The crippled media folly begins The recording industry has begun its experiment with crippled media by releasing CDs that cannot be copied into digital formats. So, no more copying songs you have onto your Rio. Anticipating the consumer hatred such items will no doubt engender, they have done this secretly, and not told consumers that the CDs they're buying have less functionality than regular CDs. This surely is illegal, and any consumer advocate group for fair labeling could take them to task. If folks know who to get in touch with about this, drop me a line. I'm not saying that music publishers can't cripple the medium if they want to, but it should be clear to me what kind of CD I'm buying before I buy it. (Here's an editorial cartoon, just for fun).

Worse is better? When designing digital experiences, I followed the maxim "the customer experience is the most important determinant of website success." This is a sharp break from information architecture which has many rules like "navigation needs to be consistent," "don't risk the value of groupings," and "site hierarchy must be strictly maintained." Customer experience only focused on how well the customer could complete whichever task was most important to them. Inconsistent navigation, perverted groupings, subverted hierarchy were all fair game when a company wanted to maximize its business by creating the best online customer experience. Focusing on the customer experience was the most effective strategy a company could employee when thinking about its website.

Imagine my surprise when reading through this old piece on LISP where it compares the "right thing" philosophy to the "worse is better" philosophy of computer language design. The "right thing" philosophy, like information architecture, has several rules requiring "simplicity," "correctness," "consistency," and "completeness." The "worse is better" philosophy places simplicity as the top concern all other elements should be subverted to support. Sounds a little like customer experience to me.

UNIX and C, built on the "worse is better" philosophy are still going strong. Sites with a good customer experience are winning. LISP is moribund. Sites with bad customer experience (but excellent information architecture) are dying.

XML-RPC, a language I will write more on soon, takes this "worse is better" philosophy to create a simple way for systems to talk to one another.

In my experience, customers have overwhelmingly preferred simple sites that let them do what they wanted to do. By using customer behavior to control scope, the technology could be kept simple and slim. This kept build and maintainance costs low. Simple, customer behavior driven technology will be increasingly important as the world moves from PC-based to network-based work environments. This will require abandoning monolithic bloatware and learning to handle bits (digital information) they way UNIX coders do: simple programs piping ASCII to each other. Check back soon and I'll tell you about porting the UNIX design philosophy to the front end (and why GNOME and KDE are seriously misguided).
Link to this column.

The Future of the Web and TV Communications hype-buster and guru Andrew Odlyzko looks at the growth in bandwidth, storage capacity, and data transmission rates, and argues that in the future, TV will still be TV, except that we'll all be using TiVo and piping stuff over IP networks. So, no streaming. This is good news as streaming usually creates horrible, crippled customer experiences.

Dmitry's still in jail The usually clueless Business Week continues its fine tradition in this article about Dmitry who, incidently, is still in jail, his future resting on the political ambitions of whichever DoJ litigator ends up taking the case. Read the Kuro5hin commentary. Sources like Business Week are useful (if depressing) places to understand the popular mindset, and figure out how to frame the debate in a way that's successful with regular folks Lessig tries in this NY Times editorial but unfortunately bases his arguments on facts and reasoned thinking which are unlikely to go down well with the great unwashed. I'm glad to see him get such prestigeous column inches, though.

Clue to publishers: you're selling experiences, not content One fact has been forgotten in all the hubbub surrounding Dmitry Slarnov's incarceration for distributing eBooks technology: no one reads eBooks. Moreover, if the print publishing industry continues to cripple digital book formats, no one ever will. DivX, DeCSS, Napster, and Dmitry all illustrate how utterly unprepared traditional media publishers are for the business model consequences of distributing their content in digital form.

Instead of placing ever more draconian authorization measures on unpopular devices, publishers should realize that, in the digital world, they're selling experiences not content. Reading a book on the Web is a worse experience than reading a paperback. Online, the text is harder to read, less mobile, and less convenient to access. A book on the other hand has excellent resolution, portability, and "always on" access. If publishers realized that the online and offline reading experience is completely different, maybe they would stop crippling digital media and start using the Internet to satisfy customers and make more money.

The same goes for music. Napter provided a better experience than over-priced, hard to find singles, but a worse experience than album length CDs, which came with liner notes, all the songs, and zero download time. Instead of improving the CD experience and using Napster to sell more songs, the record industry is creating experiences customers hate, crippling their music with metered pricing and tethered downloads.

You would think that DivX and the VCR would have taught the recording industry a thing or two about their business. The VCR did not kill the cinema because seeing a movie in a theatre is completely different from seeing it at home. Similarly, DivX, a DVD format that stops working after a few plays, provides a worse experience than renting a movie at Blockbusters because customers hate metered pricing. Hollywood's current paranoia at online movie sharing demonstrates how out of touch they are with reality: waiting 12 hours for a movie to download through a broadband connection I don't have just to watch it on a little monitor is a worse experience than just renting the bloody thing.

The sooner publishers realize that, in the networked world, they're selling experiences and not content, the better off we'll all be. Customers will start getting products and services they like. Publishers will stop obsessing over how to cripple media and start differentiating their experiences on different channels. And artists might even start benefiting from the sort of live experiences only they can create. In the digital world, experience is king.
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Dmitry's supporters miss the point? This is the most articulate argument for imprisoning Dmitry Sklyarov I've seen yet. It acknowledges that the DMCA, by not making fair use provisions, is flawed, but argues that because Dmitry and his company profited from selling their cracking tools, they've done something illegal. Under this line of argument, had ElcomSoft given away their product for free, then they should not have faced criminal charges. The article goes on to make an analogy between someone selling devices that could open store fronts claiming they were innocent because folks who let themselves into the store might not take anything. Last I checked, folks have already made such devices, they're called lockpicks, and they're legal to buy and own.

Publishers should reconsider releasing their content in digital form. E-books are not popular, despite what the columnist claims. Non-crippled CDs will always allow online file sharing. Publishers are clearly unprepared for the business model implications of moving content from the physical world to digital media. The rest of us should not have to suffer for their inability to operate in the digital world.

Bundling and anti-trust In Craig Mundie's infamous anti-open source rant, he claimed that the Internet has made people used to getting things for free. And as the online advertising market withers away, publishers are moaning that people are used to getting stuff for free because of the Internet.

This is false. Microsoft accustomed people to getting stuff for free long before the Internet. When I buy my computer, it comes with an operating system, a browser, a word processor, an email client, a spread sheet etc. etc. etc. Through bundling, the "price" of the software is hidden from the consumer, and so experientially speaking, the software is free. (Why experientially? Well, the price of the software is built into the price of the machine, and I never had to evaluate whether I want something or not, never compare different products to see which one is best value for money, etc. etc. Essentially, as far as the purchase experience goes, the software comes free with the computer).

Microsoft bundles software to maintain its monopoly. Even though their software is pretty bad, it isn't bad enough to be worth replacing for the home user (this is not true for the business user, but most businesses are clueless about how to use computers). Hal Varian describes the economics of bundling in this article (NYTimes subscription needed)

Venture capital rationally hurts companies Many people are blamed for the recent Internet boom and its subsequent crash. This includes clueless journalists who hyped companies, sleazy analysts who sold bogus recommendations, and greedy entrepreneurs who launched stupid ventures. But perhaps most hated are the venture capitalists, who epitomized the ignorant avarice that's the hallmark of all speculative bubbles.

Entrepreneurs in particular often criticize their venture capitalists for making the company take stupid risks. Unfortunately, it is perfectly rational for venture capitalists to always force a company to take on more risk that its employees want.

Imagine a venture capitalist and an entrepreneur who are both equally greedy. It's still 1997, so the venture capitalist gives gobs of money to the entrepreneur (and several of her MBA classmates) who all go off and start various businesses. Everybody is interested in maximizing the return on their investment, but for each entrepreneur this means growing their company, and for the venture capitalist this means growing his portfolio of companies.

Just as a stock market investor can improve his returns by buying several different stocks, our venture capitalist diversifies away some of the risk unique to each individual company by owning a portfolio of investments (see figure 1). Note that our entrepreneur is not so lucky. Her success depends entirely on the success of her company, and her company alone.

Figure 1.


One way to think about the utility of an investment (U) is to balance its expected return (E) with its riskiness (volatility, s, the standard deviation), magnified by some risk aversion constant (A).

So, U = E - A.s^2

All this means is that the value of an investment (U) is it's expected return (how greedy you are) minus how afraid you are of losing your money (see figure 2)

Figure 2.


The thing is that even if the venture capitalist and entrepreneur are equally greedy (both have the same E) and equally afraid (both have the same A), the venture capitalist will still push the company to take greater risks than the entrepreneur. Because the VC has diversified away company specific risk through a portfolio, he expects a higher return for any given risk level. The entrepreneur on the other hand is completely invested in her company, and has to bear the full brunt of its riskiness (see figure 3).

Figure 3.


The moral of this story is that venture capitalists aren't necessarily more greedy than the employees of the companies they fund, but are primarily interested in their portfolios as a whole, and (rationally) try to hit a home run with every company. This is bad news for the companies who might be quite content with just getting to second or third base. But of course, as VCs are acting perfectly rationally, the companies knew what they were getting into when they sought out and accepted the money.
Link to this column.

FUD around .NET At least one person is not afraid of pointing out that Microsoft's .NET "strategy" is devoid of all content. And that view seems to be echoed from the inside. Where does that leave this columnist? Well, Microsoft has wanted to rent software instead of selling it for a long time (good luck, that creates a terrible ownership experience). Microsoft also wants to put together a central authentication infrastructure (which they can only hope to do because they have a desktop monopoly). This is more serious.

Adobe drops case, just DoJ left Adobe has dropped its case against Dmitry, but since the DMCA places provision of copyright contravention as a criminal offense, the US government can still press charges. Given that the DMCA gives copyright holders protection above and beyond anything they have ever enjoyed before, and beyond what they are constitutionally able to claim, it's possible that the Supreme Court may strike down this act. Depending on what the DoJ decides to do, the Dmitry case may end up being tried at this level.

Framing the copyright debate I just returned from the DMCA protest in New York City, where people were raising awareness over Russian programmer Dmitry Sklyarov incarceration for talking about security flaws in Adobe's proprietary eBooks format. Although it's terrible that the FBI arrested Sklyarov, it has helped bring a human face to a topic most people find opaque and boring -- no one cares about some bizarre legislation they can't understand and seems to be against piracy.

Part of the copyright battle is being lost in debate terminology. "Intellectual property," "piracy," "theft," are all "ideas as property" based terms that play into the hands of Recording Companies and other publishers who see their livlihood threatened by cheap, ubiquitous distribution. To win the public debate, those on the side of open distribution need to reframe the issue by introducing new terminology that substitutes "ideas" for "intellectual propert," "sharing" for "piracy," and "access," for "theft." The Dmitry case needs to be about "an individual sharing ideas about access," not "a pirate helping others steal intellectual property." This does not mean doing away with all copyright laws or saying that piracy is OK, but it should help shift the conversation back to notions of fair use, public domain, and the intellectual commons.

Also, some tips on organzing a protest (learned from the NYC event):
- LIST-SERVs are great organizers.
- Settle on the time and date early. It makes advertising the event easier.
- Organizers should bring their own signs and flyers for protestors to use.
- Tables and banners make the event look more photogenic. Giving newspaper photographers photo-ops is helpful.

Free Dmitry! Russian software engineer Dmitry Sklyarov may become the Amadou Diallo of the software freedom world. His plights seems to be generating lots of attention, with the Electronic Frontier Foundation organizing protests around the US. Join in.

RIP Napster The record industry could have made a friend of Napster by simply converting it into a subscription service that, when activated, let you download an entire song instead of the first 60 seconds. Customers would have open access to unlimited music, those who wanted to buy CDs could still use it as a sampling tool, and the record industry would get money for nothing, as Napster runs off its users' servers. Instead they shut it down. When Napster reopens, it will try and use a proprietary .NAP format instead of MP3 and fail. As folks seem to intent on creating standards monopolies, I'll run on story next week on how to do that.
Update
A little new journalism at its best. This Boston Herald piece was put togther after the author spent a good bit of time on the free-sklyarov email list.

Artists don't get it It's pretty sad to see people give away their own rights and deprive others at the same time. Nancy Updike writes about how movie studios, recording companies, and other distribution channels, deprive artists of the "moral" rights" to their work when they're editted, or altered. She does not understand that the notions of "moral" rights comes from thinking about ideas as property that can be owned, an idea the entertainment industry is only too happy to spread. Anything that supports an artist's "moral" right will be signed away to distributors, because in the current order of the world, distributors are more powerful than artists. The distributor will then ban parodies, reviews, and criticisms of content (the way Microsoft does under its contractual EULA) in the same way they're currently outlawing sharing.

Open Source, the DMCA, and Encryption This big news of the day is how the FBI arrested Dmitry Sklyarov for giving a presentation on how the encryption protocols on e-books can be overcome. He was not arrested for overcoming the encryption available on e-books, but for showing how it could be done. This raises several interesting points:

- By criminalizing tools to crack code, the DMCA has essentially convicted gun owners of being murderers, and car drivers of being hit-and-run offenders. If China had this law, Amnesty International would be up in arms. Americans should be ashamed.
- Open sourcing software opens it up to scrutiny that will make it more secure than closed software. In fact, open sourcing software is the only way to make it truly secure. Good encryption cannot come from obscurity, it is a process built into the code.
- The battles over digital copyright are entirely over protecting business models, not protecting the public domain.

The thinking technical community is, of course, aghast at this news, but I wonder if the broader public is thinking any farther than "glad they caught the evil hacker." When it comes to authorized sharing and the DMCA, I don't think that the general public has an inkling of just how high the stakes have become.

Viral software production Richard Stallman is a well known figure in the technology community. He founded the Free Software Foundation, which promotes free software around the world. He wrote GNU, an integral part of the Linux operating system. And if that was not enough, he also created Emacs, arguably the world's greatest text editor.

But his most important innovation is the GNU Public License (GPL).

The GPL recognizes that programmers write better software when they can re-use existing code and fix each others' bugs. Therefore, programs released under the GPL come with their source code which can be freely reused and modified by others. The catch is that any software containing GPL'd code must also be released under the GPL if distributed. For example, an insurance company that created an in-house application using GPL'd code must release their program under the GPL as well if they plan to commercialize it.

Freely available source code undermines the commercial software business model based on selling programs as products that customers cannot modify or share. The GPL's "pass along" effect continually enlarges the code base GPL programmers can draw from when writing new programs. This is why Microsoft describes the licence as being "viral," "a cancer," and "unamerican"--it undermines the way they do business and keeps getting bigger.

Freely available soure code also undermines the research and development process that has driven software innovation ever since Microsoft established its desktop monopoly in the 80s. Instead of building products and hoping to be bought, coders are now launching innovative products directly into the marketplace, and leaving future development to the network, not to a proprietary software firm. Under this model, the market selects software based on its use value, not corporate best-guesses.

The GPL is a catalytic mechanism, defined by business author Jim Collins as galvinizing, non-beaurocratic means of turning objectives into performance, that changes the way software is built, sold, and maintained. Don't like a piece of software? Change it at will. Don't like the limitations of proprietary software? Use open software. Just make sure you contribute to the community. Microsoft has responded with its own "viral" licensing scheme, "shared source," which forbids any programmer who has ever looked at Microsoft code from writing anything which may resemble it or compete with it.

One can see software production splitting into two worlds. Microsoft recently banned any GPL'd code from being used in developing one of its applications. Coders who develop GPL'd software are wary of participating in Microsoft "shared source" projects, for fear of future lawsuits. Microsoft's viral strategy is more divisive, because it actually segments the community of developers, instead of just the body of code ("shared source" applies to minds, GPL just applies to software.) This restrictiveness seems unwisely antagonistic. Given that Microsoft has a monopoly on the PC, it's not clear which development model will ultimately dominate, but the catalytic GPL has accelerated the debate.
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Copyright and Big Brother Orwell would be proud. First we have the term "intellectual property," a piece of double-talk that introduces the notion of excludability to a non-scarce good (ideas). Then we have a surveillance system being built through the Net that would make the KGB proud. And now, we have state-sanctioned indoctrination in schools in the UK, where children are being taught that sharing ideas is morally wrong. My favorite line: "Many [young people] believe, for example, that if you buy a CD, you buy the right to share it."

And before Americans start patting themselves on the back, note that the US government's own little working group on authorized sharing recommends exactly the same thing.

The saddest thing about all of this is how successful such brainwashing strategies have been in the past, particularly the notion that ideas are "property." Society benefits most when ideas are shared in the public domain, and copyright can and should support that. But even well meaning, intelligent individuals have bought the whole "ideas are property" con and cannot see how insidious and abusive current copyright regimes are.

Read the discussion on slashdot.

Weekend Haiku Bill Joy isn't the first scientist to have gone a little nuts when prognosticating outside his realm of expertise, mathematician Vernor Vinge did too. My friend CD composed this amusing haiku that sums it up:

An intelligence
Greater than we know today -
Unpredictable!

Napster ordered to stay shut The courts have ordered Napster to stay shut until it can prove that it can more effectively filter copyrighted material. This ruling has set a dangerous precedent over how the authorized sharing of ideas will develop online.

Some existing business models profit off ideas by using the natural scarcity that comes with physical transmission (book publishers sell books which "bind" the information). That's fine. However, some business models profit from ideas by operating in secondary markets that freely shared ideas create (AOL offers ISP service over open-source TCP/IP). That's fine too. It costs money to impose scarcity on sharing ideas by having complex authorization systems. This is also OK. If a business benefits from imposing scarcity on ideas, and imposing that scarcity has cost (as it does not exist naturally the way it does for physical goods), then authorization and monitoring compliance is just the price of doing business, the same way paying someone for wood is part of the cost of making a chair.

Nevertheless, business models based on making ideas scarce should be under competitive pressure from business models that use the natural abundance of digital information to create secondary markets. Such business models authorize all sharing and so do not have to incur monitoring and compliance costs, which may give them competitive advantage over businesses that do. The most competitive business model will vary industry by industry. In some businesses, the demand for professional quality might justify carefully controlled authorization structures, while in others, secondary markets built on shared ideas might be more profitable than defending a primary market for the ideas themselves. But these different models must be allowed to compete in the marketplace, and may the best model win.

There are legitimate uses of Napster that the current court ruling does not acknowledge. By shutting it down, the court has ruled against a business model instead of against an illegal practice. Although RIAA lawyers say "intellectual property must be defended rigorously," in the world of CDs, unauthorized sharing (what they call "piracy") happens every time someone lends someone a CD, makes a mix tape, or listens to the same song twice. They do not pursue business models that outlaw these practices (and so do not call these practices "piracy") because 1) the cost of such enforcement is higher than its value to the record company and 2) the customer experience is not competitive--customers would flock to less draconian competitors. In the online world, they have managed to convince courts to push the cost of enforcement to others (Napster) and are pursuing business models that create non-competitive experiences (metered listening, tethered download etc.) This will fail because the cost of litigation against distributed sharing programs (such as Gnutella) is extremely high and cannot be pushed onto others, and ultimately, provided that the network remains open and people always have a choice, good customer experiences will win.
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UNIX and .NET Here's a good article that talks about how the interoperability aspects of .NET have already essentially been done by the UNIX community on Python. Just make SOAP 1.1 and XML-RPC part of the standard distribution.

History of copyright protection When originally conceived, copyright was quite different to what it has now become. Indeed, having terms of protection last beyond the author's lifetime (by 95 years) and be increased retroactively obviously do nothing to motivate authors to create original works. It seems that even patents do not spur innovation the way they were supposed to, with notorious examples like amazon's 1-click ordering system showing how broken the business process section of this field is. The egregious DMCA puts corporate copyright holders in control of even public domain works. The current state of copyright is not in keeping with the original intent of the Constitution, and may be overturned by the Supreme Court.

Bad ownership experience Windows provides a better user experience than GNU/Linux for most people trying to get their non-technical work done. This is not to say that the Windows experience is good, Apple OS is better, and even that leaves a lot to be desired, but for the average customer, Windows beats Linux. So it's interesting to see how Microsoft's new anti-piracy measures makes the ownership experience of Windows worse than the ownership experience of Linux: you can't copy software onto other computers, even if they're all yours. With open-source software, people are free to make as many copies as they like. A deteriorating ownership experience reduces some of the experiential advantage Windows currently has over GNU/Linux. Read the discussion on slashdot.

Economists argue that licensing software enables companies to sell it to different groups at different prices. For example, if they gave nonprofits a cheap version, but did not include a restrictive license, the nonprofit could then resell the software to a for-profit company at a discount to the corporate price (but above the nonprofit price). Therefore, the software company would need to sell the software at the same price to everyone, which limits the profits the company can make and reduces the number of customers who can use the software (as some customers are priced out of the market). Both consumers and producers lose. (Drug companies operate under similar economics. -- NY Times, subscription needed).

This argument makes no sense in the open-source development model, where the value-added comes from related services in a secondary market. Complex licensing schemes, when enforced through draconian methods, worsen the quality of the ownership experience, and help level the field between open-source and closed-source software.

Also, note that the school in the article above needed more copies of Windows solely to read word docs sent over from head office. Why should someone have to pay $200 to read word documents? Microsoft's upgrade policy purposefully introduces obsolescence and reduces the quality of software.

You can read more about GNU/Linux in schools here.
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Nostalgia I managed to drag this up from Slate's archice's: Michael Lewis' attenuated coverage of the Microsoft trial. It seems like just yesterday...

Quick clips Here are some quick stories of interest:
Even though Eazel has packed up, their code lives on, one of the benefits of open source.

The UK government has backtracked in their unthinking support of Microsoft. Turns out that Hailstorm does not give citizens the privacy protection they are entitled to.

The Economist twigs what readers of Kuro5hin have known for years: flat-rate streaming services lose more money as they get popular. We'll see how long it takes for that to sink into the larger conciousness. Shorewalker makes the same point. Clue to companies: sack anyone who thinks video-on-demand over IP is a good idea.

Here's a very long article that goes through .NET in detail from a functionality perspective. Clay Shirky comments on it here, Dave Winder here, and Webword here. Thanks to Webword for the article.

UCITA seems to have been stopped, at least for a while. Thank your friends at Americans for Fair Electronic Commerce Transactions coalition (http://www.affect.ucita.com).

Oh, and Microsoft continues to abuse its monopoly position, this time with Kodak.

Open source folks don't get .NET Here's an article that talks about how one open source company wants to create an open standard that does what .NET does. Unfortunately, they do not realize that a monopolistic authentication protocol can exist on top of totally open code.

Micropayments online Related to the whole "information as product" vs. "information as service" debate is the micropayment fracas. Here's a great article on Kuro5hin that not only lays out the basic micropayment approaches, but also has a lively user debate on what works and what doesn't.

The problem is the focus on using the Internet as a primary market ie. insisting that the main profit generating activity be online. Instead, a better approach for many might be to capitalize on secondary (offline) markets, and use the Internet to support those through lowering the cost for all support services. The author of Sluggy Freelance is far more famous because of his website than he would be if he tried to break into the newspaper world.

Open source struggles with .NET Here's an extended piece claiming that an easier software distrubution system will somehow combat .NET. What the poster does not understand is that the open source debate is about who controls the code, and the .NET debate is about who controls the network. The boys over at slashdot understand the former, but not the latter.

Too much email Here's an NY Times article (subscription needed) about how people have too much email in their inbox. The reason for this is clear -- 1) people coming from the PC world do not know how to handle digital information in the networked world, and 2) Windows/Outlook has no easy way to move plaintext from email to the computer's file system. Instead of messing about with antiquated PC-based interfaces, open source GUI efforts like GNOME and KDE should draw from their network histories and build front-ends that help people manage digital information.

Government role in the economics of the Networked Age Some remarks on the role the government may have in building infrastructure and shaping institutions that capture the productivity benefits that will come information shifting from siloed to networked distribution. In particular, the remarks note how technological leads once captured can be lost to environments better suited to building on the productivity gains the new technology promise.

In the US, the key questions government institutions need to wrestle with are 1) who controls the Code, and 2) who controls the Network. The Microsoft anti-trust trial is grappling with the former in the courts, while the open-source movement deals with it in the marketplace. The Napster trial, DeCSS trial, and Microsoft's are tackling the latter in the courts, while Microsoft's .NET initiative has thrown down the gauntlet in the markets.

Follow up to Steve Gibson For those who read yesterday's Steve Gibson piece, you might be interested in some of the follow-up around his concerns with Windows XP.

Don't see AI AI is one of the worst movies I have ever seen in my life. I recommend that everyone avoids it.

Online security An interesting look into secutiry guru Steve Gibson's run in with internet crackers.