The PS3 is too hard to crack

A story came out the other day about George Hotz – the infamous hacker who released a hack for the PS3 a few months ago. His hack only works for an old version of the PS3 system, and Sony moved quickly to invalidate the hack using updates. It was the first time anyone claimed to have hacked the PS3, but now he’s giving up on the PS3, saying it’s just too difficult.

I think this hints at the direction companies will take in the future to bulletproof their systems against piracy – having tight control over the hardware. No doubt, companies will get more and more skilled at this as time passes. People will complain that “it’s their hardware and they should be able to do whatever they want with it” – citing their desire to create “homebrew” or run Linux on their machine, but they’ll be blocked on a technical level (not a legal level) from doing this.

The EFF has promoted exactly this kind of argument by analogy to a car:

“It is my automobile at the end of the day,” von Lohmann said, a reference that iPhone users should be allowed to do what they want with their phones, just like car owners do.

Of course, there’s also a major problem with that kind of argument. First, the laws do not recognize people’s legal right in all cases to modify physical objects however they want – even if they own them. For example, you cannot legally convert a gun into an automatic weapon. Your car must also conform to pollution and noise standards. In other words, it doesn’t matter that you own the gun or the car – there are limits to what you’re allowed to do with it. There’s also issues with copyright that run afoul of the “I should be allowed to do whatever I want with my property”. While some people might argue that owning a book, music, or software means they should be allowed to do whatever they want with it – including filesharing, this argument quickly runs into a problem: most people (even filesharers) dislike the idea of commercial piracy (i.e. selling pirated material for money). For example, if a guy goes and creates a thousand copies of some new DVD and sells them on the street for a couple dollars each, he’s involved in commercial piracy. Logically, “I should be allowed to do whatever I want with the stuff I own” means allowing people to engage in commercial piracy since they own the original DVD.

The other method that console makers use is what Microsoft is doing: while the XBox 360 has been cracked, they control the servers where people can buy new games or get online to play multiplayer games with other people. Microsoft can lock people out of their servers for running cracked XBoxes – and that’s exactly what they did right before the launch of Modern Warfare 2. They locked a million XBox owners out of their servers. Even the EFF had to concede that Microsoft had the right to do so because they own the servers. While this second strategy is less effective than the PS3’s hardware lockout, it seems to be pretty effective, judging from Modern Warfare’s piracy gap on the XBox 360 vs the PC – the numbers I’ve seen show that 86% of the people playing Modern Warfare 2 on the XBox paid for it, while only 6% of the people playing it on the PC paid for it.

Anyway, it’s still pretty interesting that the PS3 has weathered the attacks from hackers as well as it has. It shows the potential of technical methods to block piracy – despite the refrain of pirates that someone will immediately crack all piracy prevention systems.

EFF: Helping the Pirates

I’ve long accused the EFF of being on the side of the pirates. They downplay the effects of piracy, do their best to throw up legal challenges to prevent any possible enforcement of copyright on the internet, hire vocal advocates of legalized filesharing, and even created tools to detect if ISPs were throttling BitTorrent traffic so ISPs could be dragged into court. Now a new CNet article is making the connection even more clear. Fred von Lohmann, senior staff attorney and author of numerous EFF articles has been instructing pirate groups on how to facilitate piracy, but avoid legal responsibility.

A few quotes:

According to Wood, LimeWire founder Mark Gorton testified that he and former company Chief Technology Officer Greg Bildson received questionable advice from von Lohmann. “Gorton states that another attorney, [von Lohmann], gave [LimeWire], including Bildson, confidential legal advice regarding the need to establish a document retention program to purge incriminating information about LimeWire users’ activities,” Wood wrote in her decision.

In his zeal to keep some of these services from being sued out of existence, von Lohmann has gone too far, say critics. During the Grokster trial, MGM’s lawyers noted that von Lohmann in 2001 wrote a primer called “Peer-to-Peer File Sharing and Copyright Law After Napster.” In the piece, von Lohmann advised that to “avoid liability,” operators should create “plausible deniability” by “choosing an architecture that will convince a judge…monitoring and control is impossible.”

In a paper titled “What Peer-to-Peer Developers Need to Know about Copyright Law,” von Lohmann wrote, “The court also found that Napster had a duty to monitor the activities of its users “to the fullest extent” possible. Accordingly, in order to avoid vicarious liability, a P2P developer would be wise to choose an architecture that makes control over end-user activities impossible.”

Is von Lohmann instructing file-sharing services on how to avoid violating the law here, or is he teaching them how to violate the law and avoid responsibility?

This isn’t surprising at all. It’s clear that the EFF and von Lohmann has always had an interest in helping pirates evade legal responsibility for copyright violations.

It’s worth reiterating what Dave Winer, creator of RSS and an early supporter of the EFF said about the EFF years ago:

I gave $5000 to the EFF when they started, I think it was in 1990, with the noble goal of protecting freedoms as our technology and culture move online. I think I have supported every cause the EFF has adopted since then, but that’s no longer true. I gave this a lot of thought, believe me, and had a long email exchange with Brad Templeton, the chairman of the EFF board of directors, and think they have become as radically polarized as the entertainment industry, and like Hollywood are now working against the interests of those they were meant to serve. The issue appears to be copyright, and it appears that the EFF believes there should be no copyright….

The problem with the EFF position is that in order to remain consistent, they have had to say that copyright doesn’t exist — if a policy or law restricts what a user can do on the Internet then that is a bad policy or law. The courts can’t agree with the EFF. I don’t agree with the EFF.

Interesting Piracy Statistic

I’ve heard people argue about PC piracy and XBox piracy in the past – saying that PCs are getting hurt badly by piracy, followed by the retort that piracy exists on the XBox as well, but it’s a lot harder and riskier (you have to install a mod-chip, and you risk being locked out of the XBox network).

According to a recent GamesRadar article, the PC version of Modern Warfare 2 was pirated 4.1 million times and sold 270,000 copies. Meanwhile, the XBox 360 version was pirated 970,000 times and sold 6 million copies. That’s a pretty stark contrast. To put it another way, 6% of the people playing Modern Warfare 2 on the PC actually paid for it, while 86% of the people playing the game on the XBox 360 payed for it. Partially as a result of this, Modern Warfare 2 sold 22x better on the XBox than on the PC.

The disparity might be due to a number of factors. Other than the fact that the XBox games are more difficult to pirate, there’s also the fact that Microsoft did a major crackdown on XBox pirates right before the Modern Warfare launch, banning 1 million players – which probably put the fear of god into players considering pirating the game.

This actually reminded me of an article I saw some time ago on a pro-piracy website. They argued that the fact that Modern Warfare 2 was the most pirated game of the year, but still managed to be the best-selling game of the year meant that piracy had no effect on sales. What they neglected to notice, based on these numbers, is that the piracy, the ease of piracy, and the fear of getting caught seems to have played a large role in the disparity in PC vs XBox sales.

Seems Like A Bad Idea…

… to comment about your love of piracy while mocking the movie industry and including all kinds of personally-identifying information.

( I blurred the information to protect the guilty, but it is posted on a public forum and available for anyone to see. )

Random Thought on DRM

I was thinking about DRM lately, and one idea that crossed my mind was this: what about a system where every executable contains a serial number. The serial number would be long (and therefore resistant to brute-force attacks). It would be used whenever connecting to the (company) servers to get updates, play multiplayer games, or any other downloadable game content.

You could then install the software wherever you wanted, without any kind of server validation, but if too many computers with the same serial number started asking for the exact same update or multiplayer access, then we could assume the game had been pirated. That serial number could be automatically blacklisted from server access. In other words, if someone uploads their copy to a pirate website, they would end up harming their own copy and all the pirates could also be blocked from accessing the server. Optionally, the application could either be disabled or could start show a nag message about buying the software.

While it doesn’t actually stop anyone from using the application (unless the application is disabled, as indicated above), this system is resistant to a variety of hacks. Using a long serial number means people can’t just guess a different serial number for their copy. If they rewrite the serial number to something else (like a bad serial number), they still can’t access the server.

This system would also accomplish a couple of good things. It would allow the application to continue working even if there were no DRM servers running (e.g. if the company goes bankrupt). It allows users to install the application where they want without needing to remember a registration code (the registration code is built in). Users would never have to worry about unregistering their copies on old computers (if you computer suddenly dies or your hard drive goes bad, no problem because the only thing that matters is whether it’s asking for updates or server access). It allows the company to recognize and selectively ban copies that have been spread on the internet by pirates.

While I was thinking about this, I realized that it only works very well for software. And it works better for multiplayer games than single-player games. (If someone pirates a single-player game, doesn’t care about updates, and doesn’t care about downloadable content, it doesn’t really restrict them.) Theoretically, this DRM system could be open-sourced, too, because it doesn’t get harmed by the fact that people can see what’s going on inside the code. Plus, it would be nice to see people’s reaction to the phrase “open source DRM”. I don’t think I’d want to do that, though, because I think open-source DRM would attract too many confederates who want to either destroy the system or build-in backdoors. One other possible problem with the system is that a pirate could hack the application to point it to another server, then setup their own (open source) copy of the server elsewhere, serving up copies of the updates and other downloadable content. This would a somewhat dangerous strategy, though, because it means setting up a website. Websites can get shutdown, they cost money, and it means that their identity might be revealed. Still, I’ve seen websites that were clones of other websites, in an attempt to get some ad-traffic based on someone elses’s content.

Unfortunately, it’s not a system that can work for things like movies or music, because they don’t benefit from updates, server-access, or multiplayer access. Well, the other day, I stumbled on one company seems to be trying this strategy with music:

Is the World Ready for the Successor of the MP3?

A leading technology company is set to launch a new digital music file format that will embed additional content for fans including lyrics, news updates and images in what could be a successor to the ubiquitous MP3 file.

Music labels, bands or retailers could then also send updates to the music file every time they have something new to announce such as the dates of future tours, new interviews or updates to social network pages.
(Source: Wired Magazine)

What they seem to be doing in this case is embedding a serial number in the MP3 metadata. They then update the file with new data (images, lyrics, etc) if you have a valid serial number. I don’t think their system works very well, though. First, once someone gets the update, they can pass it around to everyone else, giving them access to the images and lyrics. Also, I’m unclear on what happens if you have 40 songs by one artist. Are all 40 mp3s going to get updated with tour dates? That seems inefficient. And, what if someone had one legitimate mp3 on my system, and 39 pirated mp3s? Would that mean that the one legitimate mp3 be enough to get all the tour date and news information? While it’s generally a step in the right direction, I don’t think it’s going to be terribly beneficial to the music industry. Maybe it will help pull-in some of the music fanatics that absolutely need the best.

EFF: Most Pirated Movie of 2009 … Makes Heaps of Money

As a followup to my previous blog post, where I claim that the EFF is pro-piracy.

There are a number of articles on the EFF website that make me think they are pro-piracy, or, at least, indifferent to the issue. For example, this article, posted a few weeks ago (and linked to all over the internet by pirates):

EFF: Most Pirated Movie of 2009 … Makes Heaps of Money

According to TorrentFreak, last summer’s Star Trek movie was the “most pirated movie of 2009.” So it seems that Paramount Pictures was prescient when it gave testimony before the FCC that used Star Trek as an illustrative example of how “Internet piracy” is poised to devastate Hollywood and (though the nexus here is less than clear) undermine residential broadband in America.

Funny thing is, Star Trek is on course to make more than $100 million in profits.

Here’s the financial breakdown, courtesy of The, which gathers financial data for movie industry analysts:

Production costs: $140m
Promotion costs: ~$100m
Global box office revenues: $385m
U.S. TV syndication rights: $30m
DVD & Bluray revenues (anticipated, based on sales and rentals since Nov. 2009): >$100m

When I first read the EFF’s article, my thoughts were that the movie studios picked a particularly bad example to cite as a victim of piracy. But, I also had doubts about judging the health of the industry based on one movie, and thought about the fact that Star Trek was highly rated by viewers, so maybe they can legitimately claim it should’ve made more. (Box Office Mojo readers gave the movie an “A-“.)

But, then I checked the EFF’s numbers, and I became less convinced of their argument. So, to clear up some of the sketchy numbers: According to BoxOfficeMojo, the production budget was $150 million (rather than $140 million). More importantly, “Global box office revenues” is the money taken by the movie theaters. I’ve read elsewhere that Movie studios and theaters split that money 50/50 (*see update). This means that, from the movie-production studio’s perspective, the box office revenues that they see are half of $385m.

When “DVD & Blueray revenues” say $100m, I believe that’s the amount of money paid by customers to retailers (e.g. Best Buy or Amazon), not the amount of money seen by the movie studios themselves. Like the movie-theater numbers, the movie studios might be seeing half or less of that $100m, because stores like Best Buy typically make half of the money from each sale. Plus, there’s some small packaging costs.

The updated numbers, from the movie studio’s perspective, should say:

Production costs: $150m (not $140m)
Promotion costs: ~$100m
Global box office revenues: $192.5m (not $385m)
U.S. TV syndication rights: $30m
DVD & Bluray revenues (anticipated): >$50m* (not $100m)

Using these updated numbers, then things look like this: Costs: $250m, Revenue: $272.5m. Total profit: $22.5m or 9% return on investment. And that 9% mostly disappears once you consider inflation and interest rates.

The EFF’s numbers suggest that Star Trek made a 115% return on investment. More importantly, the EFF article contains this:

As 2009 comes to a close, there is no evidence out there that “Internet piracy” is leaving us with fewer creators or fewer copyrighted works

I think that shows the EFF’s attitude towards piracy: it isn’t a problem despite what people say; it’s a non-issue, it needs no remedy, creators need no protection from piracy. Honestly, this sounds like something that the Pirate Bay could’ve written.

* I’ve seen a number of contradictory claims about how movie theaters and movie studios split the money on ticket sales. Whatever the case, it is misleading for the EFF to use the $385m “Global box office revenue” number without qualifying the fact that studios do not see 100% of that money, which is what the average reader will assume.
Source #1: “This percentage will vary from movie to movie depending on the specifics of the individual leasing deal. For instance, 2 movie theatre managers told me that for Star Wars Episode II: Attack of the Clones, the studio took 100% of the box office take for the first week of release… Now, as you move into the second and third weeks of release, the percentage starts to swing to anywhere from 45% – 55% that the theatre gets to keep. It gets better after the fourth week when theatres generally can keep up to 80% or better of the ticket sales.”
Source #2: “Except for a small operational fee paid to theaters, for the first two weeks that a movie was playing in theaters, 100% of ticket revenue went to the studio. In the third week, the studio would take about 90% of ticket revenue, while the theater would earn 10%. The fourth week, they’d split revenue 80/20, then the next week 70/30, then 60/40, until the level reached 50/50, where the division of money stayed until the end of the movie’s run.”
In response to Source #2, one commenter writes: “I study the industry and have 2 years of contract data between theaters and movie distributors. The average rental fee paid on all movies in that time period was 52%. In the first week, the highest it ever is is 70%, and it goes down from there. So you’re wrong when you say that theaters barely make any money on the tickets. They keep 48% of it on average.”
Source #3: “Upon initial release, for the first 10 days of a movie, the box office is split 80/20 in favor of the studio. For the next 10 days, it is split 60/40 in favor of the studio. For the next 10 days, the split is 50/50. For the next 10 days and usually a films final week in theaters the split is 30/70 in favor of the theater. If a movie makes it to almost 2 months in theaters the split goes to 20/80 (theater favor) for the remainder of the film’s time at the theater. For most films – this ends up being a 50/50 split over the entire run of the movie in theaters.”

It would be nice to get the numbers from some typical theater – something like “in 2009, we took in X dollars of revenue from ticket sales, and paid-out Y dollars to movie studios”.

Hollywood, Box Office Numbers, and Piracy

This article came up on Slashdot today.

“Claims by the MPAA that illegal downloads are killing the industry and causing billions in losses are once again being shredded. In 2009, the leading Hollywood studios made more films and generated more revenue than ever before, and for the first time in history the domestic box office grosses will surpass $10 billion. … [N]either the ever-increasing piracy rates nor the global recession could prevent Hollywood having its best year ever in 2009. With an estimated $10.6 billion in consumer spending at the US and Canadian box office, the movie industry will break the 2008 record by nearly a billion dollars.”

They reference a TorrentFreak article claiming that domestic box office numbers are higher than ever — and, therefore, movie piracy isn’t having any effect:

Claims by the MPAA that illegal downloads are killing the industry and causing billions in losses are once again being shredded. In 2009, the leading Hollywood studios made more films and generated more revenue than ever before, and for the first time in history the domestic box office grosses will surpass $10 billion.

Those despicable Hollywood liars. Additionally, these kinds of stories seem to be an annual occurrence (What piracy crisis? MPAA touts record box office for 2007, What piracy? Movie biz sees record box office in 2008).

But, I don’t consider TorrentFreak to be a reliable source, and expect a big dose of spin coming from them. Too bad they didn’t provide any statistics so that we could see the trends. That’s okay. I will. Shown on the right are the total domestic (US and Canada) box office numbers, according to BoxOfficeMojo. The dollar amounts are in millions. (Hollywood Box Office, the original source for the $10.6 billion estimate has adjusted their estimate downward to $10.5 billion.)

Okay, you might see some trends here. There’s some pretty strong growth from 1980 until around 2002. Then, after 2002, the box office revenues hover between $9 billion and $10 billion a year.

Let’s take a look at those numbers in chart form. Strong growth up until around 2002, then some leveling off. But, the movie industry is still growing, right?

Well, if you consider that inflation is around 4%, you start to wonder if the movie industry is keeping up with inflation. What happens if we take a look at these same numbers and adjust for inflation using the Inflation Calculator?

This chart shows the inflation adjustment in the third column and the Inflation-Adjusted (2008) domestic Box Office numbers in column four. Once you take the inflation adjustments into account, you can see that 2009 wasn’t the best year ever. The best year ever for the movie industry was 2002. If box office revenue reaches $10.5 billion this year, after adjusting for inflation, it will be the fifth highest year, behind years 2001-2004. Here’s a chart of these numbers:

Once inflation is taken into account, the 2009 box office numbers are about 9% lower (or $0.8 billion) than 2002 numbers. (Hm, that’s a few years after music industry revenues also peaked*.) On average, movie box office revenue increased by $177 million/year between 1980 and 2002. Then, on average between 2002 and 2009, it has declined by $114 million/year. Yes, this could be a short term dip in revenue (like the slump in the early 1990s), but had revenue grown at the same rate between 2002-2009 as it had between 1980-2002, revenues would be $2.0 billion (20%) higher in 2009.

If we wanted to go one step further, we could also point out that the US and Canadian populations have grown from 227 million and 24.5 million in 1980 to 305.5 million and 33.9 million in 2009, an increase of 35%. Based on that, we can see that the movie industry’s growth in the past 30 years has been based on population growth. Per-capita spending has fluctuated a bit, and has declined by 14% since 2002.

Per-capita inflation-adjusted domestic box office:

It’s not a horrible downturn, and it is similar to the decline seen in the early 1990s, but it’s also not an argument that piracy isn’t hurting the movie industry, nor is it “shredding” the claims that movie piracy is “causing billions in losses”.

I should also point out another interesting bit of spin. The Ars Technica article linked at the top says: What piracy? Movie biz sees record box office in 2008. Looking at that headline, it looks all wonderful for the movie business, doesn’t it? But, once you look at the inflation-adjusted numbers, you can see that 2008 numbers ($9.63 billion) were the worst numbers since 2000, and per-capita spending was the worst since 1997. Funny the tricks you can play when you don’t adjust for inflation.

* Graph of the music industry downturn since 1999:

Jury Rules: $1.92 Million Fine Against Filesharer

MINNEAPOLIS – A replay of the nation’s only file-sharing case to go to trial has ended with the same result — a Minnesota woman was found to have violated music copyrights and must pay huge damages to the recording industry.

A federal jury ruled Thursday that Jammie Thomas-Rasset willfully violated the copyrights on 24 songs, and awarded recording companies $1.92 million, or $80,000 per song.

[Source: Yahoo News]

I really don’t know why the RIAA hits people with these kinds of fines. I’m obviously no fan of pirates, but when I was a kid, I remember hearing that shoplifting carried a fine of 7x the value of goods you stole. But, $80,000 per song is a 80,000x fine. The RIAA and is also in another case against Brittany English aiming for 150,000:1 damages. Personally, I think piracy should carry a lesser penalty than shoplifting. I know that opens up problems for when trying to pursue court-cases, because small-fines aren’t really worth the time or effort, but oh well. (I’ve heard that some stores won’t even try to prosecute you if you shoplift small dollar-value items; it’s not worth their time. That’s the unfortunate side of small-penalties.)

The justice system exists not just to punish crime, but to punish it appropriately. This punishment is out of proportion to her crime (does anyone think she did $1.92 million worth of damage to the music industry?), which is an injustice in itself. I think everyone has a sense that say, shoplifting $24 worth of merchandise should carry a penalty, but it shouldn’t be an excessive penalty. We’d all be aghast if Walmart hit a shoplifter with a $1.92 million fine. This injustice just fuels dislike of the recording industry (and entire copyright-industry by association), and allows pirates to pretend that they’re the “good guys” here – as if the other side being “bad” somehow makes you “good”.

In general, I think people’s motivation for sharing digital media on the internet is to be nice to their fellow man. I think it feels completely different than, say, shoplifting. I’ve had pirates offer me pirated copies of this or that software because I happened to mention it, and it’s done with a “hey let me help you out” attitude. (And, no, I never take pirated media.) For that reason, I think uploading-pirates see themselves as helping out their fellow man – even if it hurts the big, evil, faceless corporation (assuming they think about the creator at all). I mean – how much more evil can you get than trying to stop people from “sharing”. It’s like the corporations are run by Gargamel. I’m kidding, of course. I don’t believe piracy can be reasonably compared to sharing, although, I think pirates probably view the world that way.

My guess is that the recording industry wants to cover their court costs, and paying lawyers to get a couple-hundred dollar ruling isn’t worth it. But, $1.92 million is still outside the range of reasonable lawyer costs. Or maybe their strategy is to scare the bejesus out of pirates – to send a message? Is that the purpose of these trials?

There are some hints that the recording industry won’t try to make her pay – and why would they, it’s not like she has the money. But, what does that mean? That a bad credit rating for the next seven years is her punishment?

Now, of course, she was uploading songs on Kazaa (rather than downloading them). Which means that she could potentially have shared with hundreds of people. But, I think any fine against her should be the minimum sufficient to stop her activity. Heck, she’d probably stop if she got a cease and desist letter in the mail. She also tried to get out of the accusations by claiming that someone else (her ex-husband or kids) did it, or that someone hacked into her wifi connection (even though she doesn’t have a wifi connection). I doubt that helped her case – the jury was probably insulted about being lied to. I’ve also read that her lawyer was trying to argue (in another case) that filesharing was “fair use” – which almost everyone (including anti-copyright activists) thought was a very bad argument. And the fact that she opted out of paying a settlement, and then keeps appealing the verdict (this is her second appeal and she plans for a third) probably isn’t helping at all.

There’s also something bizarre in the fact that she had a $1.92 million fine, but the PirateBay was hit with only a $3.6 Million fine (plus a year’s jail time). They’ve done far more damage to the creative industries than this woman.

The whole situation just leaves me feeling confused with a sense of injustice.

Slashdot and Piracy

Wow, the past few days Slashdot has been putting up quite a few pro-piracy articles. I think it’s been one a day for the past few days. It’s generally dismal to read some of the comments there.

First, there was “Slashdot: The Pirates Will Always Win, Says UK ISP” / The Guardian: The pirates will always win, says Carphone’s Dunstone

Slashdot summary:

“The head of UK ISP TalkTalk, Charles Dunstone, has made the comment ahead of the communications minister’s Digital Britain report that illegal downloading cannot be stopped. He said ‘If you try speed humps or disconnections for peer-to-peer, people will simply either disguise their traffic or share the content another way. It is a game of Tom and Jerry and you will never catch the mouse. The mouse always wins in this battle and we need to be careful that politicians do not get talked into putting legislation in place that, in the end, ends up looking stupid.’ Instead he advocates allowing users ‘to get content easily and cheaply.'”

First of all – he’s right in saying that it’s impossible at the ISP level to stop pirates for any length of time. As far as I can tell from the article, that’s what Dunstone’s argument was. Unfortunately, most people have generalized this correct observation into the incorrect claim (in the Slashdot summary) that “illegal downloading cannot be stopped”. Even the Guardian gets their headline wrong (“The pirates will always win, says Carphone’s Dunstone”), which again misrepresents what Dunstone said. I agree with Dunstone that legal downloading services are part of the fight against piracy – although, most of those are already in place. ITunes, Netflix Download service, Amazon Video-on-demand, etc are already there. Additionally, with sufficient legal pressure – we could also drive piracy down. The most obvious method is to go after filesharing hubs – like Pirate Bay. That’s a different method of attack than sifting internet traffic for illegal filesharing. What would happen then, is that piracy is marginalized. People don’t want to jump from one website to another every few months – so most people will just stop trying to skirt the law, and do it the legal way. Only the die-hard pirates will stick with it. The fact of the matter is that you don’t have to stop 100% of piracy. This isn’t a war that has one of two outcomes: you “win” or you “lose”. A world with 95% or 100% piracy is a very different world than one with 10% or 20% piracy. In both cases, piracy exists, but in the first case, creativity gets smothered.

What’s odd is the number of people who buy-in to the false dichotomy. They wouldn’t buy-in to similar dichotomies like: “shoplifting cannot be stopped” or “littering cannot be stopped”. We can do the same thing to piracy that we do to shoplifting or littering: minimize it so that its damage is minimized.

I read an article by Clay Shirky recently that seemed to imply that piracy cannot be eliminated because, if they have to, pirates will resort to the “sneakernet” – i.e. manually sending a hard-drive from one location to the other for duplication. The whole thing takes place without the internet involved. I couldn’t help but think, “well, duh – if pirates have to resort to those kinds of actions to pirate stuff, then piracy rates will be extremely low because it’s just too inconvenient for a large majority of people. That means it won’t be very threatening”.

Slashdot, of course, leaves out the fact that Charles Dunstone doesn’t call for the elimination of copyright or surrender to pirates, but, rather:

Charles Dunstone said, the solution is education about the benefits of respecting copyright coupled with services that allow consumers “to get content easily and cheaply”.

Obviously, his comment about “getting content easily and cheaply” means legal download services – like iTunes.

Then, Ben Goldacre’s article in the Guardian got posted: (Slashdot: Lies, Damned Lies, and the UK Copyright Industry, “Illegal downloads and dodgy figures”, BadScience: Home taping didn’t kill music). I generally like Ben Goldacre. He’s probably most famous for combating the anti-vaccination groups. Most of his article dealt with unrealistic numbers of lost sales due to piracy. I think it’s perfectly fine to raise issues about bad numbers. Unfortunately, he makes some jabs at the whole copyright system, implying that piracy isn’t a bad thing. He seem to buy-in to the questionable results of the Norwegian “pirate” study. And the title of his article is rather odd (“Home taping didn’t kill music”) since his article has nothing to do with home taping. The problem, of course with the “Home taping didn’t kill music” argument is that home-taping is really inconvenient. It’s like the “sneakernet”. Internet piracy gives you free copies of digital media (read: perfect copying) and everything is there (often hours after its release). Home-taping on the other hand, gives you a degraded copy, you have to get a physical copy to duplicate in the first place, and you have to borrow that copy from someone else who has it. This means you probably can’t get what you want because your friend doesn’t have it either, and if he does have it, you feel like a leech when you ask to borrow lots of music.

Then comes the article saying that the Pirate Party has won a seat in the EU Parliament. (Link to my article examining the Pirate Party’s arguments) At least it’s only one seat out of 736. They’re hoping to make the most of it though, by being a one-issue party. They’re also hoping that other political parties chase votes by taking up their cause. It’s rather sad. The Pirate Party / Pirate Bay always remind me of the “killing the golden goose” story. They’re sharpening up their knives without understanding the economic issues going on with digital media. For a real treat, and to raise your blood pressure, just read some of the Slashdot comments. I feel frequently insulted by slashdot comments whenever the issue of piracy comes up. A few favorites:

All works intellectual creativity of should be given away free. We should only have to pay for retail services, and stuff that China and the rest of the world manufactures… not for what America does best. (Source)

Copyright is the antithesis of free speech. (Source)

Everyone who applies copyright restrictions, deep inside, knows doing so is wrong and screws all humanity over.

If you don’t want something copied, don’t release it. (Source)

Sigh. I never would’ve guess that working hard to make great software and earn a living would’ve provoked these kinds of reactions, just because I won’t give away years of work.

Rick Falkvinge: Copyright Regime vs. Civil Liberties

I always like to know what other people think, even if I disagree with them, so I recently watched a video by Pirate Party founder Rick Falkvinge titled “Copyright Regime vs. Civil Liberties”. The Pirate Party is dedicated to copyright and patent “reform”, and by “reform”, they mean that they advocate elimination of almost all copyright, patent, and intellectual property laws. The only vestige of copyright that they support is to prevent commercial selling of copyrighted material for 5-10 years, and works would have to be attributed to their authors. Under the Pirate Party, filesharing would be legal, and all patents would be eliminated. They also support trademarks, because trademarks help society distinguish one creator from another.

Here’s the video, and (below) I’ve detailed what’s wrong with it:

Falkvinge’ main argument is this:

Copyright is at it’s heart a commercial monopoly. When it was created, it was created to distribute books to bookstores by horse and cart. And, the key thing there is that if you found an infraction of copyright, you can find a copied book in a bookstore, you can see an unauthorized concert (not paying license money). The key thing here is that you found them in public places – with the naked eye. Today, however, copyright has crept into my private communications. It is illegal for me to send a piece of music in email to you guys. It is illegal if we are in a chat channel, to drop a video clip there. And if copyright is to be enforced in this new environment, then that means all private communications must be monitored for copyright infractions. That means out goes the postal secret. That means law enforcement and corporate interest groups must monitor every 1 and 0 that leaves my computer. That includes looking at letters to my lawyer and doctor and wife. I’m frankly not prepared to give them that right… So, our poor lady justice has a problem: on one side of the scale, you have one income source for one entertainment industry – essentially a luxury consumption in our society. On the other side of the scale, you have two foundations of our democracy. Hmmmm.

Over the few minutes, Falkvinge goes into the consequences of monitoring all internet communications: whistleblowers no longer have protection, damage to freedom of the press, how this influences people to self-censorship, how your identity is formed by private communications with other people, etc.

So, the copyright industry would like you to believe that it is about somehow about right to profits. That the filesharing debate it is about percentages, about graphs on a piece of paper. It is not. It is about vital civil liberties that need to be eroded or abolished in order to maintain their old crumbling monopolies. And this is the message that we’ve started to get out in Sweden.

The whole situation sounds awful – like something out of 1984. Here’s the problem: Falkvinge’ argument is completely wrong. Everything Falkvinge says is correct if our goal is to stop every single instance of copyright infringement. However, the legal system has always recognized limits on law enforcement’s ability to pursue crimes. We can quickly see how flawed Falkvinge’ argument is if we simply insert a different crime in place of “copyright infringement” and repeat his argument. For example:

“And if [laws against child pornography] are to be enforced in this new environment, then that means all private communications must be monitored for [child pornography].”
“And if [laws against libel and slander] are to be enforced in this new environment, then that means all private communications must be monitored for [libel and slander].”
“And if [laws against false medical claims] are to be enforced in this new environment, then that means all private communications must be monitored for [false medical claims].”

If you believe that Falkvinge’ argument is valid for copyright, then you must advocate the elimination of lots of other laws. Further, if law enforcement’s goal is to eliminate all instances of any particular crime, without regard for people’s rights, then we might as well throw out all laws. Laws against burglary should be abolished because the only way to eliminate burglary is to put video cameras everywhere – and we can’t have that, therefore, we must abolish burglary laws. Laws against drugs should be abolished because the only way to eliminate the drug trade is to monitor everyone’s actions at every time, completely control all trade, and insert a device inside everyone’s body to monitor drug-levels at every moment. We can’t allow that, therefore, we must abolish drug laws.

So, the whole argument is just plain wrong. It’s true that copyright can be infringed through email-to-email communication, but, let’s face the facts here: that’s not how the vast majority of it happens, and second, even if 100% of copyright infringement happened through email, that’s not an argument that copyright laws should be abolished – it’s simply an argument that we will not be able to enforce copyright laws in particular cases. Falkvinge’ argument is that copyright cannot be enforced on private communications, therefore the laws should be abolished. Abolishing copyright means we can no longer prosecute public violations of copyright. In short: he’s arguing that we shouldn’t be able to prosecute public violations of copyright because sometimes copyright is privately violated.

Alternatively, we could simply enforce copyright whenever someone sticks out their neck and violates copyright in public. In fact, this is where the vast majority of copyright infringement happens anyway. Combating piracy is a very open-ended problem; there are numerous possible ways to combat it. It is disingenuous of Falkvinge to pretend that the one and only way to combat copyright violations is through monitoring all internet communication.

I’ve actually seen this quite a few times from the anti-copyright crowd: this attempt to connection copyright elimination with “saving human culture” or “protecting our fundamental freedoms”. It gives them the opportunity to twist-around “not paying the creator for their work” into a saintly “I’m fighting for our freedom against greedy corporations”.

Besides, if Falkvinge’ argument was true, then there’s a major problem for him. The stance of the Pirate Party is that copyrights should last for 5-10 years, and they only restrict what you can buy and sell. This means, for example, that Walmart cannot print-up their own copies of books and sell them during that 5-10 year window. But, I can go online right now and purchase a pirated copy of software. I’ve seen the websites. So, the question is this: if I buy copyrighted material from some illegal vendor over the internet (maybe through email, maybe through a website), then that is “private communication”. By Falkvinge own argument, we HAVE to allow this type of activity because the only way to stop it is by monitoring all internet communication. Therefore, the 5-10 year restriction on selling copyrighted material is unenforceable, and should be abolished. The Pirate Party’s stance is internally inconsistent.

Now, the Pirate Party might argue that a website selling pirated material on the internet is “public”, but how is that any more public than filesharing websites?

So, the major argument of Falkvinge’ “Copyright Regime vs Civil Liberties” talk is 100% wrong.

And it gets worse. The copyright is now lobbying for ISPs to be liable for what their users do on the net. And there goes another very important principle called the “common carrier principle” which ways that the messenger is never responsible for the contents of the message. Imagine if the US postal service would be held liable for what you send in letters. This is what the copyright industry is lobbying for. And they’re taking advantage of the fact that politicians are clueless about what new technology means.

There is a grain of truth in Falkvinge’ argument here, but it’s not nearly as bad as he wants us to believe. He wants us to believe that the ISP can be held guilty for the crime committed over the internet connection. For example, it sounds like an ISP can be held responsible for a death-threat send via email by one of their users. This is not actually what “holding the ISP responsible” means. Falkvinge’ statement is actually vague on this issue – which makes people assume the worst. (You can read more about this issue here.)

It’s currently two years after he gave his talk, and it’s true that copyright groups have started working with ISPs to cut-off internet service to pirates. I have actually heard about people receiving warning letters from their ISPs about pirating material over the internet. In one case, an internet user received a letter about a specific movie they had pirated on a specific day. They didn’t cut off his service, but it’s possible that they would after the third infraction. There are already some parallels with the policy of cutting-off pirates. For example, ISPs are sometimes contacted about cutting off customers who send spam, or who are involved in port scanning (which is typically associated with computer hacking). I’m sure that, if there is a grain of truth in Falkvinge’ argument, it might be true that the copyright industry is lobbying to get the right to sue ISPs who ignore piracy by specific users even after the ISP has been repeatedly notified about those users. In that sense, the ISP would be liable for failing to act on specific complaints about infractions by specific users. Falkvinge could then twist that into ISPs are going “to be liable for what their users do on the net”, which is true or false depending on how you interpret it.

I completely agree that ISPs should not have to monitor their users, or be held responsible for first-time infractions of their users. However, if an ISP repeatedly ignores notifications about a particular user, then it’s reasonable that their liability should increase. There is similar to how copyrighted material is treated on the web. If the copyright holder finds their material on the internet, they can send a cease-and-desist letter. You can then remove the offending material with no consequences. However, if you ignore the letter, your liability increases. This is why YouTube doesn’t get sued into bankruptcy – they don’t have to police every video uploaded onto YouTube for copyright violations, but they can be held liable if they ignore cease-and-desist letters about specific videos. In effect, ignoring cease-and-desist letters is tantamount to providing safe-harbor for copyright violators. I suppose someone could (just as truthfully) make the statement that “YouTube is being held liable for the actions of its users” – which is also true or false, depending on how you interpret it. (This is what gets a lot of piracy websites into trouble: they ignore cease and desist letters.)

Falkvinge gives his history of copyright and why it exists. His basic narrative is that the Catholic Church “was one source of culture and knowledge”. It was a top-down, one-source to “the masses” type of communication. Then, the printing press came along. The English monarchy established a single group of printers who could print books for authors, but censor and burn books not wanted by the crown. Later, when England allowed more freedom of the press, they also allowed more people to print books. The printers then pushed to establish “copyright” so that they could control printing of works by authors. He claims that it was always about protecting the distributor’s profits, never about protecting the author. I think the main point he is trying to make here is to establish a pattern: the Catholic Church controlled everything (bad), but then the printing presses came along (more distributors=good). But, the monarchy locked down the printing presses with censorship and ‘authorized printers’ (bad). Eventually, freedom of the press was established and more printers were allowed (good), but the ‘old system’ didn’t like that. He seems to be trying to create the pattern in the listener’s mind of the ‘old system’ trying to control things, but the ‘new way’ was always better and more democratic. While his point was muddled, he seems to trying to argue that ‘filesharing’ is the new democratic distributor which is opposed to the ‘old system’ of copyright.

This isn’t so much an actual argument as it is an attempt to get the listener’s mind thinking along a particular pattern and then insert filesharing into the sequence to guide the listener to a predefined conclusion. This type of argument is just “patterning”, and while it might confuse people into believing your pet theory, it has some big logical flaws. It’s easy to setup a pattern and then fit your own pet theory into it. For example, you could argue that the “old system” has always resisted the “new system”, but the new system was always better. Monarchy resisted democracy, but democracy was better. The Ptolemaic astronomers resisted Galileo, but Galileo was right. Governments resisted free speech, but free speech was better. Then, once you’ve established a pattern to get the listener to think in a particular direction, throw in your pet theory that superficially fits the pattern: and capitalism (the old system) will resist communism (the new system), but communism is better. Of course, that’s nonsense. I mostly see “patterning” arguments used with pseudoscience. Some crackpot will say that the establishment resisted Galileo and laughed at Einstein, and then imply that he fits the same pattern. Of course, he conveniently ignores the fact that 99 out of 100 theories turn out to be completely wrong. In the end, “patterning” is just rhetoric – a way to convince people you’re right without actually putting forward reasoned arguments.

So, the key here is that copyright, while written into law that it’s supposed to be for the benefit of the author, never was. It was for the benefit of the distributors. It was lobbied by the old monopoly as a way for that monopoly to remain even after the authors has supposedly gotten it instead…

Falkvinge is trying to setup the idea that authors/creators (the people we like) don’t benefit from copyright but (faceless, greedy) distributors make loads of cash from copyright. I’m sure most authors and creators see this as nonsense, but Falkvinge can probably pull the wool over the public’s eyes on this one. Heck, it’s almost an argument that you should pirate because (according to him) buying only helps greedy distributors and never the author.

What we’re saying is that, okay, there might be some business models that require a time-limited monopoly. Like, I can imagine a $200 zillion dollar movie out of Hollywood might want some sort of time-limited monopoly in order to get all of that venture capital. But, that monopoly must really now stretch into my private communication. I’m sorry, but the buck stops there… Non-commercial usage must be let free.

This is his argument about why filesharing should be legal, but they’re going to allow a 5-year monopoly on commercial trade. (Nevermind the fact that filesharing will drop the bottom out of any commercial trade.)

We have as vision a society where every citizen has 24/7 access to all of humanity’s collected knowledge and culture anywhere. That is a huge leap-forward. It is not a bad thing that the copyright industry has to take a step back. This is a much larger leap ahead than when public libraries arrives 150 years ago. And it is now enabled by today’s technology.

Actually, society already has that access. What Falkvinge wants is free access, and free access at the expense of the creator who produced it. Our copyright system enables the continued creation of new work. Economists know there is no such thing as a free lunch, but Falkvinge hasn’t figured that out yet. And the comparison to libraries is faulty. Libraries support authors by buying books. He might have a point if libraries printed up their own copies of books (without paying the author), and also printed up free, permanent copies for anyone.

I also hate the “knowledge and culture” phrase that anti-copyright advocates use because they want to make “entertainment” sound lofty and legitimize making it free. Anyway, more and more information is freely available on the web. Dictionaries and encyclopedias, for example. More and more TV and movies are available online – with only a few advertisements. There is so much information available on the internet for free, more than anyone could ever read. We have more free “knowledge and culture” available at our fingertips than anyone at any other period of history. All of this actually makes it clear that the Pirate Party isn’t really interested in spreading knowledge. They want free access to all the movies, music, and software that they can get. It’s about free entertainment, about never having to pay for anything digital. (A quick look at the top downloads at piracy websites will quickly reveal that entertainment is the primary goal of pirates.)

He sums up the Pirate Party positions:

The only items where I really agree with his ideas are shortening copyright lengths (but not as extreme as lowering it to 5-years) and also reducing patents (to cut out all the frivolous, defensive patents, but not to eliminate all patents).

What’s important about this is that every single business model that makes money today will make money with these changes implemented. The only difference is that millions of people will not be criminals.

It’s hard to interpret exactly what he means by this statement. It could have two possible meanings:
(1) He’s claiming that the business models will bring in the same levels of revenue as they did under a copyright system, and therefore, creators will continue to create.
(2) He’s claiming that those business models will “make money” without copyright, but avoids saying that they make a lot less money. This obviously true – no businesses will bring in zero dollars in revenue, but it’s irrelevant since a company that makes 20% of its original revenue is probably a bankrupt company.

So, I’ll address the first interpretation, which is the only relevant question here. Because companies and creators have a variety of costs and variable profitability, Falkvinge essentially has to argue that people will continue to pay as much money to creators if copyright is eliminated. Presumably, he thinks that people will simply donate money – and they’ll donate just as much money to support creators as they currently spend to buy copyrighted material, or purchase copies (even though they already have the media). This sounds like complete nonsense. I’m sure that if you compared the amount of money donated to OpenOffice versus the amount of money paid to Microsoft for MS Office, you’d find a huge disparity. (And I say that not because I’m crying for big-companies or their potential loss, but simply to point-out that people do not donate nearly enough to match what they were paying for copyrighted material.) Similarly, wikipedia has never earned nearly as much money in donations as Encyclopedia companies were earning back in the 1980s. More specifically, wikipedia was trying to raise $6 million in donations in 2008. In comparison, the Encyclopedia Britannica brought-in $800 million in 1989. It’s great that there’s a free encyclopedia for everyone, but my point is simply that people are clearly not donating at levels that replace revenue compared to copyright systems.

Now, I know that people argue that pirates purchase a lot of digital after they pirate it. (I don’t actually believe that most pirates continue to buy at levels near their pre-piracy rates.) I also doubt that a good comparison can be made between the behavior of pirates and the behavior of the general public in a society without copyright over a long period of time. Sometimes, I think pirates purchase copies of material they pirate because they’re still in the habit of buying digital media from their pre-piracy days (thanks to copyright). I think that companies will see revenues fall to a small fraction of their current earnings if copyright is eliminated. That may not be a problem for the survival of a few extremely profitable products, but it will bankrupt almost everyone else.

I think the Pirate Party’s ideas are bad economics, and has quite a bit in common with other bad economic systems that got people excited, but were fundamentally flawed (like communism and the dot-com bubble). Unfortunately, “free entertainment” is a pretty good way to draw-in votes, especially among younger people – who are cash-strapped and very interested in entertainment.

Update: From an 19 October 2009 BBC article

[Falkvinge] takes a long pause when asked whether he agrees with the principle that artists should be allowed to make a living from their creations, if they are popular enough.

“In economic terms, there is an enormous oversupply of people wanting to live off creativity,” he replies.

“So there isn’t enough demand to pay everybody. In such an occasion, market forces dictate that there will only be so many successful creators.”

First of all, he actually dodged the question. It reminds me of that adage politicians follow: don’t answer the question that was asked, answer the question that you wish they asked.

Second, the reality is that all economic systems require laws to function well. If you own a store, you need laws against shoplifting, embezzlement, and laws involved in contracts (so that, for example, you can require that your suppliers hold-up their end of the bargain). If the government suddenly decided that shoplifting was okay, you’d see stores taking drastic action to stop theft (e.g. guns) and lots of stores going bankrupt. The fact that they go bankrupt is not a symptom of “market forces dictating that there will only be so many successful [stores]”. That would misattribute the reason for the failure, and would be an attempt to dodge the blame for setting up a bad economic system.

The Pirate Party wants to change the economic system and make it much harder for creators to recoup the value that they have produced for society. Then, under this biased economic system, when creators fail, they point to “the market” as the reason that the creator failed. In reality, when a customer buys a product for $10, what they are saying is that “this product is worth more to me than the $10 I have in my pocket”. The Pirate Party, by eliminating copyright, would be opening the doors for everyone to get it all for free – which would eliminate ability to make a mutually-beneficial trade, just as legalizing shoplifting would eliminate the ability to make mutually-beneficial trade between the store and the customer. Customers get this valuable product for free, the creator goes bankrupt and stops producing for society. It’s not because “the market” decided that the creator wasn’t producing value for society, but rather, because the economic system was changed so that the value that the creator produced would no longer be repaid by society to the creator. So, what Falkvinge is doing here is revealing how badly he would bungle the economic system that encourages production, and how poorly he understands the economic and legal underpinnings of society.

In economic terms, eliminating copyright is a loss for society. It’s a “tragedy of the commons” situation. When everyone pursues their own self-interest (by pirating and not paying) it leads to a collapse of the economic system that enables creators to continue their work:

The tragedy of the commons refers to a dilemma described in an influential article first published in the journal Science in 1968. The article describes a situation in which multiple individuals, acting independently, and solely and rationally consulting their own self-interest, will ultimately destroy a shared limited resource even when it is clear that it is not in anyone’s long-term interest for this to happen.