The Ghost in the Business Model

I’ve been meaning to get to this interesting NYT discussion on CD sharing and copying.

200pxhome_taping_is_killing_musicI’m old enough to recall the recording industry’s campaign against home (analog) taping: "Home Taping is Killing Music", and MPAA honcho Jack Valenti’s dire warning that the VCR would ruin the film industry.

Of course, the VCR and then the DVD were huge money makers for film, and music thrived in the 1980s and early 90s. Just imagine if the film industry refused  to move from tape to DVD;  As absurd as that has been, it is roughly the equivalent of the recording industry’s long refusal to embrace digital downloads — both legal and not.

In appeasing their brick and morter retailers, they created another problem: By the time they finally agreed to digital distribution (i.e, Apple iTunes Music Store), they had helped train a generation of music fans to get music for free. Simply a horrific business decision . . .

Here’s the NYT column on CD copying and sharing amongst friends:

Nyt_184336"After years of battling users of free peer-to-peer file-sharing networks (and the software companies that support them), the recording industry now identifies "casual piracy" – the simple copying and sharing of CD’s with friends – as the biggest threat to its bottom line.

And in one company’s haste to limit the ripping and burning of CD’s, a hornet’s nest has been stirred. By the end of last week, that company, Sony BMG, which had embedded aggressive copy-protection software on the Van Zant CD and at least 19 others, suspended the use of that software after security companies classified it as malicious.

At least two Internet-borne worms were discovered attempting to take advantage of the program, which the CD’s transferred to computers that played them. And the company was facing lawsuits accusing it of fraud and computer tampering in its efforts at digital rights management, or D.R.M.

Sony BMG seems to have failed that test when, in seeking to limit consumers to making three copies of its CD’s, it embedded the First 4 Internet software, which penetrates deeply into the PC’s of users with a program that introduced a real, if minor, security risk."

It all began unraveling early last month, after an American customer notified F-Secure, a Finnish antivirus company, of some files attempting to hide themselves on his computer. F-Secure deduced that the Van Zant CD had deposited a program that looked a lot like a "rootkit" – typically a dirty word in computer security circles because it describes software tools used to hack the deepest level of a computer system and hide the footprints of an intruder.

That might have been bad enough, said Mikko H. Hypponen, the chief research officer of F-Secure, but the rootkit also proved capable not just of hiding itself, but any file, folder or process on the computer that used a five-character string as part of its name."

HometapingiskillingteeOf course, the industry is as wrong about CD sharing as they are about everything else. I make mixed CDs for friends, and if there is an artist I am really hot about, I’ve made copies of discs for friends. More often than not, it leads to additional sales of discs for that musician. It works as advertising and promotion, not theft.

And as reminds us, its fun.

I like having physical CDs, and I have 1,000s of them. But if I could not rip CDs to my Mac & iPod, if I could not easily make back up copies for the car or summer house, if I could not swap ’em, than I would not buy them.

I suspect lots of other consumers feel the same way . . .


The Ghost in the CD
NYT, November 14, 2005

Forget the spin, taping is not killing music
Peter Martin
The Sydney Morning Herald, December 31, 2003

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  1. Robert Cote commented on Feb 23

    Real estate; location, location, location.

    Intellectual content; utility, utility, utility.

    The “music industry” cannot insist upon a protected sales price at the same time it insists upon a lease agreement. Until the music industry gets over this paradox it has no standing to ask for protection or fair treatment or regulated markets or any of that.

  2. RogerThat commented on Feb 23

    Amen. I was at Tower yesterday and made sure that the two CDs I bought could be transferred to my computer and do so without being infected. Only then did I buy the CDs.

    Even the ITunes Music Store is fighting an uphill battle. I make 320Kbps Mp3s from my CDs which sound a lot better than their relatively low quality files AND I they don’t prompt my friends for a password if they try to play them on my computer.

    You can use ITunes to create MP3s instead of AAC. Go to:
    and change it from AAC to MP3 and up the quality settings.

    My roommate had one of those super protected CDs. I just fired up Linux and used a command line program to extract wav files which I burned back to a blank CD, bypassing their copy protection without losing any quality. You only need one guy like me per 1000 to create a high quality dupe. Or one per billion if they put it online.

  3. Paul commented on Feb 23

    Damian, of OK Go, has a great summary:

    “DRM just flat out sucks.

    “Its most obvious problem is that it doesn’t work. No matter how sophisticated the particular software, it only takes one person to break it, once, and the music that was “protected” by the DRM is free to roam the vast expanses of the P2P networks. It’s the most ridiculous house-of-cards model imaginable: one single breech and the whole system implodes.

    “Why go to the trouble of buying the cumbersome strings-attached version of a record when you can get a better version for free? Less net-knowledgeable fans (those who don’t know how to get around DRM or don’t use P2P networks) are punished by discs that they can’t load onto their computers or iPods. They might as well have bought cassette tapes. The particularly conscientious fans, who buy music legally because it’s the right thing to do, they just get insulted. They’ve made the choice not to steal their music, and the labels thank them by giving them inferior versions of records, hampered by software that’s at best a pain in the ass and at worst a real threat to people’s security.

    “As for musicians, we get to wonder how many more people could be listening to our music if it weren’t such a hassle to listen to…the more times a song gets played, the more of a chance it has to get stuck in someone’s head or catch the ear of somebody new. It’s basic marketing. Music advertises itself, so we want our music played as much as possible. ”

    I think this was a NY Times editorial, although the blog version is less restrained. The rest is at

  4. cm commented on Feb 24

    All these DRM machinations (which appear to drift more and more towards the pay-per-view concept) are just because the content peddlers are not bold enough to go for the real thing and ask lawmakers to install a worldwide per-head “content license tax” payable directly to their corporate accounts.

  5. Estragon commented on Feb 24

    In 1986 I started a small chain of music retail stores designed, staffed, and stocked mainly to appeal to a 25+ buyer disaffected by the hit-oriented mall stores prevailing at the time. We (re)introduced listening stations, and carried extensive classical, jazz, blues, world etc. as well as very deep and broad rock catalog. The concept worked quite well, but I was always treated like a bit of a nutter by the labels. I spent a lot of time and money thinking about and executing strategies to get older buyers enthusiastic about music after they’d past the peak teen buying age. They spent a lot of time and money executing strategies to move boatloads of that week’s hits to teen buyers. Their idea of market research was to pay off radio to play something and pay off chains to put a pile at the front of the store.

    By the mid nineties, I had started an ISP and could see the writing on the wall. Before I sold the music business to a larger chain, I tried to develop some forward thinking in the industry, mainly with some of the more progressive labels. Even they couldn’t see past their egos and next month’s quotas though, so I gave up. They did (and I think still do) recognize both the dangers and opportunities that lurk in the net, but thought they could control and profit from it. Their strategy wasn’t to drive sales in physical carriers (CD’s etc) through retail stores by stopping downloading. They wanted to benefit by eliminating the marginal cost of producing the physical carrier and the costs of distributing it (sales networks and retail margins), thus increasing their own margins. I think the strategy failed because of egos. All they could agree on was to fight downloading legally, and to blame downloading for them not making their month.

    The point is (yes this rant is almost done) that the same people run the music business today for the most part, so I’m not optimistic that they’ll suddenly embrace a consumer friendly strategy to deal with downloading.

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