who often work job to job. The film industry has some vastly overpaid people at the top, but so do the lawn mower industry and the computer industry. I'm not a huge fan of "two wrongs make a right." I think the best justification for downloading a movie is simply because you'd really rather not pay for it. Nothing wrong with wanting to get something for free. No need to base the decision to pirate on some (quite possibly incorrect) assumption about the wealth of the people who've worked to create it.
"The MPAA keeps saying they're losing X amount of money due to downloads, but I'm not sure that if they were to eliminate all downloading, those figures would transfer into real world sales."
Agreed. In fact, I think that's a given. The loss is probably much, much less. But on our side of the fence, we exaggerate as well -- if you were to believe Slashdotters, piracy actually helps the industry, pirates end up buying the CDs and even more CDs, and so on. It's hard to find a Slashdotter who'll admit that they prefer to download because they'd simply rather not pay. Meanwhile, here in the real world, everybody I know who pirates does so for exactly that reason.
"I'm sick of their "the stuntman will starve if you download a movie!!" argument, when actors make millions per movie (eg., Brad Pitt earned $17.5M for Troy). I'm not trying to justify the downloading of movies, I'm just sick of the MPAA's silly argument."
The vast majority of films released don't feature actors taking home $10M+ paychecks. There are tons of smaller budget and indie films out there. But I can understand that for those who don't happen to live at the coasts, the only types of films that ever play at their local Googleplex are crap like Troy. That aside, if every film were like Troy, then I think your plan would work -- pay Brad only, say, $5MM and let Slashdotters download as much as they want.
Either way, even with a film like Troy, if the total budget was $100M and, say, $30M went to the big names, the other $70M was largely spent in the form of paychecks for people who don't have the glamorous lifestyle you might imagine. The typical person who works in the film industry often has a pretty rough time of it. Their ability to feed their family is only as good as their ability to get that next gig. On that point, the MPAA ads are correct.
"And we all know those are the same people. Sheesh."
Nah, I don't think that's what the article meant. Going after the big dogs -- the counterfeiters and the sellers -- and suing downloaders are not mutually exclusive acts. The problem is being attacked on both end. Our government has lately been putting increasing pressure on the Chinese government to put a stop to counterfeiting of all sorts of items, including DVDs, and busting the guys selling them on the streets is typically the job of the police. But since international diplomacy and police raids of stores selling counterfied DVDs don't fall as well into "your rights online," you seldom see them reported on Slashdot.
In short, the "why don't they go after the real pirates instead" sentiment is often expressed around here when there's a story about busting file sharers. They are.
"No, the free market would be in play at all. The monopolies provided by patents and copyrights are the antithesis of a free market, which is why they must be time-limited."
I should have been more clear. Right now, the character of Mickey Mouse has value on the free market vs. other cartoon characters and cultural icons. Disney's ability to make money off of that Mickey Mouse apparel item depends on their ability to make people love Mickey Mouse more than, say, Pockemon.
If Mickey were to be in the public domain, the competition would not be (say) "Mickey vs. Pockemon," but "Disney-produced Mickey t-shirt vs. Mickey t-shirts produced by a squillion other vendors" in addition to the existing competition between Mickey and Pockemon.
As you can tell, I see Mickey as ultimately just another cartoon character. He's not air or water or food or anything that we need or which is a God-given right. Mickey already has plenty of competition. Putting him into the public domain would change the players a bit, but it would not usher in a glorious age of IP enlightenment.
"There is NO logical reason why Mickey Mouse isn't in the public domain now."
Sure there is -- Disney, like just about every other person or company on the planet, wants money. The difference is that when Disney wants money, they're greedy, but when you want money, you're not.
I don't lose sleep over Mickey Mouse being copyrighted. If Mickey went into the public domain, the primary effect would be that the price of items with Mickey's face on it would go down, since you'd have the option of buying from some Far East importer rather than through Disney. It would not be some grand and glorious new age of copyright enlightenment; just more money for the country that can produce items the cheapest. The free market economy would still be in play.
Very well put. A popular response seems to be "The RIAA is evil! It would be just like them to sue him! Okay, so they haven't, but wouldn't it be cool if they did? Because they're evil!"
Alas, many of the posts on Slashdot fall into the category of "okay, that's not really true, but what if it were? Let's pretend it is!"
"Those who say AllOfMP3 SHOULD obviously be illegal are just shilling for the industry that literally gets together and decides how to screw the customers."
Many people who think it should be illegal have this belief because they think that the people who create the music should be paid fairly, and should have the right to decide how their work is distributed.
I am aware that a common sentiment on Slashdot is "fuck the artists," but it's important to understand that not all geeks have the same moral compass. For many people, the golden rule -- basically, "treat others as you would like to be treated" is not simply a quaint bromide from childhood, but a foundation of their moral code.
Please have a little more understanding for others' viewpoints. If you can get to that point where you understand that people with moral codes that differ from yours are not obviously "shills," it may make you a better person overall.
"And, even if most albums don't break even, it doesn't come out of the labels' pockets. They front the money to the groups, who are then on the hook. Some of them probably default on the loan, but rest of the money is paid back to the labels, no doubt with hefty interest."
Incorrect. It's the record labels that take the risk. It's an advance, not a loan, and, naturally, there's no interest charged. If an album costs $50K to make and only nets $25K, the record label, not the artist, is out that $25K difference. That's one reason why it's so difficult to get a record deal; it's a hugely speculative market and the record companies, like any other company, need to see a return on their investment.
On the other hand, what you've described does fit what happens when an artist decides to go it alone and record, produce and promote their own album. Unless they happen to have a lot of cash lying around, this means getting a loan, and in this case, you're correct -- that must be paid back 100% to the bank or credit card company, with interest.
The point here is that each route has its trade-offs. If you sign with a record label, you get to spend their money, in exchange for getting only a small percentage of the proceeds and not having a copyright on the recordings themselves (although, of course, you retain the copyright on the songs). If your album tanks, you've lost nothing but time. Going the record label route is bad enough; no need to make up stuff like "you have to pay interest on the advance" to make it sound worse!
Producing and selling your album yourself means that you get to keep all the money, you own the masters and you have complete creative control over how your music is sold and marketed, but it means a lot more hard work for you, and you must come up with the cash.
"Like most "interesting facts" in the world, those are wrong. If it wasn't profitable to make an album, then those albums wouldn't be made. Simple as that. They make money on the vast majority of albums and then screw the artist by use of creative accounting practices"
No, the GP is correct. The recording industry is what's called a "speculative" business. It's a bit like playing the stock market, or investing VC money. Nine investments may lose money for you, but that tenth one just might pay for all the rest. In the recording industry, one gold or platinum record can keep a company afloat for a year.
I certainly understand that this isn't intuitive to somebody who hasn't been in a speculative business, but nonetheless, that's how it works. This is why you seldom see record companies on the Fortune 500 (except for those that are part of some conglomerate), and why you seldom see analysts issue "buy" ratings for record companies. It's also why small record labels go out of business all the time (but new ones seem to pop up at an equal rate).
Slashdot Mirror
"But I don't think it's fair to draw that conclusion based on, "well, ya know, just LOOK at it."
Actually, there's more of that which goes on in the courts than non-legal folks often think. There's even a couple of legal terms, prima facie and res ipsa loquitur which (I'm grossly simplifiying) refer to things that are blindingly obvious. There's also a slightly less formal term that I've heard lawyers use: "the laugh test." These concepts exist because a lot of bad actors go through the courts, and the system can be surprisingly good at quickly calling something a duck if it looks, walks and quacks like one.
"Well, by the same reasoning, knife manufacturers know that knives are used to stab people. They don't pull their knives off the market until they can make stab-proof knives."
Product recalls happen all the time. This is an unpleasant example, but if a toy manufacturer finds out that their toy might be unsafe, they'll pull it from the market. Or, a gun manufacturer might similarly pull their product or at least stop manufacturing it if they discover that the safety mechanism is faulty. Many, many companies exhibit a modicum of corporate responsibility; Grokster, Kazaa, et al simply do not. They give lip service to announcing that their product should not be used for piracy (similar to aftermarket cable box suppliers warning you that their product should not be used for theft of service), but they are being disingenuous. If they truly did not want their product to be used for piracy, and they truly respected others' rights, they would stop making their software available for download. They don't, of course, because their business model relies on piracy.
"Yes, but those usually require a positive action which contributes to a crime. That's not the same as someone being charged for failing to take positive action to prevent a crime."
Not always. A real-world example is knowing that your business establishment is used for prostitution or other illegal activities, but not calling the cops. Or, to get a little more into the geek realm, knowing that somebody's uploading kiddie porn onto your host and not alerting the authorities.
BTW, it's been great discussing this with you. Cheers.
"The media companies are asserting that if a technology is primarily used for illegal activity, then it should be banned."
Where did you read that? I've read the brief and they appear to be saying nothing of the sort. They are trying to put Grokster out of business. They are not trying to ban P2P protocols. There are plenty of ways to implement P2P in a way that respects the rights of others (in fact, Wayne Rosso, Grokster's president, is working on just such a system), but Grokster sure ain't it.
There is a debate technique known as a "straw man" in which one deliberately mischaracterizes one's opponent's argument to make it easier to tear down. I don't know if that was your intention, but there are plenty of intelligent things to say on both sides of this case without having to resort to this technique.
"Since there are statistics showing that a majority of email is now SPAM, which is illegal, shouldn't we have to shut down email as well?"
Of course not. But I can imagine an instance where a spammer that's being taken to court trying the same trick: painting it as an attack on e-mail itself, and not the action of the abuser.
"Ok, then tell me, what is it about Grokster that specifically targets "pirates" as their consumer-base? Do they have something built-in which allows DRM stripping or something? Do they have CD/DVD ripping software built in? I mean, I've never used grokster, so I'm not familiar with what features it has as opposed to other P2P software. So what, exactly, makes the Grokster software makes it more useful for "piracy" than other data-sharing?"
I'm glad you asked. This is my area of exertise, so forgive me if I ramble a bit too much. An integral part of the product design process is market analysis. The folks who launched Grokster (and Kazaa, et al) saw the enormous popularity of the original Napster, understood that 90% of Napster's traffic was pirated material, and (correctly) realized that they could launch their own file sharing application and make money hand over fist in advertising revenues. To draw a distinction between the analysis behind Grokster/Kazaa/etc. and, say, Internet Explorer (both of which can be used for legal or illegal purposes), Grokster/Kazaa/etc. were developed to capitalize on the exploding market for P2P piracy. Internet Explorer was launched to tap into the market of people who want to use the Internet. That's simplifying it a bit, but I hope you get the idea.
"Now including filters and such are valid actions a software designer might reasonably take in order to prevent their tool from being used for copyright infringement, but that would be positive action, not neutrality. So my question is, can you can demonstrate where Grokster has taken positive action to endorse piracy?"
By launching it in the first place with their target market in mind, and making the choice to not introduce features that would make it unappealing for its purpose. Because of the legalities involved, there's a lot of implied stuff going on here. For example, if you are releasing a mouse aimed at gamers, you can put "this mouse is great for gamers!" in your ad and on your box, and show screen shots on your games. Grokster, obviously, couldn't blatantly do this, so they have to be a bit more implicit and subtle and let the customer connect the dots. Other businesses, like the aftermarket cable descrambler business, often work in the same manner.
Perhaps the most important thing implicit thing they've done is left the network running when it's obvious to anybody with a brain what it's used for. If they were truly against piracy, they'd shut it down and stop making the software available until they can come out with a new version with filters or other controls. Naturally, they won't do this, because their business model is based on the widespread demand for pirated material, and (just like MGM) their primary goal is to make money.
"Admittedly, our legal system does, at times, require that people take positive action to prevent crime, but the threshold for that is usually high, and the consequences are usually life-and-death."
I would shy away from the word "usually." "contributory" and "aiding and abetting" are often applied to lots of non-life-threatening crimes and torts.
"laiming P2P networks should be banned because it's used to share copyrighted works is like claiming that HTTP should be banned because web pages are used to slander people, or that knives should be outlawed because knives are used for stabbings."
I think everybody agrees on this. That's why MGM isn't trying to ban P2P. They're trying to put Grokster out of business, because they set up a business to capitalize on the widespread popularity of piracy, and they're profiting from it. It's not MGM vs. technology; it's MGM's business interests vs. Grokster's business interests.
"However, the designs of all of these tools are morally/ethically/legally neutral, as is the case with tools in general."
It depends on how you define "design" in this context. If you're simply referring to protocols, you're 100% correct. But in this case, it's clear that Grokster's founders designed the software as part of an overall plan to provide a medium that would be largely used for piracy, and to make money off of it. That's not neutral.
Compare this to somebody who designs a P2P app from the ground up to be permissions-based, or who designs a P2P app with hooks built in for filtering (as Grokster president Wayne Rosso is now doing with Mashboxx), or somebody who sets up a Torrent site and only allows torrents for content that's published under Creative Commons. Exploiting P2P in a way that respects others' rights takes a little work, and is less of a sure thing in the money-making department (those legal torrent sites don't get great traffic, while Kazaa's founders are now millionaires), but overall it isn't that tough.
"What I don't understand is why it even has to go this far. P2P applications are the same as any other network transmission medium."
Correct you are. That's why it's "MGM v. Grokster" and not "MGM v. P2P" or "MGM v. The Internet."
MGM and/or the MPAA are taking the position that they're trying to shut down the companies whose business model relies on piracy. Grokster analyzed the market and saw that there was big business in facilitating piracy. If they claim otherwise -- if they claim they had no idea it would be used for piracy, or that they really do support the artists, then they are simply lying. This is a case of one company vs. another, both of whom want to protect their business interests. MGM wants to be able to sell movies, and Grokster wants to provide a mechanism that will largely be used for piracy, and make money on ad revenue.
It's relatively simple to have a business model that relies on P2P but which does not rely on piracy for its survival. Similarly, the MPAA has been shutting down torrent sites that contain primarily pirated material, and are leaving the permission-based torrent sites alone.
If I'm not being clear, consider the case of the government prosecuting a child pornographer. This would be "the government v. the child pornographer," and not "the government v. photography" or "the government v. light photons hitting a CCD sensor." I can't imagine the defense taking a similarly specious slippery-slope approach of calling expert witnesses to testify that photography can be used for good purposes, or attempting to infer that prosecuting child pornographers represents a threat toward photography as a whole.
I think the key phrase is "Apple said in an article shortly after the iTMS launch." Lots of Internet ventures take a while to recoup launch costs and hit the point where they start making money.
More to the point, Piper Jaffray has said that they expect the iTMS operating margin to hit 5% - 10% in 2006.
If 5% - 10% doesn't seem very high, keep in mind that Vivendi Universal ended last year with an operating margin of about negative three percent, and a common meme on Slashdot is that record companies have "obscene profit margins."
"Now, RIAA presses in 100,000 to 1,000,000 of units. So I am wagering they are well under a $1."
Nah, the volumes aren't nearly that high for the vast majority of CDs released. Sales of 500K make a gold record, and 1MM is a platinum. I'd guess that typical first runs are more in the 5K - 10K range.
"Now explain to me why I have to pay $12.49 - $21.95 for a single CD that cost under a $1?"
Because the people involved in getting that record from the studio to your hands do not work on a volunteer basis. If you applied to work as a clerk in a record shop, or as a recording engineer, or as a marketer, and you were told that there was no pay, you'd rightfully tell them to fuck off. The recording industry is no different than whatever industry you work in: they are expected to pay their employees.
Additionally, UPS charges you and me money to ship a package across the country; do you really think they're providing this service for free to the record companies? Likewise, it's just not realistic to expect the electric companies to supply record stores with free power.
I hope that clears it up. If you still don't get it, google on "net margin" and "gross margin" or just ask anybody who's ever worked in retail, or in any industry that involves manufacturing products and selling them at retail.
"Online music sales scare the crap out of the recording industry because they become obsolete the second somebody can simply make their music available online to whomever wants to download it."
Nonsense. If the record industry didn't want to sell songs online, it wouldn't -- the record companies would cut Apple off tomorrow if it wasn't a good proposition for them. iTunes is simply another reseller. Your statement is a bit like saying that Amazon.com scares the crap out of the book industry, and is bordering on tinfoil-hat territory. The reality is that iTMS has been a huge success, and the record labels are laughing all the way to the bank.
When something is an enormous sales success, it's quite common to experiment by raising prices. It really does happen all the time. Remember, their goal is to make as much money as possible, and not sell as many units as possible or sell a particular item in a particular format. That's a hugely important distinction.
"If you really, seriously think that the record company execs are consulting economists on their pricing structure, well, we're back to my opinion of silliness."
You can be sure that they are.
Companies -- and entire industries -- experiment with pricing all the time. As I believe has been explained, the market is exploding, so they're experimenting with raising prices to see exactly where that optimal point on the supply/demand curve is. This may not seem intuitive to you, but nonetheless, this sort of experimentation happens a lot.
".99 is too high for me to purchase music. I've bought a few albums at 9.99. If they try to jack the prices any higher, they'll certainly lose my business. They are, of course, welcome to do so."
If $0.99 per track is too high, you've already selected yourself out. Remember, their goal is not go make all potential customers happy, but to make the most amount of money possible. If moving north of $0.99 leaves some folks behind but ultimately makes them more money, that's what they'll do.
Pricing strategy is often far more complicated than folks who've had a few econ classes might believe. I think Slashdot discussions like these tend to exemplify the concept of "knowing just enough to be dangerous." I've learned far more about the realities of pricing strategy in my years in the PC business than I ever learned in school. While this experiment by the record companies is certainly boggling many Slashdotters (many of whom are in college and whose understanding of supply and demand ends at econ 101), those of us with real world experience are not surprised that they're doing this.
"We don't need them and there business model anymore, and they know it, but they don't want you to know it."
Slashdotters have been claiming that the Internet will destroy the record industry since the days of the original Napster. I typically see "the record industry is already dead" or "it will happen real soon now" but that's just not happening. Do you have an estimate of when it will happen? Next year, five years from now, ten years from now?
Unfortunately I don't think it's this simple, and Slashdotters who make this proclamation often forget a few things:
But perhaps most importantly, I think the "The Internet will kill the record industry" crowd tend to see the Internet as a bit of a universal panacea. Make no mistake: many acts, both signed and unsigned, have done a great job of leveraging online distribution to build a fan base or to reach out to their fans when their label dropped them -- They Might Be Giants comes to mind. But the fact remains that:
Now, before you say "but I don't need any of that," keep in mind that if you choose the route of avoiding the record label and taking on all the responsibilities I've covered above (and God bless you if you do), you're essentially in competition with the record labels who will be taking those steps.
As you can guess, my opinion differs from yours on the motives behind the record companies' talks of raising wholesale prices. Online distribution is a format change, nothing more. The record industry has survived a dozen format changes over the past century. Part of a format change is experimenting with the pricing model. Now, frankly, I think that their attempts to go north of $0.99 are completely fucking stupid, but they are doing what many businesses do in developing a pricing strategy: experiment.
"Remember when CDs first came out? Remember the cost of a vinyl album at the time ($7)? Remember the cost of a CD at the time($12-15)? Remember the music industries promise that CD costs would drop when they became popular?"
I remember CD prices being closer to $18 at launch in the early 80s, but we'll use your numbers. That $15 you remember paying in 1984 is $26 in today's dollars. The average price of a new CD is now south of $13, so that's a 50% price drop in the past 20 years. I only wish that all industries followed a similar trend -- that would mean that the average price of a new car would be less than $10,000 today!
The rest of your post was spot on, though.
I've used match.com on a few occasions. The most recent time, my income had gone north of $150K, so that's what I chose. I noticed a significant increase in women who wrote to me. This was not a good thing.
"I never actually met anyone from match.com in real life. I even subscribed for 3 months and emailed probably 20 different girls. Most didn't reply, and the closest I got to a date was a phone call with a girl who thought the world revolved around her. So if you're thinking about subscribing... don't expect miracles! I think only tall, dark and handsome guys do well online, but they don't really need dating sites anyway!"
I'd classify myself as "average" and I've done quite well on the matchmaking sites -- haven't yet found the right one, but I've met and dated at least ten very attractive women this way. It's all in your schtick. Being a good writer helps. Try experimenting with your approach and your tone, and don't send copy-and-paste generic notes -- people can easily tell when you do this. Meeting people online isn't easy, but like golf or skiing, working on your form helps quite a bit.
Huh? I wrote "indie and specialty stores like Tower." Tower is a specialty store. C'mon, this is basic reading comprehension.
What Tower and Amoeba have in common in this case is that, unlike Wal-Mart, they don't have an acre of children's clothes and camping gear in the back of the store to make the money they don't make on CDs. Wal-Mart can afford to sell CDs at lousy margins because they're a draw to get customers in to buy the high-margin stuff. Tower and Amoeba can't do this; one more reason why big-box retailers like Wal-Mart are putting indie and specialty retailers out of business.
" Wasn't the recording industry nailed for trying to force retailers to up the price for CD's."
Kinda. They set up a MAP (minimum advertised price) program with Tower Records and TWE in which they helped pay for advertising if Tower and TWE agreed not to advertise the price of CDs for below a certain point. The MAP program started because Tower Records and TWE complained that Wal-Mart, Best Buy, etc. were putting them out of business by selling CDs at or below cost. When Wal-Mart and Best Buy found out about the MAP program, they went to the government.
As another poster put it, "nailed" isn't the best term. The MAP program didn't affect the distributor price of the CDs, so the record labels didn't lose any profits as a result of being ordered to stop MAPping. The big winners here were Wal-Mart and Best Buy. The losers are indie and specialty record stores like Tower (who subsequently filed for bankruptcy), as Wal-Mart and Best Buy will continue to drive them out of business. Also among the list of losers is music fans who might be willing to pay a buck or two extra per CD for the opportunity to shop in a cool indie store with great selection, rather than having to deal with the Wal-Mart or Best Buy shopping experience.
"Wouldn't this be just as illegal for Mp3 downloads?"
It's a different scenario here, as in this case, the record companies are actually trying to raise wholesale prices. An equivalent to the price-fixing case would be if the record companies were now offering to help fund Apple's advertising if they agreed to only advertise tracks that sell for, say, $1.29.
"As it stands, this is just one more sad pitiful example of how broadcasters really really really just don't get it!"
Ah... irony!
Either way, it seems obvious that you're clearly in the wrong business. On Monday, why don't you start producing a multimillion dollar TV show, and then give away HD copies for a buck.
For extra credit, write a 100-word essay on one of the following topics:
You can compare and contrast this with HD video downloads, and why it is reasonable for you to expect the industry as a whole to be supporting them right this second.
" Do you really believe ANY of that has to do with downloading movies? Or is it much more likely that the movie studios use harsh contracts and creative accounting to make as much money for themselves as possible?"
Not sure what you mean. I certainly think that the film companies lose a certain amount to piracy, but the losses stated are overblown (it's quite common to exaggerate to make one's point; the MPAA certainly isn't the only group to ever do this).
And, yeah, I do know for a fact that most of the people whose names you see in the credits of a film (and the many more whose names don't make it into the credits) are ordinary working folks who often work job to job. The film industry has some vastly overpaid people at the top, but so do the lawn mower industry and the computer industry. I'm not a huge fan of "two wrongs make a right." I think the best justification for downloading a movie is simply because you'd really rather not pay for it. Nothing wrong with wanting to get something for free. No need to base the decision to pirate on some (quite possibly incorrect) assumption about the wealth of the people who've worked to create it.
"The MPAA keeps saying they're losing X amount of money due to downloads, but I'm not sure that if they were to eliminate all downloading, those figures would transfer into real world sales."
Agreed. In fact, I think that's a given. The loss is probably much, much less. But on our side of the fence, we exaggerate as well -- if you were to believe Slashdotters, piracy actually helps the industry, pirates end up buying the CDs and even more CDs, and so on. It's hard to find a Slashdotter who'll admit that they prefer to download because they'd simply rather not pay. Meanwhile, here in the real world, everybody I know who pirates does so for exactly that reason.
"I'm sick of their "the stuntman will starve if you download a movie!!" argument, when actors make millions per movie (eg., Brad Pitt earned $17.5M for Troy). I'm not trying to justify the downloading of movies, I'm just sick of the MPAA's silly argument."
The vast majority of films released don't feature actors taking home $10M+ paychecks. There are tons of smaller budget and indie films out there. But I can understand that for those who don't happen to live at the coasts, the only types of films that ever play at their local Googleplex are crap like Troy. That aside, if every film were like Troy, then I think your plan would work -- pay Brad only, say, $5MM and let Slashdotters download as much as they want.
Either way, even with a film like Troy, if the total budget was $100M and, say, $30M went to the big names, the other $70M was largely spent in the form of paychecks for people who don't have the glamorous lifestyle you might imagine. The typical person who works in the film industry often has a pretty rough time of it. Their ability to feed their family is only as good as their ability to get that next gig. On that point, the MPAA ads are correct.
"And we all know those are the same people. Sheesh."
Nah, I don't think that's what the article meant. Going after the big dogs -- the counterfeiters and the sellers -- and suing downloaders are not mutually exclusive acts. The problem is being attacked on both end. Our government has lately been putting increasing pressure on the Chinese government to put a stop to counterfeiting of all sorts of items, including DVDs, and busting the guys selling them on the streets is typically the job of the police. But since international diplomacy and police raids of stores selling counterfied DVDs don't fall as well into "your rights online," you seldom see them reported on Slashdot.
In short, the "why don't they go after the real pirates instead" sentiment is often expressed around here when there's a story about busting file sharers. They are.
"No, the free market would be in play at all. The monopolies provided by patents and copyrights are the antithesis of a free market, which is why they must be time-limited."
I should have been more clear. Right now, the character of Mickey Mouse has value on the free market vs. other cartoon characters and cultural icons. Disney's ability to make money off of that Mickey Mouse apparel item depends on their ability to make people love Mickey Mouse more than, say, Pockemon.
If Mickey were to be in the public domain, the competition would not be (say) "Mickey vs. Pockemon," but "Disney-produced Mickey t-shirt vs. Mickey t-shirts produced by a squillion other vendors" in addition to the existing competition between Mickey and Pockemon.
As you can tell, I see Mickey as ultimately just another cartoon character. He's not air or water or food or anything that we need or which is a God-given right. Mickey already has plenty of competition. Putting him into the public domain would change the players a bit, but it would not usher in a glorious age of IP enlightenment.
"There is NO logical reason why Mickey Mouse isn't in the public domain now."
Sure there is -- Disney, like just about every other person or company on the planet, wants money. The difference is that when Disney wants money, they're greedy, but when you want money, you're not.
I don't lose sleep over Mickey Mouse being copyrighted. If Mickey went into the public domain, the primary effect would be that the price of items with Mickey's face on it would go down, since you'd have the option of buying from some Far East importer rather than through Disney. It would not be some grand and glorious new age of copyright enlightenment; just more money for the country that can produce items the cheapest. The free market economy would still be in play.
Very well put. A popular response seems to be "The RIAA is evil! It would be just like them to sue him! Okay, so they haven't, but wouldn't it be cool if they did? Because they're evil!"
Alas, many of the posts on Slashdot fall into the category of "okay, that's not really true, but what if it were? Let's pretend it is!"
"Those who say AllOfMP3 SHOULD obviously be illegal are just shilling for the industry that literally gets together and decides how to screw the customers."
Many people who think it should be illegal have this belief because they think that the people who create the music should be paid fairly, and should have the right to decide how their work is distributed.
I am aware that a common sentiment on Slashdot is "fuck the artists," but it's important to understand that not all geeks have the same moral compass. For many people, the golden rule -- basically, "treat others as you would like to be treated" is not simply a quaint bromide from childhood, but a foundation of their moral code.
Please have a little more understanding for others' viewpoints. If you can get to that point where you understand that people with moral codes that differ from yours are not obviously "shills," it may make you a better person overall.
"And, even if most albums don't break even, it doesn't come out of the labels' pockets. They front the money to the groups, who are then on the hook. Some of them probably default on the loan, but rest of the money is paid back to the labels, no doubt with hefty interest."
Incorrect. It's the record labels that take the risk. It's an advance, not a loan, and, naturally, there's no interest charged. If an album costs $50K to make and only nets $25K, the record label, not the artist, is out that $25K difference. That's one reason why it's so difficult to get a record deal; it's a hugely speculative market and the record companies, like any other company, need to see a return on their investment.
On the other hand, what you've described does fit what happens when an artist decides to go it alone and record, produce and promote their own album. Unless they happen to have a lot of cash lying around, this means getting a loan, and in this case, you're correct -- that must be paid back 100% to the bank or credit card company, with interest.
The point here is that each route has its trade-offs. If you sign with a record label, you get to spend their money, in exchange for getting only a small percentage of the proceeds and not having a copyright on the recordings themselves (although, of course, you retain the copyright on the songs). If your album tanks, you've lost nothing but time. Going the record label route is bad enough; no need to make up stuff like "you have to pay interest on the advance" to make it sound worse!
Producing and selling your album yourself means that you get to keep all the money, you own the masters and you have complete creative control over how your music is sold and marketed, but it means a lot more hard work for you, and you must come up with the cash.
"Like most "interesting facts" in the world, those are wrong. If it wasn't profitable to make an album, then those albums wouldn't be made. Simple as that. They make money on the vast majority of albums and then screw the artist by use of creative accounting practices"
No, the GP is correct. The recording industry is what's called a "speculative" business. It's a bit like playing the stock market, or investing VC money. Nine investments may lose money for you, but that tenth one just might pay for all the rest. In the recording industry, one gold or platinum record can keep a company afloat for a year.
I certainly understand that this isn't intuitive to somebody who hasn't been in a speculative business, but nonetheless, that's how it works. This is why you seldom see record companies on the Fortune 500 (except for those that are part of some conglomerate), and why you seldom see analysts issue "buy" ratings for record companies. It's also why small record labels go out of business all the time (but new ones seem to pop up at an equal rate).